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FDIC Enforcement Decisions and Orders

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{{11-30-95 p.C-3825}}
   [11,083] In The Matter of Pacific Heritage Bank Torrance, California, Docket No. FDIC-94-151b (10-24-94).

   Bank to cease and desist from such unsafe or unsound practices as operating with inadequate management; operating with inadequate capital; operating with an excessive level of poor quality assets; operating without adequate reserve for loan losses; following hazardous lending and lax collection practices; operating in such a manner as to produce operating losses; and operating in violation of applicable laws or regulations. (This order was terminated by order of the FDIC dated 8-25-95. See ¶16,035.)

   [.1] Management—Qualifications—Review
{{11-31-95 p.C-3826}}
   [.2] Capital—Tier 1 Capital—Increase/Maintain—Methods
   [.3] Capital—Capital Restoration Plan—Minimum Requirements
   [.4] Assets—Adversely Classified—Eliminate/Reduce
   [.5] Loans—Extensions of Credit—Existing Borrowers—Curtail
   [.6] Lending and Collection Policy—Minimum Requirements
   [.7] Loan Loss Reserve—Establish/Maintain
   [.8] Profit Plan—Minimum Requirements
   [.9] Violations of Law—Eliminate/Correct
   [.10] Reports of Condition and Income—Amendment Required
   [.11] Accounting—Procedures—Correction Required
   [.12] Dividends—Restricted
   [.13] Compensation—Institution-Affiliated Party—Restricted
   [.14] Assets—Average Assets—Limits on Increase
   [.15] Bank Expansion—Restricted
   [.16] Brokered Deposits—Notice to FDIC Required
   [.17] Shareholders—Disclosure—Cease and Desist Order
   [.18] Real Estate Activities—Compliance with State Law Required

In The Matter of

PACIFIC HERITAGE BANK
TORRANCE, CALIFORNIA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-94-151b

   Pacific Heritage Bank, Torrance, California ("Bank"), having been advised of its right to 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)(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 October 18, 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 banking practices and had committed violations of law and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that 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 and unsound banking practices and violations of law and/or regulation:
   (a) operating with inadequate management;
   (b) operating with inadequate equity capital and reserves in relation to the volume and quality of assets held by the Bank;
   (c) operating with a large volume of poor quality loans;
   (d) operating with an inadequate loan valuation reserve;
   (e) following hazardous lending and lax collection practices;
   (f) operating in such a manner as to produce operating losses; and
   (g) operating in violation of section 323.3(a) of the FDIC's Rules and Regulations, 12 C.F.R. § 323.3(a), as more fully described on page 8.10 of the Report of Examination as of February 28, 1994 and section 323.4(a) of the FDIC's Rules and Regulations, 12 {{12-31-94 p.C-3827}} C.F.R. § 323.4(a), as more fully described on pages 8–10 and 8–11 of the Report of Examination as of February 28, 1994.
   IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

   [.1] 1. The Bank shall have and retain qualified management. Each member of management shall have qualifications and experience commensurate with his or her duties and responsibilities at the Bank. Management should include a chief executive officer with proven ability in managing a Bank of comparable size, and experience in upgrading a low quality loan portfolio, improving earnings, and other matters needing particular attention. Management should also include a senior lending officer with significant appropriate lending, collection, and loan supervision experience and experience in upgrading a low quality loan portfolio. Each member of management shall be provided appropriate written authority from the Bank's board of directors to implement the provisions of this ORDER.

       (a) 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) restore all aspects of the Bank to a safe and sound condition, including asset quality, capital adequacy, earnings, management effectiveness, and liquidity.
       (b) During the life of this ORDER, the Bank shall notify the Regional Director of the FDIC's San Francisco Regional Office ("Regional Director") and the Superintendent of Banks for the State of California ("Superintendent") in writing when it proposes to add any individual to the Bank's board of directors or employ any individual as a senior executive officer. The notification must be received at least 30 days before such addition or employment is intended to become effective and should include a description of the background and experience of the individual or individuals to be added or employed.
       (c) The Bank may not add any individual to its board of directors or employ any individual as a senior executive officer if the Regional Director issues a notice of disapproval pursuant to section 32 of the Act, 12 U.S.C. § 1831i.

