(This order was terminated by order of the FDIC dated 5-4-04; see ¶16,381.)
[.1] ManagementQualifications Specified
[.2] ManagementManagement Report Required
[.3] CapitalIncrease Required
[.4] Profit PlanPreparation of Plan Required
[.5] Loan Loss ReserveEstablishment of or Increase Required
[.6] AssetsCharge-off or Collection
[.7] LoansExtensions of CreditTo Borrowers with Existing Adversely
Classified Credits
[.8] Loan PolicyPreparation or Revision of Policy Required
[.9] Real Estate ActivitiesOther Real Estate (ORE), Management Policy
Required
{{12-31-01 p.C-5237}}
[.10] LoansInternal Review Procedure
[.11] Violations of LawCorrection of Violations Required
[.12] Reports of Condition and IncomeAmendment Required
[.13] Information SystemsManagementQualifications Specified
[.14] Funds Management and LiquidityPreparation or Revision of Funds
Management Policy Required
[.15] DividendsDividends Restricted
[.16] ShareholdersDisclosure of Cease and Desist Order Required
In the Matter of
PEOPLES BANK
PARAGOULD, ARKANSAS
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-01-124b
Peoples Bank, Paragould, Arkansas ("Bank"), having
been advised of its right to a Notice of Charges and of Hearing
detailing the unsafe or unsound banking practices and violations and/or
contraventions 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 October 19, 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 and/or contraventions 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 and/or contraventions 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 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, violations and/or contraventions:
(a) Engaging in hazardous lending and lax collection practices;
(b) Operating with inadequate 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 operating losses;
(g) Operating in violation of section 39 of the FDI Act, 12 U.S.C.
§1831p-1; Part 365 of the FDIC Rules and Regulations, 12 C.F.R.
§365; Section 323.3(a)(1) of the FDIC Rules and Regulations, 12
C.F.R. §323.3(a)(1); Section 326.8 of the FDIC Rules and
Regulations, 12 C.F.R. §326.8;, and Section 103.22(b)(1) of the
Treasury Department's Financial Recordkeeping Regulations, 31 C.F.R.
§103.22(b)(1);
(h) Operating with management whose policies and practices are
detrimental to the Bank and jeopardize the safety of its deposits;
(i) Operating with a board of directors which has failed to provide
adequate supervision over and direction to the active management of the
Bank; and
(j) Operating with inadequate internal routine and control policies.
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 60 days from the effective date of this ORDER, the Bank
shall
{{12-31-01 p.C-5237}}
have management qualified to restore the Bank to a sound
condition. Such management shall include an experienced chief executive
officer and an experienced senior leading officer responsible for
supervising the Bank's overall lending function. The chief executive
officer and the senior lending official may be the same individual.
(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, earnings adequacy, and sensitivity to market risk;
(iii) Comply with all applicable State and Federal laws, regulations,
and policy statements.
(c) During the life of this ORDER, the Bank shall notify the
Regional Director of the Memphis Regional Office ("Regional
Director") and the Bank Commissioner for the State of Arkansas
("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).
(d) The Bank shall comply with section 32 of the Act, 12 U.S.C.
§1831i.
(e) 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 at least 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.
(f) For the purpose 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 five 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 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.
[.2] 2. (a) Within 60 days from the effective date of this ORDER, the board
of directors shall review and make a written report ("Management
Report") on the Bank's management needs in the lending area. The
Management Report shall incorporate an analysis of the Bank's
management and staffing requirements and shall, at a minimum:
(i) Identify both the number and type of positions needed to
properly supervise the Bank's lending functions, giving appropriate
consideration to the Bank's loan volume, customer base, and the number
of problem credits;
(ii) Provide a clear and concise description of the general duties and
responsibilities for lending officers and their support staff;
(iii) Identify the skills, experience, and pay required for each
position;
(iv) Provide an evaluation of the Bank's senior management and lending
officials, indicating whether Bank officials possess the necessary
lending and collection experience and qualifications required to
adequately perform present and anticipated duties;
(v) Establish a plan to recruit, hire, and/or replace personnel based
on ability and experience;
(vi) Establish a plan providing for periodic evaluation of each
individual's job performance; and
(vii) Provide for periodic review of Bank's management and updating of
lending policies and procedures.
(b) The board of directors shall obtain the services of an outside
consultant(s), acceptable to the FDIC and the Commissioner, who is
knowledgeable in the area of lending, collections, and personnel
evaluation to assist the board of directors in reviewing the Bank's
management needs and preparing the Management Report. The acceptability
of the consultant(s) shall be based on the consultant's ability to
advise the Bank in each of the areas identified in Paragraph 2(a).
