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FDIC Enforcement Decisions and Orders

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   [11,840] In the Matter of Dorchester State Bank, Dorchester, Wisconsin, Docket No. 01-118b (10-5-01).

(This order was terminated by order of the FDIC dated 12-24-03; see ¶16,364.)

   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] Capital—Increase Required

   [.2] Management—Management Plan Required

   [.3] Management—Qualifications Specified
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   [.4] Dividends—Dividends Restricted

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

   [.6] Assets—Charge-off or Collection

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

   [.8] Loans—Risk Position—Written Plan Required

   [.9] Technical Exceptions—Correction of Technical Exceptions Required

   [.10] Loans—Concentration of Credit—Reduction Required

   [.11] Loans—Collection—Written Policy Required

   [.12] Loan Policy—Review Committee Established

   [.13] Loan Policy—Preparation or Revision of Policy Required

   [.14] Audit—Program Required

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

   [.16] Profit Plan—Preparation of Plan Required

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

   [.18] Audit—Internal Information Technology Systems Audit Required

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

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

In the Matter of
DORCHESTER STATE BANK
DORCHESTER, WISCONSIN
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-01-118b

   Dorchester State Bank, Dorchester, Wisconsin ("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 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 s. 220.04(9), Wis. Stats., regarding hearings before the Department of Financial Institutions for the State of Wisconsin ("WDFI"), 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 WDFI dated September 19, 2001, whereby, solely for the purpose of this proceeding and without admitting or denying the charges of unsafe or unsound banking practices or violations of law and regulation, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC and WDFI.

   The FDIC and WDFI considered the matter and determined that there was reason to believe that the Bank had engaged in unsafe or unsound banking practices and violations of law and regulation. The FDIC and WDFI, 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:

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

   B. — Operating with a board of directors that fails to exercise adequate supervision over active Bank officers.

   C. — Operating with management whose policies and practices are detrimental to the Bank.
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   D. — Engaging in hazardous lending and lax collection practices, including, but not limited to:

       The failure to obtain proper loan documentation;

       The failure to obtain adequate collateral;

       The failure to establish and monitor collateral margins of secured borrowers;

       The failure to establish and enforce adequate loan repayment programs;

       The failure to obtain current and complete financial information;

       The failure to enforce loan policy guidelines;

       Extending credit without adequate diversification of risk;

       Extending and renewing credit without full payment of interest;

       Extending unsecured credit by overdraft without adequate monitoring, documentation and control; and

       The failure to follow acceptable credit administration practices.

   E. — Operating with an excessive level of adversely classified assets, failing to timely recognize loan deterioration, and failing to timely recognize loan losses.

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

   G. — Failing to implement and monitor appropriate Bank policies.

   H. — Failing to implement timely corrective measures to resolve continuing asset problems.

   I. — Operating with an inadequate asset/liability management policy.

   J. — Operating without a realistic budget.

   K. — Operating without adequate liquidity in light of the Bank's asset and liability mix.

   L. — Operating with a low net interest margin and exposing the Bank to undue interest rate risk.

   M. — Operating with inadequate internal routines and controls.

   N. — Operating with an inadequate audit program, including an Information Technology audit program.

   O. — Violating laws and regulations, including:

   Regulation O: The overdraft restrictions of section 215.4(e) of Regulation O of the Board of Governors of the Federal Reserve System ("Regulation O"), 12 C.F.R. 215.4(e);

   Section 23A: The collateral requirements of section 23A(c)(1) of the Federal Reserve Act, 12 U.S.C. 371c(c)(1);

   U.S. Treasury Regulation: The currency transaction reporting requirement of section 103.22(b) of the Treasury Department's Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulation, 31 C.F.R. 103.22(b), for items $10,000 and over;

   Part 309: The confidentiality of examination information required by Part 309 of the FDIC's Rules and Regulations, 12 C.F.R. Part 309; and

   Part 353: The suspicious activity report filing requirement of Part 353 of the FDIC's Rules and Regulations, 12 C.F.R. Part 353.

   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 30 days from the effective date of this ORDER, the Bank shall develop and implement a plan to increase by year-end 2001 its Tier 1 leverage capital ratio to a level not less than 7.0 percent of total assets.

   (b) Within 30 days from the last day of each calendar quarter following the required date of compliance with subparagraph (a) of this paragraph, 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.

