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FDIC Enforcement Decisions and Orders

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   [11,895] In the Matter of Buffalo Savings Bank, Buffalo, Iowa, Docket No. 01-182b (2-6-02).

   A cease and desist order was issued, based on findings by the FDIC that it had reason to believe that respondent had engaged in unsafe and unsound practices.

(This order was terminated by order of the FDIC dated 3-25-04; see ¶16,375.)

   [.1] Management—Qualifications Specified

   [.2] Board of Directors—Outside Directors Added to Board

   [.3] Capital—Maintain Tier 1 Capital

   [.4] Dividends—Dividends Restricted

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

   [.6] Assets—Charge-off or Collection

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

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

   [.9] Loans—Overdue—Written Plan for Reduction Required

   [.10] Loans—Special Mention

   [.11] Loan Committee—Membership, Duties

   [.12] Board of Directors—Internal Review and Grading System
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   [.13] Technical Exceptions—Correction of Technical Exceptions Required

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

   [.15] Profit Plan—Preparation of Plan Required

   [.16] Reports of Condition and Income—Amendment Required

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

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

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

In the Matter of
BUFFALO SAVINGS BANK,
BUFFALO, IOWA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-01-182b

   Buffalo Savings Bank, Buffalo, Iowa ("Bank"), having been advised of its rights 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, as well as of its rights to a hearing on the charges under section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") dated January 29, 2002, with counsel for the Federal Deposit Insurance Corporation ("FDIC"), 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 and regulation, 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 and unsound banking practices and violations of law and regulation. The FDIC, 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), and its successors and assigns, cease and desist from the following unsafe or unsound banking practices and violations of law and regulation:

       A. Operating with management whose policies and practices are detrimental to the Bank and 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 of the Bank to prevent unsafe or unsound banking practices and violations of law and regulation.

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

       D. Operating with an inadequate allowance for loans and lease losses for the volume, kind, and quality of loans and leases held, and/or failing to make provision for an adequate allowance for possible loan and lease losses.

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

         (i) the failure to obtain proper loan documentation;

         (ii) the failure to obtain adequate collateral;

         (iii) the failure to establish and monitor collateral margins of secured borrowers;

         (iv) the failure to establish and enforce adequate loan repayment programs;

         (v) the failure to obtain current and complete financial information; and

         (vi) other ineffective credit administration practices.

       F. Operating with an excessive level of adversely classified loans or assets, and/or delinquent loans and/or non-accrual loans.

       G. Operating with an inadequate loan policy.
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       H. Operating with an inadequate asset/liability and/or funds management policy.

       I. Violating laws and/or regulations, including:

         (i)   the legal lending limit restrictions of the State of Iowa as set forth in Section 524.904 of the Iowa Code Annotated;

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

         (iii)   the currency transaction reporting requirements in section 103.27(a)(i) of the Treasury Department's Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulation, 31 C.F.R. §103.27(a)(1);

         (iv)   the requirements regarding Reports of Condition and Income in section 304.4(a) of the FDIC Rules and Regulations, 12 C.F.R. §304.4(a);

         (v)   the real estate appraisal requirements in section 323.3(b) of the FDIC Rules and Regulations, 12 C.F.R. §323.3(b);

         (vi) the independent testing requirements in section 326.8(b) of the FDIC Rules and Regulations, 12 C.F.R. §326.8(b);

         (vii) the real estate appraisal requirements in section 187-9.2(3) of the Iowa Administrative Code, implementing section 524.905 of the Iowa Code Annotated;

         (viii) the loan-to-value requirements in section 187-9.2(4) of the Iowa Administrative Code, implementing section 524.905 of the Iowa Code Annotated; and

         (ix) the title opinion/insurance requirements in section 187-9.2(5) of the Iowa Administrative Code, implementing section 524.905 of the Iowa Code Annotated.

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

   [.1]1.MANAGEMENT

   For purposes of this ORDER, the qualifications of management shall be assessed on its ability to comply with the requirements of this ORDER, operate the Bank in a safe and sound manner, comply with applicable laws and regulations, and 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. Furthermore, "senior executive officer" shall be defined as in section 32 of the Act, 12 U.S.C. §1831(i), and section 303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. §303.101(b). Each member of Bank management shall have qualifications and experience commensurate with his or her duties and responsibilities at the Bank.

