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FDIC Enforcement Decisions and Orders

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{{8-31-95 p.C-3632}}
   [10,965]In the Matter of Buckner State Bank, Dallas, Texas, Docket No. FDIC-94-38b (4-6-94).

   Bank to cease and desist from such unsafe or unsound practices as operating in violation of applicable consumer laws or regulations and failing to provide supervision to prevent such violations. (This order was terminated by order of the FDIC dated June 28, 1995. See ¶16,016.)

[.1] Consumer Laws—Compliance Officer Required
[.2] Violations of Law—Eliminate/Correct
[.3] Consumer Laws—Compliance Program—Minimum Requirements
[.4] Bank Secrecy Act—Compliance Program—Employee Training
[.5] Bank Records—Compliance with Regulations Required
[.6] Regulation Z—Disclosures to Borrowers
[.7] Regulation B—Notification to Applicants
[.8] Regulation CC—Funds Availability
[.9] Community Reinvestment Act—Compliance Required
[.10] Shareholders—Disclosure—Cease and Desist Order

In the Matter of

BUCKNER STATE BANK
DALLAS, TEXAS
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-94-38b

   Buckner State Bank, Dallas, Texas ("Bank"), through its board of directors, having been advised of its right to the issuance and service of a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Bank and of its right to a hearing on the alleged 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 15, 1994, whereby, solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and/or 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 {{6-30-94 p.C-3633}}banking practices. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

DEFINITIONS

   1. "Compliance program" means the same as the definition contained in the FDIC Manual for Compliance Examinations, including a consciously planned and organized effort to meet the Bank's compliance with consumer laws in a comprehensive manner or an ongoing basis.
   2. "Consumer laws" means those laws and regulations referenced in the FDIC Manual for Compliance Examinations, including the laws and regulations referred to in the FDIC's Compliance Report of the Bank as of September 17, 1993.

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Bank and its institution-affiliated parties cease and desist from the following unsafe or unsound banking practices and violations of laws and/or regulations:
   1. Engaging in violations of applicable consumer laws and/or regulations; and
   2. Failing to provide adequate supervision and direction over the Bank's compliance program to prevent violations of consumer laws and/or regulations.
   IT IS FURTHER ORDERED, that the Bank take affirmative action as follows:

    [.1] 1. (a) Within 60 days after the effective date of this ORDER, the Bank shall have and thereafter retain a qualified compliance officer who shall be given stated written authority by the Bank's board of directors to implement and supervise the Bank's compliance program, including but not limited to, providing training for the Bank's employees in all consumer laws and regulations, establishing internal controls and procedures reasonably designed to prevent violations of consumer laws, and performing or supervising periodic internal audits to ascertain compliance with consumer laws and regulations and/or the Bank's compliance program. The compliance officer shall report directly to the board of directors.
         (i) The Bank shall promptly notify the Regional Director of the FDIC's Dallas Regional Office ("Regional Director") of the identity of said compliance officer. If the compliance officer is to be added as a director or employed as a senior executive officer of the Bank, the Bank shall comply with the requirements of section 32 of the Act, 12 U.S.C. § 1831i, and section 303.14 of the FDIC Rules and Regulations, 12 C.F.R. § 303.14, prior to the addition of the compliance officer to such position.
       (b) The Bank's compliance officer shall be evaluated on his ability to comply with the requirements of this ORDER and to comply with applicable consumer laws and regulations.

   [.2] 2. After the effective date of this Order, the Bank, consistent with sound banking practices, shall eliminate and/or correct all violations of laws and regulations existing in the Bank as of September 17, 1993, as more fully set forth on pages 2 through 2-a-2 of the Compliance Report.

[.3] 3. (a) Within 60 days after the effective date of this ORDER, the Bank shall develop and implement a written compliance program which, at a minimum, shall expressly provide for:

       (i) Comprehensive training in consumer laws conducted at least once a year for all Bank employees whose duties and responsibilities include the need to comply with consumer laws and regulations; and,
       (ii) Procedures for monitoring the Bank's compliance with consumer laws, including an internal audit of the Bank's compliance program to be performed or supervised by the compliance officer each calendar quarter. The compliance officer shall report the results of said audit to the Bank's board of directors, and the Bank's board of directors shall record the results of said audit and any recommendations by the compliance officer and/or the board of directors in the board of directors's minutes of the meeting;
   (b) The board of directors shall approve the written compliance program and/or any subsequent modification thereto, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank, and its successors and assigns shall follow the written compliance program and/or any subsequent modification thereto.