   (c) 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
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       assets classified "Loss" in the FDIC's Report of Examination dated May 14, 2001 ("FDIC Report"), 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 of the Chicago Regional Office of the FDIC ("Regional Director") and the Administrator, Division of Banking, Department of Financial Institutions for the State of Wisconsin ("Administrator"); or

       (vi) Any combination of the above means.

   (d) 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 the plan. Should the implementation of the plan involve a 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 FDIC Registration & Disclosure Section, 550 17th Street, N.W., Washington, D.C. 20429, and to WDFI, 345 W. Washington Avenue, 4th Floor, P.O. Box 7876, Madison, Wisconsin 53707-7876, for review. Any changes requested to be made in the materials by the FDIC and WDFI shall be made prior to their dissemination.

   (e) In complying with the provisions of this paragraph, 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.

   (f) 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.

   [.2]2. (a) Within 30 days from the effective date of this ORDER, the Bank shall retain a bank consultant acceptable to the Regional Director and Administrator. The consultant shall develop a written analysis and assessment of the Bank's management and staffing needs ("Management Plan") for the purpose of providing qualified management for the Bank. The Management Plan shall be developed within 60 days from the effective date of this ORDER.

   (b) The Bank shall provide the Regional Director and Administrator with a copy of the proposed engagement letter or contract required by this paragraph for review before it is executed. The contract or engagement letter, at a minimum, should include:

       (i) A description of the work to be performed under the contract or engagement letter;

       (ii) The responsibilities of the consultant;

       (iii) An identification of the professional standards covering the work to be performed;

       (iv) Identification of the specific procedures to be used when carrying out the work to be performed;

       (v) The qualifications of the employee(s) who are to perform the work;

       (vi) The time frame for completion of the work;

       (vii) Any restrictions on the use of the reported findings;
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       (viii) A provision for unrestricted examiner access to workpapers.

   (c) 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 (excluding tellers and insurance personnel) 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; and

       (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 the Management Plan.

   (d) The Management Plan shall be submitted to the Regional Director and Administrator for review and comment upon its completion. Within 30 days from the receipt of any comments from the Regional Director and Administrator, and after the adoption of any recommended changes, the Bank shall approve the Management Plan and record its approval in the minutes of the board of directors' meeting. Thereafter, the Bank, its directors, officers, and employees shall implement and follow the Management Plan.

   [.3]3. (a) The Bank shall have and retain qualified management. Such persons shall be provided the necessary written authority to implement the provisions of this ORDER. 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, liquidity, and sensitivity to market risk.

   (b) During the life of this ORDER, the Bank shall notify the Regional Director and the Administrator, in writing, of any changes in any of the Bank's management. For purposes of this ORDER, "management" shall include any "director," as defined in section 303.101(a) of the FDIC Rules and Regulations, 12 C.F.R. 303.101(a), and any "senior executive officer," as defined in section 303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. 303.101(b). Prior to the addition of any director or the employment of any senior executive officer, the Bank shall comply with the requirements of section 32 of the Act, 12 U.S.C. 1831(i), and Subpart F of Part 303 of the FDIC Rules and Regulations ("Subpart F"), 12 C.F.R. Part 303, Subpart F.

   [.4]4. As of the effective date of this ORDER, the Bank shall pay no cash dividends that would result in a Tier 1 capital ratio of less than 7.0 percent, without the prior written consent of the Regional Director and Administrator.

   [.5]5. (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 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" 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.

   [.6]6. 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" in the FDIC Report 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 Administrator. Elimination or reduction of these assets with the proceeds of other Bank
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   extensions of credit is not considered collection for the purpose of this paragraph.

   [.7]7. (a) Within 30 days from the effective date of this ORDER, the Bank shall replenish its ALLL balance as of December 31, 2000 to a minimum level of adequacy ranging between $798,000 and $1,156,000.

   (b) Within 60 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 classified "Substandard" and all other loans and leases in its portfolio.

   (c) Prior to submission or publication of all Reports of Condition and Income required by the FDIC and WDFI 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 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.

   (d) Within 30 days following the last day of each calendar quarter, the Bank shall submit to the Regional Director and Administrator copies of all Reports of Condition and Income filed with the FDIC and WDFI.

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

   [.8]8. (a) Within 60 days from the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director and Administrator 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 FDIC 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:

       (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 on the plan 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 or WDFI.

   (d) Within 30 days from the receipt of any comment from the Regional Director and Administrator, and after the adoption 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.

