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FDIC Enforcement Decisions and Orders

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{{9-30-97 p.C-4269}}
   [11,350] In the Matter of Citizens State Bank, Roma, Texas, Docket No. FDIC-96-137b (10-3-96)

   Bank agrees to cease and desist from such unsafe and unsound practices as violating applicable consumer laws and/or regulations and failing to provide adequate supervision and direction over the bank's compliance program. (This order was terminated by order of the FDIC dated 7-8-97. See ¶16,177.)

   [.1] Violations of Law—Eliminate/Correct
   [.2] Compliance Program—Develop/Implement
   [.3] Regulation Z—Compliance Required
   [.4] Regulation B—Compliance Required
   [.5] Regulation X—Compliance Required
   [.6] Regulation C—Compliance Required
   [.7] Insurance—Flood Insurance—Compliance with FDIC Regulations Required
   [.8] Regulation CC—Compliance Required
   [.9] Interest Rates—Demand Deposits—Limits on Interest Rates Paid
   [.10] Shareholders—Cease and Desist Order—Disclosure
   [.11] Cease and Desist Order—Compliance Reports Required

In the Matter of

CITIZENS STATE BANK
ROMA,TEXAS
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-96-137b

{{9-30-97 p.C-4270}}Citizens State Bank, Roma, 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/or 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 October 3, 1996, 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 the Bank had engaged in unsafe or unsound banking practices and had violated laws 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 and institution-affiliated parties of the Bank cease and desist from all of the following unsafe or unsound banking practices and violations of laws and/or regulations:
   (a) Engaging in violations of applicable consumer laws and/or regulations; and
   (b) 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. 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 more fully set forth on pages 2.1 through 3.4 of the April 22, 1996 Compliance Examination Report. In addition, the Bank shall ensure its future compliance with all applicable laws and regulations.

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

       (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.
       (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 director's minutes of the meeting.
   (b) The board of directors shall approve the revisions to 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.

   [.3] 3. Within 30 days after the effective date of this ORDER, the Bank shall comply with the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., as implemented by Regulation Z of the Board of Governors of the Federal Reserve System ("Regulation Z"), 12 C.F.R. Part 226, including, but not limited to:

       (a) Providing applicants with the required initial Truth in Lending disclosure statement as required by section 226.19 (a)(1) of Regulation Z, 12 C.F.R. § 226.19 (a)(1).
       (b) Disclosing to borrowers the correct terms of the legal obligations between the parties.
       (c) Providing applicants with the statement concerning required deposits, that the annual percentage rate does not reflect the effect of such required deposits.

       [.4] 4. Within 60 days after the effective date of this ORDER, the Bank shall develop and implement procedures to ensure compliance with regulations governing loan ap-

{{8-31-02 p.C-4271}}plicants and notifications to customers against whom adverse action is taken. These procedures shall include procedures to ensure that the Bank provides loan applicants with notification when adverse action has been taken and specific reason(s) for the action taken as required by section 202.9(a)(2) of Regulation B of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 202.9 (a)(2).

   [.5] 5. Within 60 days from the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that the Bank provides to applicable credit applicants the Good Faith Estimate of Closing Costs and Mortgage Servicing Transfer Disclosures in all transactions covered by the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq., and Regulation X of the Department of Housing and Urban Development, 24 C.F.R. Part 3500.

   [.6] 6. Within 60 days from 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.

   [.7] 7. Within 60 days from the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that, for all extensions of credit secured by improved real estate or a mobile home, the Bank maintains sufficient records to indicate the method used by the Bank to determine whether the extensions of credit fall within the provisions of section 339.3 or section 339.4 of the FDIC Rules and Regulations, 12 C.F.R. § 339.3 or § 339.4, including, but not limited to:

       (a) Use of the standard flood hazard determination form developed by the Director of Federal Emergency Management Agency, as set forth in Appendix A of 44 C.F.R. Part 65, when determining whether improved real estate or a mobile home offered as collateral for security for a designated loan is or will be in a special flood hazard area in which flood insurance coverage is available.
       (b) Insuring that flood insurance coverage is obtained when required.

   [.8] 8. 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, 12 C.F.R. §§ 229.10 and 229.12.

   [.9] 9. Within 60 days after the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that the Bank does not pay interest on any demand deposit in violation of Part 329 of the FDIC Rules and Regulations, 12 C.F.R. Part 329.

   [.10] 10. After 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.

   [.11] 11. Within 30 days after the end of each calendar quarter following the effective date of this ORDER, the Bank shall furnish written progress reports to the Regional Manager detailing the form and manner of any actions taken to comply 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 Manager has released the Bank in writing from making additional reports.
   12. 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 all institution-affiliated parties of the Bank. The provisions of this ORDER shall remain effective and enforceable unless modified, terminated, suspended, or set aside by the FDIC.
   This ORDER is issued pursuant to delegated authority.
   Dated at Dallas, Texas, this 3rd day of October, 1996.

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