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   [11,922] In the Matter of Asiana Bank, Sunnyvale, California, Docket No. 02-071b (5-3-02).

(This order was terminated by order of the FDIC dated 9-15-03; see ¶16,352.)

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

   [.1] Management—Qualifications Specified

   [.2] Capital—Maintain Tier 1 Capital

   [.3] Assets—Adversely Classified Assets—Reduction Required
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   [.4] Loan Policy—Preparation or Revision of Policy Required

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

   [.6] Loan Portfolio—Diversification Required

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

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

   [.9] Budget Plan—Preparation Required

   [.10] Strategic Plan—Preparation of Required

   [.11] Audit—Required

   [.12] Dividends—Dividends Restricted

   [.13] Brokered Deposits—Restricted

In the Matter of
ASIANA BANK
SUNNYVALE, CALIFORNIA
(Insured State Nonmember Bank)
CONSENT ORDER

FDIC-02-071B

   Asiana Bank, Sunnyvale, California ("Bank"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Bank and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated May 2, 2002, whereby solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and/or regulations, the Bank consented to the issuance of a CONSENT ORDER ("ORDER") by the FDIC.

   The FDIC considered the matter and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices and had committed violations of law and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

CONSENT ORDER

   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 and unsound banking practices and violations of law and/or regulation:

   (a) operating with inadequate management;

   (b) operating with inadequate equity capital and reserves in relation to the volume and quality of assets held by the Bank;

   (c) operating with a large volume of poor quality and/or poorly documented loans;

   (d) operating with an inadequate allowance for loan and lease losses;

   (e) following hazardous lending and lax collection practices;

   (f) operating with inadequate provisions for liquidity and funds management;

   (g) operating with inadequate routine and controls policies;

   (h) operating in such a manner as to produce operating losses; and

   (i) operating in violation of section 309.6(a) of the FDIC's Rules and Regulations, 12 C.F.R. §309.6(a), as more fully described on pages 19 and 20 of the Report of Examination as of November 13, 2001; section 323.4 of the FDIC's Rules and Regulations, 12 C.F.R. §323.4, as more fully described on page 18 of the Report of Examination as of November 13, 2001; section 359 of the FDIC's Rules and Regulations, 12 C.F.R. §359, as more fully described on page 20 of the Report of Examination as of November 13, 2001; and section 364 of the FDIC's Rules and Regulations, 12 C.F.R. §364, as more fully described on page 21 of the Report of Examination as of November 13, 2001.

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

   [.1]1. The Bank shall have and retain qualified management.

   (a) Each member of management shall have qualifications and experience commensurate with his or her duties and responsibilities at the Bank. Management shall include a chief executive officer with proven ability in managing a Bank of comparable size, and experience in upgrading a low quality loan portfolio, improving earnings, and other matters needing particular attention. Management shall also include a chief credit officer with significant appropriate policy, lending, collection, and loan supervision experience and experience in upgrading a low quality loan portfolio. Management shall also have a chief financial officer with significant and appropriate experience in planning, budgeting, and operating a financial institution in a profitable manner. Each member of management shall be provided appropriate written authority from the Bank's board of directors to implement the provisions of this ORDER.

   (b) The qualifications of management shall be assessed on its ability to:

       (i) comply with the requirements of this ORDER;

       (ii) operate the Bank in a safe and sound manner;

       (iii) comply with applicable laws and regulations; and

       (iv) restore all aspects of the Bank to a safe and sound condition, including asset quality, capital adequacy, earnings, management effectiveness, sensitivity to market risk and liquidity.

   (c) During the life of this ORDER, the Bank shall notify the Regional Director of the FDIC's San Francisco Regional Office ("Regional Director") and the Commissioner, Department of Financial Institutions for the State of California ("Commissioner") in writing when it proposes to add any individual to the Bank's board of directors or employ any individual as a senior executive officer. The notification must be received at least 30 days before such addition or employment is intended to become effective and should include a description of the background and experience of the individual or individuals to be added or employed.

   (d) The Bank may not add any individual to its board of directors or employ any individual as a senior executive officer if the Regional Director issues a notice of disapproval pursuant to section 32 of the Act, 12 U.S.C. §1831i.

   (e) The Bank's board of directors shall include at least two outside directors who possess prior and significant experience in supervising the affairs and operations of a financial institution.

   (f) The Bank shall provide the Regional Director and Commissioner with 30 days prior notice of any proposed changes to senior management not previously covered by Subparagraph 1(c) and 1(d). Such notice shall be accompanied by a written plan of succession, which is in a form and manner acceptable to the Regional Director.