   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, supra, and Subpart F of Part 303 of the FDIC Rules and Regulations, 12 C.F.R. §§ 303.100-303.104.

       a. Within ONE HUNDRED TWENTY days from the effective date of this ORDER, the Bank shall have and retain qualified management, who shall be provided the necessary written authority to implement the provisions of this ORDER. At a minimum, such management shall include a new senior lending officer with an appropriate level of lending, collection, and loan supervision experience for the type and quality of the Bank's loan portfolio.

       b. Within THIRTY days of the effective date of this ORDER, the Bank shall develop and complete a plan ("Management Plan") for the purpose of providing qualified management for the Bank. The Management Plan shall include, at a minimum:

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

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

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

       c. (i) Upon completion of the Management Plan, it shall be submitted to the Regional Director and the Iowa Superintendent of Banking ("Superintendent of Banking") for review and comment. Within THIRTY days of the receipt of any comments from the Regional Director and after the adoption of any recommended changes, the board of directors of the Bank shall meet, approve the Management Plan, and record the approval in its minutes for the meeting. Any subsequent modification of the Management Plan shall require submission to the Regional Director for review and comment prior to approval by the Bank.

       (ii) Thereafter, the Bank, its directors, officers and employees shall implement and follow the approved Management Plan.

   2. INDEPENDENT DIRECTORS

   For purposes of this ORDER, an independent director shall be any individual who: (a) is not an officer of the Bank, any subsidiary, or any of its affiliated organizations; (b) owns less than 10 percent of the outstanding shares of the Bank; (c) is not related by blood or marriage to an officer or director of the Bank or to any shareholder owning 10 percent or more of the Bank's outstanding shares, and who does not otherwise share a common financial interest with such officer, director or shareholder; (d) is not indebted to the Bank directly or indirectly, including the indebtedness of any entity in which the individual has a substantial financial interest, in an amount exceeding 10 percent of the Bank's total Tier 1 capital and allowance for loan and lease losses; or, (e) is deemed to be an independent director for purposes of this ORDER by the Regional Director.

   The addition of any new Bank directors required by this paragraph may be accomplished, to the extent permissible by state statute or the Bank's by-laws, by means of appointment or election at a regular or special meeting of the Bank's shareholders.

       a. (i) Within NINETY days from the effective date of this ORDER, the Bank shall take all steps necessary to increase the number of independent board of director members.

       (ii) The actions taken to comply with this paragraph, including identifying and contacting potential candidates, shall be documented and made a part of the board of directors' minutes.

       b. During the life of this ORDER, the Bank shall notify the Regional Director and the Superintendent of Banking in writing of any changes in any of the Bank's directors. Prior to the addition of any individual to the board of directors, the Bank shall comply with the requirements of section 32 and Subpart F of Part 303 of the FDIC Rules and Regulations, 12 C.F.R. §§ 303.100-303.104.

   [.3]3. CAPITAL ADEQUACY

   For purposes of this ORDER, "capital ratio" means the level of Tier 1 capital as a percentage of total assets. 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.

       a. After appropriate entries for an adequate allowance for loan and lease losses ("ALLL") are made in accordance with the requirements of this Order, but no later than THIRTY days from the effective date of this ORDER, the Bank shall have and maintain a capital ratio in excess of 6 percent.

       b. Within THIRTY days from the last day of each calendar quarter following the effective date of this ORDER, the Bank shall determine, from its Reports of Condition and Income, its capital ratio for that calendar quarter. If it is less than 6 percent, within SIXTY days from said required determination, the Bank shall increase its capital ratio, calculated as of the end of said past quarter, to no less than 6 percent.

       c. Any increases in Tier 1 capital may be accomplished by the following:

         (i) the sale of common stock and non-cumulative perpetual preferred stock;

         (ii) the elimination of all or part of the asset classified "Loss" and of 50 percent of the assets classified "Doubtful" as of September 4, 2001, 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;

         (iii) the collection in cash of assets previously charged off; and
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         (iv) any other means acceptable to the Regional Director.

       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 said plan. Should the implementation of the plan involve public distribution of 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 other material disclosures necessary to comply with Federal securities laws. Prior to the implementation of the plan and, in any event, not less than TWENTY days prior to the dissemination of such materials, the materials used in the sale of the securities shall be submitted to the FDIC Registration and Disclosure Section, 550 17th Street, Room F-6043, N.W., Washington, D.C. 20429, for its review. Any changes to be made in the materials requested by the FDIC shall be made prior to their dissemination. If the Regional Director allows any part of the increase in Tier 1 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 for prior approval.

