Federal Deposit
Insurance Corporation

{{8-31-97 p.C-3372}}
   [¶10,861] In the Matter of The Business Bank, Vienna, Virginia, Docket No. FDIC-93-172b (8-12-93).

   Bank to cease and desist from such unsafe or unsound practices as operating with management whose policies are detrimental to the Bank; operating with excessive volumes of adversely classified assets; engaging in practices which produce inadequate operating income and excessive loan losses; operating with excessive concentrations of loans; and following unsatisfactory lending practices. (This order was terminated by order of the FDIC dated 6-3-97; see ¶16,169.)

   [.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] Assets—Adversely Classified—Eliminate/Reduce
   [.6] Assets—Adversely Classified—Individual Written Plans
   [.7] Loans—Extensions of Credit—Existing Borrowers—Curtail
   [.8] Loans—Overdue—Accrual of Interest
   [.9] Loans—Special Mention—Correct Deficiencies
   [.10] Budget and Earnings Forecast—Preparation Required
   [.11] Strategic Plan—Preparation Required
   [.12] Dividends—Restricted
   [.13] Brokered Deposits—Acceptance—Notice to FDIC Required
   [.14] Shareholders—Disclosure—Cease and Desist Order

In the Matter of

THE BUSINESS BANK
VIENNA, VIRGINIA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-93-172b
   The Business Bank, Vienna, Virginia ("Bank"), having been advised of its right to a written Notice of Charges and of Hearing detailing unsafe or unsound banking practices alleged to have been committed by the Bank, and of 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 {{10-31-93 p.C-3373}}AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with a representative of the Legal Division of the Federal Deposit Insurance Corporation ("FDIC"), dated July 30, 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, 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:

   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:
   A. Operating the Bank with management whose policies and practices have been detrimental to the Bank and have jeopardized the safety of its deposits;
   B. Operating the Bank with an excessive volume of adversely classified assets and past due loans;
   C. Engaging in practices which produce inadequate operating income and excessive loan losses;
   D. Operating the Bank with excessive concentrations of loans and other assets; and
   E. Engaging in unsatisfactory lending practices.
   IT IS FURTHER ORDERED that the Bank and its successors and assigns that affirmative action as follows:

[.1] 1. (a) Within 120 days from the effective date of this ORDER, the Bank shall have and retain qualified management. At a minimum, such management shall include a chief executive officer with proven ability in managing a bank of comparable size and a qualified senior loan officer. Such persons shall be provided the necessary written authority to implement the provisions of this ORDER. 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) 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, and management effectiveness. 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 Virginia Commissioner of Financial Institutions ("Commissioner") in writing of any proposed changes in management. 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 any individual's assuming a management position.

   [.2] (b) To facilitate compliance with paragraph 1(a) of this ORDER, the Bank's board of directors shall, within no more than ninety (90) days from the effective date of this ORDER, develop and submit to the Regional Director and the Commissioner a written analysis and assessment of the Bank's management and staffing needs ("Management Plan"), which shall include, at a minimum:

   (i) identification of both the type and number of officer 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 such position;
   (iii) identification and establishment of such Bank committees as are needed to provide guidance and oversight to active management;
   (iv) an evaluation of each Bank officer, and in particular the chief executive officer, 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 {{10-31-93 p.C-3374}}any additional or replacement personnel with the requisite ability, experience and other qualifications, 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 this paragraph 1(b) of this ORDER;
   (vi) a plan for the periodic evaluation of each Bank employee's job performance; and
   (vii) the establishment of procedures to review periodically and update the Management Policy.

[.3] 2. (a) Within 30 days after the effective date of this Order, and within 30 days after each March 31, June 30, September 30, and December 31 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.
   (b) Any increase in Tier 1 capital required by paragraph 2(a) of this ORDER may be accomplished by one or more of the following:

   (i) the sale of new securities in the form of common stock on noncumulative perpetual preferred stock;
   (ii) The collection in cash of all or part of the assets other than loans classified "Loss" as of October 29, 1992, and charged off in accordance with paragraph 4 of this Order;
   (iii) The direct contribution of cash by the directors and/or shareholders of the Bank;
   (iv) The collection in cash of assets other than loans previously charged off; or
   (v) Any other means acceptable to the Regional Director and the Commissioner.
(c) (i) If all or part of the increase in the Bank's Tier 1 capital required under paragraph 2(a) of this ORDER is accomplished by the sale of new securities, the Bank's board of directors shall take all necessary steps to 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 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 of this ORDER as well as the circumstances giving rise to the offering, and any other material disclosures necessary to comply with applicable Federal securities laws. Prior to the sale of such securities, and, in any event, not less than twenty (20) days prior to the dissemination of such materials, the materials used in the sale of the securities shall be submitted to the FDIC, Registration and Disclosure Section, 550 17th Street, N.W., Washington, D.C. 20429, and to the Commissioner for review. Any changes in such offering materials requested by the FDIC or the Commissioner shall be made prior to their dissemination.
   (ii) In complying with the provisions of paragraph 2(c)(i) 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 change which is materially different from the information reflected in any offering materials used in connection with the sale {{10-31-93 p.C-3375}}of Bank securities. The written notice required by this paragraph 2(c)(ii) of the ORDER shall be furnished within ten (10) calendar days from the date that 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.

