The Federal Reserve Bank and state Department of Financial Institutions have issued a cease and desist order to Pierce County Bancorp, parent company of Tacoma-based Pierce Commercial Bank.

The order requires the bank to submit an acceptable capital plan and be more aggressive about limiting exposure related to troubled mortgage loans, while improving its mortgage lending practices and board oversight. In addition, the bank is prohibited from paying dividends without prior regulatory approval.

According to Gary Gahan, president and CEO of the bank, these are all steps the bank has already been taking, as a result of its own review.

"While we are not pleased that Pierce Commercial Bank has joined the ranks of the hundreds of banks across the country that have received action from their regulators this year, we believe that by returning our focus to the core banking services that are our strength, the bank should be able to continue to serve our loyal customers extremely well for the long term," Gahan said.

"Our asset quality at the core bank remains solid and well diversified," he continued. "Our non-performing loans have decreased since the second quarter and are now at about 2 percent of our overall assets, compared to an average of about 5 percent for banks throughout the state.

Other local banks under federal scrutiny include Anchor Mutual Savings Bank, Bank of Tacoma, Frontier Financial, HomeStreet Bank, Horizon Bank and Rainier Pacific Bank, as well as others based elsewhere in the state.