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{{8-31-92 p.C-1548}}
   [10,351] In the Matter of St. Anthony Park State Bank, St. Paul, Minnesota, Docket No. FDIC-91-317b (10-7-91).

   Bank to cease and desist from such unsafe or unsound practices as operating with excessive volumes of adversely classified assets; following hazardous lending and lax collection practices; operating in violation of applicable laws or regulations; operating with management whose policies are detrimental to the Bank; operating with inadequate loan documentation; engaging in practices which produce inadequate operating income; failing to provide adequate supervision over the Bank's affairs; paying excessive cash dividends; operating with inadequate allowance for loan and lease losses; and failing to submit Reports of Condition and Income in accordance with instructions. (This order was terminated by order of the FDIC dated 6-15-92; see15,467.)

   [.1] Management—Qualifications—Review
   [.2] Management—Management Plan—Minimum Requirements
   [.3] Assets—Adversely Classified—Eliminate/Reduce
   [.4] Allowance for Loan and Lease Losses—Establish/Maintain
   [.5] Capital—Tier 1 Capital—Increase/Maintain—Methods
   [.6] Loans—Risk Position—Reduce—Written Plan Required
   [.7] Real Estate—Accounting and Appraisal Required
   [.8] Loans—Extensions of Credit—Existing Borrowers—Curtail
   [.9] Profit Plan—Minimum Requirements
   [.10] Dividends—Restricted
   [.11] Shareholders—Disclosure—Cease and Desist Order
   [.12] Technical Exceptions—Eliminate/Correct
   [.13] Violations of Law—Eliminate/Correct
   [.14] Compliance Reports—Frequency

In the Matter of

ST. ANTHONY PARK STATE BANK
ST. PAUL, MINNESOTA
(Insured State Nonmember Bank)
ORDER TO CEASE
AND DESIST

FDIC-91-317b

   St. Anthony Park State Bank, St. Paul, Minnesota ("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) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(b), 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 October 1, 1991, whereby solely for the purpose of this proceeding and without admitting or denying any unsafe or
{{12-31-91 p.C-1549}}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:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in Section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns cease and desist from the following unsafe and unsound banking practices and violations of law and/or regulations:
   A. operating with an excessive volume of adversely classified assets;
   B. engaging in hazardous lending and lax collection practices, including maintaining an excessive volume of adversely classified loans;
   C. engaging in violations of applicable laws and regulations;
   D. operating with management whose policies and practices are detrimental to the Bank or engaging in management policies and practices which are detrimental to the Bank;
   E. operating with deficient or inadequate loan documentation, including but not limited to current financial statements, insurance coverage, title searches or legal opinions, and cash flow and/or operating information;
   F. engaging in practices which produce inadequate operating income and excessive loan losses;
   G. failing to provide adequate supervision and direction over the affairs of the Bank to prevent unsafe or unsound practices and violations of law and/or regulations;
   H. paying excessive cash dividends in relation to the Bank's net income and/or capital position;
   I. operating with an inadequate allowance for loan and lease losses for the volume, kind and quality of loans held; and
   J. failing to submit Reports of Condition and Income in accordance with prevailing instructions.
   IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

       [.1] 1. (a) (i) No more than 90 days from the effective date of this ORDER, the Bank shall have and thereafter retain qualified management. Such management shall include a qualified senior lending officer who shall be given stated written authority by the Bank's board of directors, including responsibility for implementing and maintaining the lending policies of the Bank. The senior lending officer shall have an appropriate level of lending, collections, and loan supervision experience to perform the duties assigned to that individual by the Bank's board of directors. The Bank shall promptly notify the Regional Director of the FDIC's Kansas City Regional office ("Regional Director") of the identity of said senior lending officer. Prior to the addition of any individual to the board of directors or the employment of any individual as a senior executive officer, the Bank shall comply with the requirements of section 32 of the Act, 12 U.S.C. § 1831i and section 303.14 of the FDIC's Rules and Regulations, 54 Fed. Reg. 53040 and 53043 (to be codified at 12 C.F.R. § 303.14).
       (ii) For purposes of this ORDER, the assessment of whether the Bank has "qualified management" shall be based upon management's conduct, both individual and joint, with respect to the Bank in: (A) complying with the requirements of this ORDER; (B) complying with applicable laws and regulations; and (C) not engaging in any unsafe or unsound banking practice which has an adverse effect on the Bank's asset quality, capital adequacy, earnings, or liquidity.

