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FDIC Enforcement Decisions and Orders


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   [11,772] In the Matter of Illinois Community Bank, Effingham, Illinois, Docket No. 01-010b (3-21-01).

   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 modified by order of the FDIC dated 10-25-04; see ¶16,400.)

   [.1] Management—Qualifications Specified

   [.2] Strategic Plan—Preparation of Required

   [.3] Funds Management and Liquidity—Preparation or Revision of Funds Management Policy Required

   [.4] Profit Plan—Preparation of Plan Required

   [.5] Capital—Increase Required

   [.6] Dividends—Dividends Restricted

   [.7] Loans—Extensions of Credit—To Borrowers with Existing Adversely Classified Credits

   [.8] Assets—Charge-off or Collection

   [.9] Loans—Risk Position—Reduction of Adversely Classified Lines of Credit Required

   [.10] Loans—Special Mention

   [.11] Loan Loss Reserve—Establishment of or Increase Required

   [.12] Loan Committee—Membership, Duties

   [.13] Loan Policy—Preparation or Revision of Policy Required
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   [.14] Violations of Law—Correction of Violations Required

   [.15] Bank Operations—Expense Reimbursement, Policy Required

   [.16] Bank Operations—New Lines of Business Restricted

   [.17] Board of Directors—Committee to Review Compliance with Cease and Desist Order Required

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

In the Matter of
ILLINOIS COMMUNITY BANK
EFFINGHAM, ILLINOIS
Insured State Nonmember Bank
ORDER TO CEASE AND DESIST

FDIC-01-010b

No. 2001-BBTC-01

   Illinois Community Bank, Effingham, Illinois ("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 or regulation alleged to have been committed by the Bank, and of its right to a hearing on the charges under section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b), and under 38 Ill. Adm. Code, Section 392.30, regarding hearings before the Office of Banks and Real Estate for the State of Illinois ("OBRE"), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with representatives of the Federal Deposit Insurance Corporation ("FDIC") and OBRE dated March 8, 2001, whereby, solely for the purpose of this proceeding and without admitting or denying the charges of unsafe or unsound banking practices and violations of law or regulation, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC and OBRE.

   The FDIC and OBRE considered the matter and determined that there was reason to believe that the Bank had engaged in unsafe or unsound banking practices and had violated laws or regulations. The FDIC and OBRE, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. §1813(u), and its successors and assigns, cease and desist from the following unsafe or unsound banking practices and violations of law or regulation:

       A. – Operating without an effective strategic plan.

       B. – Operating with negative earnings.

       C. – Operating with excessive overhead expenses and inadequate net interest margins.

       D. – Violating laws or regulations, including:

         i. The State of Illinois legal lending limit restrictions as set forth in section 32 of the Illinois Banking Act, 205 ILCS 5/32.

         ii. The limitations for extensions of credit to executive officers contained in section 337.3(c)(2) of the FDIC Rules and Regulations, 12 C.F.R. §337.3(c)(2), and in section 215.5(d) of Regulation O of the Board of Governors of the Federal Reserve System ("Regulation O"), 12 C.F.R. §215.5(d).

         iii. The overdraft restrictions of section 215.4(e) of Regulation O, 12 C.F.R. §215.4(e).

         iv. The good faith terms and circumstances requirement of section 23B of the Federal Reserve Act ("section 23B"), 12 U.S.C. §371c-1(a)(1)(B).

         v. The requirements for adopting and maintaining real estate lending limits and standards contained in section 365.2 of the FDIC Rules and Regulations, 12 C.F.R. §365.2.

       E. – Engaging in hazardous lending and lax collection practices, including, but not limited to the following:

         i. The failure to adequately analyze credit risk;

         ii. The failure to obtain proper loan documentation, including current and complete financial information;

         iii. The failure to obtain or perfect ad-
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         equate collateral and to establish and monitor collateral margins of secured borrowers;

         iv. The failure to implement an effective loan review system;

         v. The failure to establish and enforce liquidation agreements; and

         vi. Extending credit in a manner for which the Bank's management lacks expertise.

       F. – Operating with an inadequate loan policy.

       G. – Operating with an excessive level of adversely classified assets.

       H. – Operating with an inadequate allowance for loans and lease losses ("ALLL") for the volume, kind, and quality of loans and leases held.

       I. – Operating with an inadequate level of capital for the kind and quality of assets held.

       J. – Operating with inadequate liquidity and excessive net non-core funding dependence in light of the Bank's asset and liability mix.

