Each depositor insured to at least $250,000 per insured bank


Home > Regulation & Examinations > Bank Examinations > FDIC Enforcement Decisions and Orders





FDIC Enforcement Decisions and Orders



ED&O Home | Search Form | Text Search | ED&O Help


{{5-31-05 p.C-4607}}
   [11,550] In the Matter of American State Bank, Tulsa, Oklahoma, Docket No. 98-059b (9-3-98)

   A cease and desist order was issued, based on findings by the FDIC that it had reason to believe that respondent had engaged in unsafe and unsound practices. (This order was terminated by order of the FDIC dated 3-23-05; see ¶16,414.)

   [.1] Management—Qualifications Specified
   [.2] Profit Plan—Preparation of Plan Required
   [.3] Violations of Law—Correction of Violations Required
   [.4] Strategic Plan—Preparation of Required
   [.5] Capital—Increase Required
   [.6] Payments—Restricted
   [.7] Asset/Liability Management—Preparation or Revision of Asset/ Liability Management Policy Required
   [.8] Bank Operations—Internal Controls—Reviewed
   [.9] Loan Loss Reserve—Establishment of or Increase Required
   [.10] Bank Operations—Internal Controls—Correction of Weaknesses Required
   [.11] Technical Exceptions—Correction of Technical Exceptions Required
   [.12] Reports of Condition and Income—Amendment Required
   [.13] Board of Directors—Committee to Review Compliance with Cease and Desist Order Required
   [.14] Shareholders—Disclosure of Cease and Desist Order Required

In the Matter of
AMERICAN STATE BANK
TULSA,OKLAHOMA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-98-059b

   The American State Bank, Tulsa, Oklahoma ("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 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 August 11, 1998, whereby, solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices, 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 {{5-31-05 p.C-4608}}the Bank had engaged in unsafe or unsound banking practices. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS ORDERED, that the Bank and institution-affiliated parties of the Bank cease and desist from the following unsafe or unsound banking practices:
   (a) Operating the Bank with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;
   (b) Operating the Bank without adequate supervision and direction by the board of directors over the management of the bank;
   (c) Operating the Bank with operating losses;
   (d) Operating the Bank in violation of applicable federal and State laws and regulations as more fully set forth on pages 31 through 50 of the Report of Examination of the Bank as of December 31, 1997;
   (e) Operating the Bank without a strategic plan;
   (f) Operating the Bank with a level of capital considered inadequate in view of the recent level of loan losses and the lack of support from a viable earnings stream;
   (g) Operating the Bank without proper regard for funds management and the interest rate risk assumed by the Bank;
   (h) Operating the Bank with policy deficiencies and/or weaknesses in practices relating to the vital functions of loans, investments, funds management, regulatory compliance, and internal controls;
   (i) Renewing or extending credit without adequate and appropriate supporting documentation;
   (j) Operating the Bank with inadequate internal controls; and,
   (k) Failing to accurately reflect the condition of the Bank in published statements and Consolidated Reports of Condition and Income.
   IT IS FURTHER ORDERED, that the Bank take affirmative action as follows:

   [.1] 1. The Bank shall have and retain qualified management. Each member of management shall possess qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of management personnel shall be evaluated on their ability to:

       (a) comply with the requirements of the ORDER;
       (b) operate the Bank in a safe and sound manner;
       (c) comply with applicable laws and regulations;
       (d) comply with the existing Bank policies; and
       (e) restore all aspects of the Bank to a safe and sound condition, capital adequacy, earnings, management effectiveness, and funds management. During the life of the ORDER, the Bank shall notify the Regional Director of the FDIC's Dallas Regional Office, Dallas, Texas ("Regional Director") and the Bank Commissioner for the State of Oklahoma ("Commissioner"), in writing of any changes in management. The notification must include the name(s) and background(s) of any replacement personnel and must be provided prior to the individual(s) assuming the new position(s).

   [.2] 2. (a) Within 90 days after the effective date of this ORDER, the board of directors shall develop a written profit plan consisting of goals and strategies for improving the earnings of the Bank, which written profit plan shall include, at a minimum:
       (i) 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 expense components.
   (b) The written profit plan shall be submitted to the Regional Director and the Commissioner for review and comment within 90 days from the effective date of this ORDER. No sooner than 30 days, but under no circumstances more than 60 days after such submissions, the board of directors shall approve the written profit plan, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the meeting of the board of directors.

{{11-30-98 p.C-4609}}

   [.3] 3. (a) After the effective date of this ORDER, the Bank, consistent with sound banking practices, shall eliminate and/or correct all violations of laws and/or regulations existing in the Bank as of March 30, 1998, as more fully set forth on pages 31 through 50 of the March 30, 1998, Report of Examination. In addition, the Bank shall ensure its future compliance with all applicable laws and regulations.
   (b) Upon the effective date of this Order, the Bank shall immediately implement the Bank Secrecy Act program as required by Section 326.8 of the FDIC Rules and Regulations.
   (c) Upon the effective date of this Order, the Bank shall immediately implement procedures to comply with sections 103.22, 103.27, and 103.29 of the Department of the Treasury Regulations, including but not limited to, ensuring all required Currency Transaction Reports are complete and properly submitted for appropriate transactions, ensuring the maintenance of a complete and appropriate list of exempt customers, and that all required information is obtained pertinent to the purchasers of monetary instruments.
   (d) Within 60 days of the effective date of this Order, the Bank shall ensure that all staff members involved in activities bearing on compliance with the Bank Secrecy Act program and the Department of the Treasury's Financial Recordkeeping Regulations are properly trained to satisfactorily discharge their responsibilities in this regard. Further, the Bank shall implement a program to periodically retrain all Bank employees to ensure an ongoing satisfactory compliance program.

