NORMAL -- The Bank of Illinois has been warned by state regulators that its business practices are unsafe and must be corrected within 60 days or it risks a takeover.

The Illinois Department of Financial and Professional Regulation issued a 19-page "order to cease and desist" to the Normal-based bank, saying it believes the bank has "engaged in unsafe or unsound banking practices."

Bank of Illinois President Larry Maschhoff disagrees, but said the bank has been working to correct the issues. The bank waived its right to a hearing before the state agency.

"We try to help our community and we make loans in our community," Maschhoff said Monday. "And we do have customers that are struggling."

He added the kind of notice issued by the state is becoming commonplace.

"As you know regulatory review of all banks has been heightened because of the economy," said Maschhoff, adding the bank is "working with our clients and regulators to address and correct all issues" and is committed to "serving our community for many years to come."

There have been 33 enforcement actions against Illinois banks this year, according to the IDFPR. The only other one in Central Illinois was the July takeover of the former John Warner Bank in Clinton.

The order against the Bank of Illinois, filed earlier this month after a routine inspection by state regulators, cites the bank for "engaging in hazardous lending and lax collection practices," including: "poor selection of credit risk ... inadequate diversification of risk … ineffective loan grading systems … untimely collection of interest and inappropriate capitalization of interest."

The bank at 200 W. College Ave. reported assets of $238.9 million, liabilities of $219.6 million and a net income of $276,000 at the end of 2008, according to information on its Web site. That compares to assets of $225.7 million, liabilities of $207.5 million and a net income of $71,000 at the end of 2007.

The IDFPR order also criticized the bank's management for policies it said jeopardized the safety of deposits.

Susan Hofer, an IDFPR spokeswoman, would not discuss details of the order, but said if a bank fails to comply, the agency can file a notice to take it over.

The order gives the bank 30 days to develop a plan to fix the problems, and 60 days to correct them. Among the requirements are the need for the bank to develop plans to: increase its capital; reduce and collect on delinquent loans; and reduce concentrations of credit in areas, including commercial and speculative real estate loans.

Maschhoff said he could not comment on or address the specifics cited by the agency, but said 60 to 70 percent of the issues have been resolved.

One independent measure of bank stability, Bankrate's Safe & Sound Ratings, gave the Bank of Illinois a one-star rating, its lowest in a five-star grading system, for the quarter ending June 30. A year earlier, Bankrate gave the bank two stars, defined as "below peer group."

Business Editor Karen Hansen contributed to this report.