       K. – Operating with an inadequate asset/liability policy.

       L. – Failing to maintain adequate documentation of business expenses.

       M. – Operating with management whose policies and practices are detrimental to the Bank and which jeopardize the safety of its deposits.

       N. – Operating with a board of directors which has failed to provide adequate supervision over and direction to the management of the Bank to prevent unsafe or unsound banking practices and violations of law or regulation.

   IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

   [.1]1. (a) During the life of this ORDER, the Bank shall have and thereafter retain qualified management. Each member of management shall have the qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of management shall be assessed on its ability to:

       (i) comply with the requirements of this ORDER;

       (ii) operate the Bank in a safe and sound manner;

       (iii) comply with applicable laws and regulations; and

       (iv) restore all aspects of the Bank to a safe and sound condition, including asset quality, capital adequacy, earnings, management effectiveness, and liquidity.

   (b) During the life of this ORDER, the Bank shall notify the Regional Director of the Chicago Regional Office of the FDIC ("Regional Director") and the Commissioner of Banks and Real Estate for the State of Illinois ("Commissioner") in writing of any changes in the Bank's management. For purposes of this ORDER, "management" is defined as members of the board of directors and "senior executive officers," as that term is defined in section 32 of the Act ("section 32"), 12 U.S.C. §1831(i), and section 303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. §303.101(b). Prior to the addition of any individual to the board of directors or the employment of any individual as a senior executive officer, the Bank shall comply with the requirements of section 32 and Subpart F of Part 303 of the FDIC Rules and Regulations, 12 C.F.R. §§ 303.100-303.104.

   [.2]2. (a) Within 90 days from the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director and Commissioner for review and comment a realistic, comprehensive strategic plan. The plan required by this paragraph shall contain an assessment of the Bank's current financial condition and market area, and a description of the operating assumptions that form the basis for major projected income and expense components.

   (b) The written strategic plan shall address, at a minimum, the following:

       (i) Strategies for pricing policies and asset/liability management;

       (ii) Staffing needs;

       (iii) Succession of management; and

       (iv) Financial goals, including pro forma statements for asset growth, capital adequacy, and earnings.

   (c) In order to accomplish the management staffing needs assessment, within 30 days from the effective date of this ORDER, the Bank shall retain a bank consultant acceptable to the Regional Director and Commissioner. The consultant shall develop a written analysis and assessment of the Bank's management and staffing needs ("Management Plan") for the purpose of providing
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   qualified management for the Bank. The Management Plan shall be developed within 60 days from the effective date of this ORDER. The Management Plan shall include, at a minimum:

       (i) Identification of both the type and number of officer positions needed to properly manage and supervise the affairs of the Bank;

       (ii) Identification and establishment of such Bank committees as are needed to provide guidance and oversight to active management;

       (iii) Evaluation of all Bank officers and staff members to determine whether these individuals possess the ability, experience and other qualifications required to perform present and anticipated duties, including adherence to the Bank's established policies and practices, and restoration and maintenance of the Bank in a safe and sound condition;

       (iv) A plan to recruit and hire any additional or replacement personnel with the requisite ability, experience and other qualifications to fill those officer or staff member positions identified by this paragraph.

   (d) The Management Plan shall be submitted to the Regional Director and Commissioner for review and comment upon their completion or receipt. Within 30 days from the receipt of any comment from the Regional Director or Commissioner and after the consideration of such comments, the Bank shall approve the Management Plan or any subsequent modifications, which approval shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank, its directors, officers, and employees shall implement and follow the Management Plan.

   (e) Within 30 days of the end of each calendar quarter following the effective date of this ORDER, the Bank's board of directors shall evaluate the Bank's actual performance in relation to the strategic plan required by this paragraph and record the results of the evaluation, and any actions taken by the Bank, in the minutes of the board of directors' meeting at which such evaluation is undertaken.

   (f) The strategic plan required by this ORDER shall be updated and submitted to the Regional Director and the Commissioner for review and comment 30 days prior to the end of each calendar year for which this ORDER is in effect. Within 30 days of receipt of all such comments from the Regional Director or the Commissioner, and after consideration of all such comments, the Bank shall approve the plan, which approval shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank shall implement and follow the plan.

