Federal Deposit
Insurance Corporation

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   [¶10,222] In the Matter of Amoskeag Bank, Manchester, New Hampshire, Docket No. FDIC-91-116b (4-19-91).

   Bank to cease and desist from operating with an excessive volume of adversely classified assets; operating with inadequate capital; operating in violation of laws and regulations; and operating with inadequate liquidity. (This order was terminated by order of the FDIC dated 10-17-91; see ¶15,344.)

   [.1] Board of Directors—Meetings—Frequency—Written Record Required
   [.2] Assets—Adversely Classified—Eliminate/Reduce
   [.3] Capital—Capital Plan—Written Plan—Minimum Requirements
   [.4] Loans—Risk Position—Reduce
   [.5] Loans—Extensions of Credit—Existing Borrowers—Limits
   [.6] Profit Plan—Written Plan Required
   [.7] Funds Management—Policy Revision Required
   [.8] Dividends—Restricted
   [.9] Compliance—Progress Reports—Frequency

In the Matter of

AMOSKEAG BANK
MANCHESTER, NEW HAMPSHIRE
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

   Amoskeag Bank, Manchester, New Hampshire ("Bank"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices and violations of law and/ or regulations alleged to have been committed by the Bank and of its right to a hearing on such alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated April 11, 1991, whereby solely for the purpose of this proceeding and without admitting or denying any unsafe or unsound banking practices or violations of law and/or regulations, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.
   The FDIC considered the matter and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices and had violated laws and/ or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:
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   IT IS HEREBY ORDERED that the Bank and its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), cease and desist from the following unsafe or unsound banking practices:

   (a) operating with an excessive volume of adversely classified assets;
   (b) operating with inadequate capital for the kind and quality of assets held;
   (c) engaging in violations of applicable laws and regulations; and
   (d) operating with inadequate liquidity.

   [.1] 1. The Bank's Board of Directors shall meet at least monthly. The Board shall prepare in advance and shall follow a detailed written agenda at each meeting, which shall include consideration of actions of any committees. A chronological file of all written agendas shall be maintained. Notwithstanding the foregoing, the Board shall not be precluded from considering matters other than those contained in the agenda. Detailed written minutes of all Board meetings shall be maintained and recorded on a timely basis.

   [.2] 2. Within ten (10) days from the effective date of this ORDER, the Bank: (1) shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified "Loss" in the May 21, 1990 FDIC Report of Examination ("Examination"); and (2) shall either (A) eliminate from its books by charge-off or collection, or (B) if the asset is an extension of credit or lease, increase its Reserve by an amount equal to fifty (50.0) percent of those assets or portions of assets classified "Doubtful" in the Examination, which have not been previously collected or charged off. Reduction of these assets through use of proceeds of loans made by the Bank, other than to qualified third party borrowers, does not constitute "collection" or "elimination" for the purpose of this paragraph.

   [.3] 3. (a) (i) On or before December 31, 1992, the Bank shall increase Tier 1 capital to not less than six (6.0) percent of the Bank's total assets ("Tier 1 leverage capital ratio") and shall continue to maintain its Tier 1 leverage capital ratio at or in excess of such level as calculated herein while this ORDER is in effect. Toward this end, the Bank shall develop a Capital Plan which will be submitted to the Regional Director and the Commissioner for approval within ninety (90) days from the effective date of this ORDER. The Capital Plan should address both internal and external sources of capital augmentation, including capital infusions, retention of earnings, restrictions of asset growth and asset sales.
   (ii) For purposes of this ORDER, the terms "Tier 1 capital" and "total assets" shall have the meanings ascribed to them in the revised Part 325 of the FDIC's Rules and Regulations, 12 C.F.R. Part 325, which became effective April 10, 1991.
   (b) In calculating the Bank's Tier 1 leverage capital ratio under paragraph 3(a) initially, the Bank shall first comply fully with paragraph 2 of this ORDER. Thereafter, such ratio and its component parts shall be determined only after the Bank has made such additions to its allowance for loan and lease losses ("Reserve") so as to bring the Reserve into compliance with the prevailing requirements of the Instructions for the Reports of Condition and Income ("Instructions") and charged off any losses identified subsequent to the Examination.
   (c) Any increase in the Tier 1 leverage capital ratio made by the Bank in order to meet the requirements of paragraph 3(a) of this ORDER may be accomplished by:

   (i) the sale of new offerings of common stock or perpetual preferred stock;
   (ii) the direct contribution of cash by the directors of the Bank;
   (iii) the collection of all or part of assets classified "Loss" within the Examinations without loss or liability to the Bank. Reductions to loans and leases classified "Loss" shall first be credited to the Bank's Reserve and, if the Board of Directors' review of the adequacy of the Reserve required by paragraph 2 of this ORDER indicates that such Reserve has a balance in excess of that required for adequacy, any such excess may be transferred to equity capital through a negative provision to the Reserve;

   (iv) the collection in cash of assets previously charged off;
   (v) any combination of the above means; or
   (vi) any other means acceptable to the Regional Director and the Commissioner.

   [.4] 4. (a) Within sixty (60) days from the effective date of this ORDER, the Board of Directors shall develop a written plan of action to lessen the Bank's risk position with respect to each borrower who or which had outstanding principal balance of debt owing to the Bank of $500,000 or more which was classified "Substandard" or "Doubtful" in whole or in part as of May 21, 1990. In developing such plan, the Bank shall, at a minimum:

   (i) review the financial position of each such borrower, including source of repayment, repayment ability, and alternative repayment sources; and
   (ii) evaluate the available collateral for each such credit, including possible actions to improve the Bank's collateral position.

   [.5] 5. The Bank shall not extend or renew, directly or indirectly, credit to, or for the benefit of, any borrower who has a loan or other extension of credit with the Bank that has been charged off or classified, in whole or in part, "Loss," "Doubtful," or "Substandard," and is uncollected, unless a majority of the Bank's Board of Directors first (1) determines that such advance is in the best interest of the Bank, (2) determines that the Bank has satisfied the requirements set out in paragraph 4 of this ORDER as to such borrower, and (3) approves such advance. A written record of the Board of Directors' determination and approval of any advance under the terms of this paragraph 5 shall be maintained in the credit file of the affected borrower(s), as well as the minutes of the Board of Directors.

   [.6] 6. (a) Within thirty (30) days from the effective date of this ORDER, the Bank shall develop a written policy plan consisting of goals and strategies for improving the earnings of the Bank, which written profit plan shall include, at a minimum:

   (i) identification of the major areas in, and means by, which the Board of Directors will seek to improve the Bank's operating performance:
   (ii) realistic and comprehensive budgets;
   (iii) a budget review process to monitor the income and expenses of the Bank to compare actual figures with budgetary projections; and
   (iv) a description of the operating as-

sumptions that form the basis for, and adequately support, major projected income and expense components.

   [.7] 7. (a) Within thirty (30) days from the effective date of this ORDER, the Bank shall revise its written funds management policy with a goal toward increasing its liquidity ratio to at least ten (10.0) percent by June 30, 1991. The policy shall include, at a minimum:

   (i) the Bank's liquidity needs and plans for insuring that such needs are met on an ongoing basis, including a contingency plan for dealing with unforeseen deposit withdrawals; and
   (ii) coordination of the Bank's loan, investment, operating, and budget and profit planning policies with the written funds management policy.

   [.8] 8. The Bank shall not declare or pay any dividends unless:

   (i) such declarations and payments are made in accordance with applicable State and Federal laws and regulations;
   (ii) after payment of such dividends, the Tier 1 capital ratio shall not be less than six (6.0) percent and the Bank's allowance for loan and lease losses shall be adequate;
   (iii) such declaration and payment of dividends shall be approved in advance by the Board of Directors of the Bank; and
   (iv) such declaration and payment of dividends shall be approved in advance, in writing, by the Regional Director and the Commissioner, which approval shall not be unreasonably withheld.