{{12-31-01 p.C-5239}}
(c) Within 90 days of the effective date of this ORDER, the board of
directors, with the assistance of the outside consultant(s), shall
prepare a written plan of implementation ("Plan") addressing the
findings of the Management Report. The plan shall specify the actions
to be taken by the board of directors and the time frames for each
action.
(d) Within 90 days of the effective date of this ORDER; the board
of directors shall prepare a written report ("Written Report")
which shall (1) contain a recitation identifying the recommendations
made by the outside consultant(s) which have been incorporated in the
Management Report and Plan, (2) a recitation identifying the
recommendations made by the outside consultant(s) which were not
incorporated in the Management Report and Plan and the reasons for not
including such recommendations, and (3) a copy of any report(s)
prepared by the outside consultant(s).
(e) A copy of the Management Report, Plan, and Written Report 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 Report and Plan of implementation which approval shall be
recorded in the minutes of the meeting of the board of directors. It
shall remain the responsibility of the board of directors to fully
implement the Plan within the specified time frames. In the event the
Plan, or any portion thereof, is not implemented, the board of
directors shall immediately advise the Regional Director and
Commissioner, in writing, of specific reasons for deviating from the
Plan.
[.3] 3. (a) Within 60 days from the effective date of this ORDER; the Bank
shall increase its Tier I capital by no less than $5,000,000. During
the life of this ORDER, the Bank shall maintain Tier I capital equal to
or greater than eight percent (8.0%) of the Bank's adjusted Part 325
total assets.
(b) Any increase in Tier I capital necessary to meet the requirements
of Paragraph 3(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 3(a) of this ORDER is 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 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 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 plan and any materials used in the sale of the
securities shall be submitted to the FDIC, Division of Supervision,
Registration, Disclosure, & Securities Unit Section, 550 17th Street,
N.W., Room F-6043, Washington, D.C., 20429 and to the Commissioner,
Sedgwick Center, 400 Hardin Road, Suite 100, Little Rock, Arkansas
72211 for review. Any changes requested to be made in the plan or
materials by the FDIC or the Commissioner shall be made prior to their
dissemination. If the Regional Director and the Commissioner allow any
part of the increase in Tier I capital to be provided by the sale of
non-cumulative 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 convertibility factor, shall be
presented to the Regional Director and Commissioner for prior
approval.
(d) In complying with the provisions of Paragraph 3 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 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
{{12-31-01 p.C-5240}}
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",
"total 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 72
of the FDIC 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.
[.4] 4. (a) Within 90 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:
(i) Identification of the major areas in, and means by which the
board of directors will seek to improve the Bank's operating
performance;
(ii) Realistic and comprehensive budgets;
(iii) A 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
(iv) A description of the operating assumptions that form the basis
for, and adequately support, major projected income and expense
components.
(b) Such written profit 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 which approval shall be recorded in the minutes of the board of
directors. Thereafter, the Bank, its directors, officers, and employees
shall follow the written profit plan and/or any subsequent
modification.
[.5] 5. (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. 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. The criteria for
the review shall be as set forth in Paragraph 5(a).
{{12-31-01 p.C-5241}}
(c) Notwithstanding the provisions of Paragraph 5(a) and 5(b) above,
the Bank shall achieve, within 30 days from the effective date of this
ORDER, a valuation reserve for loan and lease losses, after charge off
of loans classified "Loss" and required in Paragraph 6(a) below,
of not less than $2,862,000, 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 in
accordance with Paragraph 12.
(e) The requirements of Paragraph 5(c) above are not to be construed as
a standard for future operations.
[.6] 6. (a) 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 March 31, 2001, 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.
(b) 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 reducing the Bank's risk position in each line of credit or other
asset which were classified "Substandard" and each line of credit
or asset listed as "Special Mention" as of March 31, 2001, and
which aggregated $100,000 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 submissions of monthly written progress reports
under this Paragraph 6 to the Bank's board of directors for review and
recordation in the board minutes.
(c) As used in Paragraph 6(b) the word "reduce" means (1) to
collect, (2) to charge off, or (3) to sufficiently improve the quality
of 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 make any further extension of credit to any borrower whose loans
are charged off, in whole or in part, or are adversely classified
"Loss" or "Doubtful" as of March 31, 2001, and remain
uncollected.