    [.2] 2. (a) The Bank shall have and maintain Tier 1 capital as follows:
         (i) As of the effective date of this ORDER, the Bank shall have and maintain Tier 1 capital in such an amount as to equal or exceed four (4.0) percent of the Bank's total assets.
         (ii) On or before December 31, 1994, the Bank shall have and maintain Tier 1 capital in such an amount as to equal or exceed four point two (4.2) percent of the Bank's total period end assets
         (iii) On or before February 28, 1995, the Bank shall have and maintain Tier 1 capital in such an amount as to equal or exceed five (5.0) percent of the Bank's total assets, unless the Bank has reduced its classified assets such that it is fully in compliance with the requirements of paragraph 4(a) and 4(b) of this ORDER on or before December 31, 1994. If such compliance has been achieved by the Bank, on or before December 31, 1994, the requirements of this subparagraph shall not apply.
         (iv) On or before June 30, 1995, the Bank shall have and maintain Tier 1 capital in such an amount as to equal or exceed seven (7.0) percent of the Bank's total assets; and thereafter, during the life of this ORDER, the Bank shall maintain Tier 1 capital in such an amount as to equal or exceed seven (7.0) percent of the Bank's total assets.
       (b) The level of Tier 1 capital to be maintained during the life of this ORDER pursuant to Subparagraph 2(a) shall be in addition to a fully funded loan loss reserve, the adequacy of which shall be satisfactory to the Regional Director and Superintendent as determined at subsequent examinations and/or visitations.
       (c) Any increase in Tier 1 capital necessary to meet the requirements of Paragraph 2 of this ORDER may be accomplished by the following:
         (i) the sale of common stock; or
         (ii) the sale of noncumulative perpetual preferred stock; or
         (iii) the direct contribution of cash by {{12-31-94 p.C-3828}}the board of directors and/or shareholders of the Bank; or
         (iv) the recovery of previously charged-off assets; or
         (v) any other means acceptable to the Regional Director and the Superintendent (including but not limited to net income as would be reported on Schedule RI on the Consolidated Report of Condition and Income); or
         (vi) any combination of the above means.
       Any increase in Tier 1 capital necessary to meet the requirements of Paragraph 2 of this ORDER may not be accomplished through a deduction from the Bank's loan loss reserves.
       (d) If all or part of the increase in Tier 1 capital required by Paragraph 2 of this ORDER is accomplished by the sale of new securities, the board of directors shall forthwith 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 only to the Bank's existing shareholders), the Bank shall prepare offering materials fully describing the securities being offered, including 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 fifteen (15) 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, Registration and Disclosure Section, 550 - 17th Street, N.W., Washington, D.C. 20429, for review. Any changes requested to be made in the plan or materials by the FDIC shall be made prior to their dissemination. If the increase in Tier 1 capital is provided by the sale of noncumulative perpetual preferred stock, then all terms and conditions of the issue, including but not limited to those terms and conditions relative to interest rate and convertibility factor, shall be presented to the Regional Director and the Superintendent for prior approval.
       (e) In complying with the provisions of Paragraph 2 of this ORDER, the Bank shall provide to any subscriber and/or purchaser of the Bank's securities, a 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 ten (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.
       (f) For the purposes of this ORDER, the terms "Tier 1 capital" and "total assets" shall have the meanings ascribed to them in Part 325 of the FDIC Rules and Regulations, 12 C.F.R. §§ 325.2(t) and 325.2(v).

    [.3] 3. (a) The Bank shall submit to the FDIC and the Superintendent an acceptable capital restoration plan no later than October 3, 1994.
       (b) The capital restoration plan referred to in Paragraph 3(a) shall:
         (i) specify the steps the Bank will take to become adequately capitalized; the levels of capital to be attained during each year in which the plan will be in effect; how the Bank will comply with the restrictions or requirements then in effect under Section 38 of the Federal Deposit Insurance Act; and the types and levels of activities in which the Bank will engage; and
         (ii) contain such other information as the FDIC may require.
       (c) The FDIC shall consider and act on the capital restoration plan according to the pertinent time frames set forth by FDIC regulation; however, the FDIC shall not accept the capital restoration plan submitted by the Bank under Paragraph 3 unless the Bank's capital restoration plan complies with all requirements of Paragraph 3(b); the Bank's capital restoration plan is based on realistic assumptions, and is likely to succeed in restoring the Bank's capital; and the Bank's capital restoration plan would not appreciably increase the risk (including credit risk, interest-rate risk, and other types of risk) to which the Bank is exposed.
    {{12-31-94 p.C-3829}}
       (d) Paragraph 3 may not be construed as:
         (i) requiring any company not having control of the Bank to guarantee, or otherwise be liable on, a capital restoration plan;
         (ii) requiring any person other than the Bank to submit a capital restoration plan; or
         (iii) affecting compliance by brokers, dealers, government securities brokers, and government securities dealers with the financial responsibility requirements of the Security Exchange Act of 1934 and regulations and orders thereunder.

