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FDIC Enforcement Decisions and Orders

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{{5-31-95 p.C-3338}}
   [10,853] In the Matter of The Peoples Bank, Elba, Alabama, Docket No. FDIC-93-165b (7-29-93).

   Bank to cease and desist from such unsafe or unsound practices as failing to provide adequate supervision over the Bank's affairs; operating with management whose policies are detrimental to the Bank; operating with inadequate capital; and operating in violation of applicable laws or regulations. (This order was terminated by order of the FDIC dated 3-9-95; see ¶15,976.)

   [.1] Management—Qualifications—Review
   [.2] Management—Management Plan—Minimum Requirements
   [.3] Capital—Tier 1 Capital—Increase/Maintain—Methods
   [.4] Dividends—Restricted
   [.5] Violations of Law—Eliminate/Correct
   [.6] Bank Legal Status—Change Prohibited
   [.7] Insurance—Claims—Blanket Bond
   [.8] Strategic Plan—Preparation Required
   [.9] Covered Transactions—Bank Affiliates—Prohibited

In the Matter of

THE PEOPLES BANK
ELBA, ALABAMA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-93-165b

   The Peoples Bank, Elba, Alabama ("Bank"), having been advised of its right to a written Notice of Charges and of Hearing detailing unsafe or unsound banking practices and violations of applicable law and regulations alleged to have been committed by the Bank and its right to a hearing regarding 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 TO CEASE AND DESIST ("CONSENT AGREEMENT") with a representative of the Legal Division of the Federal Deposit Insurance Corporation ("FDIC"), dated July 29, 1993, whereby solely for the purpose of this proceeding and without admitting or denying any of the alleged charges of unsafe or unsound banking practices and violations of applicable 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 had committed violations of applicable law and regulations.
   The FDIC, therefore, accepted the CON- {{9-30-93 p.C-3339}}SENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as such 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 regulations:
   A. Failing to provide adequate supervision and direction over the affairs of the Bank by the board of directors of the Bank to prevent unsafe or unsound practices and violations of laws and regulations;
   B. Operating the Bank with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;
   C. Operating the Bank with equity capital that is inadequate for the kind and quality of assets held by the Bank; and
   D. Engaging in violations of applicable Federal and state laws and regulations, as more fully described on pages 6-b through 6-b-4 of the joint FDIC and State of Alabama Banking Department Report of Examination of the Bank as of March 29, 1993, copies of which pages are attached hereto and incorporated herein as Appendix A.
   IT IS FURTHER ORDERED that the Bank and its successors and assigns take affirmative action as follows:

[.1] 1. (a) Within 60 days from the effective date of this ORDER, the Bank shall have and retain qualified management. At a minimum, such management shall include: (i) a qualified chief executive officer with proven ability in managing a bank of comparable size, who shall be given specific written authority by the Bank's board of directors to implement lending, investment, and operating policies and procedures in accordance with the Bank's written policies and with sound banking practices, and who shall be the senior officer in terms of overall responsibility for the daily management and operation of the Bank; and (ii) a qualified chief lending officer who shall not also hold the position of chief executive officer, who has an appropriate level of lending, collection, and loan supervision experience necessary to supervise the upgrading of a low quality loan portfolio, who shall be given specific written authority by the Bank's board of directors to implement sound lending practices and improve the quality of the loan portfolio, and who shall be a senior officer in terms of overall responsibility for the lending area. 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 all applicable laws and regulations, and (iv) maintain all aspects of the Bank, in, or if necessary, restore all aspects of the Bank to, a safe and sound condition, including asset quality, capital adequacy, earnings, management effectiveness, and liquidity. As long as this ORDER remains in effect, the Bank shall notify the Regional Director of the FDIC's Atlanta Regional Office ("Regional Director") and the Alabama Superintendent of Banks ("Superintendent") in writing of any proposed changes in the composition of the board of directors, executive officers or other officers of the Bank. Such notification shall be in addition to any application and prior approval requirements established by section 32 of the Act, 12 U.S.C. § 1831i, and implementing regulations; must include the names and qualifications of any replacement personnel; and must be provided at least 30 days prior to the individual assuming the new position.

   [.2] (b) To facilitate compliance with paragraph 1(a) of this ORDER, the board of directors shall, within 30 days from the effective date of this ORDER, develop a written analysis and assessment of the Bank's management and staffing requirements ("Management Plan"), which shall include, at a minimum:

       (i) identification of both the type and number of management positions needed to manage and supervise properly the affairs of the Bank;
       (ii) a clear and concise description of the required experience and level of compensation for each management position at the Bank;
       (iii) identification and establishment of such Bank committees as are needed to provide guidance and oversight to active management and to provide a centralized reporting procedure for the {{9-30-93 p.C-3340}}Bank's Elba, Centreville, and Mobile offices:
       (iv) evaluation of each Bank officer and staff member to determine whether these individuals possess the ability, experience and other qualifications required to perform present and anticipated duties, including adherence to the Bank's established policies and practices, and maintenance of the Bank in a safe and sound condition;
       (v) a plan of action to recruit and hire any additional or replacement personnel with the requisite ability, experience and other qualification, which the board of directors determines are necessary to fill Bank officer or staff member positions consistent with the analysis, evaluation and assessment as provided in paragraphs 1(b)(i) and 1(b)(iv) of this ORDER;
       (vi) a periodic evaluation of each Bank employee's job performance; and
       (vii) requirements for periodic review and update of the Management Plan.
   (c) The written Management Plan and any subsequent modification thereto shall be submitted to the Regional Director and the Superintendent for review and comment. No more than 30 days from the receipt of any comment from the Regional Director and the Superintendent, and after consideration of such comment, the board of directors shall approve the written Management Plan and/or any subsequent modification thereto which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank shall implement and follow the written Management Plan and/or any subsequent modification thereto.

