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FDIC Enforcement Decisions and Orders

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   [10,639] In the Matter of Gladstone-Norwood Trust and Savings Bank, Chicago, Illinois, Docket No. FDIC-92-279b (9-9-92).

   Bank to cease and desist from such unsafe or unsound practices as following hazardous lending and lax collection practices; operating with inadequate capital; operating in violation of applicable laws or regulations; operating with excessive volumes of adversely classified assets; operating with inadequate liquidity; engaging in speculative investment practices and operating with an inadequate investment policy; operating with inadequate allowance for loan and lease losses; paying excessive dividends; operating without proper internal routine and controls; operating with an inadequate loan policy; operating with an inadequate asset/liability policy; failing to account adequately for security trading activities; operating with inadequate policies to monitor and control asset growth; failure to keep accurate books and records; operating with management whose policies are detrimental to the Bank; and failing to provide adequate supervision over the Bank's affairs. (This order was terminated by order of the FDIC dated 8-22-94; see ¶ 15,908.)

   [.1] Capital—Tier 1 Capital—Increase/Maintain—Methods
   [.2] Management—Qualifications—Review
   [.3] Management—Management Plan—Minimum Requirements
   [.4] Board of Directors—Election—Outside Directors Added
   [.5] Dividends—Restricted
   [.6] Loans—Extensions of Credit—Existing Borrowers—Curtail
   [.7] Assets—Adversely Classified—Eliminate/Reduce
   [.8] Allowance for Loan and Lease Losses—Establish/Maintain
   [.9] Loans—Risk Position—Reduce—Written Plans Required
   [.10] Loans—Special Mention—Correct Deficiencies
   [.11] Technical Exceptions—Eliminate/Correct
   [.12] Loans—Overdue—Collection Practices
   [.13] Loan Committee—Membership, Duties
   [.14] Loan Policy—Written Revision—Minimum Requirements
   [.15] Assets—Total Assets—Limitation on Increase
   [.16] Liquidity—Written Policy—Minimum Requirements
   [.17] Violations of Law—Eliminate/Correct
   [.18] Audit—External—Notice to FDIC
   [.19] Bank Operations—Internal Controls—Correct Deficiencies
   [.20] Accounting—Accounting Practices—Correction Required
   [.21] Budget and Earnings Plan—Preparation Required
   [.22] Investment Policy—Revision—Minimum Requirements
   [.23] Shareholders—Disclosure—Cease and Desist Order
   [.24] Board of Directors—Committee to Review Compliance with Cease ad Desist Order

In the Matter of

GLADSTONE-NORWOOD TRUST
AND
SAVINGS BANK

CHICAGO, ILLINOIS
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-92-279b

   Gladstone-Norwood Trust and Savings Bank, Chicago, Illinois ("Bank"), having {{10-31-94 p.C-2692}}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 regulation alleged to have been committed by the Bank, and of its right to a hearing on the 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 August 14, 1992, whereby, solely for the purpose of this proceeding and without admitting or denying the charges of unsafe or unsound banking practices and violations of law and regulation, 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 regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:
   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 or unsound banking practices and violations of law and regulation:
   A. Engaging in inadequate and unsatisfactory lending and collection practices, including, but not limited to the following:

    — The failure to obtain proper loan documentation;
    — The failure to obtain adequate collateral;
    — The failure to establish and monitor collateral margins of secured borrowers;
    — The failure to establish and enforce adequate loan repayment programs;
    — The failure to obtain current and complete financial information; and
    — other deficient credit administration practices.
   B. Operating with an inadequate level of capital protection for the kind and quality of assets held.
   C. Violating:
   1. The collateral requirements of section 23A of the Federal Reserve Act ("section 23A"), 12 U.S.C. § 371c(c)(1);
   2. The good faith terms and circumstances requirement of section 23B of the Federal Reserve Act ("section 23B"), 12 U.S.C. § 371c-1(a)(1)(B);
   3. The requirements of sections 103.22(a)(1), 103.29(a)(1) and 103.22(d) of the Treasury Department's Regulations, 31 C.F.R. §§ 103.22(a)(1), 103.29(a)(1) and 103.22(d);
   4. The reporting requirements of section 304.4(a) of the FDIC Rules and Regulations, 12 C.F.R. § 304.4(a);
   5. The interest on deposits restrictions of section 329.2 of the FDIC Rules and Regulations, 12 C.F.R. § 329.2;
   6. The appraisal requirements of section 323.4 and 323.5 of the FDIC Rules and Regulations, 12 C.F.R. §§ 323.4 and 323.5;
   7. The annual disclosure statement and disclaimer requirements of section 350.10 of the FDIC Rules and Regulations, 12 C.F.R. § 350.10; and
   D. Operating with an excessive level of classified assets, delinquent loans, nonaccrual loans, and excessive net loan losses.
   E. Operating with inadequate liquidity.
   F. Engaging in speculative investment practices and operating with an inadequate investment policy.
   G. Operating with an inadequate allowance for loans and lease losses for the volume, kind, and quality of loans and leases held.
   H. Paying excessive dividends in relation to the Bank's capital position, earnings capacity and asset quality.
   I. Operating with inadequate internal routines and controls.
   J. Operating with an inadequate written loan policy.
   K. Operating with an inadequate written audit program.
   L. Operating with an inadequate written asset/liability policy.
   M. Failing to account for security trading activities in accordance with generally accepted accounting principles.
   N. Operating with inadequate policies to monitor and control asset growth.
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   O. Failure to keep accurate books and records.
   P. Operating with policies and practices that are detrimental to the Bank and which jeopardize the safety of the Bank's deposits.
   Q. Operating with a board of directors which fails to provide adequate supervision over and direction to the management of the Bank to prevent unsafe or unsound banking practices, and violations of law or regulation.
   IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

[.1] 1. (a) The Bank shall increase its Tier 1 capital by not less than $2,000,000 by December 31, 1992.
   (b) Within 30 days from the last day of each calendar quarter following the date of required compliance with paragraph 1(a) of this ORDER, the Bank shall determine from its Report of Condition and Income its level of Tier 1 capital as a percentage of its total assets ("capital ratio") for that calendar quarter. If the capital ratio is less than 7 percent, the Bank shall, within 60 days of the date of the required determination, increase its capital ratio to not less than 7 percent calculated as of the end of that preceding quarterly period. For purposes of this ORDER, Tier 1 capital and total assets shall be calculated in accordance with Part 325 of the FDIC Rules and Regulations ("Part 325"), 12 C.F.R. Part 325.
   (c) Any such increase in Tier 1 capital may be accomplished by the following:

       (i) The sale of common stock and noncumulative perpetual preferred stock constituting Tier 1 capital under Part 325; or
       (ii) The elimination of all or part of the assets classified "Loss" as of January 25, 1992 without loss or liability to the Bank, provided any such collection on a partially charged-off asset shall first be applied to that portion of the asset which was not charged off; or
       (iii) The collection in cash of assets previously charged off; or
       (iv) The direct contribution of cash by the directors and/or the shareholders of the Bank or its holding company; (Provided: this subparagraph does not require them to do so.) or
       (v) Any other means acceptable to the Regional Director of the Chicago Regional Office of the FDIC ("Regional Director") and Commissioner of Banks and Trust Companies for the State of Illinois ("Commissioner"); or
       (vi) Any combination of the above means.
   (d) If all or part of the increase in capital required by this paragraph is to be accomplished by the sale of new securities of the Bank, the board of directors of the Bank shall adopt and implement a plan for the sale of such additional securities, including the voting of any shares owned or proxies held by or controlled by them in favor of said plan. Should the implementation of the plan involve public distribution of the Bank securities, including a distribution limited only to the Bank's existing shareholders, the Bank shall prepare detailed 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 the 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 materials used in the sale of the securities shall be submitted to the FDIC at Washington, D.C., for its review. Any changes requested to be made in the materials by the FDIC shall be made prior to their dissemination.
   (e) In complying with the provisions of paragraph 1(d) of this ORDER, the Bank shall provide to any subscriber and/or purchaser of Bank securities written notice of any planned or existing development or other changes which are materially different from the information reflected in any offering materials used in connection with the sale of Bank securities. The written notice required by this paragraph shall be furnished within 10 calendar days of the date any material development or change was planned or occurred, whichever is earlier, and shall be furnished to every purchaser and/or subscriber of the Bank's securities who received or was tendered the {{11-30-92 p.C-2694}}information contained in the Bank's original offering materials.
   (f) The capital ratio analysis required by this paragraph shall not negate the responsibility of the Bank and its board of directors for maintaining throughout the year an adequate level of capital protection for the kind, quality and degree of market depreciation of assets held by the Bank.

