{{5-31-04 p.C-5081}}
[¶11,773] In The Matter of PBK Bank, Inc., Richmond, Kentucky, Docket No. 01-007b
(3-22-01).
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 terminated by order of the FDIC dated 3-15-04; see ¶16,374.)
[.1] Management—Qualifications Specified
[.2] Capital—Increase Required
[.3] Loan Loss Reserve—Establishment of or Increase Required
[.4] Profit Plan—Preparation of Plan Required
[.5] Ethics—Written Policy Required
[.6] Loans—Risk Position—Reduction of Adversely Classified Lines of Credit
Required
[.7] Loans—Extensions of Credit—To Borrowers with Existing Adversely
Classified Credits
[.8] Loan Policy—Preparation or Revision of Policy Required
[.9] Loans—Internal Review Procedure
[.10] Real Estate Activities—Other Real Estate (ORE), Management Policy
Required
[.11] Violations of Laws—Correction of Violations Required
[.12] Funds Management and Liquidity—Preparation or Revision of Funds
Management Policy Required
[.13] Dividends—Dividends Restricted
In the Matter of
PBK BANK, INC.
RICHMOND, KENTUCKY
Insured State Nonmember Bank
ORDER TO CEASE AND DESIST
FDIC-01-007b
PBK Bank, Inc., Richmond, Kentucky (the "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 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)(1) of the
Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b)(1),
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 March 22, 2001, 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 it had reason to
believe that the Bank had engaged in unsafe or unsound banking
practices and had committed violations of law 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, its directors, officers,
employees, agents, and other institution-affiliated parties (as that
term
{{5-31-04 p.C-5082}}
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:
(a) Engaging in hazardous lending and lax collection practices;
(b) Operating with less than satisfactory capital in relation to the
kind and quality of assets held by the Bank;
(c) Operating with a large volume of poor quality loans;
(d) Operating with an inadequate loan valuation reserve;
(e) Operating with inadequate provisions for liquidity;
(f) Operating in such a manner as to produce low earnings;
(g) Operating in violation of 12 C.F.R. Part 323, 12 C.F.R.
§323.3(b) and 4(a); 12 C.F.R. Part 337, 12 C.F.R. §337.2(d);
Section 23A and 23B of the Federal Reserve Act, 12 U.S.C. §371c,
made applicable to state nonmember banks by section 18(j)(1) of the
Act, 12 U.S.C. §1828(j)(1); Section 215.4(e)(2)(ii) and 215.5(d)(3)
of the Board of Governors of the Federal Reserve System Regulation O,
12 C.F.R. §§ 215.4(e)(2)(ii) and 215.5(d)(3), made applicable to
state nonmember banks by section 18(j)(2) of the Act, 12 U.S.C.
§1828(j)(2); 12 C.F.R. Part 365, 12 C.F.R. §365; and
§§ 287.280(1), 287.280(3) and 287.100(1)(b), Kentucky Revised
Statutes.
(h) Operating with management whose policies and practices are
detrimental to the Bank and jeopardize the safety of its deposits; and
(i) Operating with a board of directors which has failed to provide
adequate supervision over and direction to the active management of the
Bank.
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 management
qualified to restore the Bank to a sound condition. Such management
shall include a chief executive officer and an experienced senior
lending officer responsible for supervising the Bank's overall lending
function.
(b) Present management shall be assessed on its ability to:
(i) Comply with the requirements of this ORDER;
(ii) Improve and thereafter maintain the Bank in a safe and sound
condition, including asset quality, capital adequacy, liquidity
adequacy, and earnings adequacy;
(iii) Comply with all applicable State and Federal laws, regulations;
and FDIC and Federal Financial Institutions Examination Council policy
statements;
(iv) Restore all aspects of the Bank to a safe and sound condition,
including asset quality, capital adequacy, earnings, management
effectiveness, and liquidity.
(c) During the life of this ORDER, the Bank shall notify the
Regional Director of the Memphis Regional Office ("Regional
Director") and the Commissioner of Financial Institutions for the
Commonwealth of Kentucky ("Commissioner") in writing of any
resignations and/or terminations of any members of its board of
directors and/or any of its senior executive officer(s) within 15 days
of the event.
(d) Bank shall comply with section 32 of the Act, 12 U.S.C. §1831i.
