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FDIC Enforcement Decisions and Orders

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   [10,397] In the Matter of River Bank America, New Rochelle, New York, Docket No. FDIC-91-394b (12-5-91).

   Bank to cease and desist from such unsafe or unsound practices as operating with management policies detrimental to the Bank; operating with inadequate capital; failing to establish and follow adequate lending, investment, and funds management policies; operating with excessive volumes of adversely classified assets; following hazardous lending and lax collection practices; extending credit which is inadequately secured and without sufficient documentation; operating with excessive concentrations of credit; operating without adequate reserve for loan losses; operating without adequate liquidity and proper regard for funds management; operating in such a manner as to produce unsatisfactory earnings; operating with excessive reliance on brokered deposits and volatile funding; operating in violation of applicable laws or regulations; and operating with inadequate routine and controls policies.

   [.1] Capital Plan—Tier 1 Capital—Increase/Maintain—Methods
   [.2] Dividends—Restricted
   [.3] Assets—Adversely Classified—Eliminate/Reduce
   [.4] Loans—Extensions of Credit—Existing Borrowers—Curtail
   [.5] Assets—Problem Assets—Individual Written Plans
   [.6] Assets—Problem Assets—Review of Plans
   [.7] Loans—Special Mention—Correct Deficiencies
   [.8] Loans—Documentation Review Required
{{2-29-92 p.C-1726}}
   [.9] Strategic Plan—Preparation Required
   [.10] Lending and Collection Policy—Revision Required
   [.11] Loans—Concentrations of Credit—Written Policy Required
   [.12] Liquidity and Funds Management—Written Policy Required
   [.13] Brokered Deposits—Acceptance Limited
   [.14] Violations of Law—Eliminate/Correct
   [.15] Management—Qualifications—Review
   [.16] Board of Directors—Committee to Evaluate Management
   [.17] Bank Operations—Internal Routine and Controls—Written Policy Required
   [.18] Board of Directors—Committee to Review Compliance with Cease and Desist Order
   [.19] Shareholders—Disclosure—Cease and Desist Order
   [.20] Compliance Reports—Frequency

In the Matter of

RIVER BANK AMERICA
NEW ROCHELLE, NEW YORK
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

   River Bank America, New Rochelle, New York ("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 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 ("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 December 5, 1991, whereby, solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and 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 violations of law and regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that River Bank America, New Rochelle, New York, its successors, assigns, directors, officers, employees, agents, and other "institution-affiliated parties", as 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 and violations of law and regulations:

       (a) Operating the Bank with management policies and practices which are detrimental to the Bank and jeopardize the safety of its deposits;
       (b) Operating the Bank with a level of Tier 1 capital which is inadequate in relation to the kind and quality of its assets;
       (c) Failing to establish and follow adequate lending, investment, and funds management policies;
       (d) Operating the Bank with an excessive level of adversely classified assets;
       (e) Engaging in hazardous lending and lax collection practices;
       (f) Extending credit which is inadequately secured and without adequate and appropriate supporting documentation;
       (g) Operating the Bank with excessive concentrations of credit;
       (h) Failing to provide an adequate reserve for loan and lease losses;
       (i) Operating the Bank without adequate liquidity and proper regard for funds management;
       (j) Operating the Bank in such a manner as to produce unsatisfactory earnings;
    {{2-29-92 p.C-1727}}(k) Operating the Bank with an excessive reliance upon brokered deposits and volatile funding;
       (l) Engaging in violations of applicable laws and regulations as more fully set forth on pages 6-a through 6-a-2 of the Report of Examination of the Bank by the FDIC as of February 11, 1991, and on page 10 of the Report of Examination of the Bank by the New York State Department of Banking as of December 31, 1990; and
       (m) Operating the Bank without establishing and following acceptable internal routine and controls.
   IT IS FURTHER ORDERED, that River Bank America, New Rochelle, New York, its successors, assigns, directors, officers, employees, agents and other institution-affiliated parties, take AFFIRMATIVE action as follows:

   [.1] 1. Within 90 days from the effective date of this ORDER, the Bank shall submit a capital plan to the Regional Director of the New York Regional Office of the FDIC ("Regional Director") and the Superintendent of Banks of the New York State Banking Department ("Superintendent"), which provides for:

       (a) Recapitalizing the Bank so as to increase the ratio of its Tier 1 capital to its total assets ("Tier 1 capital ratio") to not less than 6.0 percent by September 30, 1992, and thereafter maintain that ratio. For the purposes of this ORDER, the terms "Tier 1 capital" and "total assets" shall have the meanings ascribed to them in Part 325 of the FDIC's Rules and Regulations, respectively, in subsections 325.2(m) and (n), 56 Fed. Reg. 10,154, 10,161 (1991) (to be codified at 12 C.F.R. §§ 325.2(m) and (n)). The 6.0 percent Tier 1 capital ratio required by this paragraph 1(a) is dependent upon the Bank achieving compliance with the ratio requirements of paragraph 6(a) of this ORDER. Therefore, if the Bank is not in compliance with the requirements of paragraph 6(a) of this ORDER as of September 30, 1992 and/or June 30, 1993, the Bank shall forthwith be required to achieve a greater Tier 1 capital ratio. Such additional capital requirements shall be determined by the FDIC, giving consideration to the asset quality and condition of the Bank, each time that the Bank is not in compliance with the requirements of paragraph 6(a) of this ORDER.
       (b) Exploring all methods and opportunities for achieving the Tier 1 capital ratio levels set forth and provided for in paragraph 1(a), including, but not limited to: conversion of the Bank's outstanding preferred stock and/or subordinated notes to securities which constitute Tier 1 capital; asset sales; downsizing of the Bank; the sale of subsidiaries; income retention; the sale of portions of the Bank's deposits; the direct contribution of cash by the directors; the sale of common stock or non-cumulative perpetual preferred stock without regard to any diminution in the value of stock presently held by any stockholder; merger or consolidation; private investor acquisition or investment; or any combination of the above or alternative means acceptable to the FDIC and the Superintendent. Upon receipt of a written approval or statement of nonobjection from the Regional Director and the Superintendent, the revised capital plan shall forthwith be adopted and implemented.
       2. (a) If all or part of the increase in Tier 1 capital required by paragraph 1(a) of this ORDER is accomplished by the sale of new securities, the board of directors of the Bank shall forthwith adopt and implement a plan for the sale of such additional securities, including voting any shares owned or proxies controlled by them in favor of the plan. Should the implementation of the plan involve a public distribution of Bank securities (including a distribution limited only to the Bank's existing shareholders), the Bank shall prepare offering materials fully describing the securities being offered, including an accurate description of the financial condition of the Bank and the circumstances giving rise to the offering, and any other material disclosures necessary to comply with State and Federal securities laws. Prior to the implementation of the plan, and in any event not less than 20 days prior to the dissemination of such materials, the plan and any materials used in the sale of the securities shall be submitted to the FDIC, Registration and Disclosure Section, Washington, D.C., 20429, and to the New York State Banking Department ("NYSBD") for review. Any changes requested to be made in the of- {{2-29-92 p.C-1728}}fering plan or materials by the FDIC or the NYSBD shall be made prior to their dissemination. If any part of the increase in Tier 1 capital is provided by the sale of or conversion to noncumulative perpetual preferred stock, then all terms and conditions of the issue, including but not limited to those terms and conditions relative to interest rate and any convertibility factor, shall be presented to the Regional Director and the NYSBD for prior approval.
       (b) In complying with the provisions of paragraph 2(a) of this ORDER, written notice shall be provided by the Bank to any subscriber and/or purchaser of Bank securities detailing any planned or existing development or other change which is materially different from the information reflected in any offering material used in connection with the sale of Bank securities. The written notice required by this paragraph shall be furnished within 10 calendar days from the date such material development or change was planned or occurred, whichever is earlier, and shall be furnished to every purchaser and/or subscriber of Bank securities who received or was tendered the information contained in the Bank's original offering materials.
   3. By the thirtieth day of each calendar quarter, the Bank shall provide the Regional Director and the Superintendent with a progress report, in form and content acceptable to the Regional Director and the Superintendent, discussing in detail all capitalraising alternative explored pursuant to paragraph 1(b) of this ORDER. The progress report shall include, but not be limited to, information about third parties contacted, and other relevant information which would assist the FDIC and the NYSBD in evaluating the Bank's actions and progress in achieving and maintaining the capital ratio levels set forth in paragraph 1(a) of this ORDER.