   [.3]3. Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement a written plan addressing liquidity and the Bank's relationship of volatile liabilities to temporary investments and rate sensitivity objectives. A copy of the plan shall be submitted to the Regional Director and the Commissioner upon its completion. Annually thereafter during the life of this ORDER, the Bank shall review this plan for adequacy and, based upon such review, shall make appropriate revisions in the plan that are necessary to strengthen funds management procedures and maintain adequate provisions to meet the Bank's liquidity needs. The initial plan shall, at a minimum:

       (i) Establish recordkeeping systems to identify and track the volume of core deposits and volatile deposits;

       (ii) Establish a desirable range for net non-core funding dependency ratio ("dependency ratio") as computed by the FDIC;

       (iii) Require that monthly calculations of the liquidity ratio (following the format utilized by the OBRE in regulatory reports of examination), and the dependency ratio be provided to the board of directors for review, with such review noted in the board minutes;

       (iv) Identify the source and use of borrowed and/or volatile funds;

       (v) Establish an acceptable range for the relationship between rate sensitive assets and rate sensitive liabilities;

       (vi) Ensure that interest rate risk measurement systems provide meaningful and reliable information and use reasonable and supported assumptions specific to the Bank;

       (vii) Ensure that management has sufficient training and expertise to manage the Bank's asset/liability mix within risk limits prescribed by the Bank's board of directors;

       (viii) Require an independent review of
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       the data used in the interest rate risk monitoring systems;

       (ix) Establish appropriate lines of credit at correspondent banks that would allow the Bank to borrow funds to meet depositor demands if the Bank's other provisions for liquidity are inadequate;

       (x) Require the retention of securities and/or other identified categories of investments that can be liquidated within one day in amounts sufficient (as a percentage of the Bank's total assets) to ensure the maintenance of the Bank's liquidity posture at a level consistent with short- and long-term liquidity objectives; and

       (xi) Establish contingency plans to improve liquidity to the level established in the plan.

   [.4]4. (a) Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement a written profit plan and a realistic, comprehensive budget for all categories of income and expense. The plan required by this paragraph shall contain formal goals and strategies, consistent with sound banking practices, to reduce discretionary expenses and to improve and sustain earnings of the Bank. The plan shall include a description of the operating assumptions that form the basis for major projected income and expense components. Thereafter, the Bank shall formulate such a plan and budget by November 30 of each subsequent year.

   (b) The plans and budgets required by this paragraph, upon completion, shall be submitted to the Regional Director and Commissioner for review and the opportunity for comment.

   (c) Following the end of each calendar quarter, the Bank's board of directors shall evaluate the Bank's actual performance in relation to the plan and budget required by this paragraph and record the results of the evaluation, and any actions taken by the Bank, in the minutes of the board of directors' meeting at which such evaluation is undertaken.

   [.5]5. (a) Within 30 days from the last day of each calendar quarter following the effective date of this ORDER, the Bank shall determine from its Report of Condition and Income its level of Tier 1 capital as a percentage of its total assets ("capital ratio") for that calendar quarter. If the capital ratio is less than 7.0 percent, the Bank shall, within 60 days of the date of the required determination, increase its capital ratio to not less than 7.0 percent calculated as of the end of that preceding quarterly period. For purposes of this ORDER, Tier 1 capital and total assets shall be calculated in accordance with Part 325 of the FDIC Rules and Regulations ("Part 325"), 12 C.F.R. Part 325.

   (b) Any such increase in Tier 1 capital may be accomplished by the following:

       (i) The sale of common stock and noncumulative perpetual preferred stock constituting Tier 1 capital under Part 325; or

       (ii) The elimination of all or part of the assets classified "Loss" as of September 18, 2000, without loss or liability to the Bank, provided any such collection on a partially charged-off asset shall first be applied to that portion of the asset which was not charged off pursuant to this ORDER; or

       (iii) The collection in cash of assets previously charged off; or

       (iv) The direct contribution of cash by the directors and/or the shareholders of the Bank or its holding company; or

       (v) Any other means acceptable to the Regional Director and the Commissioner; or

       (vi) Any combination of the above means.

   (c) If all or part of the increase in capital required by this paragraph is to be accomplished by the sale of new securities, the board of directors of the Bank shall adopt and implement a plan for the sale of such additional securities, including the voting of any shares owned or proxies held by or controlled by them in favor of said plan. Should the implementation of the plan involve public distribution of the Bank securities, including a distribution limited only to the Bank's existing shareholders, the Bank shall prepare detailed offering materials fully describing the securities being offered, including an accurate description of the financial condition of the Bank and the circumstances giving rise to the offering, and any other material disclosures necessary to comply with the Federal securities laws. Prior to the implementation of the plan and, in any event, not less than 20 days prior to the dissemination of such materials, the materials used in the sale of the securities shall be submitted to the Registration and Disclosure Section, Division of Supervision, Federal Deposit In-
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   surance Corporation, 550 17th Street, N.W., Washington, D.C., 20429, and to the Office of Banks and Real Estate, 500 East Monroe, Suite 900, Springfield, IL 62701, for their review. Any changes requested to be made in the materials by the FDIC or OBRE shall be made prior to their dissemination.