(e) (i) To ensure both compliance with this ORDER and qualified
management for the Bank, the board of directors, within 60 days from
the effective date of this ORDER shall develop a written policy
("Management Policy") which shall incorporate an analysis of the
Bank's management and staffing requirements and shall, at a minimum
address (1) both the number and type of positions needed to properly
manage the Bank, (2) a clear and concise description of the needed
experience and pay for each job, (3) an evaluation of present
management, (4) a plan to recruit, hire or replace personnel with
requisite ability and experience, (5) a periodic evaluation of each
individual's job performance, and (6) the establishment of procedures
to periodically review and update the Management Policy.
(ii) The Management Policy and any subsequent modification thereto
shall be submitted to the Regional Director and the Commissioner for
review and comment. Within 30 days from receipt of any comment, and
after consideration of such comment, the board of directors shall
approve the Management Policy which approval shall be recorded in the
minutes of the meeting of the
{{5-31-01 p.C-5083}}
board of directors. Thereafter, the Bank
and its directors, officers and employees shall implement and follow
the Management Policy and any modifications thereto.
(f) Within 30 days from the effective date of this ORDER, the
board of directors shall establish a committee of the board of
directors with the responsibility to ensure that the Bank complies with
the provisions of this ORDER. At least two-thirds of the members of
such committee shall be independent, outside directors as defined
herein. The committee shall report monthly to the entire board of
directors, and a copy of the report and any discussion relating to the
report or the ORDER shall be included in the minutes of the board of
directors. Nothing contained herein shall diminish the responsibility
of the entire board of directors to ensure compliance with the
provisions of this ORDER.
(g) For the purposes of this ORDER, an "outside director" shall
be an individual:
(i) Who shall not be employed, in any capacity, by the Bank or
its affiliates other than as a director of the Bank or an affiliate;
(ii) Who shall not own or control more than ten (10%) percent of the
voting stock of the Bank or its holding company;
(iii) Who shall not be indebted to the Bank or any of its affiliates in
an amount greater than five (5%) percent of the Bank's equity capital
and reserves;
(iv) Who shall not be related to any directors, principal shareholders
of the Bank or affiliates of the Bank; and
(v) Who shall be a resident of, or engage in business in, the Bank's
trade area.
(h) Within twelve months from the effective date of this ORDER,
each member of the board of directors shall attend at least eight (8)
hours of training relating to the duties and responsibilities of bank
directors. This training shall be conducted by a recognized
organization of bankers or sponsored and approved by such an
organization.
[.2]2. (a) Within ninety (90) days from the effective date of this ORDER,
the Bank shall have Tier I capital equal to or greater than seven and
one half percent (7 1/2%) percent of the Bank's adjusted Part 325
total assets. Thereafter, during the life of this ORDER, the Bank shall
maintain Tier I capital equal to or greater than seven and one half
percent (7 1/2%) percent of the Bank's adjusted Part 325 total
assets.
(b) Any increase in Tier I capital necessary to meet the ratio required
by Paragraph 2(a) of this ORDER may be accomplished by the following:
(i) The sale of new securities in the form of common stock; or
(ii) The direct contribution of cash by the directors, shareholders, or
parent Bank holding company of the Bank; or
(iii) Any other method acceptable to the FDIC.
(c) If all or part of the increase in Tier I capital required by
Paragraph 2(a) of this ORDER is accomplished by the sale of new
securities, the Bank's board of directors shall adopt and implement a
plan for the sale of such additional securities, including the voting
of any shares owned or proxies held or controlled by them in favor of
the plan. Should the implementation of the plan involve a public
distribution of the Bank's securities (including a distribution
limited only to the Bank's existing shareholders), the Bank shall
prepare offering materials fully describing the securities being
offered, including an accurate description of the Bank's financial
condition 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 plan and any materials used in the sale of the
securities shall be submitted to the FDIC, Registration and Disclosure
Unit, 550 17th Street, N.W., Room F-250, Washington, D.C. 20429 for
review. Any changes requested to be made in the plan or materials by
the FDIC shall be made prior to their dissemination. If the Regional
Director allows any part of the increase in Tier I capital to be
provided by the sale of noncumulative perpetual preferred stock, then
all terms and conditions of the issue, including but not limited to
those terms and conditions relative to the interest rate and any
convertability factor, shall be presented to the Regional Director for
prior approval.
(d) In complying with the provisions of Paragraph (2) of this ORDER,
the Bank shall provide to any subscriber and/or purchaser of the
Bank's securities written notice of any planned or existing
development or other
{{5-31-01 p.C-5084}}
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 days from the date such material
development or change was planned or occurred, whichever is earlier,
and shall be furnished to every subscriber and/or purchaser of the
Bank's securities who received or was tendered the information
contained in the Bank's original offering materials.
