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FDIC Enforcement Decisions and Orders

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{{3-31-94 p.C-2339}}
   [10,551] In the Matter of Lyndonville Savings Bank and Trust Company, Lyndonville, Vermont, Docket No. FDIC-92-159b (5-28-92).

   Bank agrees not to extend credit to or engage in any financial transaction with a specific institution-affiliated party without FDIC approval.

   [.1] Loans—To Named Individual—Restrictions
   [.2] Loans—To Named Individual—Quarterly Status Reports to FDIC

In the Matter of

LYNDONVILLE SAVINGS BANK
AND TRUST COMPANY

LYNDONVILLE, VERMONT
(Insured State Nonmember Bank)
ORDER

   Lyndonville Savings Bank and Trust Company, Lyndonville, Vermont ("Bank"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices that the Bank was alleged to be about to commit as to any future extension of credit to, or a financial transaction with one Paul J. Gallerani, or his related interests, 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 PURSUANT TO SECTION 8(b) OF THE FEDERAL DEPOSIT INSURANCE ACT ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated May 28, 1992, whereby solely for the purpose of this proceeding and without admitting or denying any unsafe or unsound banking practices, the Bank consented to the issuance of an ORDER ("ORDER") by the FDIC.
   The FDIC considered the matter and determined that it had reason to believe that the Bank was about to engage in unsafe or unsound banking practices were it to extend credit to, or enter into a financial transaction with one Paul J. Gallerani, or his related interests. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER

   IT IS ORDERED that the Bank and its institution-affiliated parties shall not:

   [.1] (a) approve, purchase, grant, make, commit to or fund any loan or other extension of credit, or re-write or renew any {{3-31-94 p.C-2340}}existing loan or extension of credit, directly or indirectly, to or from Paul J. Gallerani or to his related interests, unless the loan or other extension of credit does not involve more than the normal risk of repayment or present other unfavorable features and has been approved in advance by a majority of the Bank's entire Board of Directors and, after written notification to the Regional Director of the FDIC's Boston Regional Office ("Regional Director"), the Bank has obtained the written nonobjection of the Regional Director or his designee;
   (b) enter into, participate in, or in any other manner engage in, directly or indirectly, any financial transaction with Paul J. Gallerani or his related interests, unless the financial transaction has been approved in advance by a majority of the Bank's Board of Directors and, after written notification to the Regional Director, the Bank has obtained the written nonobjection of the Regional Director or his designee.
   IT IS FURTHER ORDERED that the Bank and its directors and executive officers take the following affirmative action:

   [.2] The Bank shall prepare, each calendar quarter, a written report that provides current information on all outstanding relationships, direct or indirect, with Paul J. Gallerani. Such information shall include, at a minimum: (1) the borrower's name, (2) the loan account number, (3) the current balance of the loan, (4) the principal and/or interest "paid to" date, (5) if delinquent as to principal or interest, the number of days overdue and (6) the scheduled maturity of the loan, as well as any other material changes in the lending relationship not specifically listed previously.
   For purposes of this ORDER, the terms:

       (i) "institution-affiliated party" shall be defined as set forth Section 3(u) of the Federal Deposit Insurance Act, 12 U.S.C. § 1813(u);
       (ii) "loan or other extension of credit" shall be defined as set forth in Section 215.3 of Regulation O of the Board of Governors of the Federal Reserve System ("Regulation O"), 12 C.F.R. § 215.3;
       (iii) "related interest" shall be defined as set forth in Section 215.2 of Regulation O, 12 C.F.R. § 215.2;
       (iv) "financial transaction" may include, but is not limited to: the transfer, purchase or sale of any asset, or any contractual agreement for services; provided, however, the term "financial transaction" shall not include the standard and ordinary use of a bank savings and/or checking account or purchase of a certificate of deposit; and
       (v) "executive officer" shall be defined as set forth in Section 215.2 of Regulation O.
   This ORDER shall become effective ten (10) days from the date of its issuance.
   The provisions of this ORDER shall be binding upon the Bank and its institution-affiliated parties.
   This ORDER has been reviewed and concurred in by the State Supervisor.
   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 at Needham, MA, this 28th day of May, 1992.
   Pursuant to delegated authority.

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