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{{10-31-00 p.C-4637}}
   [11,562] In the Matter of Cache Bank, Greeley, Colorado, Docket No. 98-077b (10-15-98)

   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 8-25-00; see ¶16,264.)

   [.1] Management—Qualifications Specified
   [.2] Board of Directors—Committee to Review Compliance with Cease and Desist Order Required
   [.3] Assets—Adversely Classified Assets—Reduction Required
   [.4] Loan Policy—Preparation or Revision of Policy Required
   [.5] Loan Loss Reserve—Establishment of or Increase Required
   [.6] Capital—Increase Required
   [.7] Dividends—Dividends Restricted
   [.8] Strategic Plan—Preparation of Required
   [.9] Asset/Liability Management—Preparation or Revision of Asset/Liability Management Policy Required
   [.10] Violations of Law—Correction of Violations Required
   [.11] Shareholders—Disclosure of Cease and Desist Order Required

In the Matter of

CACHE BANK
GREELEY, COLORADO
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-98-077b

   The Cache Bank, Greeley, Colorado ("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 October 15, 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 {{10-31-00 p.C-4638}}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 ORDERED, that the Bank and institution-affiliated parties of the Bank cease and desist from the following unsafe or unsound banking practices and violations of law and/or regulations:
   (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 an excessive level of adversely classified assets;
   (d) Engaging in hazardous lending and ineffective and lax collection practices;
   (e) Operating the Bank without adequate written loan policies and procedures;
   (f) Financing credits to borrowers in weak financial positions with inadequate collateral margins or established structured repayment programs;
   (g) Failing to provide an adequate allowance for loan and lease losses;
   (h) Operating the Bank without an adequate level of capital protection;
   (i) Operating the Bank without adequate internal loan review policies or procedures;
   (j) Failing to accurately reflect the condition of the Bank in published statements and Consolidated Reports of Condition and Income;
   (k) Operating the Bank with a heavy reliance on concentrations of credit in sub-prime automobile dealer paper;
   (l) Operating the Bank without an adequate Asset/Liability Management policy which addresses, among other subjects, liquidity objectives, funds management and funding strategies;
   (m) Operating the Bank in violation of applicable Federal and State laws and regulations as more fully set forth on page 27 the Report of Examination of the Bank as of March 31, 1998.
   (n) Operating the Bank with deficient or inadequate budget; and,
   (o) Operating the Bank without a strategic plan which addresses, among other things, the business, economic, and financial risks associated with hazardous lending and lax collection practices;
   IT IS FURTHER ORDERED, that the Bank take affirmative action as follows:

   [.1].1 (a) 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:

    (i) comply with the requirements of the ORDER;
       (ii) operate the Bank in a safe and sound manner;
       (iii) comply with applicable laws and regulations;
       (iv) comply with the existing Bank policies; and
       (v) restore all aspects of the Bank to a safe and sound condition, including asset quality, capital adequacy, earnings, management effectiveness, and liquidity. 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 State Bank Commissioner for the State of Colorado ("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).
   (b) Within 75 days after the effective date of this ORDER, the Board shall study the adequacy of the Bank's staff. The study may be conducted by a qualified third party. Adequacy shall be determined both in terms of the size of the staff as a whole and the qualifications of specific employees to perform necessary duties. The Board shall provide a copy of the findings of this study, including any recommended changes, to Regional Director and the Commissioner for review and comment. No sooner than 30 days, but under no circumstances more than 60 days after such submissions, the board of directors shall approve and implement the findings of this study. The Board shall promptly accomplish any recommended staffing changes resulting from the study.

   [.2].2 Within 60 days after the effective date of this ORDER, the board of directors shall establish a committee of the board of {{10-31-00 p.C-4639}}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 independent 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 minutes of the meeting 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.

   [.3] 3. (a) Upon the effective date of this ORDER, the Bank shall, to the extent that it has not previously done so, eliminate from its books, by charge-off or collection, all assets or portions of assets classified Loss by the FDIC as a result of the examination of the Bank as of March 31, 1998. Reduction of these assets through proceeds of loans made by the Bank shall not be considered "collection" for the purpose of this paragraph.
   (b) Within 60 days after the effective date of this ORDER, the Bank shall submit a written plan to the Regional Director and the Commissioner to reduce the remaining assets classified Substandard as of March 31, 1998. The plan shall address the classified assets grouped by the originating automobile dealer and provide the following:

    (i) Aggregate amount of each originating automobile dealer's indirect paper remaining on the Bank's books;
       (ii) Actions to be taken in order to reduce the classified asset;
       (iii) Time frames for accomplishing the proposed actions.
   (c) The bank shall present the plan to the Regional Director and the Commissioner for review. Within 30 days after their response, the plan, including any modifications or amendments requested by the Regional Director and the Commissioner, shall be adopted by the board of directors of the bank. The Bank shall then immediately initiate measures detailed in the plan to the extent such measures have not been initiated.
   (d) For purposes of the plan, the reduction of the level of adversely classified assets as of March 31, 1998, to a specific percentage of total equity capital and reserves may be accomplished by:
    (i) charge-off;
       (ii) collection;
       (iii) Sufficient improvement in the quality of adversely classified assets so as to warrant removing any adverse classification, as determined by the FDIC; or
       (iv) increase of total equity capital and reserves.
   (e) While this ORDER is in effect, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified Loss as determined at any examination conducted by the FDIC or the State of Colorado at such time as the report of examination is received by the Bank.