   [.2] 4. While this ORDER is in effect, the Bank shall not declare or pay either directly or indirectly any dividends, whether in cash, stock, or otherwise, on its common stock, without the prior written consent of the Regional Director and the Superintendent.

   [.3] 5. (a) Within 10 days from the effective date of this ORDER, the Bank shall eliminate from its books, by collection, charge-off, or other proper entry, all assets or portions of assets classified "Loss" and 50 percent of all assets or portions of assets classified "Doubtful" by the FDIC or the NYSBD as a result of their examinations of the Bank as of February 11, 1991 and December 31, 1990, respectively, which have not been previously charged off or collected. In addition, and so long as this ORDER remains in effect, the Bank shall, within 30 days of the receipt of any subsequent Report of Examination of the Bank from the FDIC or the NYSBD, eliminate from its books, by collection, charge-off, or other proper entry, all assets or portions of assets classified "Loss" and 50 percent of all assets or portions of assets classified "Doubtful" in said Report of Examination. Elimination of these assets through the use of proceeds of loans or other extensions of credit made by the Bank does not constitute collection for the purposes of this paragraph 5(a).
   (b) Within 60 days from the effective date of this ORDER, the Bank's board of directors shall adopt a method of computing the balance of the Bank's reserve for loan and lease losses that gives consideration to the volume and composition of the loan portfolio not subject to criticism, as well as to the volume and composition of assets which are subject to criticism, whether by any bank regulatory agency or by the Bank as a result of its internal reviews of assets. Thereafter, the Bank's board of directors shall, during the first month of each quarter, reevaluate the reserve for loan and lease losses and make such additional provisions for loan and lease losses that are, in the judgement of the board, necessary to maintain the reserve at an adequate level relative to the volume of risk of the Bank's loan portfolio. All such additional provisions for loan and lease losses shall be made in the first month of the calendar quarter in which the deficiency in the reserve is identified, but as of the end of the preceding calendar quarter, and shall be reflected in the Report of Condition and the Report of Income filed in the calendar quarter in which the deficiency in the reserve is identified. The minutes of the board of directors of the bank shall reflect that such reevaluation has been performed, and documentary proof of the method employed in determining the level of the reserve shall be maintained for future regulatory review.
   (c) All increases in the reserve for loan and lease losses, with the exception of
{{2-29-92 p.C-1729}}recoveries credited directly to the reserve, shall be accomplished by charges to operating earnings through the provision for loan and lease losses.
   6. (a) By September 30, 1992, the Bank shall reduce the remaining total of all assets classified "Doubtful" and "Substandard" by the FDIC and the NYSBD as a result of their examinations of the Bank as of February 11, 1991 and December 31, 1990, respectively, to not more than 150 percent of total equity capital and reserves and, subsequently, the Bank shall reduce the total of such assets to not more than 100 percent of total equity capital and reserves by June 30, 1993.
   (b) The requirements of this paragraph 6 shall not be construed as a standard for future operations of the Bank. In addition to accomplishing the foregoing schedule of reductions, the Bank shall eventually reduce all adversely classified assets of the Bank.
   (c) As used in paragraphs 6(a) and 6(b) of this ORDER, the word "reduce" means (1) to collect, (2) to charge-off or eliminate by other proper entry, or (3) to improve the quality of adversely classified assets sufficiently to warrant removing any adverse classification, as determined by the FDIC and the NYSBD. Reduction of these assets through the use of the proceeds of loans or other extensions of credit made by the Bank does not constitute collection for the purposes of paragraph 6(a) and 6(b) of this ORDER.