   (d) In complying with the provisions of paragraph 5(c) of this ORDER, the Bank shall provide to any subscriber and/or purchaser of Bank securities written notice of any planned or existing development or other changes which are materially different from the information reflected in any offering materials used in connection with the sale of Bank securities. The written notice required by this paragraph shall be furnished within 10 calendar days of the date any material development or change was planned or occurred, whichever is earlier, and shall be furnished to every purchaser and/or subscriber of the Bank's original offering materials.

   (e) The capital ratio analysis required by this paragraph shall not negate the responsibility of the Bank and its board of directors for maintaining throughout the year an adequate level of capital protection for the kind, quality and degree of market depreciation of assets held by the Bank.

   [.6]6. As of the effective date of this ORDER, the Bank shall not declare or pay any cash dividend without the prior written consent of the Regional Director and Commissioner.

   [.7]7. (a) As of the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower who is already obligated in any manner to the Bank on any extensions of credit (including any portion thereof) that has been charged off the books of the Bank or classified "Loss" so long as such credit remains uncollected.

   (b) As of the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower whose loan or other credit has been classified "Substandard" or is listed for Special Mention and is uncollected unless the Bank's board of directors has adopted, prior to such extension of credit, a detailed written statement giving the reasons why such extension of credit is in the best interest of the Bank. A copy of the statement shall be placed in the appropriate loan file and shall be incorporated in the minutes of the applicable board of directors' meeting.

   [.8]8. As of the effective date of this ORDER, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified "Loss" as of September 18, 2000, that have not been previously collected or charged off. Any such charged-off asset shall not be rebooked without the prior written consent of the Regional Director and the Commissioner.

   Elimination or reduction of these assets with the proceeds of other Bank extensions of credit is not considered collection for the purpose of this paragraph.

   [.9]9. (a) Within 60 days from the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director and Commissioner for review and comment, a written plan to reduce the Bank's risk position in each asset in excess of $100,000, which is classified "Substandard" in the FDIC and OBRE's Report of Examination as of September 18, 2000 ("Joint Report"). In developing such plan, the Bank shall, at a minimum:

       (i) Review the financial position of each such borrower, including source of repayment, repayment ability, and alternative repayment sources; and

       (ii) Evaluate the available collateral for each such credit, including possible actions to improve the Bank's collateral position.

   (b) Such plan shall include, but not be limited to, the following:

       (i) Dollar levels to which the Bank shall reduce each asset within 6 and 12 months from the effective date of this ORDER; and

       (ii) Provisions for the submission of monthly written progress reports to the Bank's board of directors for review and notation in minutes of the meetings of the board of directors.

   (c) As used in this paragraph, "reduce" means to (1) collect; (2) charge off; or (3) improve the quality of such assets so as to warrant removal of any adverse classification by the FDIC and OBRE.

   (d) Within 30 days from the receipt of any comment from the Regional Director or Commissioner, and after consideration of such comments, the Bank shall approve the writ-
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   ten plan, which approval shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank shall implement and follow this written plan.

   [.10]10. (a) Within 60 days from the effective date of this ORDER, the Bank shall correct all deficiencies in the loans listed for "Special Mention" in the Joint Report.

   (b) Within 60 days from the effective date of this ORDER, the Bank shall correct the technical exceptions listed in the Joint Report.

   [.11]11. (a) Within 10 days from the effective date of this ORDER, the Bank shall replenish its ALLL by an expense entry in an amount equal to those loans required to be charged off by this ORDER.

   (b) Within 10 days from the effective date of this ORDER, the Bank shall make an additional provision for loan and lease losses which, after review and consideration by the board of directors, reflects the potential for further losses in the remaining loans or leases classified "Substandard" and all other loans and leases in its portfolio. In making this determination, the board of directors shall consider the results of any revisions in the Bank's loan review function which are required by this ORDER.

   (c) Within 10 days from the effective date of this ORDER, Reports of Condition and Income required by the FDIC and filed by the Bank subsequent to September 18, 2000, shall be amended and refiled if they do not reflect a provision for loan and lease losses and an ALLL which are adequate considering the condition of the Bank's loan portfolio, and which, at a minimum, incorporate the adjustments required by the above subparagraphs of this ORDER.

