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FDIC Enforcement Decisions and Orders

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   [11,099] In The Matter of First State Bank and Trust Company, Plain Dealing, Louisiana, Docket No. FDIC-94-192b (12-8-94).

   Bank to cease and desist from such unsafe or unsound practices as operating in violation of applicable consumer laws and regulations; operating with management whose policies are detrimental to the Bank; and failing to provide adequate supervision over the Bank's affairs. (This order was terminated by order of the FDIC dated 3-5-96. See ¶16,078.)

   [.1] Consumer Laws—Compliance Officer Required
   [.2] Civil Rights Laws—Review of Files—Reimbursement to Minority Borrowers
   [.3] Consumer Laws—Written Compliance Program Required
   [.4] Loans—Consumer Loans—Internal Review System Required
   [.5] Community Reinvestment Act—Compliance Plan—Minimum Requirements
   [.6] Violations of Law—Eliminate/Correct
   [.7] Loan Policy—Nondiscriminatory Practices Required
   [.8] Home Mortgage Loans—Recordkeeping Requirements
   [.9] Civil Rights Laws—Personnel Training Required
   [.10] Appraisals—Certified Appraisers—Minorities
   [.11] Personnel—Minority Recruitment
   [.12] Loans—Internal Review for Nondiscrimination
   [.13] Civil Rights Laws—Consultant Report on Bank Performance
   [.14] Shareholders—Disclosure—Cease and Desist Order

In The Matter of

FIRST STATE BANK AND TRUST
COMPANY

PLAIN DEALING, LOUISIANA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-94-192b

   First State Bank and Trust Company, Plain Dealing, Louisiana ("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 November 1, 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 de- {{2-28-95 p.C-3861}} termined 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:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED that the Bank, its directors, officers, employees, agents, successors, assigns, and other persons participating in the conduct of affairs of the Bank, cease and desist from the following unsafe or unsound banking practices:
   (a) Operating in violation of the following laws and regulations:

       1. The Truth in Lending Act, 15 U.S.C. § 1601, et seq., and Regulation Z of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 226, promulgated thereunder;
       2. The Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§ 2601–2617, and Regulation X of the Secretary of the Department of Housing and Urban Development, 24 C.F.R. Part 3500, promulgated thereunder;
       3. The Equal Credit Opportunity Act, 15 U.S.C. §§ 1691–1691f, and Regulation B of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 202, promulgated thereunder;
       4. The Community Reinvestment Act of 1977, 12 U.S.C. §§ 2901–2905, and Part 345 of the FDIC Rules and Regulations, 12 C.F.R. Part 345, promulgated thereunder; and
       5. Sections 338.7(a)(2)(i), 338.7(a)(2)(ii), 338.7(b), 338.8(a), 338.8(c), and 339.5 of the FDIC Rules and Regulations, 12 C.F.R. §§ 338.7(a)(2)(i), 338.7(a)(2)(ii), 338.7(b), 338.8(a), 338.8(c), and 339.5;
       6. Section 100.130 of the Housing and Urban Development Act of 1968, 12 U.S.C. § 1701x;
       7. Section 805 of the Civil Rights Act of 1968, ("Fair Housing Act"), 42 U.S.C. § 3605, as amended by the Fair Housing Amendments Act of 1988, and implemented by rules and regulations enacted by the United States Department of Housing and Urban Development, 24 C.F.R. Parts 109 and 110;
       8. Section 203.4(a) of Regulation C of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 203.4(a); and
       9. Section 205.9(b) of Regulation E of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 205.9(b)
       (b) Operating with management whose policies and practices are detrimental to the Bank; and
       (c) Operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank.
   IT IS FURTHER ORDERED that the Bank take affirmative action as follows:

    [.1] 1. (a) Within 30 days of the effective date of this ORDER, the board of directors of the Bank shall appoint and retain a qualified compliance officer to oversee and coordinate the Bank's overall compliance efforts, including the training and supervision of all affected personnel in compliance related matters. If the compliance officer is to be added as a director or a senior executive officer of the Bank, the Bank shall comply with the requirements of section 32 of the Act, 12 U.S.C. § 1831(i), and section 303.14 of the FDIC Rules and Regulations, 12 C.F.R. § 303.14, prior to the addition of the compliance officer.
       (b) The compliance officer shall be assessed on his/her ability to:
         (i) Comply with the requirements of this ORDER;
         (ii) Improve and thereafter maintain the Bank's compliance program in a safe and sound manner; and
         (iii) Comply with applicable State and Federal Laws and Regulations.