   [.4] 7. (a) Immediately upon the effective date of this ORDER, and notwithstanding any other provision of this ORDER, the Bank shall not extend, either directly or indirectly, any new or additional credit (which, for the purposes of this ORDER, shall include the granting of renewals or extensions, or the capitalizing of accrued interest) to, or for the benefit of, any borrower who is obligated in any manner to the Bank on any extension of credit, or portion thereof, which has been charged off the books of the Bank in whole or in part, or to any affiliate or related interest of any such borrower, so long as any portion of such extension of credit, whether or not that portion was charged off, remains uncollected. The provisions of this paragraph 7(a) shall not apply to the advance of funds by the Bank for the sole purpose of maintaining or protecting the Bank's real estate collateral for any extension of credit, if:

       (i) the Bank's failure to advance such funds would be substantially detrimental to the best interests of the Bank;
       (ii) a comparison with the written program adopted pursuant to paragraph 8 of this ORDER shows that the Bank's formal program to eliminate the basis of criticism of said criticized asset is not compromised; and
       (iii) prior to advancing any funds, a majority of the Bank's full board of directors approves the extension of credit and certifies, in writing, the specific reasons why failure to so act would be substantially detrimental to the best interests of the Bank. A copy of the board of director's certification shall be maintained in the credit file of the classified borrower, and shall also be submitted promptly to the Regional Director and the Superintendent.
   (b) Immediately upon the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any new or additional credit to or for the benefit of any borrower who is obligated in any manner to the Bank on any loan or other extension of credit that has been adversely classified, in whole or in part, by the FDIC or the NYSBD as a result of their examinations of the Bank as of February 11, 1991 and December 31, 1990, respectively, or as a result of any subsequent examination of the Bank by the FDIC or the NYSBD, or to any affiliate or related interest of any such borrower ("classified borrower"), so long as such loan or other extension of credit remains classified or uncollected. This paragraph 7(b) shall not prohibit the Bank from renewing all or any part of an extension of an extension of credit to a classified borrower who is not subject to the prohibitions of paragraph 7(a) of this ORDER, after collection in cash of interest due on the entire extension of credit. The prohibitions of this paragraph 7(b) shall not apply to any extension of credit to a classified borrower who is not subject to the prohibitions of paragraph 7(a) of this ORDER, if:
       (i) the Bank's failure to extend further credit to a classified borrower would
    {{2-29-92 p.C-1730}}be substantially detrimental to the best interests of the Bank;
       (ii) a comparison with the written program adopted pursuant to paragraph 8 of this ORDER shows that the Bank's formal program to eliminate the basis of criticism of said criticized asset is not compromised; and,
       (iii) prior to extending any credit, a majority of the Bank's full board of directors approves the extension of credit and certifies, in writing, the specific reasons why failure to so act would be substantially detrimental to the best interests of the Bank. A copy of the board of director's certification shall be maintained in the credit file of the classified borrower, and shall also be submitted promptly to the Regional Director and the Superintendent.

   [.5] 8. Within 60 days from the effective date of this ORDER, the Bank's board of directors shall adopt and implement a written program for each problem asset. Subsequent to the effective date of this ORDER, within 30 days after any asset of the Bank becomes a problem asset, the board of directors of the Bank shall adopt and implement a written program for each such problem asset. For the purposes of this ORDER, a "problem asset" means any asset (including any unfunded commitment) which exceeds $3,000,000 and:
       (a) Has been adversely classified or listed for "Special Mention" by the FDIC or the NYSBD as a result of their examinations of the Bank as of February 11, 1991 and December 31, 1990, respectively, or is adversely classified or listed for "Special Mention" by either the FDIC or the NYSBD as a result of any subsequent examination of the Bank; or
       (b) Has been accorded a sub-investment quality rating and/or has been designated a work-out or watch list asset, or some equivalent designation, as the result of an internal asset review and rating procedure performed by the Bank or by another party on behalf of the Bank; or
       (c) Is past due in excess of 120 days and/or has been placed in either a nonaccrual or nonearning status by the Bank; or
       (d) Has been partially charged off.
   Such program shall include, at a minimum, an assessment of the status of each problem asset, the proposed action to eliminate the cause or causes of the asset's being a problem asset, and the time frame for its accomplishment. Once adopted, a copy of each program shall be submitted to the Regional Director and the Superintendent together with the progress reports required pursuant to paragraph 23 of this ORDER.

