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FDIC Enforcement Decisions and Orders

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{{1-31-97 p.C-3626}}
   [10,961]In the Matter of J. Michael Kinscherff, Central State Bank, Clayton, Illinois, Docket No. FDIC-94-33b (3-24-94).

   Respondent to cease and desist from such unsafe or unsound practices as following hazardous lending and lax collection practices and operating in violation of applicable laws and regulations. (This order was modified by order of the FDIC dated 1-17-96. See ¶16,066. This order was terminated by order of the FDIC dated 11-26-96. See ¶16,135.)

[.1] Loans—Loan Officer—Limits on Authority
[.2] Bank Operations—Education Plan—Compliance with Law
[.3] Education Plan—Compliance Reports to FDIC

In the Matter of
J. MICHAEL KINSCHERFF
individually, and as an
institution-affiliated
party of
CENTRAL STATE BANK
CLAYTON, ILLINOIS
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-94-33b

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   J. Michael Kinscherff ("Respondent"), individually, and as an institution-affiliated party of Central State Bank, Clayton, Illinois, ("Bank") having been advised of his right to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices and violations of law or regulation alleged to have been committed and/or about to be committed by the Respondent and of his 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 March 14, 1994, 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 or regulation, the Respondent 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 Respondent had engaged and/or was about to engage in unsafe and unsound banking practices and had violated and/or was about to violate laws or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Respondent cease and desist from the following unsafe or unsound banking practices and violations of law or regulation:
   A. Engaging in hazardous lending and lax collection practices.
   B. Violating the State of Illinois legal lending limit restrictions as set forth in section 32 of the Illinois Banking Act, ILL. REV. STAT. ch. 17, para. 339.
   IT IS FURTHER ORDERED that the Respondent take affirmative action as follows:

   [.1] 1. As of the effective date of this ORDER, the Respondent shall not approve any extension of credit to any customer of the Bank in excess of fifteen thousand dollars ($15,000) unless the Bank has in place a procedure for the prior review and written approval of a senior lending officer of the Bank appointed by the Bank's board of directors ("reviewing officer"). Such procedure and the name and qualifications of the reviewing officer shall be submitted to the Regional Director of the Chicago Regional Office of the FDIC ("Regional Director") for approval.
   2. As of the effective date of this ORDER, the Respondent shall not renew or extend the maturity date of any extensions of credit, nor advance additional funds to loan customers beyond the terms of the original extension of credit, nor capitalize interest owing on any extension of credit at the Bank, when the resulting extension of credit is in excess of fifteen thousand dollars ($15,000), without the prior review and approval of the reviewing officer.
   3. As of the effective date of this ORDER, all extensions of credit made by the Respondent not subject to the restrictions of paragraph 1 of this ORDER or any renewals, extensions, advances of additional funds, or capitalization of interest subject to the restrictions of paragraph 2 of this ORDER shall be submitted to the reviewing officer for review and subsequent approval. All exceptions to the Bank's lending policy in any extension of credit made by the Respondent shall be reported by the reviewing officer to the Bank's board of directors and noted in the minutes. Notwithstanding the above, nothing in this ORDER prohibits the Respondent from voting for loans in his capacity as a director.

   [.2] 4. As of the effective date of this ORDER, the Respondent shall prepare an educational plan focusing on the areas of lending, operations, and compliance with laws, rules, and regulations applicable to FDIC insured depository institutions. The educational plan shall be submitted to the Regional Director within thirty days of the effective date of this ORDER for review and comment and any subsequent modification shall also be submitted. After adoption of any recommended changes by the Regional Director the Respondent shall implement and follow the educational plan and any approved modification.
   5. As of the effective date of this ORDER, the Respondent shall not approve the purchase by the Bank of any extension of credit or any participation in any extension of credit from any third party or financial institution until the completion of the educational plan {{6-30-94 p.C-3628}}submitted in conformance with paragraph 4 of this ORDER.

   [.3] 6. Within ten (10) days of the end of each calendar quarter following the effective date of this ORDER, the Respondent shall submit a written report to the Regional Director detailing the actions taken to secure compliance with paragraph 4 of this ORDER (until the education plan is completed) and detailing all exceptions to the Bank's lending policy in extensions of credit made by the Respondent reported by the reviewing officer in conformance with paragraph 3 of this ORDER. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director has, in writing, released the Respondent from making further reports.
   IT IS FURTHER ORDERED that Respondent is prohibited from seeking or accepting indemnification from any FDIC-insured depository institution for any expenses, including attorneys' fees and disbursements, incurred by Respondent in connection with this matter.
   The effective date of this ORDER shall be ten (10) days after its issuance by the FDIC.
   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: March 24, 1994.
   Pursuant to delegated authority.

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