    [.2] 2. (a) No more than 60 days from the effective date of this ORDER, with respect to each residential real estate loan (excluding business loans secured by residential real estate) outstanding on the Bank's books since February 9, 1992, the Bank shall develop and submit to the FDIC's Regional Manager of the Memphis Regional Office, Division of Compliance and Consumer Affairs ("Regional Manager") a written plan for the reimbursement of each minority borrower charged more interest than any non-minority borrower for a loan of the same type and risk ("Reimbursement Plan").
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    The Reimbursement Plan shall include, at a minimum:
         (i) a search of Bank records and the identification of each residential real estate loan to minority borrowers and to non-minority borrowers outstanding on the Bank's books since February 9, 1992;
         (ii) with respect to each loan identified under paragraph 2(a)(i) of this ORDER:
           (A) a separate list by name and mailing address, loan type, risk, and interest rate of (1) each loan to a minority borrower and (2) each loan to a non-minority borrower outstanding on the Bank's books since February 9, 1992;
           (B) an analysis and comparison of the terms and interest rate for each loan listed pursuant to paragraph 2(a)(ii)(A);
           (C) for each loan listed pursuant to paragraph 2(a)(ii)(A), an appropriate procedure for identifying each minority borrower's name and mailing address, and loan number, each loan on which the interest rate charged was higher than on any loan of the same type and Bank risk code to a non-minority borrower; and
           (D) the actual identification by the minority borrower's name and mailing address, and loan number, for each loan on which the interest rate charged was higher than any loan of the same type and risk to a non-minority borrower; and
         (iii) the dollar amount to be reimbursed to each minority borrower identified in paragraph 2(a)(ii)(D), which reimbursement shall be at least:
           (A) the difference in the dollar amount of interest paid by any minority borrower as a result of the higher interest rate charged the minority borrower as compared to the dollar amount of interest paid by any non-minority borrower with a loan of the same type and risk as the minority borrower; and
           (B) the time value of money resulting from the difference in the interest charged. For purposes of this subparagraph, "time value" shall be calculated at the passbook savings rate in effect at the inception of each loan.
         (b) The Reimbursement Plan shall be submitted to the Regional Manager for review and comment within the time period prescribed in paragraph 2(a) of this ORDER. Thereafter, any modification to the Reimbursement Plan shall be submitted to the Regional Manager immediately upon completion of a final draft, but before adoption of the modification by the board of directors. Upon receipt of any comment by the Regional Manager, the board of directors, at its next meeting, shall approve the Reimbursement Plan and any subsequent modification to it, which approval shall be recorded in the minutes of the board of directors. Within 14 days after approving the Reimbursement Plan or any modification to it, the Bank shall follow the Reimbursement Plan and reimburse each minority borrower identified therein by mailing a check for the appropriate dollar amount to the minority borrower or by making an immediately available deposit on his/her behalf. In addition, with respect to any loan to a minority borrower identified and listed pursuant to paragraph 2(a)(ii)(D) of this ORDER which is outstanding as of the effective date of this ORDER, the Bank shall lower the interest rate on the loan to the rate in effect on any comparable loan to a non-minority borrower of the same loan type and risk, and maintain that rate for so long as the loan is outstanding. If, by its terms, an outstanding loan provides for a variable interest rate, once the interest rate is lowered to the interest rate on comparable loan(s) to a non-minority borrower, the interest rate may be maintained according to the loan's variable interest rate terms.

   [.3] 3. Within 60 days of the effective date of this ORDER, the Bank shall adopt and implement a written compliance program which at a minimum shall address the proper maintenance of records, the establishment of appropriate internal controls and procedures and sufficient education and training for all compliance personnel to provide effective guidance, control and personnel over the Bank's consumer lending function. The compliance program shall be in a form and manner acceptable to the Regional Manager as determined at subsequent examinations and/or visitations. A copy of the compliance program shall be provided to the Regional {{2-28-95 p.C-3863}}Manager at least 15 days prior to its implementation.