   [.6] 9. (a) The Bank's board of directors shall conduct a review of each program adopted pursuant to paragraph 8 of this ORDER at least once in each month, to determine:

       (i) the status of each problem asset;
       (ii) management's adherence to each written program;
       (iii) the status and effectiveness of each written program; and
       (iv) the need to revise each written program and/or take other actions.
   The results of such review shall be included in the minutes of the Bank's board of directors.
   (b) The board shall send quarterly progress reports to the Regional Director and the Superintendent on the status of each problem asset equal to or exceeding $5,000,000 together with the progress reports required pursuant to paragraph 23 of this ORDER, and shall include in such reports a general summary of the programs for problem assets which do not exceed $5,000,000.

   [.7] 10. Within 60 days from the effective date of this ORDER, the Bank shall take all necessary steps to eliminate all deficiencies noted in all assets listed for "Special Mention" on pages 2-c through 2-c-2 of the Report of Examination of the Bank by the FDIC as of February 11, 1991 and on supplemental pages 3 of the Report of Examination of the Bank by the NYSBD as of December 31, 1990. Within 60 days after receipt of each subsequent Report of Examination from the FDIC or the NYSBD, the Bank shall take all necessary steps to eliminate all deficiencies noted in all assets scheduled as "Special Mention" in each such report.

   [.8] 11. (a) Within 90 days from the effective date of this ORDER, the Bank shall complete a review of its files for all loans and/or real estate development investments to the same or related, affiliated, or associated borrowers which total more than $5,000,000 as to any such borrower or related, affiliated, or associated borrow- {{2-29-92 p.C-1731}}ers, to determine whether the documentation and financial statements provided by guarantors and developers to the Bank and upon which the Bank is relying in support of such extensions of credit are comprehensive in all respects, including, to the extent possible, full balance sheets, income statements, cash flow statements, and contingencies, all prepared by a certified public accountant in accordance with generally accepted accounting principles, and which include all financial obligations and information about the borrower and/or guarantor and not just a compilation of selected information.
   (b) Immediately upon discovering that any of the foregoing required documentation or any other financial information which would support an extension of credit is missing, the Bank shall take such action as it reasonably necessary to ensure that such documentation and/or information is forthwith provided to the Bank.

   [.9] 12. (a) Within 75 days from the effective date of this ORDER, the board of directors of the Bank shall formulate its 1992 Strategic Plan, covering the three years ending December 31, 1994, to incorporate therein and take into account the findings of the FDIC and NYSBD examinations of the Bank as of February 11, 1991 and December 31, 1990, respectively. Immediately subsequent to the formulation thereof, the board shall submit to the Regional Director and the Superintendent a copy of the strategic plan ("Plan") for the Bank. At a minimum, the Plan shall establish objectives for the Bank's earnings performance, growth, balance sheet mix, liability structure, capital adequacy, and reduction in the volume of nonperforming and underperforming assets, together with strategies for achieving those objectives. The Plan shall also identify capital, funding, managerial, and other resources needed to accomplish its objectives. Such Plan shall also specifically provide for the following:

       (i) the Bank shall not engage in nor shall it permit any subsidiary to engage in any new construction lending other than (1) fulfilling legally binding commitments which are outstanding on the effective date of this ORDER and (2) constructing one-to-four family units which are already subject to a legally binding contract of sale on the date of the commitment;
       (ii) the Bank shall not engage in nor shall it permit any subsidiary to engage in any new commercial business lending which is related to real estate development activities, other than any such commercial business lending as to which the Bank is subject to a legally binding commitment which is outstanding on the effective date of this ORDER;
       (iii) the Bank shall not engage in nor shall it permit any subsidiary to engage in any new cooperative housing conversion lending, other than any such cooperative housing conversion lending as to which the Bank is subject to a legally binding commitment which is outstanding on the effective date of this ORDER; and
       (iv) the Bank shall not engage in nor shall it permit any subsidiary to engage in financing any new "highly leveraged transactions", as that term is defined in the appendix to the joint request for public comment on the Supervisory Definition of Highly Leveraged Transactions, 56 Fed. Reg. 31464, 31465 (July 10, 1991), other than any such highly leveraged transaction financing as to which the Bank is subject to a legally binding commitment which is outstanding on the effective date of this ORDER.
       (v) the limitations and prohibitions of paragraphs 12(a)(i) through 12(a)(iv) of this ORDER shall not prevent the Bank from being able to (1) make such advances of funds which are specifically permitted by paragraph 7 of this ORDER, and (2) make extensions of credit to facilitate the sale of real estate collateral held by the Bank as Other Real Estate ("ORE") to a third party which is not affiliated with or a related interest of any borrower whose real estate collateral has become the ORE which is being sold, provided that the Bank's board of directors first determines that the third party is creditworthy and fully capable of repaying any such extension of credit. Written evidence of the basis for such determination shall be maintained in the credit file of the third party.
       (b) The Bank shall submit, in conjunc- {{2-29-92 p.C-1732}}tion with the Plan submitted pursuant to paragraph 12(a) of this ORDER, financial projections for a period covering at least two years. Additionally, by the forty-fifth day of each subsequent calendar quarter, the Bank shall provide to the Regional Director and the Superintendent a detailed analysis of the extent to which the Bank has achieved the submitted projections and the reasons therefor, together with appropriate supporting documentation. By February 15 of each year, while this ORDER remains in effect, the Bank shall submit updated financial projections for the ensuing two year period.
       (c) Upon receipt of written approval or a statement of nonobjection from the Regional Director and the Superintendent, the Plan submitted pursuant to paragraph 12(a) of this ORDER shall be forthwith adopted and implemented by the Bank's board of directors.

   [.10] 13. Within 90 days from the effective date of this ORDER, the Bank's board of directors shall revise, adopt, and implement written lending and collection policies and procedures to provide effective guidance and control over the lending function of the Bank. Immediately subsequent to adoption by the board of the revised policies, a copy of each such policy shall be provided to the Regional Director and the Superintendent. At a minimum, the policies shall include the following:
   (a) Standards for all applications for credit which shall include, at a minimum:
       (i) financial statement requirements;
       (ii) credit analysis requirements;
       (iii) loan purpose statement requirements;
       (iv) identification of repayment sources (primary and secondary);
       (v) realistic repayment plan requirements;
       (vi) collateral requirements; and
       (vii) documentation requirements.
   (b) Effective loan administration, servicing, and collection procedures including, at a minimum:
       (i) lending limits for specific officers and loan amounts requiring board of directors approval;
       (ii) appropriate control and periodic review of collateral;
       (iii) requirements for maintaining current information, including financial data, in credit files;
       (iv) appraisal and inspection standards, and guidelines for performing reappraisals and reinspections;
       (v) follow-up procedures on maturing and delinquent loans; and
       (vi) accurate reporting of delinquencies to the board of directors on a monthly basis.
   (c) A loan review system which will effectively identify, categorize, and report problem credits to the board of directors. Such reports shall, at a minimum, include the following information:
       (i) the overall quality of the loan portfolio;
       (ii) the identification, type and amount of problem loans;
       (iii) the identification and amount of delinquent loans;
       (iv) credit and collateral documentation exceptions; and
       (v) the identification and status of violations of law or regulations.