[.3] 2. (a) Within 30 days from the effective date of this ORDER, and within 30 days after each September 30, December 31, March 31, and June 30 thereafter while this ORDER remains in effect, the Bank's board of directors shall calculate the Bank's Tier 1 capital as a percentage of its total assets ("capital ratio") as of the nearest preceding March 31, June 30, September 30, or December 31 date. If such capital ratio is less than 6.0 percent, the Bank shall, within 90 days from the date of such calculation, increase its Tier 1 capital by an amount sufficient to raise its capital ratio to not less than 6.0 percent as of the nearest preceding March 31, June 30, September 30, or December 31 date. Any such increase in Tier 1 capital may be accomplished by any one or more of the following:

       (i) The sale of new securities in the form of common stock or noncumulative perpetual preferred stock;
       (ii) The direct contribution of cash by the directors and/or shareholders of the Bank;
       (iii) The collection in cash of assets other than loans previously charged off; or
       (iv) Any other means acceptable to the Regional Director and the Superintendent.
   (b) In addition to the requirements of paragraph 2(a) of this ORDER, for as long as this ORDER remains in effect, the Bank shall meet the minimum ratio requirements for "risk-based capital" by the deadlines set out in Appendix A of Part 325 of the FDIC's Rules and Regulations, 12 C.F.R. Part 325, which Appendix A is entitled "Statement of Policy on RiskBased Capital," and/or any subsequent amendments or modifications thereto.
   (c) For the purposes of this ORDER, the terms "Tier 1 capital" and "total assets" shall have the meanings ascribed to them in sections 325.2(m) and 325.2(n), respectively, of the FDIC's Rules and Regulations, 12 C.F.R. § §325.2(m) and 325.2(n).

   [.4] 3. Effective the date of this ORDER, the Bank shall not pay any cash or property dividends without the prior written consent of the Regional Director and the Superintendent.

   [.5] 4. Within 30 days from the effective date of this ORDER, the Bank shall take all necessary steps, consistent with sound banking practices, to eliminate and/or correct all violations of law and regulations committed by the Bank, as disclosed at the examination of the Bank as of March 29, 1993. In addition, the Bank shall adopt appropriate procedures to ensure its future compliance with all applicable laws and regulations.

   [.6] 5. Effective the date of this ORDER, the Bank shall not undertake; engage in, bring about and/or consummate, without the prior written consent of the Regional Director and the Superintendent, any activity, action or transaction which shall influence, {{9-30-93 p.C-3341}}cause, bring about or facilitate a change in the Bank's legal status. Provided, further, in the event the merger transaction involving and affecting the legal and regulatory status of the Bank, approved by the FDIC pursuant to Order dated October 21, 1992, is abrogated, rescinded, revoked, annulled and/or modified in any manner, the Bank and its directors, officers, employees, agents, successors and assigns shall not, without the prior written consent of the Regional Director and the Superintendent, take any action to reverse, amend, modify or rescind any accounting and related business transactions undertaken to facilitate and bring about the merger.

   [.7] 6. Within 30 days from the effective date of this ORDER, the Bank shall file with its fidelity insured all required notices, claims and/or information concerning the actions and activities involving former chairman and chief executive officer James B. Newell, Jr., which could result in a claim under the terms of the Bank's outstanding blanket bond.

   [.8] 7. Within 60 days from the effective date of this ORDER, the Bank shall submit a strategic plan, covering the period 1993-1996, which will reflect changes in the Bank's balance sheet and ongoing operations necessitated by the changes in the Bank's legal and/or financial status, asset/ liability structure, management structure and/or legal or financial relationships with and other person and/or entity. The strategic plan and its implementation shall be in the form acceptable to the Regional Director and the Superintendent and shall be revised and updated, as required, and submitted with the other reports described in paragraph 9 of this ORDER.

   [.9] 8. Effective the date of this ORDER, the Bank shall not engage in any "covered transaction" with any "affiliate" without the prior written consent of the Regional Director and the Superintendent. For purposes of this ORDER, the term "covered transaction" shall have the meaning ascribed to it in section 23A(b)(7) of the Federal Reserve Act, 12 U.S.C. § 371c(b)(7), and shall also include any transaction described in section 23B(a)(2) of the Federal Reserve Act, 12 U.S.C. § 371c-1(a)(2); and the term "affiliate" shall have the meaning ascribed to it in section 23A(b)(1) of the Federal Reserve Act, 12 U.S.C. § 371c(b)(1).
   9. Within 90 days from the effective date of this ORDER, and within 30 days after the end of each calendar quarter after December 31, 1993, the Bank shall furnish written progress reports to the Regional Director and the Superintendent 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 and the Superintendent have released the bank in writing from making further reports. All progress reports and other written responses to this ORDER shall be reviewed by the board of directors of the Bank and made a part of the minutes of the appropriate board meetings.
   10. The provisions of this ORDER shall become effective 10 days from the date of its issuance and shall be binding upon the Bank, its institution-affiliated parties, and its successors and assigns. Further, 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 Atlanta, Georgia, this 29th day of July, 1993.
   Pursuant to delegated authority.

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