       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 of 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 TEN 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.

   [.4]4. RESTRICTION ON DIVIDENDS

   While this ORDER is in effect, the Bank shall not declare or pay any cash dividends without the prior written consent of the Regional Director and the Superintendent of Banking.

   [.5]5. ALLOWANCE FOR LOAN AND LEASE LOSSES

   For purposes of this ORDER and in making the determinations mandated by this paragraph, the board of directors of the Bank shall consider the Federal Financial Institutions Examination Council's Instructions for the Reports of Condition and Income ("Call Report Instruction") and any analysis of the Bank's ALLL provided by the FDIC.

       a. Within TEN days from the effective date of this ORDER, the Bank shall replenish its ALLL in the amount of at least $1,128,000.

       b. Within THIRTY days from the effective date of this ORDER, Reports of Condition and Income required by the FDIC and filed by the Bank subsequent to September 30, 2001, shall be amended and re-filed if they do not reflect a provision for loan and lease losses which is adequate in view of the condition of the Bank's loan portfolio, and which, at a minimum, incorporate the adjustments required by this paragraph.

       c. Prior to the submission 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 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 ALLL recommended, if any, and the basis for determination of the amount of ALLL provided.

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


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   [.6]6. DISPOSITION OF LOSS AND DOUBTFUL

   a. 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" and 50 percent of all assets classified "Doubtful" as of September 4, 2001, that have not been previously collected or charged off. 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.

   b. As of the effective date of this ORDER, the Bank shall establish a liability account, "Allowance for credit losses on off-balance sheet credit exposures," consistent with Call Report Instructions, in an amount equal to 50 percent of the amount of the standby letter of credit classified "Doubtful" as of September 4, 2001.

   [.7]7. REDUCTION OF SUBSTANDARD LOANS

   For purposes of this ORDER and as used in this paragraph, "reduce" means to collect, charge off, or improve the quality of substandard loans so as to warrant removal of any adverse classification by the FDIC. Furthermore, in developing the plan mandated by this paragraph, the Bank shall, at a minimum, review the financial position of each such borrower, including source of repayment, repayment ability, and alternative repayment sources, and evaluate the available collateral for each such loan, including possible actions to improve the Bank's collateral position.

       a. Within THIRTY days from the effective date of this ORDER, the Bank shall adopt and implement a written plan to reduce the Bank's risk position in excess of $125,000 which is classified "Substandard" or "Doubtful" in the FDIC's Report of Examination as of September 4, 2001. Thereafter, the Bank shall implement and follow this plan. A copy of the plan shall be submitted to the Regional Director and the Superintendent of Banking upon its completion.

       b. The plan mandated by this paragraph shall include, but not be limited to, the following:

         (i) dollar levels to which the Bank shall reduce each loan; 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.

   [.8]8. PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS

   a. As of the effective date of this ORDER, and unless its board of directors adopts a written statement giving the reasons why such potential action is in the best interest of the Bank and sends the statement to the Regional Director and the Superintendent of Banking for prior review and comment, the Bank shall not, directly or indirectly, extend any additional credit to, or for the benefit of, any borrower whose loan or other credit (or portion thereof) has been charged off the books of the Bank or has been classified "Loss," so long as such credit remains uncollected. 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.

   b. As of the effective date of this ORDER, and unless its board of directors adopts a detailed written statement giving the reasons why such potential action is in the best interest of the Bank, the Bank shall not, directly or indirectly, extend any additional credit to, or for the benefit of, any borrower whose loan or other credit has been classified "Substandard" or "Doubtful", or is listed for Special Mention, and remains uncollected. 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.

   [.9]9. REDUCTION OF DELINQUENCIES

   a. Within THIRTY days from the effective date of this ORDER, the Bank shall adopt and implement a written plan for the reduction and collection of delinquent loans.

   b. The plan shall include, but not be limited to, provisions which:

       (i) prohibit the extension of credit for the payment of interest;

       (ii) establish acceptable guidelines for the collection of delinquent credits;

       (iii) establish dollar levels to which the Bank shall reduce delinquencies within TWO and SIX months from the effective date of this ORDER; and

       (iv) provide for the submission of
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       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. A copy of the written plan shall be submitted to the Regional Director and the Superintendent of Banking upon its completion. Thereafter, the Bank shall implement and follow the plan.

