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FDIC Enforcement Decisions and Orders

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{{2-28-02 p.C-4992}}

   [11,736] In the Matter of The Findlay Savings Bank, Cincinnati, Ohio, Docket No. 00-103c&b (9-12-00).

   A temporary 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 12-26-01; see ¶16,298.)

   [.1] Management—Qualifications Specified

   [.2] Transactions—Modification of Prohibited

   [.3] Bank Operations—Information Systems—Backup Required

   [.4] Disaster Recovery Plan—Required

   [.5] Bank Operations—Information Systems—Assessment of Activities Required

   [.6] Bank Operations—Information Systems—Audit Program Required

   [.7] Bank Records—Restore to a Complete and Accurate State

   [.8] Accounting—Independent CPA Exam Required

   [.9] Debits—Charge-off Unresolved Debits

   [.10] Board of Directors—Meetings—Frequency of Meetings Specified

   [.11] Shareholders—Disclosure of Cease and Desist Order Required

In the Matter of

THE FINDLAY SAVINGS BANK
CINCINNATI, OHIO
(Insured State Nonmember Bank)
TEMPORARY ORDER TOCEASE AND DESIST

FDIC-00-103c&b

   The Federal Deposit Insurance Corporation ("FDIC") has determined that the unsafe or unsound banking practices which The Findlay Savings Bank, Cincinnati, Ohio ("Bank") has engaged in or which the FDIC has reason to believe the Bank is about to engage in, as specified in the NOTICE OF CHARGES AND OF HEARING ("NOTICE") attached hereto and incorporated herein by reference, and the continuation thereof by the Bank, are likely to cause significant dissipation of the assets or earnings of the Bank, or are likely to weaken the condition of the Bank or otherwise prejudice the interests of the depositors of the Bank prior to the completion of the proceedings against the Bank conducted pursuant to section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b).

   The FDIC's safety and soundness examination and concurrent information systems examination, which commenced July 10, 2000, have revealed major deficiencies that require immediate resolution, including: incomplete and inaccurate books and records that are and have been out of balance over an extended period of time; multiple non-interfacing information systems that lack security and access controls; inadequate auditing systems and internal controls; no disaster recovery plan, and operating without any senior bank management in place. As a result of these deficiencies, the Bank is vulnerable to unauthorized or fraudulent transactions and the ability of the Bank to survive a disaster situation is severely compromised.

   Therefore, the FDIC hereby issues this TEMPORARY ORDER TO CEASE AND DESIST ("TEMPORARY ORDER") and hereby gives notice pursuant to section 8(c)(1) of the Act, 12 U.S.C. § 1818(c)(1), that the Bank and its institution-affiliated parties, successors and assigns, be and hereby are ORDERED TO CEASE AND DESIST from and take affirmative action, as follows:

   [.1] 1. (a) During the life of this TEMPORARY ORDER, the Bank shall have and
{{10-31-01 p.C-4993}} retain qualified management. Within 30 days of the effective date of this TEMPORARY ORDER, the Bank shall submit Notifications of Addition of a Senior Executive Officer under section 32 of the Act, 12 U.S.C. § 1831i for a new chief executive officer and a new chief financial officer acceptable to the FDIC. The executive officers shall assume duties immediately upon receipt of section 32 approval.

   (b) Each member of management shall have the qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of Bank management shall be assessed on its ability to: (i) comply with the requirements of this TEMPORARY ORDER; (ii) ensure that the Bank's electronic or automated information systems result in the books and records of the Bank and its wholly-owned subsidiary FSB Funding, Inc. ("Subsidiary"), being in and remaining in a complete and accurate state; (iii) provide oversight of the data processing activities of the Bank and the Subsidiary; (iv) provide staff experience in the types of computer systems used by the Bank and the Subsidiary; and (v) operate the Bank and the Subsidiary in a safe and sound manner.

   [.2] 2. Effective immediately, the Bank shall eliminate the practice of modifying and deleting posted transactions.

   [.3] 3. The Bank shall immediately establish and implement adequate backup and offsite storage procedures for data on in-house information systems.

   [.4] 4. Within 30 days from the effective date of this TEMPORARY ORDER, the Bank shall develop and implement a disaster recovery plan, acceptable to the Regional Director for the FDIC's Chicago Regional Office ("Regional Director"), that addresses all critical services and operations which are provided by internal and external sources. At a minimum, the plan shall address:

       (a) recovery priorities;

       (b) determination of when to use alternate sites;

       (c) notification to employees;

       (d) procedures for performing backup and offsite storage; and

       (e) obtaining backup equipment, software, and current master file backup.