   [.11] 14. (a) Within 60 days from the effective date of this ORDER, the Bank's board of directors shall revise, adopt, and implement a written policy which shall establish appropriate guidelines for the commitment of the Bank's funds in amounts which exceed 10 percent of the Bank's total equity capital and reserves. Such policy shall at a minimum address loans or investments or any other assets of the Bank categorized by concentrations to obligors, industries, product lines, geographic locales, or by type of collateral. Immediately subsequent to adoption by the Bank's board of directors, copies of the policy shall be provided to the Regional Director and the Superintendent.
   (b) Within 60 days from the effective date of this ORDER, the Bank shall submit a plan to the Regional Director and the Superintendent for the reduction of the geographic concentration of credit as specified on page 2-b of the Report of Examination of the Bank by the FDIC as of February 11, 1991.

   [.12] 15. Within 90 days from the effective date of this ORDER, the Bank's board of directors shall revise, adopt, and implement written policies and procedures for investments, liquidity, and funds management. Immediately subsequent to adoption
{{2-29-92 p.C-1733}}by the board of the revised policies and procedures, a copy of each such policy and procedure shall be provided to the Regional Director and the Superintendent. At a minimum, these policies and procedures shall specifically address the deficiencies detailed on pages 6-b through 6-b-9 of the FDIC Report of Examination of the Bank as of February 11, 1991 and shall provide for:

       (a) Monthly management reporting to the board of directors;
       (b) Realistic, quantified, guidelines for liquidity and interest rate sensitivity positions; and
       (c) Interest rate sensitivity strategies which are flexible and will allow for adjustments to the risk positions to adapt to changing economic environments.

   [.13] 16. Immediately upon the effective date of this ORDER, the Bank shall not accept, renew or rollover any "brokered deposits," as defined in section 337.6(a)(1) of the FDIC's Rules and Regulations, 12 C.F.R. § 337.6(a)(1), other than in accordance with the requirements of 12 C.F.R. §§ 337.6-.11. Within 30 days from the effective date of this ORDER, the Bank shall submit to the Regional Director and the Superintendent a written plan for eliminating its reliance on brokered deposits. The plan should contain details as to the current composition of brokered deposits by maturity and explain the means and timing by which such deposits will be reduced or eliminated. The Regional Director or the Superintendent shall have the right to reject the Bank's plan. The submission of any plan which provides for any rollover of brokered deposits shall not be construed as a request for a waiver of the prohibition on acceptance, renewal or rollover of brokered deposits, and the Bank shall submit a written request for any such waiver in accordance with the requirements of 12 C.F.R. §§ 337.6-11. By the thirtieth day of each calendar quarter, the Bank shall provide a written progress report to the Regional Director and the Superintendent detailing the level, source and use of brokered deposits with specific reference to progress under the Bank's plan.

   [.14] 17. Within 30 days from the effective date of this ORDER, the Bank shall eliminate or correct all violations of law and regulations, as described on pages 6-a through 6-a-2 of the Report of Examination of the Bank by the FDIC as of February 11, 1991, exclusive of the violation of section 325.3(b) of the FDIC's Rules and Regulations cited on page 6-a-1 of said Report. That violation of section 325.3(b), together with the violation of section 325.3(b) cited on page 10 of the Report of Examination of the Bank by the NYSBD as of December 31, 1990, shall be corrected as provided for in paragraph 1 of this ORDER. In addition, within 30 days from the effective date of this ORDER, the board of directors of the Bank shall adopt and implement specific procedures to ensure future compliance with all applicable laws and regulations. Such procedures shall include, but not be limited to, the designation of a qualified compliance officer, who shall be responsible for making the Bank aware, on a continuing basis, of all applicable laws and regulations, and for ensuring compliance therewith. A copy of these procedures shall be forwarded to the Regional Director and the Superintendent.

   [.15] 18. The Bank shall have and retain sufficient qualified management and qualified staff. Each member of management and of staff shall have qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications and sufficiency of management and of staff shall be assessed on their ability, commensurate with their duties and responsibilities, to:

       (a) Comply with the requirements of this ORDER;
       (b) Operate the Bank in a safe and sound manner;
       (c) Comply with applicable laws and regulations; and
       (d) Restore all aspects of the Bank to a safe and sound condition, including capital adequacy, asset quality, management effectiveness, earnings and liquidity.