   [.9]9. Within 90 days from the effective date of this ORDER, the Bank shall correct the technical exceptions listed in the FDIC Report.

   [.10]10. (a) Within 90 days from the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director and Administrator for review and comment a written plan to reduce the concentrations of credit criticized in the FDIC Report to not more than 25 percent of the Bank's total Tier 1 capital. Such plan shall prohibit any additional advances that would increase the existing concentrations of credit or create new concentrations of credit as defined in the FDIC Report. The plan include, but not be limited to:

       (i) Dollar levels to which the Bank shall reduce each concentration 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.

   As used in this paragraph, "reduce" means to: (1) collect; (2) charge off; or (3) sell or participate portions of the concentration of credit to buyers outside the Bank.

   (b) Within 30 days from receipt of any comment from the Regional Director and Administrator, and after the adoption of any recommended changes, the Bank shall approve
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   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.

   [.11]11. Within 90 days from the effective date of this ORDER, the Bank shall formulate, adopt and implement a written plan for the reduction and collection of delinquent loans. Such plan shall include, at a minimum, provisions which prohibit the extension of credit for the payment of interest and establish acceptable guidelines for the collection of delinquent credits. Such plan shall include, but not be limited:

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

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

   [.12]12. (a) As of the effective date of this ORDER, the Bank's loan committee shall meet on a regular monthly basis and shall include at least three directors, two of whom are outside directors.

   (b) The loan committee shall evaluate, then grant or deny, loans in accordance with the Bank's loan policy amended to comply with this ORDER. The loan committee shall provide a thorough, written explanation to the Bank's board of directors of any deviations from the loan policy. Such explanation(s) shall address how said exceptions are in the Bank's best interest, and shall be reflected in the minutes of the corresponding loan committee meeting.

   (c) The loan committee shall maintain written minutes of its meetings, including a record of the review and status of the aforementioned loans. Such minutes shall be made available for review at the next Bank board of directors' 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 for adequacy and, based upon this review, shall revise the policy as necessary to strengthen the Bank's loan policy monitoring procedures.

   (b) Revisions to the Bank's loan policy required by this paragraph, at a minimum, shall include provisions:

       (i) Establishing 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;

       (ii) Establishing procedures to ensure that all extensions of credit originated or renewed by the Bank are 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;

       (iii) Requiring loan committee review and monitoring of the status of repayment and collection of overdue and maturing loans, as well as those loans which were classified "Substandard" in the FDIC Report;

       (iv) Establishing procedures to ensure that the parameters of the loan grading system and internal loan watch list are adhered to;

       (v) Prohibiting the capitalization of interest, taxes, insurance premiums, or other loan related expenses unless the board of directors provides, in writing, a detailed explanation of why said deviation is in the best interest of the Bank;

       (vi) Requiring that extensions of credit, including overdrafts, 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, 12 C.F.R. Part 215, and s. 221.0625(1), Wis. Stats.;

       (vii) Requiring a nonaccrual policy in accordance with the Federal Financial Institutions Examination Council's Instructions for the Consolidated Reports of Condition and Income;

       (viii) Addressing concentrations of credit and diversification of risk, including goals for portfolio mix, establishment of limits within loan and other asset categories, and
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       development of a tracking and monitoring system for the economic and financial condition of specific geographic locations, industries, and groups of borrowers;

       (ix) Establishing standards for extending unsecured credit;

       (x) Establishing monitoring provisions to ensure that limitations set out in the loan policy specifying the amount(s) that can be loaned in relation to established collateral values are followed;

       (xi) Prohibiting the extension of a maturity date, advancement of additional credit or renewal of a loan without the full collection in cash of accrued and unpaid interest, unless the loan is well secured and/or adequately supported by current and complete financial information, and the renewal or extension has first been approved in writing by a majority of the Bank's board of directors;

       (xii) Monitoring and adhering to established officer lending limits and established limitations on the aggregate level of credit to any one borrower which can be granted without the prior approval of the Bank's loan committee;

       (xiii) Requiring that collateral appraisals be completed prior to the making of secured extensions of credit.

   (c) 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 90 days from the effective date of this ORDER, the Bank's board of directors shall adopt and implement a comprehensive written audit program addressing both internal and external audit procedures. This program shall be consistent with the Interagency Policy Statement on External Auditing Programs of Banks and Savings Associations (October 15, 1999). The steps taken by the Bank to implement the Interagency Policy Statement shall be recorded in the minutes of the meetings of the board of directors.