(b) Beginning with the effective date of this ORDER, the Bank shall not
make any further extension of credit to any borrower thereof whose
loans in the aggregate exceed $100,000 and are adversely classified
"Substandard" as of March 31, 2001, unless such extension has
been approved by a majority of the Bank's board of directors in
advance and the Bank's board of directors has detailed in the written
minutes of the meeting how it has affirmatively determined all of the
following:
(i) That the extension of credit is in full compliance with the
Bank's loan policy;
(ii) That it is necessary to protect the Bank's interest or that the
extension of credit is adequately secured;
(iii) That based upon credit analysis, the customer is deemed to be
creditworthy; and
(iv) That all necessary loan documentation is on file, including
current financial and cash flow information and satisfactory appraisal,
title, and lien documents.
The minutes shall also include the following information about the
extension of credit:
(i) The amount adversely classified as of March 31, 2001;
(ii) The current balance;
(iii) The amount of credit requested;
(iv) A description of the collateral and its value securing the credit;
and
(v) A full description of the documentation presented to the board of
directors including the date of the borrower's most recent financial
information and the borrower's current income or cash flow data.
(c) Beginning with the effective date of this ORDER, the Bank
shall not renew any loan without the full collection of interest due.
The issuance of separate notes to the borrowing customer or a third
party, the proceeds of which pay interest due, shall not satisfy the
requirements of this paragraph
{{12-31-01 p.C-5242}}
unless these separate notes receive
prior board approval in the same manner as outlined in Paragraph 7(b)
above.
[.8] 8. (a) Within 60 days from the effective date of this ORDER, the Bank
shall review its written loan policy and make whatever changes may be
necessary to provide for the safe and sound administration of all
aspects of the lending function. At a minimum the loan policy shall:
(i) Address the collection of adequate loan documentation or
evidence thereof as is required by sound banking practices before
disbursement of the loan proceeds to borrowers or before renewal or
extensions of existing loans;
(ii) Provide guidance for the identification of primary and secondary
sources of repayment, the establishment of and adherence to realistic
amortization programs, and proper and adequate loan documentation or
evidence thereof as is required by sound banking practices before
disbursement of the loan proceeds to borrowers or before renewal or
extensions of existing loans;
(iii) Establish real estate appraisal guidelines that conform with the
Interagency Appraisal and Evaluation Guidelines, as found in Financial
Institution Letter 69-92, dated September 20, 1992;
(iv) With respect to loans secured by raw land and development loans,
establish loan-to-value guidelines which are consistent with the
Interagency Guidelines for Real Estate Lending Policies as codified to
12 C.F.R. Appendix A to Part 365; and
(v) Address the Bank's concentration in agricultural loans to ensure
that the concentration is consistent with safe and sound banking
practices, taking into account the risks of such lending, the
experience of Bank personnel, and whether the Bank has a sufficient
number of personnel to manage the portfolio.
(b) Evidence of the review and establishment 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.
[.9] 9. (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") and other assets taken by the Bank for debts previously
contracted ("other assets"). The written ORE and other assets
plan shall include, at a minimum:
(i) A quarterly review of the ORE and other assets portfolio by
the ORE committee to be appointed by the board;
(ii) Realistic and comprehensive budgets for each piece of ORE and
other assets, including projections of the Bank's cost of marketing
the ORE and other assets, and the Bank's costs of carrying the ORE and
other assets on its books (e.g., upkeep, repairs, and insurance costs);
(iii) A determination by the ORE committee for each piece of ORE and
other assets 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;
(vi) An identification of any ORE or other assets that warrant the
special attention of management;
(vii) An identification of documentation exceptions on any ORE or other
assets; and
(viii) An identification of all ORE or other assets not in conformance
with the Bank's ORE and other assets policies.
(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 and other assets, shall be made part of the
minutes of the board of directors.
[.10] 10. (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. At a minimum the System shall
provide for:
(i) The identification of the overall quality of the loan
portfolio;
{{12-31-01 p.C-5243}}
(ii) The identification and amount of each delinquent loan;
(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) The identification and status of each violation of law, rule, or
regulation;
(vii) An identification of loans not in conformance with the Bank's
lending policy, 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 loan 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 60 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 to that
borrower, either directly or indirectly, exceed or would exceed
$100,000. 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 meet
at least twice monthly and 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 monthly, the loan committee shall
submit its written minutes to the board of directors. At least
two-thirds of the members of the loan committee shall be independent,
outside directors as defined in Paragraph 1(f) of this ORDER.