[.2] 2. (a) During the life of this ORDER, the Bank shall have and thereafter retain qualified management. Each member of management shall have the qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of management shall be assessed on its ability to:

       (i) Comply with the requirements of this ORDER;
       (ii) Operate the Bank in a safe and sound manner;
       (iii) Comply with applicable laws and regulations; and
       (iv) Improve the asset quality, capital adequacy, earnings, management effectiveness, and liquidity of the Bank, so that the Bank is in a safe and sound condition.
   (b) During the life of this ORDER, the Bank shall notify the Regional Director and Commissioner in writing of any changes in the Bank's management. For purposes of this ORDER, "management" is defined as members of the board of directors and "senior executive officers," as that term is defined in section 32 of the Act ("section 32"), 12 U.S.C. § 1831(i), and section 303.14 of the FDIC Rules and Regulations ("section 303.14"), 12 C.F.R. § 303.14. 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 and section 303.14.

[.3] 3. (a) Within 60 days from the effective date of this ORDER, the Bank shall retain a bank consultant acceptable to the Regional Director and Commissioner. The consultant shall develop a written analysis and assessment of the Bank's senior executive officers, management and staffing needs of the Bank's loan department ("Management Plan"). The Management Plan shall include, at a minimum:

       (i) Identification of both the type and number of officer positions needed to properly manage and supervise 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 all Bank senior executive officers and loan department staff members 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; and
       (iv) Review executive officer compensation to ensure that salaries, bonuses, and benefits paid are commensurate with the services performed and the results attained;
       (v) A plan to recruit and hire any additional or replacement personnel with the requisite ability, experience and other qualifications to fill those officer or staff member positions identified by this paragraph of the ORDER.
   (b) The Management Plan and any subsequent modification thereto shall be submitted to the Bank's board of directors for its review, approval and any necessary modification. Upon approval of the Management Plan by the Bank's board of directors, the Management Plan shall be submitted to the Regional Director and Commissioner for review and comment upon their completion or receipt. Within 30 days from the receipt of any comment from the Regional Director and Commissioner, and after the consideration of such comments, the Bank shall approve the Management Plan or any subsequent modifications, which approval shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank, its directors, officers, and employees shall implement and follow the Management Plan and any subsequent modification.

[.4] 4. (a) Within 90 days from the effective date of this ORDER, the Bank shall add to its board of directors two new members who are independent directors.
   (b) The members of the board of directors may comply with the requirements of paragraph 4(a) of this ORDER by:
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       (i) preparing a list of independent candidates, before each shareholders' meeting at which board directors are to be elected, or before any meeting of the board of directors when there is an independent director vacancy and supporting the candidates' election;
       (ii) contacting the potential candidates to determine who is willing to serve as director;
       (iii) documenting their activities to identify and contact candidates; and
       (iv) recording in the board of directors' minutes their actions, including the documentation referenced in paragraph 4(b)(iii), in identifying, nominating and supporting independent directors for the Bank's board of directors taken pursuant to this paragraph.
   (c) For purposes of this ORDER, a person who is an independent director shall be any individual (i) who is not an officer of the Bank or any subsidiary of the Bank or any of its affiliated organizations; (ii) who does not own more than 5 percent of the outstanding shares of the Bank; (iii) who is not related by blood or marriage to an officer of or director of the Bank or to any shareholder owning more than 5 percent of the Bank's outstanding shares, and who does not otherwise share a common financial interest with such officer, director or shareholder; and (iv) who is not indebted to the Bank directly or indirectly by blood, marriage or common financial interest, including the indebtedness of any entity in which the individual has a substantial financial interest, in an amount exceeding 5 percent of the Bank's total Tier 1 capital and allowance for loan and lease losses. The addition of any new Bank directors required by this paragraph may be accomplished, to the extent permissible by state statute or the Bank's bylaws, by means of appointment or by election at a regular or special meeting of the Bank's shareholders.

   [.5] 5. As of the effective date of this ORDER, the Bank shall not declare or pay any cash dividend without the prior written consent of the Regional Director and Commissioner. Such consent by the Regional Director and Commissioner shall not be unreasonably denied.

   [.6] 6. (a) As of the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, either: (i) any borrower who is already obligated in any manner to the Bank on any extensions of credit (including any portion thereof) that has been charged off the books of the Bank or classified "Loss" so long as such credit remains uncollected; or (ii) any borrower whose loan or other credit has been classified "Substandard," "Doubtful" or is listed for Special Mention and is uncollected unless the Bank's board of directors has adopted, prior to such extension of credit, a detailed written statement giving the reasons why such extension of credit is in the interest of the Bank. A copy of the statement shall be placed in the appropriate loan file and shall be incorporated in the minutes of the applicable board of directors' meeting.