   (b) The written audit program shall provide for annual external audits of the Bank's financial statements and operating procedures to be performed by an independent public accounting firm acceptable to the Regional Director and Administrator. The Bank shall provide the Regional Director and Administrator with a copy of the proposed engagement letter or contract with the accounting firm before it is executed. The contract or engagement letter, at a minimum, should include:

       (i) A description of the work to be performed under the contract or engagement letter;

       (ii) The responsibilities of the accounting firm;

       (iii) An identification of the professional standards covering the work to be performed;

       (iv) Identification of the specific procedures to be used when carrying out the work to be performed;

       (v) The qualifications of the employee(s) who are to perform the work;

       (vi) The time frame for completion of the work;

       (vii) Any restrictions on the use of the reported findings; and

       (viii) A provision for unrestricted FDIC and WDFI examiner access to workpapers.

   (c) During the life of this ORDER, the Bank shall forward copies of any external audit reports required by this paragraph to the Regional Director and Administrator within 10 days from the Bank's receipt of such reports.

   [.15]15. Within 90 days from the effective date of this ORDER, the Bank shall correct all violations of law and regulation listed in the FDIC Report. In addition, the Bank shall establish procedures to ensure future compliance with all applicable laws and regulations.

   [.16]16. (a) Within 90 days from the effective date of this ORDER, the Bank shall implement a written profit plan with realistic, comprehensive budgets for all categories of income and expense for calendar years 2002 and 2003. The plan shall contain formal goals and strategies consistent with sound banking practices. A copy of the plan shall be submitted to the Regional Director and Administrator upon its completion.

   (b) The written profit plan shall, at a minimum:

       (i) Address strategies to improve the Bank's earnings, both short-term and long-term; and

       (ii) Identify the operating assumptions used in preparing the plan.


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   (c) 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.

   [.17]17. (a) Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement a written plan addressing liquidity, rate sensitivity objectives and the asset/liability management policy. Annually thereafter, the Bank shall review this plan for adequacy and, based upon such review, shall make appropriate revisions to 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 include, at a minimum, provisions:

       (i) Establishing a desirable range for the liquidity ratio;

       (ii) Establishing a desirable range for the net non-core funding dependency ratio as computed in the Uniform Bank Performance Report;

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

       (iv) Establishing an acceptable range for the relationship between rate sensitive assets and rate sensitive liabilities;

       (v) Requiring that monthly calculations of the liquidity, net non-core funding dependence, loan to funding sources, and rate sensitive assets to rate sensitive liabilities ratios be provided to the board for review, with such review noted in the board minutes;

       (vi) Providing definitions and methods for calculating all applicable ratios established to monitor asset and liability management;

       (vii) Establishing appropriate lines of credit at correspondent banks, including the appropriate Federal Reserve Bank;

       (viii) Identifying the source and use of borrowed and/or volatile funds and placing board approved limitations on such funds; and

       (ix) Establishing contingency plans to improve liquidity to the level established by the Bank's asset and liability management policy.

   (b) A copy of the Bank's initial plan shall be submitted to the Regional Director and Administrator for review and comment. Within 30 days from the receipt of any comments from the Regional Director and Administrator, and after the adoption of any recommended changes, 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.

   [.18]18. Within 60 days from the effective date of this ORDER, the Bank shall conduct an internal audit of its Information Technology ("IT") systems. Thereafter, the Bank shall conduct IT audits on an annual basis and present the audit findings to the board of directors for review and notation in the minutes of the board meeting.

   [.19]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, N.W., Washington, D.C. 20429, and to WDFI, 345 W. Washington Avenue, 4th Floor, P.O. Box 7876, Madison, Wisconsin 53707-7876, for review at least 20 days prior to dissemination to shareholders. Any changes requested to be made by the FDIC and WDFI shall be made prior to dissemination of the description, communication, notice, or statement.

   [.20]20. (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) of this paragraph, 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.

   21. Within 30 days of each calendar quarter following the effective date of this ORDER, the Bank shall furnish to the Regional Director and Administrator written progress
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   reports, signed by each member of the Bank's board of directors, detailing the form and manner of any actions taken to secure compliance with this ORDER. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director and Administrator have, in writing, released the Bank from making further reports.

   The effective date of this ORDER shall be 10 days after issuance of the ORDER.

   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 WDFI.

   Pursuant to delegated authority.

   Dated this 5th day of October, 2001.

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