[.4] 3. (a) Within 30 days from the effective date of this ORDER, the concurrently with compliance with the requirements of paragraph 4 of this ORDER, the Bank shall establish and thereafter continually maintain an adequate allowance for loan and lease losses in accordance with the prevailing requirements of the Instructions for the Reports of Condition and Income, by charges against current operating income. In complying with the requirements of this paragraph 3(a) of the ORDER, the Bank's board of directors shall, at a minimum, review the adequacy of the Bank's allowance for loan and lease losses prior to the end of each calendar quarter. The Bank's board of directors shall consider the volume and quality of internally rated loans, the level of delinquent and nonaccrual loans, risk in loans listed for Special Mention, the volume of adversely classified loans, and anticipated growth in the loan portfolio, in determining the adequacy of its allowance. The minutes of the board meeting at which review of the allowance for loan and lease losses is undertaken shall indicate the results of the review, the amount of any recommended increases in the allowance, and the basis for determining the amount of allowance provided.
   (b) Reports of Condition and Income required to be filed by the Bank prior to the effective date of this ORDER and subsequent to October 29, 1992, shall reflect a provision for the allowance for loan and lease losses necessary to comply with paragraph 3(a) of this ORDER. If necessary to comply with this paragraph 3(b) of the ORDER, the Bank shall file amended Reports of Condition and Income within 30 days from the effective date of this ORDER.

   [.5] 4. Within 30 days from the effective date of this ORDER, the Bank shall eliminate from its books, by collection, charge-off or other proper entries, all assets or portions of assets classified "Loss" and one-half of all assets or portions of assets classified "Doubtful" by the FDIC as a result of the FDIC's Examination of the Bank as of October 29, 1992, which have not been previously collected or charged off, unless otherwise approved in writing by the Regional Director and by the Commissioner. Reduction of these assets through use of proceeds of loans made by the Bank does not constitute collection for the purpose of this paragraph 4 of the ORDER.

[.6] 5. (a) Within 90 days from the effective date of this ORDER, the Bank shall submit to the Regional Director and to the Commissioner a written plan of action to reduce each asset which was adversely classified by the FDIC as of October 29, 1992, and which aggregated $200,000 or more as of that date. Such plan of action shall thereafter be implemented by the Bank and monitored, and progress reports thereon shall be submitted by the Bank to the Regional Director and to the Commissioner at 90-day intervals concurrently with the other reporting requirements set forth in paragraph 14 of this ORDER.
   (b) As used in this paragraph 5 of the ORDER, "reduce" means to (i) collect, (ii) charge off, or (iii) improve the quality of such assets sufficiently to warrant removal of any adverse classification by the FDIC.

[.7] 6. (a) Effective the date of this ORDER, the Bank shall not extend, directly {{10-31-93 p.C-3376}}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, unless a majority of the Bank's board of directors first: (i) determines that such extension is in the best interests of the Bank; (ii) determines that the Bank has satisfied the requirements set out in paragraph 5(a) of this ORDER as to such borrower; (iii) determines that the extension of credit is in full compliance with the Bank's loan policy; (iv) determines that all necessary loan documentation is on file, including but not limited to, current financial and cash flow information and satisfactory appraisal, title and lien documents; (v) approves such extension; and (vi) notifies the Regional Director and the Commissioner in writing of such approval within ten (10) days after any such approval is granted. A written record of the board of directors' determination and approval of any advance under this paragraph 6(a) of the ORDER shall be maintained in the credit file(s) of the affected borrower(s) as well as in the minutes of the board of directors.
   (b) Effective the 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 classified, in whole or in part, "Substandard" and is uncollected, unless, prior to the extension of credit, a majority of the Bank's board of directors: (i) determines that such advance is in the best interest of the Bank; (ii) determines that the Bank has satisfied the requirements set out in paragraph 5(a) of this ORDER as to such borrower; (iii) determines that the extension of credit is in full compliance with the Bank's loan policy; (iv) determines that all necessary loan documentation is on file, including but not limited to, current financial and cash flow information and satisfactory appraisal, title and lien documents; and (v) approves such advance. A written record of the board of directors' determination and approval of any advance under this paragraph 6(b) of the ORDER shall be maintained in the credit file(s) of the affected borrower(s) as well as the minutes of the board of directors.
   (c) The requirements of this paragraph 6 of the ORDER shall not prohibit the Bank from renewing or extending the maturity of any credit already extended to the borrower, provided such action is in accordance with both Federal and state laws, rules, and regulations, and further provided all interest due at the time of such renewal or extension is collected in cash from the borrower.