[.4] 4. (a) Within 60 days after the effective date of this ORDER, the Bank shall {{6-30-94 p.C-3634}}develop and implement a written Bank Secrecy Act compliance program in accordance with the provisions of section 326.8 of the FDIC Rules and Regulations, 12 C.F.R. § 326.8, to ensure monitoring and independent testing for compliance with the provisions of the Bank Secrecy Act is conducted by bank personnel or by an outside party, and to provide training for appropriate personnel as required by 12 C.F.R. § 326.8(c)(4).
   (b) The board of directors shall approve the written Bank Secrecy Act compliance program and/or any subsequent modification thereto, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its successors and assigns shall follow the written Bank Secrecy Act compliance program and/or any subsequent modification thereto.

   [.5] 5. Within 60 days after the effective date of this ORDER, the Bank shall develop and implement procedures to comply with section 103.29(a) of the Department of the Treasury Regulations, 31 C.F.R. § 103.29(a), including, but not limited to, ensuring that all required information is maintained on the chronological logs of transactions.
   6. Within 60 days after the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that information on applicants for residential real estate loans is properly recorded as required by section 338.8 of the FDIC Rules and Regulations, 12 C.F.R. § 338.8.

   [.6] 7. Within 60 days after the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that disclosures required by section 226.18(k) of Regulation Z of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 226.18(k), are provided to all applicable borrowers.

   [.7] 8. Within 60 days after the effective date of this ORDER, the Bank shall develop and implement procedures to ensure compliance with regulations governing loan applicants and notifications to customers against whom adverse action is taken. These procedures should ensure that the Bank notifies an applicant of action taken as required by section 202.9(a) of Regulation B of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 202.9(a).

   [.8] 9. Within 60 days after the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that funds are made available to customers as required by sections 229.10 and 229.12 of Regulation CC of the Board of Governors of the Federal Reserve System ("Regulation CC"), 12 C.F.R. §§ 229.10 and 229.12. Pursuant to section 229.19(f) of Regulation CC, 12 C.F.R. § 229.19(f), the Bank shall provide each employee who performs duties subject to the requirements of Subpart B of Regulation CC, 12 C.F.R. § 229, Subpart B, with a statement of the procedures applicable to that employee.

   [.9] 10. Within 60 days after the effective date of this ORDER, the Bank shall adopt a written Community Reinvestment Act ("CRA") policy which provides for CRA goals and objectives, employee training, and a methodology for periodic self-assessment of the Bank's CRA performance. Such a policy should also include:

       (a) A provision providing for the oversight and involvement of the board of directors in the CRA process. The board of directors's minutes shall document all discussion and review of the Bank's CRA related activity;
       (b) A formal strategy designed to inform the community of the Bank's available credit products;
       (c) Internal review of advertising efforts to ensure all areas of the delineated community are made aware of the Bank's credit services and deposit products;
       (d) A formal strategy to effectively ascertain community credit needs by direct contact with various community members. Outreach with groups representing minorities should be in proportion to their percentage of the total population. The results of such contacts should be documented;
       (e) Increased geographical analysis of the geographic distribution of credit applications, denials, and loans. The results of this analysis should be reviewed by the board of directors and incorporated into the CRA process; and
       (f) A more active role by the board of directors in supporting and development or implementation of specific projects promoting economic revitalization and growth. Board involvement should include establishing a working relationship with government and private sector representatives to identify opportunities for {{6-30-94 p.C-3635}}the Bank's involvement in addressing community development needs.

[.10] 11. Following the effective date of this ORDER, the Bank shall send to its shareholders a description of this ORDER, (a) in conjunction with the Bank's next shareholder communication, and also (b) 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, Registration and Disclosure Unit, 550 17th Street N.W., Washington, D.C. 20429-9990 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.
   12. Within 30 days after the end of the first calendar quarter following the effective date of this ORDER, and within 30 days after the end of each successive calendar quarter, the Bank shall furnish written progress reports to the Regional Director detailing the form and manner of any action taken to secure compliance with this ORDER and the results thereof. 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 board meeting. 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 additional reports.
   The effective date of this ORDER shall be 10 days after the date of its issuance.
   The provisions of this ORDER shall be binding upon the Bank and its institution-affiliated parties.
   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provision of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.
   Dated at Dallas, Texas, this 6th day of April, 1994.
   Pursuant to delegated authority.

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