   (g) Within 30 days from the effective date of this ORDER, the board of directors shall participate in the affairs of the Bank, assuming full responsibility for the approval of sound policies and objectives, compliance with the Banks articles of incorporation and bylaws, and supervision of all of the Bank's activities and operations, consistent with the role and expertise commonly expected for directors of the Bank's comparable size. This participation shall include meetings to be held no less frequently than monthly at which, at a minimum, the following areas shall be reviewed and approved; any staffing changes; reports of income and expenses; new, overdue, renewal, insider, charged-off, and recovered loans; investment activity; operating policies; and individual committee actions. The board minutes shall document these reviews and approvals, including the names of any dissenting directors.

   (h) Within 90 days of the effective date of this ORDER, the Bank is required to conduct a management and staffing study. This study shall review the current organizational structure of the Bank including position descriptions, and make recommendations regarding staffing relative to the strategic plan and objectives of the Bank. A copy of such study shall be provided to the Regional Director and Commissioner.

   [.2]2. (a) During the life of this ORDER, the Bank shall have and maintain Tier 1 leverage capital in such an amount as to equal
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   or exceed ten (10.0) percent of the Bank's total assets.

   (b) Within 90 days from the effective date of this ORDER, the Bank shall develop and adopt a plan to meet the minimum risk-based capital requirements as described in the FDIC Statement of Policy on Risk-Based Capital contained in Appendix A to Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325, Appendix A. The Plan shall be in a form and manner acceptable to the Regional Director and Commissioner as determined at subsequent examinations.

   (c) The level of Tier 1 leverage capital to be maintained during the life of this ORDER pursuant to subparagraph 2(a) shall be in addition to a fully funded allowance for loan and lease losses, the adequacy of which shall be satisfactory to the Regional Director and Commissioner as determined at subsequent examinations and/or visitations.

   (d) Any increase in Tier 1 capital necessary to meet the requirements of Paragraph 2 of this ORDER may be accomplished by the following:

       (i) the sale of common stock; or

       (ii) the sale of noncumulative perpetual preferred stock; or

       (iii) the direct contribution of cash by the board of directors, shareholders, and/or parent holding company; or

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

       (v) any combination of the above means.

   Any increase in Tier 1 capital necessary to meet the requirements of Paragraph 2 of this ORDER may not be accomplished through a deduction from the Bank's allowance for loan and lease losses.

   (e) If all or part of the increase in Tier 1 capital required by Paragraph 2 of this ORDER is accomplished by the sale of new securities, the board of directors shall forthwith take all necessary steps to 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 fifteen (15) days prior to the dissemination of such materials, the plan and any materials used in the sale of the securities shall be submitted to the FDIC, Registration and Disclosure Section, Washington, D.C. 20429, for review. Any changes requested to be made in the plan or materials by the FDIC shall be made prior to their dissemination. If the increase in Tier 1 capital is provided by the sale of noncumulative perpetual preferred stock; then all terms and conditions of the issue, including but not limited to those terms and conditions relative to interest rate and convertibility factor, shall be presented to the Regional Director and the Commissioner for prior approval.

   (f) In complying with the provisions of Paragraph 2 of this ORDER, the Bank shall provide to any subscriber and/or purchaser of the Bank's securities, a 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 ten (10) days from the date such material development or change was planned or occurred, whichever is earlier, and shall be furnished to every subscriber and/or purchaser of the Bank's securities who received or was tendered the information contained in the Bank's original offering materials.

   (g) For the purposes of this ORDER, the terms "Tier 1 capital" and "total assets" shall have, the meanings ascribed to them in Part 325 of the FDIC Rules and Regulations, 12 C.F.R. §§ 325.2(t) and 325.2(v).

   [.3]3. (a) Within 120 days from the effective date of this ORDER, the Bank shall have reduced the assets classified "Substandard" as of November 13, 2001 that have not previously been charged off to not more than $1,000,000 and shall have reduced the assets classified "Special Mention" as of November 13, 2001, that have not previously been charged off to not more than $3,000,000.
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   (b) Within 240 days from the effective date of this ORDER, the Bank shall have reduced the assets classified "Substandard" as of November 13, 2001 that have not previously been charged off to not more than $800,000, and shall have reduced the assets classified "Special Mention" as of November 13, 2001, that have not previously been charged off to not more than $2,000,000.