    [.4] 4. (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" as of February 28, 1994, that have not been previously collected or charged off. Elimination of these assets through proceeds of other loans made by the Bank, other than to qualified third-party borrowers, is not considered collection for the purpose of this paragraph.
       (b) Within 180 days from the effective date of this ORDER, the Bank shall have reduced the assets classified "Substandard" as of February 28, 1994 that have not previously been charged off to not more than $24,000,000.
       (c) Within days from the effective date of this ORDER, the Bank shall have reduced the assets classified "Substandard" as of February 28, 1994 that have not previously been charged off to not more than $20,000,000.
       (d) Within 365 days from the effective date of this ORDER, the Bank shall have reduced the assets classified "Substandard" as of February 28, 1994 that have not previously been charged off to not more than $16,000,000.
       (e) Within 730 days from the effective date of this ORDER, the Bank shall have reduced the assets classified "Substandard" as of February 28, 1994 that have not previously been charged off to not more than $10,000,000.
       (f) The requirements of subparagraphs 4(a), 4(b), 4(c), 4(d), and 4(e) of this ORDER are not to be construed as standards for future operations and, in addition to the foregoing, the Bank shall eventually reduce the total of all adversely classified assets. Reduction of these assets through proceeds of other loans made by the Bank, excluding those loans made by the Bank to qualified third-party borrowers, is not considered collection for the purpose of this paragraph. As used in subparagraphs 4(b), 4(c), 4(d), 4(e), and 4(f) the word "reduce" means:
         (i) to collect;
         (ii) to charge-off; or
         (iii) to sufficiently improve the quality of assets adversely classified to warrant removing any adverse classification, as determined by the FDIC.

    [.5] 5. (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 from the Bank that has been charged off or classified, in whole or in part, "Loss" and is uncollected. Subparagraph 5(a) of this ORDER shall not prohibit the Bank from renewing or extending the maturity of any credit in accordance with the Financial Accounting Standards Board Statement Number 15 ("FASB 15").    (b) 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 from the Bank that has been classified, in whole or part, "Substandard" or "Doubtful" without the prior written approval of a majority of the board of directors or the loan committee of the Bank. Subparagraph 5(b) of this ORDER shall not prohibit the Bank from renewing or extending the maturity of any credit in accordance with FASB 15, providing that such renewal or extension shall be made only with the prior written approval of a majority of the board of directors or the loan committee of the Bank.

       (c) In connection with subparagraph 5(a) and 5(b) of this ORDER, the Bank shall not:

         (i) continue the accrual of interest on any loan which is delinquent in principal or interest payments ninety (90) days or more unless the asset is both well

      {{12-31-94 p.C-3830}}secured and in the process of collection; or
         (ii) engage in any practice or device which essentially avoids recognition of overdue loans and/or artificially inflates the income of the Bank. For any loans restructured in accordance with FASB 15, consideration should be given to the reasonableness of the modified terms of the loan, since loans should not be restructured in an attempt to conceal credit losses or delay their recognition.

       (d) For the purpose of subparagraph 5(c) of this ORDER, debt is "well secured" if it is secured by:

         (i) collateral in the form of liens on or pledges of real or realizable value sufficient to discharge the debt (including accrued interest) in full; or

         (ii) the guaranty of a financially responsible party.

    A debt is "in the process of collection" if collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status.

    [.6] 6. (a) Within 60 days from the effective date of this ORDER, the Bank shall revise, adopt, and implement written lending and collection policies to provide effective guidance and control over the Bank's lending function, which policies shall include specific guidelines for placing loans on a non-accrual basis. In addition, the Bank shall obtain adequate and current documentation for all loans in the Bank's loan portfolio. Such policies and their implementation shall be in a form and manner acceptable to the Regional Director and the Superintendent as determined at subsequent examinations and/or visitations.

       (b) The initial revisions to the Bank's loan policy and practices, required by this paragraph, at a minimum, shall contain, if not already included, the following:

         (i) provisions, consistent with FDIC instructions for the preparation of Reports of Condition and Income, under which the accrual of interest income is discontinued and previously accrued interest is reversed on delinquent loans;

         (ii) provisions which prohibit the capitalization of interest or loan related expense unless the board of directors supports in writing and records in the minutes of the corresponding board of directors meeting why an exception thereto is in the best interests of the Bank;

         (iii) provisions which require complete loan documentation, realistic repayment terms and current credit information adequate to support the outstanding indebtedness of the borrower. Such documentation shall include, where appropriate, current financial information, profit and loss statements or copies of tax returns and cash flow projections;

         (iv) provisions which incorporate limitations on the amount that can be loaned in relation to established collateral values;