   [.2] (b) No more than 60 days from the effective date of this ORDER, the board of directors shall develop a written analysis and assessment of the Bank's management and staffing needs ("management plan"), which shall include, at a minimum:
       (i) identification of both the type and number of officer positions needed to
    {{12-31-91 p.C-1550}}manage and supervise properly the affairs of the Bank;
       (ii) identification and establishment of such Bank committees as are needed to provide guidance and oversight to active management;
       (iii) evaluation of each Bank officer, and in particular the chief executive officer, and staff member to determine whether these individuals possess the ability, experience and other qualifications required to perform present and anticipated duties, including adherence to the Bank's established policies and practices, and maintenance of the Bank in a safe and sound condition;
       (iv) a plan of action to recruit and hire any additional or replacement personnel with the requisite ability, experience and other qualifications, which the board of directors determines are necessary to fill Bank officer or staff member positions consistent with the board's analysis, evaluation and assessment as provided in paragraphs 1(b)(i) and 1(b)(iii) of this ORDER; and
       (v) Nothing in this ORDER shall preclude the board from considering matters other than those described in paragraph 1(b)(iii) in evaluating an officer or staff member.
   (c) The written management plan and any subsequent modification thereto shall be submitted to the Regional Director for review and comment. No more than 30 days from the receipt of any comment from the Regional Director, and after consideration of such comment, the board of directors shall approve the written management plan and/or any subsequent modification thereto which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall implement and follow the written management plan and/or any subsequent modification.
       (d) (i) No more than 90 days from the effective date of this ORDER, the board of directors shall prepare a list of potential candidates for the board of directors for consideration by the shareholders of the Bank. The list of potential candidates shall include individuals who are independent with respect to the Bank, in such number that, if elected, would cause a majority of the board of directors to be independent with respect to the Bank. The actions taken in identifying potential candidates, including any communication with such individuals, shall be documented and made a part of the minutes of the board of directors. Copies of these board minutes shall be provided to the Regional Director no more than 120 days from the effective date of this ORDER.
       (ii) At the next meeting of the shareholders of the Bank, and at each succeeding meeting of the shareholders at which Bank directors are to be elected, the members of the board of directors who are also shareholders shall nominate and support the election of candidates to the board of directors who are independent with respect to the Bank and who have agreed to stand for election to the board of directors, in such number as are necessary to cause a majority of the board of directors to be and to remain independent with respect to the Bank.
       (iii) For purposes of this ORDER, an individual who is "independent with respect to the Bank" shall be any individual (A) who is not an officer of the Bank, any subsidiary of the Bank, or any of its affiliated organizations and who does not own more than 5 percent of the outstanding shares of the Bank or any of its affiliated organizations, (B) who is not related by blood, marriage or common financial interest to an officer of the Bank, any subsidiary of the Bank, or any of its affiliated organizations or to any stockholder owning more than 5 percent of the outstanding shares of the Bank, any subsidiary of the Bank, or any of its affiliated organizations, and (C) who is not indebted to the Bank, directly or indirectly (including the indebtedness of any entity in which the individual has a substantial financial interest), in an amount exceeding 10 percent of the Bank's Tier 1 or core capital and allowance for loan and lease losses as defined in paragraphs 4 and 3, of this ORDER.
   (e) Effective the date of this ORDER, 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. Nothing in the foregoing sen- {{12-31-91 p.C-1551}}tence shall preclude the board 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.

