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   [11,819] In the Matter of Rantoul First Bank, s.b., Rantoul, Illinois, Docket No. 01-068b (7-26-01).

(This order was terminated by order of the FDIC dated 7-22-03; see ¶16,344.)

   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.

   [.1] Management—Qualifications Specified

   [.2] Bank Operations—Internal Controls, Correction of Weaknesses Required

   [.3] Strategic Plan—Preparation of Required

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

   [.5] Assets—Charge-off or Collection

   [.6] Loans—Risk Position—Reduction of Adversely Classified Lines of Credit Required
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   [.7] Capital—Increase Required

   [.8] Loans—Special Mention

   [.9] Report of Examination—Correction of Exceptions Required

   [.10] Profit Plan—Preparation of Plan Required

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

   [.12] Violations of Law—Correction of Violations Required

   [.13] Concentration of Credit—Reduce

   [.14] Interest Rate Risk Policy—Minimum Requirements

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

In the Matter of
RANTOUL FIRST BANK, s.b.
RANTOUL, ILLINOIS
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-01-068b
OBRE Thrift Order No. 2001-1

   Rantoul First Bank, S.B., Rantoul, 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 sections 9016 and 9018 of the Illinois Savings Bank Act ("ISBA"), 205 ILCS 205/9016 & 9018, respectively, 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 the Office of Banks and Real Estate for the State of Illinois ("OBRE") dated July 11, 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/or section 11005 of the ISBA, 205 ILCS 205/11005, and its successors and assigns, cease and desist from the following unsafe or unsound banking practices and violations of law or regulation:

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

   B. Operating with a board of directors which has failed to provide adequate supervision over and direction to the management.

   C. Operating with inadequate internal routines and controls.

   D. Failing to post the general ledger promptly.

   E. Failing to keep accurate books and records.

   F. Operating without an effective strategic plan.

   G. Operating with an inadequate allowance for loans and lease losses for the volume, kind, and quality of loans and leases held.

   H. Operating with an excessive level of adversely classified loans, and other assets.

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

   J. Engaging in hazardous lending and lax collection practices.

   K. Operating with inadequate earnings.

   L. Operating with inadequate liquidity in light of the Bank's asset and liability mix.
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   M. Violating laws or regulations, including:

       (i) Section 9011(a) of the Illinois Savings Bank Act, 205 ILCS 205/9011(a) - Recordkeeping and retention of records by a savings bank;

       (ii) Section 6013 of the Illinois Savings Bank Act, 205 ILCS 205/6013 - Loans to one borrower;

       (iii) The Uniform Disposition of Unclaimed Property Act, 765 ILCS 1025/1-30;

       (iv) Part 304 of the FDIC Rules and Regulations, 12 C.F.R. Part 304 - Submission of accurate Reports of Condition and Income; and

       (v) Part 365 of the FDIC Rules and Regulations, 12 C.F.R. Part 365.

   N. Failing to adequately monitor and control interest rate risk;

   O. Operating with concentrations of credit.

   P. Failing to implement existing Bank policies on a consistent basis.

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

   [.1]1. (a) Within 120 days from the effective date of this ORDER, the Bank shall have and retain qualified management. At a minimum, such management shall include: (i) a new chief executive officer with proven ability in managing a bank of comparable size and experience in upgrading a low quality loan portfolio; (ii) a new senior operations officer with an appropriate level of knowledge of bank operations and the ability to provide appropriate oversight to the Bank's operations staff. Such persons shall be provided the necessary written authority to implement the provisions of this ORDER. 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;

       (iv) Cause the Bank's electronic or automated information systems to maintain complete and accurate books and records for the Bank; and

       (v) 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 any of 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 303.14 of the FDIC Rules and Regulations ("section 303.14"), 12 C.F.R. §303.14. 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 section 303.14.

   [.2]2. (a) Within 30 days from the effective date of this ORDER, the Bank shall correct the deficiencies in internal routines and controls identified in the Joint FDIC/OBRE Report of Examination of the Bank as of September 30, 2000 ("Report of Examination"), and the FDIC Information Systems Report of Examination as of February 26, 2001 ("IS Report of Examination"). Such correction shall include, but not be limited to, the following:

       (i) Effective immediately, the Bank shall restrict Vice President Hoyle Puckett's user access to inquiry only on the Intrieve system.