   [.4] 4. Within 120 days of the effective date of this ORDER, the Board shall consider and act to establish a formal written corporate strategy for the bank. It is suggested that the plan be as comprehensive as appropriate to direct the activities of management to achieve stated defined goals. Consideration should be afforded to establishing clear goals for capital maintenance, earnings and other recommendations as detailed in the Report.
   The plan shall include at least the following provisions:

       (a) Short-term goals to comply with this Order and correct all regulatory criticisms;
       (b) An operating plan for the next 12 to 18 months to accomplish the short-term goals; and
       (c) Specify the long-term corporate goals of the Bank with consideration accorded growth, organizational structure, capital maintenance, profitability, and service to the community.
   The written strategic operating plan shall be submitted to the Regional Director and the Commissioner for review and comments.

   [.5] 5. After the effective date of this ORDER, and for so long thereafter as this ORDER is outstanding, the Bank shall maintain adjusted Tier 1 capital equal to or greater than 6 percent of its adjusted total assets.

   [.6] 6. While this ORDER is in effect, the Bank shall neither declare nor pay in any manner whatsoever, directly or indirectly, any dividend, cash or otherwise, to shareholders without the prior written consent of the Regional Director and the Commissioner.

   [.7] 7. Within 30 days after the effective date of this ORDER, the Board shall establish an Asset/Liability Management Committee to identify, measure, monitor, control interest rate risk, and effect periodic reporting to the board of directors. The committee shall initiate the following actions:

       (a) Implement procedures that translate the Board's policies into clear operating standards;
       (b) Maintain a measurement system that identifies, measures, and monitors IRR; and,
       (c) Establish effective internal interest rate risk controls.
   8. Within 90 days of the effective date of this ORDER, the board of directors shall review and revise as appropriate the Bank's asset/liability management policy. Consideration should be afforded to incorporating the following into the formal policy: specific parameters of acceptable range of assumed interest rate sensitivity; strategies for achieving and maintaining an acceptable level of interest rate risk; and formal methods for monitoring the level of interest rate risk and maintaining compliance with bank policy.

   [.8] 9. Within 90 days of the effective date of this Order, the board of directors shall review and revise as appropriate the entire of body of formal policies under which the bank operates. The specific policies to evaluate include those directed to provide guidance {{11-30-98 p.C-4610}}to the essential bank functions of loans, investments, funds management, regulatory compliance, and internal controls. Consideration should be afforded to the recommendations for policy amendment as detailed in the Report of Examination dated March 30, 1998. The adequacy of the policies will be reviewed at future regulatory examinations or visitations of the Bank.

   [.9] 10. Within 60 days of the effective date of this ORDER, the Bank shall review and improve as warranted the methodology employed by the Bank to determine that the level of allowance for loan and lease losses accurately depicts the loss exposure within the loan portfolio. The methodology shall require that prior to the end of each calendar quarter, the board of directors of the Bank shall review the adequacy of the Bank's allowance for loan and lease losses. Such reviews shall include, at a minimum, the Bank's loan loss experience, an estimate of the potential loss exposure in the portfolio, trends of delinquent and nonaccrual loans, and prevailing and prospective economic conditions within the trade area. The minutes of the board meetings at which such reviews are undertaken shall include complete details of the reviews and the resulting recommended increases in the allowance for loan and lease losses.

   [.10] 11. The board of directors shall ensure that necessary action is taken to eliminate or correct all internal routine and control deficiencies described on page 60 and 61 of the Report of Examination dated March 30, 1998.

   [.11] 12. Within 60 days after the effective date of this ORDER, the Bank, to the best of its ability using reasonable effort, shall eliminate and/or correct all technical exceptions with regard to loan documentation existing in the Bank as of March 30, 1998, as more fully set out on pages 54 and 55 of the March 30, 1998, Report of Examination.

   [.12] 13. Within 30 days after the effective date of this ORDER, the board of directors shall ensure that the December 31, 1997, Consolidated Reports of Condition and Income are reviewed. If necessary, these reports should be promptly amended to properly reflect the financial condition of the Bank.

   [.13] 14. Within 60 days after the effective date of this ORDER, the board of directors shall establish a committee of the board of directors charged with the responsibility of ensuring that the Bank complies with the provisions of this ORDER. At least 50 percent of the members of such committee shall be directors not employed in any capacity by the Bank other than as a director. The committee shall report monthly to the full board of directors; and, a copy of the report and any discussion relating to the report or the ORDER shall be noted in the records of the board of directors. The establishment of this committee shall not diminish the responsibility or liability of the entire board of directors to ensure compliance with the provisions of this ORDER.

   [.14] 15. After the effective date of this ORDER, the Bank shall send to its shareholders or otherwise furnish a description of this ORDER, (1) in conjunction with the Bank's next shareholder communication, and also (2) 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, Washington, D.C. 20429, 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.
   16. 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 and the Commissioner 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 Director and the Commissioner have released the Bank in writing from making additional reports.
   17. The effective date of this ORDER shall be 10 days after the date of its issuance. 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 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.
   Pursuant to delegated authority.
   Dated at Dallas, Texas, this 3rd day of September, 1998.



ED&O Home | Search Form | Text Search | ED&O Help






Last Updated 7/7/2005 legal@fdic.gov