   [.3] 2. No more than 10 days from the effective date of this ORDER, the Bank: (a) shall eliminate from its books, by charge-off, collection, or other proper entries, all assets or portions of assets classified "Loss" as of February 15, 1991; and (b) shall either (i) eliminate from its books by charge-off, collection, or other proper entries, or (ii) if the asset is an extension of credit or lease, increase its allowance for loan and lease losses by an amount equal to 50 percent of those assets or portions of assets classified "Doubtful" as of February 15, 1991, which have not been previously collected, charged off, or otherwise eliminated by other proper entries. Reduction of these assets through use of proceeds of loans made by the Bank does not constitute collection for the purpose of this paragraph.

       [.4] 3. (a) As used in this ORDER, "allowance for loan and lease losses" ("allowance") means the same as the term in section 325.2(a) of the FDIC's Rules and Regulations, 56 Fed. Reg. 10154, 10160 (1991), to be codified at 12 C.F.R. § 325.2(a), and in the Instructions for Preparation of Reports of Condition and Income ("Instructions").
       (b) The Bank shall have and maintain an adequate allowance in accordance with the requirements of the Instructions.
       (c) Reports of Condition and Income required to be submitted by the Bank as of each Report date, as that term is used in the Instructions, between and including June 30, 1991, and the effective date of this ORDER, shall, at a minimum, reflect an allowance maintained in accordance with the Instructions. If necessary to comply with this paragraph, the Bank shall file amended Reports of Condition and Income within 10 days from the effective date of this ORDER.
       (d) Prior to the submission of any Report of Condition and Income required to be filed by the Bank after the effective date of this ORDER, the board of directors of the Bank shall: (i) review the adequacy of the Bank's allowance, (ii) provide for an adequate allowance, and (iii) accurately report the allowance in any such Report of Condition and Income. The minutes of the board meeting at which such review is undertaken shall indicate the results of the review, including any increases in the allowance, and the basis for determining the amount of allowance provided.

   [.5] 4. (a) As used in this ORDER:
       (i) "Tier 1 or core capital" ("Tier 1 capital") means the same as the term in section 325.2(m) of the FDIC's Rules and Regulations, 56 Fed. Reg. 10154, 10161 (1991), to be codified at 12 C.F.R. § 325.2(m).
       (ii) "Total assets" means the same as the term in section 325.2(n) of the FDIC's Rules and Regulations, 56 Fed. Reg. 10154, 10161 (1991), to be codified at 12 C.F.R. § 325.2(n).
   (b) After appropriate entries for an adequate allowance is made in accordance with the requirements of paragraph 3 of this ORDER, but no later than September 30, 1991, the Bank shall have and maintain Tier 1 capital at or in excess of 6 percent of the Bank's total assets ("Tier 1 capital ratio"). From and after September 30, 1991, for purposes of calculating Tier 1 capital ratio, Tier 1 capital shall be the dollar amount reported in the Bank's most recent Report of Condition and Income.
   (c) During the period this ORDER is in effect, if the Tier 1 capital ratio declines below 6 percent, the Bank shall, within 60 days after the date on which the said ratio so declined, submit a written plan to the Regional Director and the Commissioner of Commerce for the State of Minnesota ("Commissioner") for approval describing the means and timing by which the Bank shall increase such ratio up to or in excess of 6 percent. Upon receiving written notification of the approval of the plan, the Bank shall increase its Tier 1 capital ratio to equal or exceed 6 percent in accordance with the approved plan and shall thereafter maintain its Tier 1 capital ratio at or in excess of such level while this ORDER is in effect.
   (d) The Bank's board of directors shall maintain in its minutes a written record of all actions taken by the Bank to comply with the capital requirements of paragraphs 4(b) and 4(c) of this ORDER, in- {{12-31-91 p.C-1552}}cluding at a minimum, any action to increase its Tier 1 capital.