         (v) provisions which specify the circumstances and conditions under which real estate appraisals must be conducted by an independent third party;

         (vi) provisions which establish standards for unsecured credit;

         (vii) provisions which establish officer lending limits by title;

         (viii) provisions that require extensions of credit to any of the Bank's executive officers, directors, or principal shareholders, or to any related interest of such persons, to be approved in advance by a majority of the entire board of directors in accordance with section 215.4(b) of Regulation O of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 215.4(b);

         (ix) provisions which prohibit the issuance of standby letters of credit unless the letters of credit are fully secured by readily marketable collateral and/or are supported by current and complete financial information;

         (x) provisions that directors first determine that the lending staff has the expertise necessary to properly supervise construction loans and that adequate procedures are in place to monitor any construction involved before funds are disbursed;

         (xi) provisions which prohibit con- {{12-31-94 p.C-3831}}centrations of credit in excess of 25 percent of the Bank's total equity capital and reserves to any borrower and that borrower's related interests;
         (xii) provisions which require the preparation of an asset "watch list" which shall include relevant information on all assets in excess of $500,000 which are classified "Substandard" and "Doubtful" as of February 28, 1994 or by the FDIC or California State Banking Department in subsequent Reports of Examination and all other assets in excess of $500,000 which warrant individual review and consideration by the board of directors as determined by the loan committee or active management. The asset "watch list" shall be presented to the board of directors for review at least monthly with such review noted in the minutes; and

         (xiii) the board of directors shall adopt procedures whereby officer compliance with the revised loan policy is monitored and responsibility for exceptions thereto assigned. The procedures adopted shall be reflected in minutes of a board of directors meeting at which all members are present and the vote of each is noted.

   [.7] 7. Within 30 days from the effective date of this ORDER, the Bank shall establish, if it has not already, and thereafter maintain an adequate reserve for loan losses.

   Additionally, within 30 days from the effective date of this ORDER, the board of directors shall develop or revise, adopt and implement a comprehensive policy for determining the adequacy of the reserve for loan losses. For the purpose of this determination, the adequacy of the reserve shall be determined after the charge-off of all loans or other items classified "Loss." The policy shall provide for a review of the reserve at least once each calendar quarter. Said review should be completed prior to the timely submission by the Bank of its Consolidated Reports of Condition and Income, in order that the findings of the board of directors with respect to the loan loss reserve may be properly reported in the quarterly Reports of Condition and Income. The review should focus on the results of the Bank's internal loan review, loan loss experience, trends of delinquent and non-accrual loans, an estimate of probable loss exposure of significant credits, concentrations of credit, and present and prospective economic conditions. A deficiency in the reserve shall be remedied in the calendar quarter it is discovered, prior to submitting the Report of Condition, by a charge to current operating earnings. The minutes of the board of directors meeting at which such review is undertaken shall indicate the results of the review. Upon completion of the review, the Bank shall increase and maintain its loss reserve consistent with the loan loss reserve policy established. Such policy and its implementation shall be satisfactory to the Regional Director and Superintendent as determined at subsequent examinations and/or visitations.

   [.8] 8. Within 90 days from the effective date of this ORDER, the Bank shall formulate and implement a written profit plan. This plan shall be forwarded to the Regional Director and to the Superintendent for review and comment and shall address, at a minimum, the following:

       (a) goals and strategies for improving and sustaining the earnings of the Bank, including:

         (i) an 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; and

         (iv) a description of the operating assumptions that form the basis for, and adequately support, major projected income and expenses components.

    (b) coordination of the Bank's loan, investment, and operating policies, and budget and profit planning, with the funds management policy.

   [.9] 9. Within 90 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law, to the extent legally possible, which are more fully set out on pages 8.10 and 8.11 of the Report of Examination of the Bank as of February 28, 1994. In addition, the Bank shall take all necessary steps to ensure future compliance with all applicable laws and regulations.

   [.10] 10. Within 10 days after eliminating from its books any asset in compliance with Paragraph 4 of this ORDER, the Bank shall file with the FDIC amended Consolidated Reports of Condition and Income which shall accurately report the allowance for loan and

{{12-31-94 p.C-3832}}lease losses of the Bank as of December 31, 1993 as set forth on page 8a of the Report of Examination as of February 28, 1994. Thereafter, 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 end of the period for which the Reports are filed, including any adjustment in the Bank's books made necessary or appropriate as a consequence of the receipt of any California State Banking Department or FDIC examination of the Bank during that reporting period.