    [.4] 4. (a) Within 60 days of the effective date of this ORDER, the Bank shall establish a consumer loan review system ("System") to review the Bank's consumer loan documentation, including but not limited to disclosure statements and adverse action notices, and to identify, categorize and correct errors contained in such documents prior to dissemination to the consumer.
       (b) The System shall include a review of all appraisals made on properties located in minority areas where the appraisal is the contributing factor for denying a loan to a minority on the terms requested by the borrower to ensure that the appraisal complies with all policies and programs established by the Bank.
       (c) The System shall provide that the reviewer of each document shall be an individual(s), other than the preparer of such documents, knowledgeable in State and Federal consumers laws and regulations.
       (d) The System shall provide for a monthly written Report to be furnished to the Bank's board of directors which shall identify the number of transactions reviewed, the number of transactions found to be in noncompliance with any State and Federal consumer laws and regulations, and the number of real estate appraisals reviewed. A written summary of each monthly Report shall be attached to the progress reports required by paragraph 15 below.

    [.5] 5. (a) Within 60 days of the effective date of this ORDER, the Bank shall develop a formal CRA program which addresses goals, objectives and a methodology for self-assessment. The program should include provisions to address section 345 of the FDIC Rules and Regulations, 12 C.F.R. § 345. The program shall be submitted to the Regional Manager for approval.
       (b) In addition to the above, the Bank shall, at a minimum:
         (i) Develop and implement a written plan, acceptable to the Regional Manager, to ascertain and meet the credit needs of the entire delineated community;
         (ii) Develop a system for monitoring the distribution of credit applications, denials and extensions to ensure that available credit services are offered fairly and without discrimination through out the delineated community; and
         (iii) Develop and implement a marketing program to make members of the community aware of the credit services offered by the bank.

    [.6] 6. (a) Within 60 days from the effective date of this ORDER, the Bank shall prepare a written plan ("Plan") to (i) eliminate and/or correct all violations of law and/or regulations which are set out on pages 2 through 3 of the FDIC Compliance Report of the Bank as of May 9, 1994, and (ii) to henceforth comply with all applicable laws and regulations.
       (b) The Plan shall specify the actions to be taken by the board of directors and the time frames for each action.
       (c) Within 60 days from the effective date of this ORDER, a copy of the Plan shall be submitted to the Regional Manager for review and comment.
       (d) Within 30 days from receipt of any comment(s) and after incorporation of such comment(s) in the Plan, the board of directors shall approve the Plan which, approval, shall be recorded in the minutes of the meeting of the board of directors.
       (e) It shall remain the responsibility of the board of directors to fully implement the Plan. In the event the Plan, or any portion thereof, is not implemented, the board shall immediately advise the Regional Manager in writing.

   [.7] 7. Within 90 days from the effective date of this ORDER, the Bank shall review its written loan policy and make whatever changes may be necessary to ensure nondiscriminatory practices in all aspects of the lending function consistent with safe and sound lending practices including appropriate loan criteria and procedures regarding real estate appraisals, amortization of real estate and mobile home loans, collateral requirements, and the use of consigners. The Bank shall adopt changes it considers necessary and appropriate, and management shall reaffirm its intent to comply with the policy, as amended. Evidence of management's reaffirmation shall be reduced to writing. The policy and its implementation shall be in a {{2-28-95 p.C-3864}}form and manner acceptable to the Regional Manager as determined at subsequent examinations and/or visitations. A copy of the written loan policy shall be provided to the Regional Manager at least 15 days prior to its implementation.

    [.8] 8. (a) Within 60 days of the effective date of this ORDER, the Bank shall develop and implement procedures for requesting and retaining data on home purchase loan applicants as required by section 338.7 of the FDIC Rules and Regulations, 12 C.F.R. § 338.7, and section 203.4(a) of Regulation C of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 203.4(a) and ensure that the information collected on residential real estate loan applicants is properly recorded as required by section 338.8 of the FDIC Rules and Regulations, 12 C.F.R. § 338.8.
       (b) Within 60 days of the effective date of this ORDER, the Bank shall establish adequate procedures for monitoring the Bank's compliance with sections 338.7 and 338.8 of the FDIC Rules and Regulations, 12 C.F.R. §§ 338.7 and 338.8, which procedures shall at a minimum provide for:
         (i) Semi-annual internal audits performed by a individual qualified to determine the accuracy and completeness of the information gathered and the information recorded.
         (ii) A semi-annual analysis, performed by a qualified individual, of the data collected pursuant to 12 C.F.R. § 338.8 to detect any disparities in the Bank's lending practices.
         (iii) A mechanism for reporting periodically, no less than semi-annual, to the board of directors the results of the internal audits and analysis performed.

