A New York bank that received $7.5 million in government bailout funds has been ordered not to pay dividends or incur new debt without the Federal Reserve's approval.

The Fed on Monday released a written agreement imposing the restrictions on BNB Financial Services Corp. (BNBF). The agreement also requires BNB, which runs BNB Bank in Fort Lee, N.J., to provide the central bank with regular progress and cash flow reports.

BNB is among dozens of so-called healthy banks that received money from the government's Troubled Asset Relief Program and are the subject of enforcement actions by banking regulators. Enforcement actions typically signal regulators' growing concern about a bank's health or management.

BNB received its $7.5 million in April 2009.

In a separate enforcement action released Monday, the Fed placed similar restrictions on Smithtown Bancorp Inc. (SMTB), based in Hauppauge, N.Y.

Smithtown, which bills itself as the largest independent commercial bank headquarted on Long Island, is not a recipient of TARP funds. It has, however, been struggling against a growing volume of soured real-estate loans.

-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629; meena.thiruvengadam@dowjones.com
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