[.7] 7. As of the effective date of this ORDER, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified "Loss" and 50 percent of all assets classified "Doubtful" in the January 25, 1992 FDIC Report of Examination ("Report of Examination"), that have not been previously collected or charged off. Elimination or reduction of these assets with the proceeds of other Bank extensions of credit is not considered collection for the purpose of this paragraph.

[.8] 8. (a) Within 10 days from the effective date of this ORDER, the Bank shall have replenished its allowance for loan and lease losses ("ALLL") by an expense entry in an amount equal to those loans required to be charged off by this ORDER.
   (b) No later than September 30, 1992 the Bank shall make any necessary additional provision for loan and lease losses which, after review and consideration by the board of directors, reflects the potential for further losses in the remaining loans or leases classified "Substandard" and all other loans and leases in its portfolio.
   (c) Within 30 days from the effective date of this ORDER, Reports of Condition and Income required by the FDIC and filed by the Bank subsequent to January 25, 1992, shall have been amended and refiled if they do not reflect a provision for loan and lease losses and an ALLL which are adequate considering the condition of the Bank's loan portfolio, and {{11-30-92 p.C-2696}}which, at a minimum, incorporate the adjustments required by the above subparagraphs of this ORDER.
   (d) Prior to submission or publication of all Reports of Condition and Income required by the FDIC after the effective date of this ORDER, the board of directors of the Bank shall review the adequacy of the Bank's ALLL and accurately report the same. The minutes of the board meeting at which such review is undertaken shall indicate the findings of the review, the amount of increase in the reserve recommended, if any, and the basis for determination of the amount of reserve provided.

[.9] 9. (a) Within 90 days from the effective date of this ORDER, the Bank shall adopt and implement a written plan to reduce the Bank's risk position in each asset in excess of $75,000 which is classified "Substandard" or "Doubtful" in the Report of Examination. A copy of the written plan shall be submitted to the Regional Director and Commissioner upon its completion. 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.
   (b) Such plan shall include, but not be limited to, the following:
       (i) Dollar levels to which the Bank shall attempt to reduce each asset within 6 and 12 months from the effective date of this ORDER; and
       (ii) Provisions for the submission of monthly written progress reports to the Bank's board of directors for review and notation in minutes of the meetings of the board of directors.
   (c) 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.

   [.10] 10. Within 90 days from the effective date of this ORDER, the Bank shall correct all remediable deficiencies in the loans listed for "Special Mention" in the Report of Examination.

   [.11] 11. Within 90 days from the effective date of this ORDER, the Bank shall correct the remediable technical exceptions listed in the Report of Examination.

   [.12] 12. Within 90 days from the effective date of this ORDER, the Bank shall adopt and implement a written plan for the reduction and collection of delinquent loans. Said plan shall include, at a minimum, provisions which: (1) prohibit the extension of credit for the payment of interest; (2) delineate areas of responsibility for collectors; and (3) establish acceptable guidelines for the collection of delinquent credits. A copy of the written plan shall be submitted to the Regional Director and Commissioner upon its completion. Such plan shall include, but not be limited to the following:

       (a) Dollar levels to which the Bank shall attempt to reduce delinquencies within 3 and 6 months from the effective date of this ORDER; and
       (b) Provisions for the submission of monthly written progress reports to the Bank's board of directors for review and notation in minutes of the meetings of the board of directors.

   [.13] 13. As of the effective date of this ORDER, the Bank's loan committee shall meet at least semi-monthly, and shall include at least three directors who are not officers of the Bank. The loan committee shall, at a minimum, perform the following functions:
   (a) Evaluate, grant, and/or approve loans in accordance with the Bank's loan policy. The loan committee shall provide a thorough written explanation of any deviations from the loan policy, which statement shall address how said exceptions are in the Bank's best interest and which shall be reflected in the minutes of the corresponding committee meeting.
   (b) Review and monitor the status of repayment and collection of overdue and maturing loans, as well as all other loans that were classified "Substandard" in the Report of Examination, or that are included on the Bank's internal watch list.
   (c) Review and give prior written approval for all advances, renewals, or extensions of credit to any borrower or the borrower's related interests when the aggregate volume of credit extended to the borrower and the borrower's related interests exceeds $50,000; provided however, that such prior written approval shall {{11-30-92 p.C-2697}}not be required for (i) overdrafts or (ii) extensions of credit less than $10,000. For purposes of this ORDER the term "related interest" is defined pursuant to section 215.2(k) of Regulation O of the Board of Governors of the Federal Reserve System ("Regulation O"), 12 C.F.R. § 215.2(k).
   (d) Review all applications for new loans and renewals of existing loans to Bank directors, executive officers, and their related interests, and determine whether the credit is in conformance with the Bank's loan policy and all applicable laws and regulations. Such applications, renewals, and written opinions shall be referred to the Bank's board of directors for consideration.
   (e) Maintain written minutes of the committee meetings which include a record of the review and status of the aforementioned loans. Such minutes shall be made available at the next Bank board of directors' meeting.