    [.9] 9. (a) Within 60 days of the effective date of this ORDER, the Bank shall train all persons involved in the credit solicitation and review process, on the requirements of the Equal Credit Opportunity Act, 15 U.S.C. § 1691(a)(1), Regulation B of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 202.5, the Fair Housing Act, 42 U.S.C. §§ 3604 and 3605, the Home Mortgage Disclosure Act, 12 U.S.C. § 2801, et seq., and any other appropriate laws and regulations that address nondiscrimination in credit or housing loan transactions.
       (b) The training required in this paragraph shall be conducted at least once every 12 calendar months.
       (c) The Bank may use an outside vendor/ contractor to provide the training required herein.

    [.10] 10. (a) Within 60 days of the effective date of this ORDER, the Bank shall establish and maintain a list of certified appraisers, whose appraisals are acceptable to the Bank.
         (i) The List shall contain a mix of both minority and non-minority certified appraisers located within a 40 miles radius of the Bank.
         (ii) Should the Bank be unable to locate minority certified appraisers within the 60 day time frame, the Bank shall, every 90 days, update the List until an acceptable mix is achieved.
         (iii) After an acceptable mix of minority and non-minority certified appraisers is achieved, the Bank shall annually update the List in accordance with subparagraph 10(a)(i).
         (iv) All efforts by the Bank to locate minority certified appraisers and achieve an acceptable List shall be documented by the Bank.
       (b) For each real estate loan in which an appraisal is required, the Bank shall provide the borrower with a copy of the List and the opportunity to select an appraiser from the List.
       (c) The Bank shall document in the loan file of the borrower, that is complied with paragraph 10(b) herein.

   [.11] 11. The Bank shall recruit qualified minorities for any job openings in the lending area on an ongoing basis and in a manner that will reach potential minority applicants.

    [.12] 12. (a) Within 60 days of the effective date of this ORDER, the Bank shall appoint a committee of senior lending officers and/or members of the board of directors with extensive knowledge of consumer laws and regulations to review the loan processing and underwriting for each credit application initially rejected to ascertain whether the applicant was treated in a nondiscriminatory manner and in accordance with the Bank's lending policy.
       (b) The written findings of the committee shall be provided to the board of directors of the Bank on a monthly basis.


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    [.13] 13. (a) Within 60 days of the effective date of this ORDER, the board of directors of the Bank shall obtain the services of an outside consultant(s), acceptable to the FDIC, who is knowledgeable in the area of lending, consumer laws and regulations, to assist the board of directors in reviewing all of the other cases of discouragement and disparate treatment not specifically covered by paragraph 2 of this ORDER and as further outlined in pages 2 through 3 of the FDIC Compliance Report of the Bank as of May 9, 1994, and determine whether reimbursement is appropriate.
       (b) Within 90 days of the effective date of this ORDER, the board of directors shall prepare a written report ("Written Report") which shall identify (1) each loan reviewed in accordance with paragraph 13(a),(2) the discouragement and disparate treatment identified as to each loan, (3) the dollar amount to be reimbursed to each borrower identified, and (4) a plan of reimbursement.
       (c) A copy of the Written Report shall be submitted to the Regional Manager for review and comment. Within 30 days from the receipt of any comment, and after consideration of such comment, the board of directors shall approve the Written Report and which approval shall be recorded in the minutes of the meeting of the board of directors. It shall remain the responsibility of the board to fully implement the plan within the specified time frames. In the event the Written Report, or any portion thereof, is not implemented, the board shall immediately advise the Regional Manager, in writing, of specific reasons for deviating from the Written Report.

   [.14] 14. 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 Section 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.
   15. On the fifteenth day of February, 1995, and on the fifteenth day of every third month thereafter, the Bank shall furnish a written progress report to the Regional Manager 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 Manager has released the Bank in writing from making further reports.
   The effective date of this ORDER shall be ten (10) days from the date of its issuance.
   The provisions of this ORDER shall be binding upon the Bank, its directors, officers, employees, agents, successors, assigns, and other persons participating in the conduct of the Bank.
   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provision of the ORDER shall be modified, terminated, suspended, or set aside by the FDIC.
   Dated: December 8, 1994.
   Pursuant to delegated authority.

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