   (d) Prior to submission or publication of all Reports of Condition and Income required by the FDIC and the OBRE after the effective date of this ORDER, the board of directors of the Bank shall review the adequacy of the Bank's ALLL and accurately report the same. The minutes of the board of directors meeting at which such review is undertaken shall indicate the findings of the review, the amount of increase in the reserve recommended, if any, and the basis for determination of the amount of reserve provided.

   [.12]12. As of the effective date of this ORDER, the Bank's loan committee shall meet at least monthly, and shall include at least 3 directors who are "independent." For purposes of this ORDER, "independent" is defined as individuals who are not employees of the Bank. The loan committee shall, at a minimum, perform the following functions:

       (a) Evaluate, grant, or approve loans in accordance with the Bank's loan policy as amended to comply with this ORDER. The loan committee shall provide a thorough written explanation of any deviations from the loan policy, which statement shall address how said exceptions are in the Bank's best interest and which shall be reflected in the minutes of the corresponding committee meeting.

       (b) Review and monitor the status of repayment and collection of overdue and maturing loans, as well as all other loans that were classified "Substandard" in the Joint Report, or that are included on the Bank's internal watch list.

       (c) Review and give prior written approval for all advances, renewals, or extensions of credit to any borrower or the borrower's related interests when the aggregate volume of credit extended to the borrower and the borrower's related interests exceeds $100,000. Extensions of credit for one-to-four family mortgage loans which conform to secondary market standards are exempt from the requirements of this Paragraph 12(c). For purposes of this ORDER the term "related interest" is defined pursuant to section 215.2(n) of Regulation O, 12 C.F.R. §215.2(n).

       (d) Review all applications for new loans and renewals of existing loans to Bank directors, executive officers, and their related interests, and prepare a written opinion as to whether the credit is in conformance with the Bank's loan policy and all applicable laws and regulations. Such applications, renewals, and written opinions shall be referred to the Bank's board of directors for consideration.

       (e) Maintain written minutes of the committee meetings which include a record of the review and status of the aforementioned loans. Such minutes shall be made available for review at the next board meeting.

   [.13]13. (a) Within 60 days from the effective date of this ORDER, and annually thereafter, the board of directors of the Bank shall review the Bank's loan policy and procedures for adequacy and, based upon this
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   review, shall make all appropriate revisions to the policy necessary to strengthen lending procedures and abate additional loan deterioration. The revised written loan policy and any subsequent modifications shall be submitted to the Regional Director and Commissioner for review and comment upon their completion.

   (b) The initial revisions to the Bank's loan policy required by this paragraph, at a minimum, shall address the concerns noted in the Joint Report and include provisions:

       (i) Requiring that all extensions of credit originated or renewed by the Bank be supported by current credit information and collateral documentation, including lien searches and the perfection of security interests; have a clearly defined and stated purpose; and have a predetermined and realistic repayment source and schedule. Credit information and collateral documentation shall include current financial information, profit and loss statements or copies of tax returns, and cash flow projections, and shall be maintained throughout the term of the loan with loan officer notations and comments;

       (ii) Establishing limitations on the amount that can be loaned in relation to established collateral values, including the requirement that the source of the valuations be identified and which require that such collateral valuations shall be completed prior to the disbursement of loan proceeds and be performed on a periodic basis over the term of the loan;

       (iii) Establishing review and monitoring procedures for real estate appraisals, including compliance with the FDIC's regulation on appraisals, 12 C.F.R. Part 323;

       (iv) Designating the Bank's normal trade area;

       (v) Requiring that extensions of credit to any of the Bank's executive officers, directors, or principal shareholders, or to any related interest of such person, be thoroughly reviewed for compliance with all provisions of Regulation O, Section 37 of the Illinois Banking Act, and 38 Il. Adm. Code Section 340;

       (vi) Establishing a loan review process which addresses the loan review deficiencies noted in the Joint Report;

       (vii) Establishing guidelines for the analysis of the repayment capacity of commercial borrowers, including but not limited to, a requirement that debt service ratios be calculated and documented;

       (viii) Requiring a written plan to lessen the risk position in each line of credit identified as a problem credit on the Bank's internal loan watch list;

       (ix) Prohibiting the capitalization of interest or loan related expenses unless the board of directors provides, in writing, a detailed explanation of why such deviation is in the best interest of the Bank;

       (x) Requiring guidelines and review of out-of-territory loans, loans purchased through brokers, and non-amortizing loans. At a minimum, such guidelines shall include approval by a majority of the board of directors prior to disbursement of funds and a detailed written explanation of why such a loan is in the best interest of the Bank;

       (xi) Providing guidelines for financing new or expanding businesses, including provisions requiring the receipt and analysis of pro forma financial statements and budget projections;

       (xii) For extensions of credit to businesses, requiring initial investment and maintenance of equity by the owners of the business; and

       (xiii) Establishing review and monitoring procedures to ensure that all lending personnel are adhering to established lending procedures and that the directorate is receiving timely and fully documented reports on loan activity, including any deviations from established policy.