   [.5] 5. (a) Within 60 days from the Bank's receipt of the FDIC's final July 10, 2000, Report of Examination, the Bank shall prepare a written assessment of information systems ("IS") activities of the Bank and the Subsidiary. This assessment shall address the findings with respect to information systems and shall include the Bank's proposed corrective measures.

   (b) Within 10 days of the completion of the assessment described above, the Bank's board of directors shall review, approve, and submit its written assessment to the Regional Director for review and approval.

   (c) Within 30 days of the Regional Director's approval of the written assessment, the Bank will adopt and implement all corrective measures detailed in the assessment.

   [.6] 6. (a) Within 90 days from the effective date of this TEMPORARY ORDER, the Bank shall formulate and submit to the Regional Director a written IS audit program for review and comment. The program shall address:

       (i) Whether IS auditing will be performed internally by the Bank or by an independent auditing firm;

       (ii) The frequency and scope of IS auditing;

       (iii) Designation of qualified personnel to perform the audit; and

       (iv) Requiring the reporting of findings to the Bank's board of directors or a committee as designated by the Bank's board of directors.

   (b) Within 10 days of receipt of the Regional Director's comments, the Bank will implement the written IS audit program.

   [.7] 7. Within 30 days of the effective date of this Order, the Bank shall have reconciled its books and records as of September 30, 2000, and those of the Subsidiary, and shall continue to maintain accurate books and records. Written documentation of the correction or reconciliation shall be retained for future regulatory review.

   [.8] 8. (a) Within 30 days from the effective date of this TEMPORARY ORDER, the Bank shall retain an independent certified public accounting firm, as that term is defined in paragraph 8(d) of this TEMPORARY ORDER, acceptable to the Regional Director to conduct an agreed-upon procedures examination ("examination"), including, but not limited to, reconciliation of the
{{10-31-01 p.C-4994}}financial statements of the Bank and the Subsidiary, as of September 30, 2000.

   (b) At a minimum, the examination shall determine:

       (i) Whether the Bank and the Subsidiary have reconciled all accounts and the date of the most recent reconciliation of each account;

       (ii) For all accounts of the Bank and the Subsidiary, whether:

         (1) Reconciliations are done in a timely manner based on the risk and volume of activity in each account;

         (2) Reconciliations adequately report the dollar amount and the description of any outstanding unreconciled transactions;

         (3) The adequacy of the segregation of duties of the personnel preparing the reconciliations; and

         (4) The collectibility of any unreconciled debits outstanding in excess of 90 days, as of September 30, 2000.

       (iii) Whether the Bank and the Subsidiary have adequate written reconciliation procedures for each account.

   (c) The Bank shall require, as part of its agreement with the accounting firm retained to perform the examination, that the accounting firm complete the examination within 45 days from the effective date of the TEMPORARY ORDER. The accounting firm's initial written report, whether in draft or final form, shall be submitted directly to the Regional Director at the same time the report is submitted to the Bank.

   (d) For purposes of this TEMPORARY ORDER, an independent public accounting firm shall be any firm where no partner or employee: (1) is an officer or director of the Bank or any of its affiliated organizations and owns more than 5 percent of the outstanding shares of the Bank or any of its affiliated organizations or (2) is related by blood, marriage or common financial interest to an officer or director of the Bank or any of its affiliated organizations or to any stockholder owning more than 5 percent of the outstanding shares of the Bank or any of its affiliates organizations; or (3) is indebted to the Bank, directly or indirectly (including the indebtedness of any entity in which any partner or employee has a financial interest), in an amount exceeding 5 percent of the Bank's total equity capital and allowance for loan and lease losses.

   [.9] 9. Within 30 days of the effective date of this Order, and every 30 days thereafter, all outstanding debits that are unresolved for more than 90 days shall be charged off from the books of the Bank and the Subsidiary.

   [.10] 10. During the life of this TEMPORARY ORDER regular board of director meetings shall be held at least every other week and within 3 days following every meeting of the Bank's board of directors, the Bank's board of directors shall submit a written report to the Regional Director detailing the Bank's compliance with this TEMPORARY ORDER.

   [.11] 11. No more than 60 days from the effective date of this TEMPORARY ORDER, the Bank shall send to its shareholders a description of this TEMPORARY ORDER. The description shall fully describe this TEMPORARY 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, 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.

   This TEMPORARY ORDER shall be effective immediately upon service on the Bank and shall remain in full force and effect, pending the completion of the administrative proceedings instituted pursuant to the foregoing NOTICE.

   Pursuant to delegated authority.

   Dated at Washington, D.C., this 12th day of September, 2000.

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Last Updated 6/6/2003 legal@fdic.gov