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{{5-31-93 p.C-3116}}
   [10,744] In the Matter of Cameron State Bank, Cameron, Louisiana, Docket No. FDIC-93-53b (3-15-93).

   Bank to cease and desist from such unsafe or unsound practices as following hazardous lending and lax collection practices; operating with an excessive level of poor quality assets; operating without adequate reserve for loan losses; operating without proper internal routine and controls; operating in such a manner as to produce operating losses; operating with management whose policies are detrimental to the Bank; and failing to provide adequate supervision over the Bank's affairs.

   [.1] Management—Qualifications—Review
   [.2] Management—Management Plan—Minimum Requirements
   [.3] Capital—Tier 1 Capital—Increase/Maintain—Methods
   [.4] Allowance for Loan and Lease Losses—Establish/Maintain
   [.5] Profit Plan—Minimum Requirements
   [.6] Assets—Adversely Classified—Eliminate/Reduce
   [.7] Loans—Extensions of Credit—Existing Borrowers—Curtail
   [.8] Lending and Collection Policy—Minimum Requirements
   [.9] Bank Operations—Internal Routine and Controls—Written Policy Required
   [.10] Reports of Condition and Income—Amendment Required
   [.11] Dividends—Restricted
   [.12] Shareholders—Disclosure—Cease and Desist Order
{{5-31-93 p.C-3117}}
In the Matter of

CAMERON STATE BANK
CAMERON,LOUISIANA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-93-53b

   Cameron State Bank, Cameron, Louisiana ("Bank"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices alleged to have been committed by the Bank and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act")), 12 U.S.C. § 1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated February 15, 1993, whereby solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices, 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. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED that the Bank, its directors, officers, employees, agents, successors, assigns, and other institution-affiliated parties of the Bank, cease and desist from the following unsafe or unsound banking practices;
   (a) engaging in hazardous lending and lax collection practices;
   (b) operating with a large volume of poor quality loans;
   (c) operating with an inadequate loan valuation reserve;
   (d) operating with inadequate internal routine and controls policies;
   (e) operating in such a manner as to produce operating losses;
   (f) operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits; and
   (g) operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank.
   IT IS FURTHER ORDERED that the Bank take affirmative action as follows:

       [.1] 1. (a) During the life of this ORDER, the Bank shall have management qualified to restore the Bank to a sound condition. Such management shall include a chief executive officer and an experiences senior lending officer responsible for supervising the Bank's overall lending function.
       (b) Present management shall be assessed on its ability to:
         (i) Comply with the requirements of this ORDER;
         (ii) Improve and thereafter maintain the Bank in a safe and sound condition, including asset quality, capital adequacy, liquidity adequacy, and earnings adequacy; and
         (iii) Comply with all applicable State and Federal laws and regulations.
         (c) (i) During the life of this ORDER, the Bank shall notify the Regional Director of the Memphis Regional Office ("Regional Director") and the Honorable Larry L. Murray for the State of Louisiana ("Commissioner") in writing of any resignations and/or terminations of any members of its board of directors and/or any of its senior executive officer(s) within 15 days of the event.
         (ii) The Bank shall comply with section 32 of the Act, 12 U.S.C. § 1831i.
         (d) (i) To ensure both compliance with this ORDER and qualified management for the Bank, the board of directors, within 60 days from the effective date of this ORDER shall develop a written policy ("Management Policy") which shall incorporate an analysis of the Bank's management and staffing requirements and shall, at a minimum address (1) both the number any type of positions needed to properly manage the Bank, (2) a clear and concise description of the needed experience and pay for each job, (3) an evaluation of present management, (4) a plan to recruit, hire or replace personnel with requisite ability and experience, (5) a periodic eval- {{5-31-93 p.C-3118}}uation of each individual's job performance, and (6) the establishment of procedures to periodically review and update the Management Policy.
         (ii) The Management Policy and any subsequent modification thereto shall be submitted to the Regional Director and the Commissioner for review and comment. Within 30 days from the receipt of any comment, and after consideration of such comment, the board of directors shall approve the Management Policy which approval shall be recorded in the minutes of the meeting of the board of directors. Thereafter, the Bank and its directors, officers and employees shall implement and follow the Management Policy and any modifications thereto.
   (e) Within 30 days from the effective date of this ORDER, the board of directors shall establish a committee of the board of directors with the responsibility to ensure that the Bank complies with the provisions of this ORDER. At least two-thirds of the members of such committee shall be independent, outside directors as defined herein. The committee shall report monthly to the entire board of directors, and a copy of the report and any discussion relating to the report or the ORDER shall be included in the minutes of the board of directors. Nothing contained herein shall diminish the responsibility of the entire board of directors to ensure compliance with the provisions of this ORDER
   (f) For the purposes of this ORDER, an "outside director" shall be an individual:
       (i) Who shall not be employed, in any capacity, by the Bank or its affiliates other than as a director of the Bank or an affiliate;
       (ii) Who shall not own or control more than 5 percent of the voting stock of the Bank or its holding company;
       (iii) Who shall not be indebted to the Bank or any of its affiliates in an amount greater than 5 percent of the Bank's equity capital and reserves;
       (iv) Who shall not be related to any directors, principal shareholders of the Bank or affiliates of the Bank; and
       (v) Who shall be a resident of, or engage in business in, the Bank's trade area.