[.6] 5. (a) Within 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 in each line of credit aggregating $50,000 or more which was classified "Substandard" or "Doubtful" as of February 15, 1991. 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.
Based upon such review and evaluation, the written plan of action shall: (A) establish target dollar levels to which the Bank shall reduce the aggregate dollar volume of "Substandard" or "Doubtful" classifications within 6 to 12 months from the effective date of this ORDER; and (B) provide for the submission of written monthly progress reports to the Bank's board of directors for review and notation in the board minutes. As used in this paragraph, "reduce" means to (1) collect, (2) charge off, or (3) improve the quality of such assets so as to warrant removal of any adverse classification by the FDIC.
   (b) The written plan of action described by paragraph 5(a) and any subsequent modification thereto shall be submitted to the Regional Director and the Commissioner for review and comment. No more than 30 days after the receipt of any comment from the Regional Director, the board of directors shall approve the written plan of action, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall follow the written plan of action and/or any subsequent modification.

    [.7] 6. (a) (i) The Bank shall reflect in its records the value of each parcel of Other Real Estate ("ORE") acquired in accordance with the prevailing requirements of the Instructions for the Reports of Condition and Income ("Instructions").
       (ii) Reports of Condition and Income required to be submitted by the Bank as of each Report date, as that term is used in the Instructions, between and including June 30, 1991, and the effective date of this ORDER, shall, at a minimum, reflect the value of the Bank's ORE that should have been reported in accordance with the Instructions. If necessary to comply with this paragraph, the Bank shall file amended Reports of Condition and Income within 10 days from the effective date of this ORDER.
       (iii) Prior to the submission of any Report of Condition or Report of Income required to be filed by the Bank after the effective date of this ORDER, the board of directors of the Bank shall review and accurately report the value of the Bank's ORE in any such Report of Condition and Income. The minutes of the board meeting at which such review is undertaken shall record the results of the review and the basis for determining the value of the Bank's ORE.
   (b) No more than 60 days from the effective date of this ORDER, the board of directors shall develop a written plan of action to, among other things, lessen the Bank's risk position in ORE. The written plan of action shall:
       (i) establish target levels for the reduction of the total dollar volume of the Bank's ORE within specified time frames;
       (ii) require written monthly reports to the board of directors reflecting the status of the Bank's ORE, including, without limitation:
         (A) an analysis of current market conditions and trends which affect the value of the ORE,
         (B) if the ORE is income producing, an analysis of current revenues, expenses and vacancies,
         (C) any offers to purchase any ORE and the Bank's reaction to any such offer,
         (D) any sales of ORE, including the price at which each parcel was sold, and
         (E) the tax status of each parcel of ORE;
       (iii) require that the review and analysis of, and any action taken with respect to, any written monthly report by
    {{12-31-91 p.C-1553}}the board of directors shall be recorded in the minutes of the board of directors;
       (iv) require in the appropriate record for each parcel of ORE evidence of title, insurance (where necessary), and the payment of taxes;
       (v) require an appraisal of each parcel of ORE, as follows:
         (A) with respect to ORE held by the Bank prior to the effective date of this ORDER for which no appraisal has been performed, require an initial appraisal within 30 days of the effective date of this ORDER,
         (B) with respect to each parcel of ORE acquired by the Bank after the effective date of this ORDER, require an initial appraisal within 30 days of the date of acquisition, and
         (C) require reappraisal at least once on an annual basis for each parcel of ORE owned by the Bank and held more than one year from the date of acquisition;
       (vi) require that any appraisal is performed in accordance with the standards prescribed in section 323.4 of the Rules and Regulations of the FDIC, 12 C.F.R. § 323.4;
       (vii) establish a reasonable value at which each parcel of ORE will be listed for sale and a minimum value which the Bank may accept for each such parcel;
       (viii) require that any written offer to purchase any parcel of ORE shall be included in the appropriate ORE Bank record; and
       (ix) establish adequate written under-writing standards pursuant to which the Bank may provide financing to any prospective purchaser of any parcel of ORE.
   (c) The written plan of action described by paragraph 6(b) of this ORDER and any subsequent modification thereto shall be submitted to the Regional Director for review and comment. No more than 30 days after the receipt of any comment from the Regional Director, the board of directors shall approve the written plan of action, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall follow the written plan of action and/or any subsequent modification.