       (ii) Effective immediately, the Bank shall appoint a new Information Systems Security Officer.

       (iii) Effective immediately, the Bank shall establish independent review of the input, authorization and preparation, computer activities, and output reconciliation activities of the Information Systems Security Officer.

       (iv) Effective immediately, the Bank shall eliminate the practice of sharing user IDs and passwords.

       (v) Effective immediately, the Bank shall implement policies and procedures that ensure that all general ledger accounts, including vault cash and ATM cash, are balanced on a daily basis.
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       (vi) Within 30 days of the effective date of this ORDER, the Bank shall implement procedures to ensure segregation of duties, in order to prevent the control of any transaction, from origination through end processing, by any one individual.

       (vii) Within 30 days of the effective date of this ORDER, the Bank shall review all user access levels and restrict system access to the minimal level required for each employee's job responsibilities.

       (viii) Within 30 days of the effective date of this ORDER, the Bank shall revise its policies and procedures related to information systems to prevent the recurrence of any deficiency noted in the IS Report of Examination.

   [.3]3. (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) Goals and procedures for secondary market mortgage lending and non-real estate lending;

       (ii) Staffing needs;

       (iii) Succession of management; and

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

   (c) The strategic plan shall be submitted to the Regional Director and Commissioner for review and comment. 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 strategic 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 strategic plan.

   (d) Within 30 days of the end of each calendar quarter following the effective date of this ORDER, the Bank's board of directors shall:

       (i) Evaluate the Bank's actual performance in relation to the strategic plan;

       (ii) Revise the strategic plan to reflect the results of the evaluation; and

       (iii) Record the results of the evaluation and revisions to the strategic plan in the minutes of the board of directors' meeting after which such evaluation and revision are completed.

   (e) Within 30 days after the quarterly evaluation, the Bank shall submit the revised strategic plan to the Regional Director and Commissioner for review and comment. 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 revised strategic plan, which approval shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank shall implement the revised strategic plan.

   [.4]4. (a) Within 10 days from the effective date of this ORDER, the Bank shall replenish its allowance for loan and lease losses ("ALLL") in the amount of at least $260,000.

   (b) Within 30 days from the effective date of this ORDER, Reports of Condition and Income required by the FDIC and filed by the Bank subsequent to December 31, 2000, shall be amended and refiled if they do not reflect an ALLL which is adequate considering the condition of the Bank's loan portfolio, and which, at a minimum, incorporate the adjustment required by the above subparagraph of this ORDER.

   (c) Prior to submission or publication of all Reports of Condition and Income required by the FDIC after the effective date of this ORDER, the board of directors of the Bank shall review the adequacy of the Bank's ALLL, provide for an adequate ALLL, and accurately report the same. The minutes of the board 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 ALLL provided. In making these determinations, the board of directors shall consider the Federal Financial Institutions Examination Council's Instructions for the Reports of Condition and Income and any analysis of the Bank's ALLL provided by the FDIC and OBRE.

   (d) While this ORDER is in effect, the Bank shall submit to the Regional Director and Commissioner the analysis supporting the determination of the adequacy of its
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   ALLL. These submissions may be made at such times as the Bank files the progress reports otherwise required by the ORDER.

   (e) ALLL entries required by this paragraph shall be made prior to any Tier 1 capital determinations required by this ORDER.

   [.5]5. 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 30, 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 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.

   [.6]6. (a) Within 30 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 $50,000 which is classified "Substandard" in the Report of Examination. 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 six and twelve 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 the consideration of any recommended changes, the Bank shall approve the written 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.

   [.7]7. (a) Within 60 days from the effective date of this ORDER, the Bank shall develop and submit to the Regional Director and the Commissioner a plan to increase its level of Tier 1 capital as a percentage of its total assets ("capital ratio") to 7.0 percent. 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) Within 30 days from the last day of each calendar quarter following the date of required compliance with paragraph 7.(a) of this ORDER, the Bank shall determine from its Report of Condition and Income its capital ratio for that calendar quarter. If the capital ratio is less than 7.0 percent, the Bank shall, within 30 days of the date of the required determination, revise and re-submit to the Regional Director and the commissioner the plan described in paragraph 7.(a).