[.2] 2. (a) Within 60 days from the date of this ORDER, the board of directors shall review and make a written report ("Management Report") on the Bank's management needs in the lending area. The Management Report shall incorporate an analysis of the Bank's management and staffing requirements and shall, at a minimum:
       (i) Identify both the number and type of positions needed to properly supervise the Bank's lending functions, giving appropriate consideration to the Bank's loan volume, customer base and the number of problem credits.
       (ii) Provide a clear and concise description of the general duties and responsibilities for lending officers and their support staff.
       (iii) Identify the skills, experience and pay required for each position.
       (iv) Provide an evaluation of the Bank's senior management and lending officials, indicating whether bank officials posses the necessary lending and collection experience and qualifications required to adequately perform present and anticipated duties.
       (v) Establish a plan to recruit, hire and/or replace personnel based on ability and experience.
       (vi) Establish a plan providing for periodic evaluation of each individual's job performance.
       (vii) Provide for periodic review of Bank's management and updating of lending policies and procedures.
   (b) Within 90 days of the effective date of this ORDER, the board of directors, shall prepare a written plan of implementation ("Plan") addressing the findings of the Management Report. The plan shall specify the actions to be taken by the board of directors and the time frames for each action.
   (c) A copy of the Management Report, Plan, and Written Report shall be submitted to the Regional Director and the Commissioner for review and comment. Within 30 days from receipt of any comment, and after consideration of such comment, the board of directors shall approve the Management Report and Plan of implementation which approval shall be recorded in the minutes of the meeting of the board of directors. It shall remain the {{5-31-93 p.C-3119}}responsibility of the board to fully implement the plan within the specified time frames. In the event the Plan, or any portion thereof, is not implemented, the board shall immediately advise the Regional Director, in writing, of specific reasons for deviating from the Plan.

   [.3] 3. (a) (i) From the effective date of this ORDER, the Bank shall maintain adjusted Tier I capital equal to or grater than five and one-half (5.5) percent of the Bank's adjusted Part 325 total assets.
   (ii) In addition to the requirements of Paragraph 3(a)(i) above, the Bank shall, on or before June 30, 1993, achieve adjusted Tier I capital equal to or greater than six (6.0) percent of the Bank's adjusted Part 325 total assets. Thereafter, during the life of this ORDER, the Bank shall maintain adjusted Tier I capital equal to or greater than six (6.0) percent of the Bank's adjusted Part 325 total assets.
   (b) Any increase in Tier I capital necessary to meet the ratio required by Paragraph 3(a) of this ORDER may be accomplished by the following:
   (i) The sale of new securities in the form of common stock; or
   (ii) The direct contribution of cash by the directors, shareholders, or parent bank holding company of the Bank; or
   (iii) Any other method acceptable to the FDIC.
   (c) If all or part of the increase in Tier 1 capital required by Paragraph 3(a) of this ORDER is accomplished by the sale of new securities, 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 or controlled by them in favor of the plan. Should the implementation of the plan involve a public distribution of the Bank's securities (including a distribution limited only to the Bank's existing shareholders), the Bank shall prepare offering materials fully describing the securities being offered, in cluding 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 plan and any materials used in the sale of the securities shall be submitted to the FDIC, Division of Supervision, Registration and Disclosure Unit, 550 17th Street, N.W., Room F-250, Washington, D.C. 20429. Any changes requested to be made in the plan or materials by the FDIC shall be made prior to their dissemination.
   (d) In complying with the provisions of Paragraph 3 of this ORDER, the Bank shall provide to any subscriber and/or purchaser of the Bank's 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 days from the date such material development or change was planned or occurred, whichever is earlier, and shall be furnished to every subscriber and/or purchaser of the Bank's securities who received or was tendered the information contained in the Bank's original offering materials.
   (e) For purposes of this ORDER, the terms "Tier I capital" and "Part 325 total assets" shall have the meanings ascribed to them in Part 325 of the FDIC's Rules and Regulations, respectively subsections 325.2(m) and 325.2(n), 12 C.F.R. §§ 325.2(m) and (n). The "Analysis of Capital" schedule on page 3 of the FDIC Report of Examination provides the method for determining the ratio of adjusted Tier I capital to adjusted Part 325 total assets as required by this ORDER.
   (f) The Insured Institution shall not lend funds directly or indirectly, whether secured or unsecured, to any purchaser of insured institution stock or to any investor by any other means for any portion of any increase in Tier I capital required herein.