   (c) The requirements of subparagraphs 3(a) and 3(b) of this ORDER are not to be construed as standards for future operations and, in addition to the foregoing, the Bank shall eventually reduce the total of all adversely classified assets. Reduction of these assets through proceeds of other loans made by the Bank is not considered collection for the purpose of this paragraph. As used in subparagraphs 3(a), 3(b), and 3(c) the word "reduce" means:

       (i) to collect;

       (ii) to charge-off; or

       (iii) to sufficiently improve the quality of assets adversely classified to warrant removing any adverse classification, as determined by the FDIC.

   [.4]4. (a) Within 90 days from the effective date of this ORDER, the Bank shall revise, adopt, and implement written lending and collection policies to provide effective guidance and control over the Bank's lending function, which policies shall include specific guidelines for placing loans on a non-accrual basis. In addition, the Bank shall obtain adequate and current documentation for all loans in the Bank's loan portfolio. Such policies and their implementation shall be in a form and manner acceptable to the Regional Director and the Commissioner as determined at subsequent examinations and/or visitations.

   (b) The initial revisions to the Bank's loan policy and practices, required by this paragraph, at a minimum, shall include the following:

       (i) revisions which ensure that the loan policy is specific to the Bank;

       (ii) provisions which require complete loans documentation, realistic repayment terms and current credit information adequate to support the outstanding indebtedness of the borrower. Such documentation shall include current financial information, profit and loss statements or copies of tax returns and cash flow projections;

       (iii) provisions which specify the circumstances and conditions under which real estate appraisals must be conducted by an independent third party;

       (iv) provisions that directors ensure that the lending staff has the expertise and training necessary to properly analyze and supervise loans and credits;

       (v) provisions which prohibit concentrations of credit in excess of 25 percent of the Bank's total equity capital and reserves to any borrower and that borrower's related interests;

       (vi) provisions which require the establishment of a loan grading system and loan review process that are acceptable to the Regional Director and Commissioner;

       (vii) provisions which require the preparation of a loan "watch list" which shall include relevant information on all loans in excess of $25,000 which are classified "Substandard" dated November 13, 2001 or by the FDIC or California Department of Financial Institutions in subsequent Reports of Examination and all other loans in excess of $100,000 which warrant individual review and consideration by the board of directors as determined by the loan committee or active management. The loan "watch list" shall be presented to the board of directors for review at least monthly with such review noted in the minutes; and

       (viii) the board of directors shall adopt procedures whereby officer compliance with the revised loan policy is monitored and responsibility for exceptions thereto assigned. The procedures adopted shall be reflected in minutes of a board of directors meeting at which all members are present and the vote of each is noted.

   [.5]5. (a) Beginning with the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower who has a loan or other extension of credit from the Bank that has been charged off or classified, in whole or in part, "Loss" and is uncollected. Subparagraph 5(a) of this ORDER shall not prohibit the Bank from renewing or extending the maturity of any credit in accordance with the Financial Accounting Standards Board Statement Number 15 ("FASB 15").

   (b) Beginning with the effective date of this ORDER the Bank shall not extend, directly
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   or indirectly, any additional credit to, or for the benefit of, any borrower who has a loan or other extension of credit from the Bank that has been classified, in whole or part, "Substandard" without the prior approval of a majority of the board of directors or the loan committee of the Bank. Subparagraph 5(b) of this ORDER shall not prohibit the Bank from renewing or extending the maturity of any credit in accordance with FASB 15, providing that such renewal or extension shall be made only with the prior approval of a majority of the board of directors or the loan committee of the Bank.

   (c) In connection with subparagraphs 5(a) and 5(b) of this ORDER, the Bank shall not:

       (i) continue the accrual of interest on any loan which is delinquent in principal or interest payments ninety (90) days or more unless the asset is both well secured and in the process of collection; or

       (ii) engage in any practice or device, which essentially avoids recognition of overdue loans and/or artificially inflates the income of the Bank. For any loans restructured in accordance with FASB 15, consideration should be given to the reasonableness of the modified terms of the loan, since loans should not be restructured in an attempt to conceal credit losses or delay their recognition.

   (d) For the purpose of subparagraph 5(c) of this ORDER, debt is "well secured" if it is secured by:

       (i) collateral in the form of liens on or pledges of real or realizable value sufficient to discharge the debt (including accrued interest) in full; or

       (ii) the guaranty of a financially responsible party.

   A debt is "in the process of collection" if collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status.

   [.6]6. Within 90 days from the effective date of this ORDER, the Bank shall develop and implement a plan to ensure that the loan portfolio is diversified and undue reliance on a limited number of large credits reduced. In addition, the Bank shall address the criticisms specifically set forth on page 8 of the Report of Examination dated November 13, 2001. The plan shall be in a form and manner acceptable to the Regional Director and Commissioner as determined at subsequent examinations and/or visitations.