   [.4].4 Within 60 days after the effective date of this ORDER, the Bank shall revise, adopt, and implement written lending and collection policies and procedures to provide effective guidance and control over the Bank's lending function. Such policies and their implementation shall be in a form and manner acceptable to the Regional Director and the Commissioner, as determined at subsequent examinations, and shall include, at a minimum, the following:
   (a) A requirement that the Bank shall not purchase indirect automobile dealer paper without obtaining complete financial information and the paper is in full compliance with the Bank's revised, adopted, and implemented written lending policies and procedures;
   (b) A requirement that extensions of credit shall not be refinanced, reworked or renewed unless current financial information and documentation have been obtained;
   (c) Standards setting forth appropriate limitations on concentrations of credit in indirect sub-prime automobile dealer paper;
   (d) Guidelines under which loans are renewed or have their due dates extended:

    (i) without full collection of interest thereon;
       (ii) by acceptance of separate notes in payment of interest; or
       (iii) by capitalization of interest to the balance of the note;
   (e) Limitations on the amount advanced in relation to the value of the collateral securing the credit and the documentation required by the Bank for each type of secured credit;
   (f) A provision specifically outlining the collection procedures to be taken by the Bank when borrowers fail to make timely payments;
   (g) A provision outlining the documentation required on all secured loans.

   [.5]5. (a) Within 10 days after the effective date of this ORDER, the Bank shall establish and thereafter maintain an adequate allowance for loan and lease losses. Such allowance shall be funded by charges to current operating income. 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 potential loss exposure in the portfolio, trends of delinquent and non-accrual loans and prevailing and prospective economic conditions. 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.
   (b) Within 10 days after the effective date of this ORDER, the Bank shall review its Consolidated Reports of Condition and Income filed with the FDIC on or after March 31, 1998, and amend said reports to properly reflect the financial condition of the Bank as of the date of each such report. In particular, such reports shall contain an adequate allowance for loan and lease losses. Reports filed after the effective date of this ORDER shall also accurately reflect the financial condition of the Bank as of the reporting date.

   [.6]6. 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 8 percent of its adjusted total assets after establishing an adequate allowance for loan and lease losses as required by paragraph 5 of this ORDER.

   [.7]7. 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.

   [.8]8. (a) Within 60 days of the effective date of this ORDER, the Board shall consider and act to establish a formal written Strategic Plan (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, the business, economic and financial risks associated with hazardous lending and lax collection procedures, and other recommendations as detailed in the Report;
   (b) After the effective date of this ORDER, the Board shall reduce the Bank's volume of sub-prime automobile dealer paper, its reliance on such paper, and diversify the Bank's loan portfolio. The Strategic Plan to be submitted pursuant to paragraph 8(a) shall include a plan to diversify the Bank's loan portfolio. Specifically, the Strategic Plan shall address diversification measures to be taken, areas of lending to be pursued, and target ratios to be met, and shall include interim time frames for reducing the volume of sub-prime automobile dealer paper and its reliance on such paper.
   (c) The Strategic Plan shall be submitted to the Regional Director and the Commissioner for review and comment within 60 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 Strategic Plan, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the meeting of the board of directors.

   [.9]9. (a) Within 60 days after the effective date of this ORDER, the board of directors shall develop, adopt, and implement a written Asset and Liability Management Policy consisting of goals and strategies for improving the earnings of the Bank, which written Asset and Liability Management Policy 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    (iv) a description of the operating assumptions that form the basis for, and adequately support, major projected income and expense components;
       (v) the establishment of acceptable ranges of ratios in the following areas: loan to deposit targets, liquid assets to total assets, and an acceptable rate sensitivity balance between bank investments and funding sources; and
       (vi) establish liquidity goals and funding sources that will provide an acceptable level for non-core funding dependence.
   (b) The Asset and Liability Management Policy shall be submitted to the Regional Director and the Commissioner for review and comment within 60 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 Asset and Liability Management Policy, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the meeting of the board of directors.
   (c) The identification of all ratios and guidelines not in conformance with the Bank's Asset/Liability Management Policy shall be recorded in the minutes of the board of directors.

   [.10]10. 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 31, 1998, as more fully set forth on page 27 of the Report of Examination. In addition, the Bank shall ensure its future compliance with all applicable laws and regulations.

   [.11]11. 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.
   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 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.
   13. 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 15th day of October, 1998.

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