       [.14] 14. (a) Within 30 days from the effective date of this ORDER, the annually thereafter, the board of directors of the Bank shall review the Bank's written loan policy and written procedures for adequacy and, based upon this review, shall make all appropriate revisions to the policy necessary to strengthen lending procedures and abate additional loan deterioration. The revised written loan policy and any subsequent modifications shall be submitted to the Regional Director and Commissioner for review and comment upon this completion.
       (b) Within 30 days from the receipt of any comments from the Regional Director and Commissioner, and after consideration of any comments, the board of directors shall approve the written loan policy and any subsequent modification thereto. The approvals shall be recorded in the minutes of a board of directors's meeting.

   [.15] 15. During the life of this ORDER, the Bank shall not increase its total assets by more than 3 percent during any calendar quarter, unless the Bank provides, at least 30 days prior to its implementation, a growth plan to the Regional Director and Commissioner. Such growth plan shall include the funding source to support the projected growth, as well as the anticipated use of funds. This growth plan shall not be implemented without the prior written consent of the Regional Director and Commissioner. For the purpose of this paragraph, "total assets" shall be defined as in the Federal Financial Institutions Examination Council's (FFIEC's) Instructions for the Consolidated Reports of Condition and Income.

[.16] 16. (a) Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement a written plan addressing liquidity and rate sensitivity objectives. Annually thereafter during the life of this ORDER, the Bank shall review this plan for adequacy and, based upon such review, shall make appropriate revisions in the plan that are necessary to strengthen funds management procedures and maintain adequate provisions to meet the Bank's liquidity and rate sensitivity needs. A copy of the revised plan shall also be submitted to the Regional Director and Commissioner upon its completion. The initial plan shall include, at a minimum, provisions:

       (i) Requiring achievement and maintenance of no less than a 30 percent liquidity ratio, as computed by the FDIC in the Report of Examination;
       (ii) Limiting of the Bank's ratio of total loans to total deposits to no more than 70 percent; the requirements of this paragraph shall not be construed as standards for future operations, and the Bank's loan to deposit ratio shall be maintained at a level consistent with prudent banking practices;
       (iii) Requiring improved rate sensitivity and gap ratios over 3-, 6-, and 12-month time horizons;
       (iv) Requiring that monthly calculations of the liquidity, rate sensitivity, and "gap" ratios, following the format utilized in regulatory reports of examination, be provided to the board of directors for review, with such review noted in the board minutes;
       (v) Requiring specific guidelines, limitations, and authority for bond trading activities;
       (vi) Establishing an acceptable range for the relationship between rate sensitive assets and rate sensitive liabilities;
       (vii) Establishing appropriate lines of credit at correspondent banks, includ- {{11-30-92 p.C-2698}}ing the Federal Reserve Bank of Chicago, that would allow the Bank to borrow funds to meet depositor demands if the Bank's other provisions for liquidity are inadequate; and
       (viii) Requiring the retention of securities and/or other identified categories of investments that can be liquidated within one day in amounts sufficient (as a percentage of the Bank's total assets) to ensure the maintenance of the Bank's liquidity posture at a level consistent with short and long term liquidity objectives.
   (b) Within 30 days from the receipt of all such comments from the Regional Director and Commissioner, and after consideration of all such comments, the Bank shall approve the plan, which approval shall be recorded in the minutes of a board of directors' meeting.

   [.17] 17. Within 90 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all remediable violations of law and regulations and contraventions of Statements of Policy listed on pages 6-c through 6-d-1 of the Report of Examination. In addition, the Bank shall maintain written procedures to ensure future compliance with all applicable laws and regulations and Statements of Policy.