(e) For purposes of this ORDER the terms "Tier I capital", and
"Part 325 total assets" shall have the meanings ascribed to them
in Part 325 of the FDIC's Rules and Regulations, respectively
subsections 325.2(t), and 325.2(v), 12 C.F.R. §§ 325.2(t) and (v).
The Capital Calculations schedule on page 85 of the Report of
Examination provides the method for determining the ratio of Tier I
capital to adjusted Part 325 total assets as required by this ORDER.
(f) The Bank shall not lend funds directly or indirectly, whether
secured or unsecured, to any purchaser of Bank stock or to any investor
by any other means for any portion of any increase in Tier I capital
required herein.
[.3]3. (a) Within 30 days from the effective date of this ORDER, the Bank
shall establish and shall thereafter maintain, through charges to
current operating income, an adequate valuation reserve for loan and
lease losses. In determining the adequacy of the valuation reserve for
loan and lease losses, the board of directors of the Bank shall at a
minimum consider the following:
(i) Prevailing instructions contained in the Federal Financial
Institutions Examination Council booklet entitled
"Instructions—Consolidated Reports of Condition and Income";
(ii) The volume and mix of the existing loan portfolio, including the
volume and severity of nonperforming loans and adversely classified
credits, as well as an analysis of net charge-offs experienced on
previously adversely classified loans;
(iii) The extent to which loan renewals and extensions are used to
maintain loans on a current basis and the degree of risk associated
with such loans;
(iv) The trend in loan growth, including any rapid increase in loan
volume within a relatively short time period;
(v) General and local economic conditions affecting the collectibility
of the Bank's loans;
(vi) Previous loan loss experience by loan type, including the trend of
net charge-offs as a percent of average loans over the past several
years;
(vii) Off balance sheet credit risks;
(viii) The overall risk associated with each concentration of credit
together with the degree of risk associated with each related
individual borrower; and
(ix) Any other factors appropriate in determining future valuation
reserves.
(b) Prior to the submission of any Report of Condition or Report
of Income, the board of directors of the Bank shall review the adequacy
of the Bank's valuation reserve for loan and lease losses and make
such charges as are necessary to current operating income to provide an
adequate loan valuation reserve. The minutes of the board meetings at
which each review is undertaken shall indicate the results of the
review, the amount of any increase to the reserve, and the basis for
the amount of the valuation reserve.
(c) Notwithstanding the provisions of Paragraph 3(a) and 3(b) above,
the Bank shall achieve, within 30 days of the effective date of this
ORDER, a valuation reserve for loan and lease losses, after charge off
of loans classified "Loss" as required in Paragraph 6 below, of
not less than $2,285,000, and shall thereafter maintain, through
charges to current operating income, an adequate valuation reserve for
loan and lease losses.
(d) In the event that the Regional Director and/or the Commissioner
determine, at subsequent examinations and/or visitations, that the
Bank's valuation reserve for loan and lease losses is inadequate, the
Bank shall amend its Consolidated Reports of Condition and Income.
[.4]4. (a) Within 60 days from the effective date of this ORDER, and within
the first 30 days of each calendar year thereafter, the board of
directors shall develop a written profit plan consisting of goals and
strategies for improving the earnings of the Bank for each calendar
year. The written profit plan shall include, at a minimum:
(1) Identification of the major areas in, and means by, which the
board of directors will seek to improve the Bank's operating
performance;
{{5-31-01 p.C-5085}}
(2) Guidelines that specify the sources and uses of Bank deposits and
other funds;
(3) Describe the acceptable types and amounts of assets that the Bank
will acquire;
(4) Guidelines for growth that ensure the maintenance of acceptable
capital ratios in accordance with the capital adequacy guidelines
contained in Paragraph 2 of this ORDER;
(5) Realistic and comprehensive budgets;
(6) Budget review process to monitor the income and expenses of the
Bank to compare actual figures with budgetary projections on not less
than a quarterly basis; and
(7) Describe the operating assumptions that form the basis for, and
adequately support, major projected income and expense components; loan
growth within capital and liquidity parameters established through the
Bank's annual budget; and any approved written capital plan pursuant
to Paragraph 2(c) of this ORDER.