[.4] 4. (a) Within 30 days from the effective date of this Order, the Bank shall establish and shall thereafter maintain, through charges to current operating income, an adequate valuation reserve for loan and lease losses. In determining the adequacy of the valuation reserve for loan {{5-31-93 p.C-3120}}and lease losses, the board of directors of the Bank shall at a minimum consider the following:

       (i) Prevailing instructions contained in the Federal Financial Institutions Examination Council booklet entitled "Instructions—Consolidated Reports of Condition and Income";
       (ii) The volume and mix of the existing loan portfolio, including the volume and severity of nonperforming loans and adversely classified credits, as well as an analysis of net charge-offs experiences on previously adversely classified loans;
       (iii) The extent to which loan renewals and extensions are used to maintain loans on a current basis and the degree of risk associated with such loans;
       (iv) The trend in loan growth, including any rapid increase in loan volume within a relatively short time period;
       (v) General and local economic conditions affecting the collectibility of the bank's loans;
       (vi) Previous loan loss experience by loan type, including the trend of net charge-offs as a percent of average loans over the past several years;
       (vii) Off balance sheet credit risks;
       (viii) The overall risk associated with each concentration of credit together with the degree of risk associated with each related individual borrower; and
       (ix) Any other factors appropriate in determining future valuation reserves.
   (b) Prior to the submission of any Report of Condition or Report of Income, the board of directors of the Bank shall review the adequacy of the Bank's valuation reserve for loan and lease losses. The minutes of the board meetings at which each review is undertaken shall indicate the results of the review, the amount of any increase to the reserve, and the basis for the amount of the valuation reserve. The criteria for the review shall be as set forth in Paragraph 4(a).
   (c) Notwithstanding the provisions of Paragraph 4(a) and 4(b) above, the Bank shall achieve, within 30 days of the effective date of this ORDER, a valuation reserve for loan and lease losses, after charge off of loans classified "Loss" as required in Paragraph 6(a) below, of not less than $1,300,000.
   (d) In the event that the Regional Director and/or the Commissioner determine, at subsequent examinations and/or visitations, that the Bank's valuation reserve for loan and lease losses is inadequate, the Bank shall amend its Consolidated Reports of Condition and Income in accordance with Paragraph 10.
   (e) The requirements of Paragraph 4(c) above are not to be construed as a standard for future operations.

[.5] 5. (a) Within 60 days from the effective date of this ORDER, and within the first 30 days of each calendar year thereafter, the board of directors shall develop a written profit plan consisting of goals and strategies for improving the earnings of the Bank for each calendar year. The 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 on not less than a quarterly basis; and
       (iv) A description of the operating assumptions that form the basis for, and adequately support, major projected income and expense components.
   (b) Such written profit plan 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 profit plan which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank, its directors, officers, and employees shall follow the written profit plan and/or any subsequent modification.

[.6] 6. (a) Within 10 days from the effective date of this ORDER, the Bank shall eliminate from its books, by charge-off or collection, all assets classified "Loss" and one-half of the assets classified "Doubtful" as of August 31, 1992, that have not been previously collected or charged off. Reduction of these assets through pro- {{5-31-93 p.C-3121}}ceeds of other loans made by the Bank is not considered collection for the purpose of this paragraph.
   (b) Within 60 days from the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director and the Commissioner for review and approval a written plan of action directed at lessening the Bank's risk position in each line of credit or other asset which was classified "Substandard" or "Doubtful" as of August 31, 1992 and which aggregated $100,000 or more. Such plan shall include but not be limited to, the following:

       (i) Target dollar levels to which the Bank will reduce each line of credit or other asset within three months, six months, and twelve months from the effective date of this ORDER; and
       (ii) Provisions for the submissions of monthly written progress reports under this Paragraph 6(b)(i) to the Bank's board of directors for review and recordation in the board minutes.
   (c) As used in Paragraph 6(b)(i) the word "reduce" means (1) to collect, (2) to charge off, or (3) to sufficiently improve the quality of assets adversely classified to warrant removing any adverse classification, as determined by the FDIC.