   [.16] 19. (a) To facilitate having and retaining qualified management, the Bank's board of directors shall, within 15 days from the effective date of this ORDER, appoint a committee with at least three members, composed of directors, the majority of whom are not now and have never been involved in the daily operations of the Bank ("Outside Directors"), and whose composition is acceptable to the Regional Director and the Superintendent (the "Committee". The Committee shall, immediately upon being appointed, undertake an in-depth analysis of the Bank's
{{2-29-92 p.C-1734}}managerial requirements. This analysis shall include a review of the board of directors, its committee structure, senior management, and the overall staffing resources and needs of the Bank. The analysis shall also include a review of the composition, policies, and practices of current operating management, consideration of whether current operating management should be changed, and consideration of the terms and conditions under which current operating management should be continued.
       (b) Within 60 days from the effective date of this ORDER, the Committee shall prepare and present to the board of directors of the Bank a written report of its findings and recommendations. The board of directors of the Bank shall review the Committee's report and evaluate its current management in light of such report and shall take whatever action is necessary to implement its determinations. A copy of the Committee's report, as well as the board of directors' evaluations, determinations, and implementing actions, shall be submitted to the Regional Director and the Superintendent within 90 days from the effective date of this ORDER.
       (c) As part of the in-depth analysis conducted pursuant to paragraphs 19(a) and 19(b) of this Order, the Committee shall review the appropriateness of salaries, fees, bonuses, and retainers paid to directors and officers of the Bank, in the context of market criteria, the Bank's ability to pay and its overall financial condition.

   [.17] 20. Within 90 days from the effective date of this ORDER, the Bank's board of directors shall revise, adopt, and implement written policies and procedures to provide effective guidance and control over the internal routine and controls of the Bank, in accordance with safe and sound banking practices. Among other provisions, the revised policies and procedures shall specifically provide for correction of all internal routine and control deficiencies cited on pages 6-b through 6-b-9 of the FDIC's Report of examination of the Bank as of February 11, 1991 and on page 15 of the NYS-BD's Report of Examination of the Bank as of December 31, 1990. Immediately subsequent to adoption by the board of the revised policies and procedures, a copy of each such policy and procedure shall be provided to the Regional Director and the Superintendent.

   [.18] 21. Within 30 days from the effective date of this ORDER, the Bank's board of directors shall appoint a committee (the "Compliance Committee") with at least three members, composed of directors, at least two-thirds of whom are Outside Directors, and whose composition is acceptable to the Regional Director and the Superintendent, to monitor the Bank's compliance with this ORDER. Within 30 days from the effective date of this ORDER, and at monthly intervals thereafter, the Committee shall prepare and present to the Bank's board of directors a written report of its findings, detailing the form, content, and manner of any action taken to secure compliance with this ORDER and the results thereof, and any recommendations with respect to such compliance. Such progress reports shall be included in the minutes of the Bank's board of directors.

   [.19] 22. Following the effective date of this ORDER, the Bank shall send to, or otherwise furnish, its shareholders a description of this ORDER (1) in conjunction with the Bank's next shareholder communication and (2) 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, 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.

   [.20] 23. By the thirtieth day of each calendar quarter following the effective date of this ORDER, the Bank shall furnish written progress reports to the Regional Director and the Superintendent detailing the form, content, and manner of any actions taken to secure compliance with this ORDER, and the results thereof. Such reports shall include the Compliance Committee reports prepared pursuant to paragraph 21 of this ORDER. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director and the Superintendent have,
{{2-28-93 p.C-1735}}in writing, released the Bank from making further reports.
   The effective date of this ORDER shall be 10 days from the date of its issuance.
   The provisions of this ORDER shall be binding upon River Bank America, its successors, assigns, directors, officers, employees, agents, and other institution-affiliated parties.
   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.
   Date of Issuance: December 5, 1991.
   Pursuant to delegated authority.

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