[.8] 7. (a) Within 30 days from the effective date of this ORDER, and in accordance with the Instructions for the Preparation of Reports of Condition and Income, the Bank shall reverse on its books all accrued and unpaid interest on any loan which is 90 days or more delinquent in principal or interest payments and which is not both well secured and in the process of collection.
   (b) Effective the date of this ORDER, the Bank shall not (i) accrue interest on any loan that is, or becomes, 90 days or more delinquent in principal or interest payments unless the loan is both well secured and in the process of collection, (ii) add uncollected interest to the unpaid principal balance of any loan on which interest is due unless such addition is supported by additional tangible collateral which adequately and completely secures the loan, (iii) extend credit by means of a new note for uncollected interest due on any loan unless such new extension of credit is supported by additional tangible collateral which adequately and completely secures the loan, or (iv) book uncollected interest by any other means in contravention of the Instructions for the Preparation of Reports of Condition and Income.
   (c) For purposes of this paragraph 7 of the ORDER, "well secured" and "in the process of collection" shall have the same meaning as those terms have in the prevailing Instructions for the Preparation of Reports of Condition and Income.

[.10] 9. (a) Within 90 days from the effective date of this ORDER, the Bank shall prepare a realistic and comprehensive budget and earnings forecast for calendar year 1993 and shall submit this budget and earnings forecast to the Regional Director and to the Commissioner for review and comment.
   (b) As long as this ORDER remains in effect, the Bank shall prepare realistic and comprehensive calendar year budgets and earnings forecasts on a consolidated basis as of January 1 of each year subsequent to 1993 and shall submit them to the Regional Director and to the Commissioner for review and comment no later than January 31 of the budget year.
   (c) In preparing the budgets and earnings forecasts required by this paragraph 9 of the ORDER, the Bank shall, at a minimum:

   (i) identify the major areas in, and means by, which the board of directors will seek to improve the Bank's operating performance, with particular emphasis on improving the Bank's net interest margin and reducing controllable overhead expenses; and
   (ii) describe the operating assumptions that form the basis for, and adequately support, major projected income and expense components.

   [.11] 10. Within 120 days of the effective date of this ORDER, the Bank shall develop and submit to the Regional Director and to the Commissioner for review and comment a written three-year Strategic Plan ("Plan"). The Plan shall include, at a minimum, specific goals for the diversification of the Bank's deposit base and earning assets and for the reduction of the Bank's concentration in commercial real estate loans as of December 31, 1993, December 31, 1994, and December 31, 1995. Within 30 days from receipt of any comment from the Regional Director and/or the Commissioner, and after consideration of such comment, the board of directors shall approve the Plan, which approval shall be recorded in the minutes of the board of directors' meeting. Thereafter, the Bank and its successors and assigns shall follow the Plan and/or any subsequent modifications thereto.

   [.12] 11. 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 Commissioner.

   [.13] 12. While this ORDER remains in effect, the Bank shall give prior written notice to the Regional Director each time the Bank intends to accept, renew or roll over brokered deposits. The notification shall contain the information required to be filed by an undercapitalized insured depository institution seeking approval to utilize brokered deposits as set forth in section 337.6(d) of the FDIC Rules and Regulations, 12 C.F.R. § 337.6(d). The Regional Director shall have the right to reject the Bank's plans for utilizing brokered deposits. Written reports detailing the level, source, and use of brokered deposits by the Bank shall be submitted by the Bank to the Regional Director concurrently with the other reporting requirements set forth in paragraph 14 of this ORDER. For purposes of this ORDER, the term "brokered deposits" shall have the same definition as found in section 337.6(a)(1) of the FDIC Rules and Regulations, 12 C.F.R. § 337.6(a)(1). While this ORDER is in effect, if by application of section 29 of the Act—12 U.S.C. § 1831f, as amended by the FDIC Improvement Act of 1991, Pub. L. No. 102–242, 105 Stat. 2236 (1991)—or by application of any implementing regulations, the Bank would be prohibited from accepting brokered deposits, then the provisions of section 29 of the Act and any imple- {{4-30-95 p.C-3378}}menting regulations shall supersede application of this paragraph.

   [.14] 13. 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 also (2) in conjunction with its notice of proxy statement preceding the Bank's next shareholder meeting. The description shall fully describe this ORDER in all material respects. The description and any accompanying communication, statement or notice shall be sent to the FDIC, Registration and Disclosure Section, 550 17th Street, N.W., Washington, D.C. 20429, and to the Commissioner 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.
   14. Within 90 days from the effective date of this ORDER, and within 30 days after the end of each calendar quarter thereafter while this ORDER remains in effect, the Bank shall furnish written progress reports to the Regional Director and to the Commissioner 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 Commissioner 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 of directors' meeting.
   15. The provisions of this ORDER shall become effective ten (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 12th day of August, 1993.
   Pursuant to delegated authority.