   (c) Within 30 days from the receipt of any comments from the Regional Director or Commissioner, and after consideration of any comments, the board of directors shall approve the written loan policy and any subsequent modification thereto, which approvals shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank shall implement and follow the written loan policy and any subsequent modifications thereto.

   [.14]14. (a) Within 30 days from the effective date of this ORDER, the Bank shall eliminate or correct all violations of law or regulations listed in the Joint Report.

   (b) Within 30 days from the effective date of this ORDER, the Bank shall implement
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   procedures to ensure future compliance with all applicable laws and regulations.

   [.15]15. (a) Within 60 days from the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director and Commissioner for review and comment a written policy covering expense reimbursements to its directors, officers, and employees. At a minimum, the policy shall include the following:

       (i) Provisions which specify the reasonable limitations for all categories of expenses related to customer entertainment and business development;

       (ii) Provisions which require complete documentation of all expenses related to customer entertainment and business development. At a minimum, the Bank shall require the submission of an original receipt, identification of the person or persons entertained, and the business purpose of the expense before a check is issued for payment by the Bank; and

       (iii) Provisions prohibiting the reimbursement of personal expenses of the Bank's directors, officers, and employees.

   (b) While this ORDER is in effect, the Bank's board of directors shall conduct monthly reviews of all expenses submitted for customer entertainment or business development, or any other expense submitted by the Bank's officers and directors, with the results of the review expressly stated in the minutes of the meetings of the board of directors at which such reviews are performed. On a monthly basis, the Bank will either seek reimbursement for any expenses paid which are not in conformance with the policy required by this paragraph or will state in the minutes of the board of directors' meeting the full justification for deviations from the policy.

   (c) Within 30 days from the receipt of any such comments from the Regional Director or Commissioner and after consideration of all such comments, the Bank shall approve the plan, which approval shall be recorded in the minutes of the board of directors' meeting. Thereafter, the Bank shall implement and follow the plan.

   [.16]16. Following the effective date of this ORDER, the Bank shall provide 30 days' prior written notice to the Regional Director and Commissioner before engaging in any new line of business, including but not limited to: subprime lending, high loan-to-value lending, out-of-territory lending in excess of twenty percent of Tier 1 capital, and transactional internet banking activities. Such notice shall include a detailed business plan which describes the nature and scope of the Bank's planned activities and includes pro forma financial projections for the first three years of operation.

   [.17]17. (a) Within 30 days from the effective date of this ORDER, the Bank's board of directors shall develop, adopt, and implement a program that will provide for monitoring of the Bank's compliance with this ORDER.

   (b) Following the required date of compliance with subparagraph (a) above, the Bank's board of directors shall review the Bank's compliance with this ORDER and record its review in the minutes of each regularly scheduled monthly board of directors' meeting.

   18. Within 30 days of the end of each calendar quarter following the effective date of this ORDER, the Bank shall furnish to the Regional Director and Commissioner written progress reports signed by each member of the Bank's board of directors, detailing the actions taken to secure compliance with the 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 Commissioner have, in writing, released the Bank from making further reports.

   [.18]19. Following 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 (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, notice, or statement shall be sent to the FDIC Registration and Disclosure Section, 550 17th Street, NW, Washington, D.C. 20429 and to the Office of Banks and Real Estate, 500 East Monroe, Suite 900, Springfield, Illinois 62701, for review at least 20 days prior to dissemination to shareholders. Any changes requested to be made by the FDIC and OBRE shall be made prior to dissemination of the description, communication, notice, or statement.

   The effective date of this ORDER shall be 10 calendar days after its issuance by the FDIC and OBRE.
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   The provisions of this ORDER shall be binding upon the Bank, its institution-affiliated parties, and any successors and assigns thereof.

   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC and OBRE.

   Pursuant to delegated authority.

   Dated: March 21st, 2001.



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