   [.8] 7. Effective the date of this ORDER, the Bank shall not extend, directly or indirectly, credit to, or for the benefit of, any borrower:

       (a) 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; or
       (b) from whom the Bank has acquired one or more parcels of ORE which are carried on the Bank's books or which have resulted in a loss to the Bank; unless a majority of the Bank's board of directors first (i) determines that such advance is in the best interest of the Bank, (ii) determines that the Bank has satisfied the requirements set out in paragraph 5 of this ORDER as to such borrower, and (iii) approves such advance. A written record of the board of directors' determination and approval of any advance under the terms of this paragraph shall be maintained in the credit file of the affected borrower(s) as well as the minutes of the board of directors. The requirements of this paragraph do not prohibit the Bank from renewing any credit already extended to the borrower.

    [.9] 8. (a) No more than 30 days from the effective date of this ORDER, the Bank shall develop a written profit 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 assumptions that form the basis for, and adequately support, major projected income and expense components.
       (b) The written profit plan and any subsequent modification thereto shall be submitted to the Regional Director for review and comment. No more than 30 days after
    {{12-31-91 p.C-1554}}the receipt of any comment from the Regional Director, the board of directors shall approve the written profit plan and any subsequent modification thereto, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall follow the written profit plan and/or any subsequent modification thereto.

   [.10] 9. The Bank shall not pay or declare any cash dividends without the prior written consent of the Regional Director and the Commissioner which shall not be unreasonably withheld or delayed.

   [.11] 10. Following the effective date of this ORDER, the Bank shall send to its shareholders a description of this ORDER, (a) in conjunction with the Bank's next shareholder communication, and also (b) in conjunction with its notice or proxy statement preceding the Bank's next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, statement, or notice shall be sent to the FDIC, Registration and Disclosure Section, 550 - 17th Street, N.W., Washington, D.C. 20429, for review at least 20 days prior to dissemination to shareholders. Any changes requested to be made by the FDIC shall be made prior to dissemination of the description, communication, notice, or statement.

    [.12] 11. (a) No more than 60 days from the effective date of this ORDER, the Bank shall correct the technical exceptions on loans noted on pages 2-d through 2-d-2 of the FDIC's Report of Examination of the Bank as of February 15, 1991. For any technical exception with respect to which correction is not accomplished due to the conduct and/or condition of the borrower outside the reasonable control of the Bank, the Bank shall promptly correct the technical exception when such conduct or condition no longer exists. For any technical exception for which correction is not accomplished, the Bank's board of directors shall maintain in its minutes, and include in the appropriate individual credit file, a written record of all actions taken by the Bank to correct such technical exception, including an express description of the conduct and/or condition of the borrower which is outside the reasonable control of the Bank.
       (b) No more than 60 days from the effective date of this ORDER, the Bank shall correct the cited deficiencies in the loans listed for "Special Mention" on pages 2-b through 2-b-3 of the FDIC's Report of Examination of the Bank as of February 15, 1991.

   [.13] 12. No more than 60 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law and regulations allegedly committed by the Bank as described on page 6-1 of the FDIC's Report of Examination of the Bank as of February 15, 1991.

   [.14] 13. The Bank shall furnish written progress reports to the Regional Director and the Commissioner detailing the form and manner of any action taken to secure compliance with this ORDER and the results thereof every 90 days, beginning on or before January 30, 1992. In addition, the Bank shall furnish such reports on request of the Regional Director or the Commissioner. All progress reports and other written responses to this ORDER shall be reviewed by the board of directors of the Bank and made a part of the minutes of the board meeting.
   This ORDER shall become effective 10 days from the date of its issuance.
   The provisions of this ORDER shall be binding upon the Bank and its institution-affiliated parties, successors and assigns.
   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.
   Dated this 7th day of October, 1991.
   Pursuant to delegated authority.

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