   [.10]10. SPECIAL MENTION

   Within SIXTY days from the effective date of this ORDER, the Bank shall correct all deficiencies in the assets listed for "Special Mention" in the FDIC Report of Examination as of September 4, 2001.

   [.11]11. LOAN COMMITTEE

   a. As of the effective date of this ORDER, the Bank's loan committee shall meet on a regular basis.

   b. The loan committee shall include at least TWO directors who are "independent." An independent director shall be any individual who: (i) is not an officer of the Bank, any subsidiary, or any of its affiliated organizations; (ii) owns less than 10 percent of the outstanding shares of the Bank; (iii) is not related by blood or marriage to an officer or director of the Bank or to any shareholder who owns 10 percent or more of the Bank's outstanding shares, and who does not otherwise share a common financial interest with such officer, director or shareholder; (iv) is not indebted to the Bank directly or indirectly, including the indebtedness of any entity in which the individual has a substantial financial interest, in an amount exceeding 10 percent of the Bank's total Tier 1 capital and allowance for loan and lease losses; or, (v) is deemed to be an independent director for purposes of this ORDER by the Regional Director or the Superintendent of Banking.

   c. The loan committee shall, at a minimum, perform the following functions:

       (i) evaluate, grant and/or approve loans in accordance with the Bank's loan policy as amended to comply with this order;

       (ii) provide a thorough written explanation of any deviations from the loan policy which shall:

         (1) address how such exceptions are in the Bank's best interest;

         (2) be included in the minutes of the corresponding committee meeting; and

         (3) be maintained in the borrower's credit file.

       (iii) review and monitor the status of repayment and collection of overdue and maturing loans, as well as all loans classified "Substandard" or "Doubtful" in the FDIC's Report of Examination as of September 4, 2001, or that are included on the Bank's internal watch list;

       (iv) review and give prior written approval for all advances, renewals, or extensions of credit to any borrower or the borrower's related interests when the aggregate volume of credit extended to the borrower and its "related interests", as such term is defined in section 215.2(n) of Regulation O of the Board of Governors of the Federal Reserve System, 12 C.F.R. §215.2(n), exceeds $150,000;

       (v) review all applications for new loans and renewals of existing loans to Bank directors, executive officers, and their related interests, prepare a written opinion as to whether the credit is in conformance with the Bank's loan policy and all applicable laws and regulations; and

       (vi) maintain written minutes of the committee meetings, including a record of the review and status of the loans considered.

   d. All loan committee minutes shall be made available to the Bank's board of directors at their next scheduled meeting.

   [.12]12. LOAN POLICY

   a. Within THIRTY days from the effective date of this ORDER, and annually thereafter, the board of directors of the Bank shall review the Bank's loan policy and procedures for adequacy and, based upon this review, shall make all appropriate revisions to the policy necessary to strengthen lending procedures.

   b. The initial revisions to the Bank's loan policy required by this paragraph, at a minimum, shall include provisions:

       (i) establishing officer lending limits and 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;

       (ii) establishing review and monitoring procedures to ensure that all lending personnel are adhering to established lending procedures and that the directorate is receiving timely and fully documented reports on loan activity, including any deviations from established policy;
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       (iii) requiring that all extensions of credit originated or renewed by the Bank:

         (1) be supported by current credit information and collateral documentation, including lien searches and the perfection of security interests; and

         (2) have a clearly defined and stated purpose and a predetermined and realistic repayment source and schedule;

       (iv) revising the annual loan review criteria and defining responsibility for reviews;

       (v) revising the bank's internal loan review to include:

         (1) an assessment of key trends and changes in financial information;

         (2) an analysis of the borrower's repayment capacity; and

         (3) assignment of a risk rating;

       (vi) revising the internal loan grading system to:

         (1) define loan grading categories; and

         (2) document support for the grade assigned;

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

       (viii) establishing limitations on the maximum amount of overdrafts to be paid without the prior written approval of the Bank's loan committee, and imposing appropriate limitations on the use of Cash Items account.

   c. The Bank shall submit the proposed loan policy revisions to the Regional Director and the Superintendent of Banking for review and comment. Within THIRTY days of receipt of any comment from the Regional Director and after 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 comply with the revised policy.