[.11] 11. Within 60 days from the effective date of this ORDER, the Bank
shall eliminate and/or correct all violations of law which are set out
on pages 36-40 of the Report of Examination of the Bank as of March 31,
2001. In addition, the Bank shall henceforth comply with all applicable
laws and regulations.
[.12] 12. (a) Within 30 days from the effective date of this ORDER, the Bank
shall review all Consolidated Reports of Condition and Income filed
with the FDIC on and after March 31, 2001 and shall amend and file with
the FDIC amended Consolidated Reports of Condition and Income which
accurately reflect the financial condition and the capital account of
the Bank as of the date of each such Report.
(b) In addition to the above and during the life of this ORDER, the
Bank shall file with the FDIC Consolidated Reports of Condition and
Income that accurately reflect the financial condition and the capital
account of the Bank as of the reporting period. In particular, such
Reports shall include any adjustment in the Bank's books made
necessary or appropriate as a consequence of any State or FDIC
examination of the Bank during that reporting period.
[.13] 13. (a) Within 90 days from the effective date of this ORDER, the Bank
shall develop and implement procedures to address and correct the
deficiencies noted in the May 21, 2001, Information Systems Report of
Examination, particularly those relating to audit coverage, security
administrations, and management oversight.
(b) Within 90 days from the effective date of this ORDER, the Bank
shall appoint an information systems (IS) manager qualified to correct
the deficiencies noted in paragraph 13(a) above. The IS manager may be
an individual or group.
(c) The IS manager shall be assessed on his ability to:
(i) Comply with the requirements of this ORDER; and
(ii) Improve and thereafter maintain the information systems operation
in a safe and secure manner.
{{12-31-01 p.C-5244}}
(d) The IS manager shall have:
(i) A sound knowledge of bank accounting practices and
recordkeeping requirements;
(ii) A firm understanding of management concepts and practices and the
fundamental principles of internal control;
(iii) The ability to communicate tactfully (orally and in writing) with
senior management;
(iv) A general understanding of systems design and project management
concepts;
(v) A general knowledge of operating systems, automated applications,
methods of storing and retrieving data files, i.e., programming, file
organization and documentation, direct access storage devices, and
controls customarily used in information systems;
(vi) The ability to identify general installation security measures and
work flow, including risk analysis and threat assessment; and
(vii) A working knowledge of data processing technology.
(e) Within 60 days from the effective date of this ORDER, the Bank
shall formulate and implement a functional audit program of the Bank's
data processing operations. The program shall include the appointment
of an Internal Information System Auditor or Information System Audit
Manager, who shall be independent from the IS Manager. The Internal
Information System Auditor or Information System Audit Manager shall
have:
(i) The knowledge of, and expertise in, information systems
auditing concepts and techniques;
(ii) The ability to direct, plan, schedule, and supervise specific IS
audit functions;
(iii) The ability to investigate IS functions thoroughly and document
the results of the investigation;
(iv) The ability to communicate tactfully (orally and in writing) with
those subject to the audit and the Bank's senior management; and
(v) The ability to derive, summarize, and report criticisms effectively
and constructively.
[.14] 14. 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; 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.
[.15] 15. While this ORDER is in effect, the Bank shall not declare or pay
any cash dividends on its capital stock without the prior written
approval of the Regional Director and the Commissioner.
[.16] 16. Following the effective date of this ORDER, the Bank shall send to
its shareholders or otherwise furnish a description of this ORDER, (i)
in conjunction with the Bank's next shareholder communication, and
also (ii) 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, statement, or notice shall be sent to the
FDIC, Division of Supervision, Registration, Disclosure, & Securities
Unit, 550 17th Street, N.W., Room F-6043, Washington, D.C., 20429 and
to the Commissioner, Sedgwick Center, 400 Hardin Road, Suite 100,
Little Rock, Arkansas 72211, for review at least 20 days prior to
dissemination to shareholders. Any changes requested by the FDIC and/or
the Commissioner shall be made prior to dissemination of the
description, communication, notice, or statement.
17. On the 15th day of the second month following the effective date of
this ORDER, and on the 15th 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 and Commissioner have
released
{{2-29-04 p.C-5245}}
the Bank in writing from making further reports.
The provisions of this ORDER shall be binding upon the Bank, its
directors, officers, employees, agents, successors, assigns, and other
institution-affiliated parties of the Bank.
This ORDER shall become effective 10 days from the date of its
issuance.
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: October 23, 2001.