(b) Within 60 days from the effective date of this ORDER, the Bank
shall formulate and implement a long range planning process. At a
minimum, the Bank shall formulate a written strategic plan which
includes long range goals and objectives, steps for achieving these
goals and objectives, competitive factors of new markets, and periodic
monitoring of performance to allow for both the actual results and the
making of necessary revisions.
(c) Both the profit plan and the long term strategic plan and any
subsequent modification thereto shall be submitted to the Regional
Director and the Commissioner for review and comment. No more than 30
days after the receipt of any comment from the Regional Director and/or
the Commissioner, the board of directors shall approve the written
profit plan and the written strategic plan, which approval shall be
recorded in the minutes of the board of directors. Thereafter, the
Bank, its directors, officers, and employees shall follow the profit
plan, the strategic plan, and/or any subsequent modification.
[.5]5. Within 60 days from the effective date of this ORDER, the Bank shall
develop, adopt and implement a written ethics policy and procedures
with regard to the ethical conduct and other standards of conduct and
responsibilities for its directors, officers, employees, agents and
other persons participating in the conduct of the affairs of the Bank.
("Ethics Policy") At a minimum, the Ethics Policy shall address
the financial interests and obligations of individuals that appear to
conflict with that individual's duties and responsibilities such as
participating in any manner in any transaction or loan in which the
individual, his spouse, child, partner, or organization is involved, or
in which the individual serves as an officer, director, trustee,
partner, or employee.
[.6]6. Within 10 days from the effective date of this ORDER, the Bank shall
eliminate from its books, by charge-off or collection, all assets
classified "Loss" as of October 23, 2000, that have not been
previously collected or charged-off. Reduction of these assets through
proceeds of other loans made by the Bank is not considered collection
for the purpose of this paragraph.
(a) Within 60 days from the effective date of this ORDER, the Bank
shall formulate and submit to the Regional Director and the
Commissioner for review and approval a written plan of action directed
at lessening the Bank's risk position in each line of credit or other
asset which was classified "Substandard" as of October 23, 2000,
and which aggregated $150,000.00 or more. Such plan shall include but
not be limited to, the following:
(i) Target dollar levels to which the Bank will reduce each line
of credit or other asset within three months, six months, and twelve
months from the effective date of this ORDER; and
(ii) Provisions for the submission of monthly written progress reports
under this Paragraph 6 to the Bank's board of directors for review and
recordation in the board minutes.
(b) Within 90 days of the effective date of this ORDER, the Bank
shall sufficiently reduce or otherwise improve assets subject to
Special Mention as of October 23, 2000, to warrant removal from the
Special Mention category. Specifically, where appropriate, the Bank
shall correct any technical exceptions for these loans and obtain
current financial information for the loans.
(c) As used in Paragraph 6 the word "reduce" means (1) to
collect, (2) to charge off, or (3) to sufficiently improve the quality
of
{{5-31-01 p.C-5086}}
assets adversely classified to warrant removing any adverse
classification, as determined by the FDIC.
[.7]7. (a) Beginning with 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 has a loan or other extension of
credit with the Bank that has been charged off or classified, in whole
or in part "Loss" and is uncollected. The requirements of this
paragraph shall not prohibit the Bank from renewing (after collection
in cash of interest due from the borrower) any credit already extended
to any borrower.
(b) Beginning with the effective date of this ORDER, the Bank shall not
make any further extensions of credit, directly or indirectly, to any
borrower whose loans are adversely classified "Substandard" as of
October 23, 2000, without prior approval by the Bank's board of
directors after the board's affirmative determination, as reflected in
the minutes of the meeting, that the extension of credit is in full
compliance with the Bank's loan policy, that the extension of credit
is necessary to protect the Bank's interest or is adequately secured,
that credit analysis has determined the customer to be credit worthy,
and that all necessary loan documentation is on file, including current
financial and cash flow information and satisfactory appraisal, title
and lien documents.
(c) This paragraph shall not prohibit the Bank from extending funds
pursuant to a valid pre-existing loan commitment or unfunded letter of
credit to any borrower whose other loans are adversely classified as of
October 23, 2000, provided all necessary loan documentation is on file
for such borrower including current financial and cash flow information
and satisfactory appraisal, title and lien documents.
(d) If any borrower whose loans are adversely classified as of October
23, 2000, has a pre-existing loan commitment or unfunded letter of
credit with the Bank, and such commitment or letter of credit expires,
it shall not be renewed or extended unless the Bank complies with the
provisions of Paragraph 7(a) or (b), respectively, as appropriate.