   [.13]13. TECHNICAL EXCEPTIONS

   Within SIXTY days from the effective date of this ORDER, the Bank shall:

       a. correct the technical exceptions listed in the FDIC Report of Examination as of September 4, 2001; and

       b. initiate and implement a program to ensure its credit files contain complete, adequate and current documentation.

   [.14]14. INTEREST RATE RISK PLAN

   a. Within SIXTY days from the effective date of this ORDER, the Bank shall submit to the Regional Director and the Superintendent of Banking, for review and comment, a written plan addressing interest rate risk and funds management. Within THIRTY days from the receipt of all such comments from the Regional Director, 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.

   b. Annually during the life of this ORDER, 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.

   c. The initial plan shall include, at a minimum, provisions:

       (i) establishing a desirable range for dependence on potentially volatile liabilities;

       (ii) identifying the source and use of borrowed and/or volatile funds;

       (iii) establishing a method to measure/monitor rate sensitivity;

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

       (v) establishing appropriate lines of credit at correspondent banks, including the appropriate Federal Reserve Bank, that would allow the Bank to borrow funds to meet depositor demands if the Bank's other provisions for liquidity proved to be inadequate;

       (vi) establishing prudent limitations on the Bank's ratio of total loans to total funding liabilities; and

       (vii) establishing parameters for borrowing federal funds, including limits concerning dollar amounts and duration and specifying authorized sources/lenders.

   [.15]15. PROFIT PLAN AND BUDGET

   The plan and budget required by this paragraph shall contain formal goals and strategies,
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   consistent with sound banking practices, to reduce discretionary expenses and to improve the Bank's overall earnings, as well as a description of the operating assumptions that form the basis for major projected income and expense components.

       a. Within SIXTY 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 2002. A copy of the plan and budget shall be submitted to the Regional Director and the Superintendent of Banking upon their completion. Thereafter, the Bank shall implement and follow the plan and budget.

       b. Within THIRTY days from the end of each calendar quarter following completion of the profit plan and budget required by this paragraph, the Bank's board of directors shall evaluate the Bank's actual performance against them, record the results of the evaluation, and note any actions taken by the Bank in the minutes of the board of directors' meeting at which such evaluation is undertaken.

       c. A written profit plan and budget shall be prepared for each calendar year for which this ORDER is in effect.

   [.16]16. CALL REPORTS

   a. Within THIRTY days from the effective date of this ORDER, the Bank shall review the Consolidated Report of Condition and Income filed with the FDIC as of March 31, 2001, and shall file with the FDIC an amended Consolidated Report of Condition and Income which accurately reflects the financial condition of the Bank as of the date of the 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 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.

   [.17]17. VIOLATIONS OF LAW AND REGULATION

   Within NINETY days from the effective date of this ORDER, the Bank shall:

       a. eliminate and/or correct all violations of law and regulation listed in the FDIC's Report of Examination September 4, 2001; and

       b. implement procedures to ensure future compliance with all applicable laws and regulations.

   [.18]18. DISCLOSURE TO SHAREHOLDERS

   Following the effective date of this ORDER, the Bank shall send to its shareholders, or otherwise furnish a description of this ORDER, in conjunction with the Bank's next shareholder communication, and 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., Room F-6043, Washington, D.C. 20429 for review at least TWENTY days prior to dissemination to shareholders. Any requests for changes made by the FDIC shall be made prior to dissemination of the description, communication, notice or statement.

   [.19]19. COMPLIANCE WITH ORDER

   Within THIRTY days from the effective date of this ORDER, the Bank's board of directors shall have in place a program that will provide for monitoring of the Bank's compliance with this ORDER. Following the adoption of said program, 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 board of directors' meeting.

   20. PROGRESS REPORTS

   On the last day of the first month following the effective date of this ORDER, and on the last day of every third month thereafter, the Bank shall furnish written progress reports to the Regional Director and the Superintendent of Banking, 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 has, in writing, released the Bank from making further reports.

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

   The provisions of this ORDER shall be
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   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 provision has been modified, terminated, suspended, or set aside by the FDIC.

   Issued Pursuant to Delegated Authority.

   Dated: February 6, 2002.

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Last Updated 6/13/2004 legal@fdic.gov