   (c) Any increase in Tier 1 capital required by the plan and this paragraph may be accomplished by the following:

       (i) The elimination of all or part of the assets classified "Loss" as of September 30, 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

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

       (iii) The direct contribution of cash by the directors of the Bank; or

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

       (v) Any combination of the above means.

   (d) 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.

   [.8]8. Within 90 days from the effective date of this ORDER, the Bank shall correct
{{9-30-01 p.C-5180}} all deficiencies in the loans listed for "Special Mention" in the Report of Examination.

   [.9]9. Within 60 days from the effective date of this ORDER, the Bank shall correct the credit data or collateral documentation exceptions listed in the Report of Examination.

   [.10]10. (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 for calendar year 2001. The plan required by this paragraph shall contain formal goals and strategies, consistent with sound banking practices, to reduce discretionary expenses and to improve the Bank's overall earnings, and shall contain a description of the operating assumptions that form the basis for major projected income and expense components. Copies of the plan shall be submitted to the Regional Director and Commissioner upon its completion for review and comment.

   (b) Prior to 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.

   [.11]11. (a) Within 60 days from the effective date of this ORDER, the Bank shall revise and submit to the Regional Director and Commissioner for review and comment a written policy addressing liquidity. Annually thereafter during the life of this ORDER, the Bank shall review this policy for adequacy and, based upon such review, shall make appropriate revisions in the policy that are necessary to strengthen funds management procedures and maintain adequate provisions to meet the Bank's liquidity needs. The initial policy shall include, at a minimum, provisions:

       (i) Establishing prudent limitations on the Bank's ratio of total loans to total funding liabilities;

       (ii) Establishing a desirable range for the net non-core funding dependence ratio as computed in the Uniform Bank Performance Report, and requiring a monthly internal calculation of the ratio;

       (iii) Identifying the source and use of borrowed and/or volatile funds;

       (iv) Requiring 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;

       (v) Establishing a desired minimum liquidity ratio, of not less than 20 percent, using the same calculation method used by the Bank during the FDIC examination of the Bank as of September 30, 2000;

       (vi) Establishing contingency plans to improve liquidity to the level established in the Bank's liquidity policy; and

       (vii) Establishing parameters for borrowed funds such as limits concerning dollar amounts and duration and specifying authorized sources/lenders.

   (b) Within 30 days from the receipt of all such comments from the Regional Director and 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.

   [.12]12. (a) Within 90 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law and/or regulations listed in the Report of Examination.

   (b) Within 90 days from the effective date of this ORDER, the Bank shall implement procedures to ensure future compliance with all applicable laws and regulations.

   [.13]13. (a) Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement a written plan to reduce the concentrations of credit identified in the Report of Examination to not more than 25 percent of the Bank's total Tier 1 capital. A copy of the written plan shall be submitted to the Regional Director and Commissioner upon its completion. Such plan shall prohibit any additional advances that would increase the concentrations or create new concentrations and shall include, but not be limited to, the following:

       (i) Dollar levels to which the Bank shall reduce the concentrations 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
    {{9-30-01 p.C-5181}} Bank's board of directors for review and notation in minutes of the meetings of the board of directors.

   (b) As used in this paragraph, "reduce" means to decrease the balances of loans outstanding.

   [.14]14. Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement policies and procedures for managing the Bank's sensitivity to interest rate risk. The Bank's policy shall comply with the Joint Agency Statement of Policy on Interest Rate Risk dated June 26, 1996, and the Joint Supervisory Statement on Investment Securities and End-user Derivative Activities dated April 23, 1998. The Bank shall submit the policy to the Regional Director and the Commissioner for their review and comment.

   [.15]15. (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 and with the Bank's own policies.

   (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 the Bank's policies, and record its review in the minutes of each regularly scheduled monthly board of directors' meeting.

   16. 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.

   The effective date of this ORDER shall be 10 days after its issuance by the FDIC and OBRE.

   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 Commissioner.

   Pursuant to delegated authority.

   Dated: July 26, 2001.

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