   [.7]7. (a) During the life of this ORDER, the Bank shall maintain an adequate allowance for loan and lease losses.

   (b) Additionally, within 60 days from the date of this ORDER the Board of Directors shall revise and fully implement its policy for determining the adequacy of the allowance for loan and lease losses. For the purpose of this determination, the methodology contained in the policy shall be predicated on an objective and accurate evaluation of the risk inherent in the Bank's loan portfolio. The policy shall provide for a review of the allowance at least once each calendar quarter. Said review shall be completed at least ten (10) days prior to the end of each quarter, in order that the findings of the Board of Directors with respect to the loan and lease loss allowance may be properly reported in the quarterly Reports of Condition and Income. The review should focus on the results of the Bank's internal loan review, loan and lease loss experience, trends of delinquent and non-accrual loans, an estimate of potential loss exposure of significant credits, concentrations of credit, and present and prospective economic conditions. A deficiency in the allowance shall be remedied in the calendar quarter it is discovered, prior to submitting the Report of Condition, by a charge to current operating earnings. The minutes of the Board of Directors meeting at which such review is undertaken shall indicate the results of the review. Upon completion of the review, the Bank shall increase and maintain its allowance for loan and lease losses consistent with the allowance for loan and lease loss reserve policy established. Such policy and its implementation shall be satisfactory to the Regional Director and the Commissioner as determined at subsequent examinations and/or visitations.

   [.8]8. Within 60 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law which are more fully set out on pages 18 through 22 of the Report of Examination of the Bank dated November 13, 2001. In addition, the Bank shall take all necessary steps to ensure future compliance with all applicable laws, regulations, and policies.

   [.9]9. (a) Within 90 days from the effective date of this ORDER, the Bank shall
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   formulate and fully implement a written plan and a comprehensive budget for all categories of income and expense. The plan and budget required by this paragraph shall include formal goals and strategies, consistent with sound banking practices, to improve the Bank's net interest margin, increase interest income, reduce discretionary expenses, and improve and sustain earnings of the Bank. The plan shall include a description of the operating assumptions that form the basis for and adequately support, major projected income and expense components. Thereafter, the Bank shall formulate such a plan and budget by November 30 of each subsequent year.

   (b) The plan and budget required by subparagraph 9(a) of this ORDER, upon completion, shall be submitted to the Regional Director and Commissioner for their review and opportunity for comment.

   (c) Following the end of each calendar quarter, the board of directors shall evaluate the Bank's actual performance in relation to the plan and budget required by subparagraph 9(a) of this ORDER and shall 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. This information shall in turn be submitted to the Regional Director and Commissioner.

   [.10]10. Within 90 days of the effective date of this ORDER, the Bank shall develop and submit to the Regional Director a written three-year strategic plan, taking into consideration adequate staffing, compliance with this ORDER, proper internal routines and controls, and an adequate audit function. Such plan shall include specific goals for the dollar volume of total loans, total investment securities, and total deposits projected on a quarterly basis through year-end 2004. In addition, such plan shall address strategies for increasing the Bank's core deposit base to reduce its dependence on volatile funding sources and improve the Bank's net interest margin. For each time frame, the plan will also specify the anticipated average maturity and average yield on loans and securities; the average maturity and average cost of deposits; the level of earning assets as a percentage of total assets; and the ratio of net interest income to average earning assets. The plan shall be in a form and manner acceptable to the Regional Director as determined at subsequent examinations and/or visitations.

   [.11]11. (a) Within 90 days from the effective date of this ORDER, the Bank shall develop an internal audit program that establishes procedures to protect the integrity of the Bank's operational and accounting systems. The program shall be in a form and manner acceptable to the Regional Director and the Commissioner as determined at subsequent examinations and/or visitations.

   (b) Within 90 days from the effective date of this ORDER, the Bank shall conduct an internal audit. Such audit shall be conducted by an outside independent auditor. The results of the audit shall be made available to the Regional Director and the Commissioner for review and comment.

   [.12]12. The Bank shall not pay cash dividends without the prior written consent of the Regional Director and the Commissioner.

   [.13]13. Upon the effective date of this ORDER, the Bank shall not increase the amount of brokered deposits above the amount outstanding on that date. In addition, during the life of this ORDER, the Bank shall not solicit, retain, or rollover brokered deposits.

   14. On the tenth day of the third month following the effective date of this ORDER, and on the tenth 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 the Commissioner has released the Bank in writing from making further reports.

   This ORDER shall become effective ten (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 at San Francisco, California, this 3rd day of May, 2002.

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