[.8]8. (a) Within 90 days from the effective date of this ORDER, the Bank
shall revise, adopt, and implement written lending and collection
policies to provide effective guidance and control over the Bank's
lending function. Proper and adequate loan documentation as is required
by sound banking practices before disbursement of the loan proceeds to
borrowers or before renewal or extensions of existing loans shall be
part of the review. In addition, the Bank shall obtain adequate and
current documentation for all loans in the Bank's loan portfolio. 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/or visitations.
(b) Within 90 days from the effective date of this ORDER, the board of
directors shall develop a written plan for the making of real estate
construction loans, consisting of goals and strategies for minimizing
the inherent risks of this type of lending by controlling disbursements
and collateral margins and assuring timely completion of the projects
and timely repayment of the Bank's loans. The written real estate
construction loan plan shall include, at a minimum:
(i) Guidelines to ensure that the Bank investigates the
character, expertise and financial standing of any person (and any
related parties) seeking a real estate construction loan from the Bank;
(ii) Maintenance of documentation files including background
information concerning the reputation, work and credit experience for
the developers or contractors, and also obtaining draw inspection
reports, lot releases, appraisals, and insurance policies;
(iii) Require that before entering into any real estate construction
financing agreements, the Bank, builder and property owner shall enter
into a written building loan agreement that specifies the performance
of each party during the entire course of construction and is backed by
a purchase or takeout agreement from a financially responsible
permanent lender;
(iv) Guidelines for the disbursement of loan funds appropriate to the
type of project financed, including procedures to ensure that all funds
advanced are used properly to complete construction or development of
the property serving as collateral; and
(v) Ensure that the Bank has retained sufficiently trained personnel to
monitor real estate construction loans before it extends any such
loans.
(c) Evidence of the review and establish-
{{5-31-01 p.C-5087}}
ment of procedures to
ensure compliance with the loan policy shall be reduced to writing. The
policy and its implementation shall be in a form and manner acceptable
to the Regional Director and the Commissioner as determined at
subsequent examinations and/or visitations.
(d) Beginning with the effective date of this ORDER, the Bank shall
initiate and implement a program to strengthen its credit files and
correct the technical exceptions as detailed on page 78-82 of the
Report of Examination. In all future operations, the Bank shall
ascertain that all documents or evidence thereof, properly completed,
have been obtained before credit is extended.
(e) Within 180 days from the effective date of this ORDER, the Bank
shall submit a written proposal, for review and comment, to the
Regional Director and the Commissioner for reducing and monitoring the
Bank's concentration in real estate construction lending (the
"concentration plan") as of October 23, 2000, to an amount which
shall be less than one hundred (100%) percent of the Bank's Tier I
capital. In addition, the concentration plan will provide procedures
for monitoring the Bank's compliance with the plan and provide for
written reports to the board of directors regarding such compliance at
least quarterly, and copies of such reports, shall be made part of the
minutes of the board of directors. No more than 30 days after the
receipt of any comment from the Regional Director and/or the
Commissioner, the board of directors shall approve the concentration
plan, which approval shall be recorded in the minutes of the board of
directors. Thereafter, the Bank, its directors, officers, and employees
shall follow the plan and/or any subsequent modification.
[.9]9. (a) Within 30 days of the effective date of this ORDER, the board
shall establish an internal loan review and grading system
("System") to periodically review the Bank's loan portfolio and
identify and categorize problem credits, assets, or letters of credit.
At a minimum the System shall provide for:
(i) The identification of the overall quality of the loan
portfolio;
(ii) The identification and amount of each delinquent asset;
(iii) An identification or grouping of loans that warrant the special
attention of management;
(iv) For each loan identified, a statement of the amount, and an
indication of the degree of risk that the loan will not be fully repaid
according to its terms and the reason(s) why the particular loan merits
special attention;
(v) An identification of credit and collateral documentation
exceptions;
(vi) An identification and status of each violation of law, rule, or
regulation;
(vii) An identification of assets not in conformance with the Bank's
policies, and exceptions to the Bank's lending policy;
(viii) An identification of insider loan transactions; and
(ix) A mechanism for reporting periodically, no less than quarterly, to
the board of directors on the status of each asset identified and the
action(s) taken by management.
(b) A copy of the reports submitted to the board, as well as
documentation of the action taken by the Bank to collect or strengthen
assets identified as problem credits, shall be kept with the minutes of
the board of directors.