    [.18] 18. (a) By June 30, 1993, the Bank shall cause a certified audit of the Bank to be performed as of December 31, 1992, by an independent public accounting firm acceptable to the Regional Director and Commissioner.
       (b) During the life of this ORDER, the Bank shall forward copies of any external audit reports required by this paragraph to the Regional Director and Commissioner within 10 days from the Bank's receipt of such reports.

   [.19] 19. Within 30 days from the effective date of this ORDER, the Bank shall correct the remediable deficiencies in internal routines and controls which are listed on pages 6-e to 6-e-2 of the Report of Examination. Additionally, policies and procedures shall be established to prevent the recurrence of any deficiency so noted.

   [.20] 20. Within 60 days of the effective date of this ORDER, the Bank shall adjust its method of accounting for the Bank's leveraged leases, other real estate and repossessed assets in a manner consistent with that set forth at pages 1-a-2 and 1-a-3 of the Report of Examination.

    [.21] 21. (a) By November 30, 1992, the Bank shall adopt and implement a written profit plan and a comprehensive budget for all categories of income and expense for calendar year 1993. The plan required by this paragraph shall contain formal goals and strategies, consistent with sound banking practices, to reduce discretionary expenses and to improve the Bank's overall earnings, and shall contain a description of the operating assumptions that form the basis for major projected income and expense components. A copy of the plan shall be submitted to the Regional Director and Commissioner upon its completion.
       (b) Within 30 days after the end of each calendar quarter, the Bank's board of directors shall evaluate the Bank's actual performance in relation to the plan and budget required by this paragraph and record the results of the evaluation, and any actions taken by the Bank, in the minutes of the board of directors' meeting at which such evaluation is undertaken.

[.22] 22. (a) Within 60 days from the effective date of this ORDER, and annually thereafter, the Bank's board of directors shall review the Bank's investment policy and practices for adequacy and, based upon this review, shall make appropriate revisions in the policy which it deems necessary to strengthen the Bank's investment procedures. The revised investment policy shall, at a minimum, include provisions, consistent with FFIEC's Instructions for the Preparation of Reports of Condition and Income, under which the Bank will properly segregate and account for trading account securities and procedures to ensure active management's adherence to the policy.
   (b) The Bank's policy, when revised as required by this paragraph, shall be submitted to the Regional Director and Commissioner for review and comment, along with a detailed plan describing the means by which the minimum provisions detailed in this paragraph will be accomplished. Within 30 days of the receipt of any comments from the Regional Director and Commissioner, and after consideration of such comments, and after the adoption of any recommended changes the Bank shall approve the policy, which ap- {{11-30-92 p.C-2699}}proval shall be recorded in the minutes of the board of directors' meeting. Thereafter, the Bank shall implement and follow the policy.

   [.23] 23. Following the effective date of this ORDER, the Bank shall send to its shareholders or otherwise furnish 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, notice, or statement shall be sent to the FDIC in Washington, D.C. 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.

   [.24] 24. Within 15 days from the effective date of this ORDER, the Bank shall establish a compliance committee comprised of at lease three directors who are not officers of the Bank. Two of the three members of the committee shall constitute a quorum and shall be authorized to take action on behalf of the full committee. No committee member may be an executive officer or principal shareholder, as those terms are defined in sections 215.2(d) and (j) of Regulation O, 12 C.F.R. §§ 215.2(d) and (j). The committee shall monitor compliance with the terms of this ORDER, and, within 30 days from the effective date of this ORDER, and every 30 days thereafter, shall submit to the board of directors for consideration at its regular monthly meeting a written report detailing the Bank's compliance with this ORDER. The compliance report shall be incorporated in the minutes of the board of directors' meeting. Establishment of this committee does not in any way diminish the responsibility of the entire board of directors for ensuring compliance with the provisions of this ORDER is achieved.
   25. Within 30 days of the end of each calendar quarter following the effective date of this ORDER, the Bank shall furnish to the Regional Director and Commissioner written progress reports signed by each member of the Bank's board of directors, detailing the actions taken to secure compliance with the ORDER and the results thereof. Such reports may be discontinued when the corrections required by this ORDER have. been accomplished and the Regional Director and Commissioner have, in writing, released the Bank from making further reports.
   The effective date of this ORDER shall be 10 days after its issuance by the FDIC.
   The provisions of this ORDER shall be binding upon the Bank, its institution-affiliated parties, and any successors and assigns thereof.
   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: September 9, 1992.
   Pursuant to delegated authority.

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