[.7] 7. (a) Beginning with the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower who has a loan or other extension of credit with the Bank that has been charged off or classified, in whole or in part, "Loss" or "Doubtful" and is uncollected. The requirements of this paragraph shall not prohibit the Bank from renewing (after collection in cash of interest due from the borrower) any credit already extended to any borrower.
   (b) Paragraph 7(a) shall not apply to those agricultural loans which were on the books of the Bank as of August 31, 1992, if prior to the extending of any additional credit pursuant to this paragraph, either in the form of a renewal, extension, or further advance of funds, such additional credit is approved by a majority of the Bank's board of directors who shall certify, in writing that each advance of credit is in the best interests of the Bank, and (i) that all advances over $25,000 have received a 90 percent Farmers Home Administration ("FmHA") Guaranty (with full disclosure of the circumstances made to FmHA); or (ii) that lien subordinations either fully secured the debt, or that adequate collateral margins have been otherwise provided. The signed certification shall be made a part of the minutes of the Bank's board of directors or designated committee, and a copy of the signed certification shall be retained in the borrower's credit file.
   (c) Beginning with the effective date of this ORDER, the Bank shall not make any further extensions of credit, directly or indirectly, to any borrower whose loans are adversely classified "Substandard" as of August 31, 1992, without prior approval by the Bank's board of directors after the board's affirmative determination, as reflected in the minutes of the meeting, that the extension of credit is in full compliance with the Bank's loan policy, that the extension of credit is necessary to protect the Bank's interest or is adequately secured, that credit analysis has determined the customer to be creditworthy, and that all necessary loan documentation is on file, including current financial and cash flow information and satisfactory appraisal, title and lien documents.

[.8] 8. (a) Beginning with the effective date of this ORDER, the Bank shall review and strengthen its collection policies and procedures and adopt and implement a written loan interest nonaccrual policy which conforms with requirements contained in Instructions for Preparation of Reports of Condition and Income published by the Federal Financial Institutions Examination Council.
   (b) Beginning with the effective date of this ORDER, the Bank shall initiate and implement a program to strengthen its credit files and correct the technical exceptions as detailed on pages 2-b and 2-b-1 of the August 31, 1992 Report of Examination. In all future operations, the Bank shall ascertain that all documents or evidence thereof, properly completed, are obtained before credit is extended.
   (c) Beginning with the effective date of this ORDER, the Bank shall make whatever changes may be necessary to provide for the implementation of the lending policy of the Bank.
{{5-31-93 p.C-3122}}

   [.9] 9. Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement a written policy for the operation of the Bank in such a manner as to provide internal routine and controls consistent with safe and sound banking practices. Such policy and its implementation shall be satisfactory to the Regional Director and the Commissioner as determined at subsequent examinations and/or visitations.

       [.10] 10. (a) Within 30 days from the effective date of this ORDER, the Bank shall review all Consolidated Reports of Condition and Income filed with the FDIC on and after August 31, 1992 and shall amend and file with the FDIC amended Consolidated Reports of Condition and Income which accurately reflect the financial condition of the Bank as of the date of each such Report.
       (b) In addition to the above and during the life of this ORDER, the Bank shall file with the FDIC Consolidated Reports of Condition and Income which accurately reflect the financial condition of the Bank as of the reporting period. In particular such Reports shall include any adjustment in the Bank's books made necessary or appropriate as a consequence of any State or FDIC examination of the Bank during that reporting period.

   [.11] 11. While this ORDER is in effect, the Bank shall not declare or pay any cash dividends on its capital stock without the prior written approval of the Regional Director and the Commissioner.

   [.12] 12. Following the effective date of this ORDER, the Bank shall send to its shareholders or otherwise furnish a description of this ORDER, (i) in conjunction with the Bank's next shareholder communication, and also (ii) 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, Division of Supervision, Registration and Disclosure Unit, 550 17th Street N.W., Room F-250, 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.
   13. On the fifteenth day of the second month following the effective date of this ORDER, and on the fifteenth day of every third month thereafter, the Bank shall furnish written progress reports to the Regional Director detailing the form and manner of any actions taken to secure compliance with this ORDER and the results thereof. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director has released the Bank in writing from making further reports.
   The provisions of this ORDER shall be binding upon the Bank, its directors, officers, employees, agents, successors, assigns, and other institution-affiliated parties of the Bank.
   This ORDER shall become effective 10 days from the date of its issuance.
   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: 3-15-93.
   Pursuant to delegated authority.

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