(c) Within 90 days from the effective date of this ORDER the Bank's
board of directors shall establish and appoint a loan committee to
review and approve in advance all extensions of credit, and/or renewals
that when aggregated with all other extensions of credit (including
unfunded loan commitments and unfunded letters of credit) to the
borrower, either, directly or indirectly, exceed or would exceed
$150,000. At least two-thirds of the members of the loan committee
shall be outside directors. The review should include financial,
income, and cash flow information, collateral values and lien
information, repayment terms, past performance by the borrower, the
purpose of the extension, and whether the extension complies with the
Bank's loan policy and applicable laws, rules and regulations. The
loan committee shall maintain written minutes which detail the
information reviewed by the loan committee, its conclusions, approvals,
denials, recommendations, and reasons for the approval of any credit
which does not fully comply with the review requirements set forth in
this paragraph. At least
{{5-31-01 p.C-5088}}
monthly the loan committee shall submit its
written minutes to the board of directors.
[.10]10. (a) Within 90 days from the effective date of this ORDER, the board
of directors shall develop a plan for managing the Other Real Estate
("ORE") of the Bank. The written ORE plan shall include, at a
minimum:
(i) A quarterly review of the ORE portfolio by an ORE committee
to be appointed by the Bank;
(ii) Realistic and comprehensive budgets for each piece of ORE,
including projections of the Bank's cost of marketing the ORE, and the
Bank's costs of carrying the ORE on its books (e.g., upkeep, repairs
and insurance costs);
(iii) A determination by the ORE committee for each piece of ORE that
the property is listed with a real estate broker or otherwise made
widely available for sale in an appropriate manner, and that the
proposed selling price is realistic;
(iv) Guidelines to ensure that periodic appraisals are obtained for the
ORE and that progress reports are obtained from all real estate brokers
marketing the ORE, including a projected sales time frame for each
piece of ORE;
(v) Guidelines to ensure that all taxes and insurance premiums are
timely paid for all ORE;
(vi) An identification of any ORE that warrants the special attention
of management;
(vii) An identification of documentation exceptions on any ORE; and
(viii) An identification of all ORE not in conformance with the Bank's
policies, and exceptions to the Bank's ORE policy;
(b) Reports from the ORE committee shall be submitted to the board
of directors on at least a quarterly basis and a copy of such reports,
as well as documentation of the action taken by the Bank to facilitate
the timely sale of ORE, shall be made part of the minutes of the board
of directors.
[.11]11. Within 60 days from the effective date of this ORDER, the Bank
shall eliminate and/or correct all violations of law or regulation as
well as all contraventions of FDIC policy, which are set out on page
39-45 of the Report of Examination of the Bank as of October 23, 2000.
In addition, the Bank shall henceforth comply with all applicable laws
and regulations.
[.12]12. Within 60 days from the effective date of this ORDER, the Bank
shall formulate and adopt a written liquidity and funds management
policy. Such policy shall include the establishment of acceptable
ranges of ratios in the following areas: volatile liability dependence,
total loans to total deposits and temporary investments to volatile
liabilities. In addition, the liquidity policy shall incorporate a
funds management program which designates acceptable levels for:
volatile liabilities, including borrowings; lines of credit, including,
loan commitments and letters of credit; asset mix, including temporary
funds and investments, long-term investment securities and classes of
obligors, and loans to deposits; and rate-sensitive assets as a percent
of rate-sensitive liabilities. The written liquidity and funds
management policy shall be submitted to the Regional Director and the
Commissioner for review and comment.
[.13]13. The Bank shall not pay cash dividends in any amount except as
follows:
(a) Such declarations and payments are made in accordance with
applicable State and Federal laws and regulations;
(b) That after payment of such dividends, the ratio of Tier I capital
to adjusted Part 325 total assets of the Bank will be not less than
seven and one-half (7 1/2) percent;
(c) That after payment of such dividends, the Bank's net earnings
remain positive for the current year;
(d) That such declaration and payment of dividends shall be approved in
advance by the board of directors of the Bank;
(e) That such declaration and payment of dividends shall be approved in
advance, in writing, by the Regional Director and the Commissioner.
14. On the fifteenth day of the second month following the effective
date of this ORDER, and on the fifteenth day of every third month
thereafter, 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 has
released the Bank in writing from making further reports.
{{5-31-01 p.C-5089}}
15. This ORDER shall become effective 10 days from the date of its
issuance.
16. 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.
Pursuant to delegated authority.
Dated: March 22, 2001.