   [.11] 11. Within 60 days of the effective date of this ORDER the Bank shall revise and correct its accounting procedures, at a minimum such revisions and corrections shall address all items of criticism contained on page 8-b of the Report of Examination as of February 28, 1994. Such revisions and corrections shall be in a form and manner acceptable to the Regional Director and the Superintendent as determined at subsequent examinations.

       [.12] 12. (a) The Bank shall pay no cash dividends nor make any capital distribution without the prior written consent of the Regional Director and the Superintendent.

       (b) The Bank may, with the prior written approval of the Regional Director and the Superintendent, repurchase, redeem, retire, or otherwise acquire shares or ownership interest if the repurchase, redemption, retirement, or other acquisition:

         (i) is made in connection with the issuance of additional shares or obligations of the Bank in at least an equivalent amount; and

         (ii) will reduce the Bank's financial obligations or otherwise improve the Bank's financial condition.

       (c) For purposes of this Paragraph, the term "capital distribution" means:

         (i) a distribution of cash or other property by the Bank to its owners made on account of that ownership, but not including any dividend consisting only of shares of the Bank;

         (ii) a payment by the Bank to repurchase, redeem, retire, or otherwise acquire any of its shares or other ownership interests, including any extension of credit to finance an affiliated company's acquisition of those shares or interests; or

         (iii) a transaction that the FDIC determines, by order or regulation, to be in substance a distribution of capital to the owners of the Bank.

   [.13] 13. The Bank shall pay no management fee to any person having control of the Bank, if after making the payment the Bank would be, or continue to be "undercapitalized", "significantly undercapitalized", or "critically undercapitalized", as those terms are defined by Section 38 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831o.

   [.14] 14. So long as the Bank's capital level is "undercapitalized", "significantly undercapitalized", or "critically undercapitalized", as those terms are defined by Section 38 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831o, the Bank shall not permit its average total assets during any calendar quarter to exceed its average total assets during the preceding calendar quarter unless:

       (i) the FDIC has accepted the Bank's capital restoration plan;

       (ii) any increase in total assets is consistent with the Bank's capital restoration plan; and

       (iii) the Bank's ratio of tangible equity to assets increases during the calendar quarter at a rate sufficient to enable the Bank to become adequately capitalized within a reasonable time.

   [.15] 15. So long as the Bank's capital level is "undercapitalized", "significantly undercapitalized", or "critically undercapitalized", as those terms are defined by Section 38 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831o, the Bank shall not, directly or indirectly, acquire any interest in any company or insured depository institution, establish or acquire any additional branch office, or engage in any new line of business unless:

       (i) the FDIC has accepted the Bank's capital restoration plan, the Bank is implementing the capital restoration plan, and the FDIC determines that the proposed action is consistent with and will further the achievement of the capital restoration plan; or

       (ii) the FDIC Board of Directors determines that the proposed action will further the purpose of the Bank's capital restoration plan.

   [.16] 16. While this ORDER is in effect,

{{12-31-94 p.C-3833}}the Bank shall give written notice to the Regional Director and the Superintendent at such time as the Bank intends to make use of brokered deposits. The notification should indicate how the brokered deposits are to be utilized with specific reference to credit quality of investments/loans and the effect on the Bank's funds position and asset/liability matching. The Regional Director and the Superintendent shall have the right to reject the Bank's plans for utilizing brokered deposits. For purposes of this ORDER, brokered deposits are defined as described in section 337.6(a)(1) of the FDIC Rules and Regulations to include any deposits funded by third party agents or nominees for depositors, including deposits managed by a trustee or custodian when each individual beneficial interest is entitled to or asserts a right to federal deposit insurance.

   [.17] 17. Following the effective date of this ORDER, the Bank shall send to its shareholders or otherwise furnish a description of this ORDER in conjunction with the Bank's next shareholder communication and also 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 Section, 555 - 17th Street, N.W., Washington, D.C. 20429, at least fifteen (15) 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.

   [.18] 18. During the life of this ORDER, the Bank shall furnish to the Regional Director a copy of any application to the Superintendent filed pursuant to section 751.3 of the California Financial Code, Cal. Fin. Code § 751.3 (West 1989), to engage in real estate activities. This copy of such application shall be furnished to the Regional Director on or before the date of its filing with the Superintendent. In no event shall the Bank engage in real estate activities which are the subject of any such application filed pursuant to section 751.3 of the California Financial Code without the prior written consent of the Regional Director.
   19. Within 45 days of the end of the first quarter following the effective date of this ORDER, and within forty-five (45) days of the end of each quarter thereafter, 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 shall include a copy of the Bank's Report of Condition and the Bank's Report of Income. 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.

   This ORDER shall become effective ten (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 at San Francisco, California, this 24th day of October, 1994.

   Pursuant to delegated authority.

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