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FDIC Enforcement Decisions and Orders

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   [11,931] In the Matter of First American Bank, Jackson, Mississippi, Docket No. 02-032b (5-15-02). P>(This order was terminated by order of the FDIC dated 9-16-03; see ¶16,353.)

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

   [.1] Management—Qualifications Specified

   [.2] Capital—Maintain Tier 1 Capital

   [.3] Profit Plan—Preparation of Plan Required

   [.4] Assets—Charge-off or Collection

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

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

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

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

   [.9] Investments and Investment Policy—Investment Policy, Preparation or Revision Required

   [.10] Asset/Liability Management—Preparation or Revision of Asset/Liability Management Policy Required
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   [.11] Violations of Law—Correction of Violations Required

   [.12] Bank Operations—Internal Routine and Control Procedures—Establish

   [.13] Strategic Plan—Preparation of Required

   [.14, .20] Audit—External Audit, Minimum Procedures Specified

   [.15] Reconciliation of Books and Records—Examination Required

   [.16] Bank Operations—Training Program Required

   [.17] Risk Assessment—Formal Assessment Required

   [.18] Bank Operations—Processing Platform—Controls Required

   [.19] Information Systems—Steering Committee—Qualifications Specified

   [.21] Bank Operations—Backup and Offsite Storage Procedures Required

   [.22] Disaster Recovery Plan—Testing of Required

   [.23] Information Systems Activities—Written Policy Required

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

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

   [.26] Dividends—Dividends Restricted

In the Matter of
FIRST AMERICAN BANK
JACKSON, MISSISSIPPI
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-02-032b

   First American Bank, Jackson, Mississippi ("Bank"), having been advised of its right to a NOTICE OF CHANGES AND OF HEARING detailing the unsafe or unsound banking practices and violations of laws and/or regulations alleged to have been committed by the Bank, and of its right to a hearing on the charges under section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with a representative of the Federal Deposit Insurance Corporation ("FDIC") dated May 14, 2002, 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 or unsound banking practices and had violated laws and 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 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 and violations of laws or regulations:

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

       • The failure to obtain proper loan documentation;

       • The failure to obtain adequate collateral;

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

       • The failure to establish and enforce adequate loan repayment programs;

       • The failure to obtain current and complete financial information; and

       • Other poor credit administration practices as identified in the Joint FDIC/
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       Department of Banking and Consumer Finance Report of Examination of the Bank as of October 9, 2001 ("Report").

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

   C. Violating laws and regulations including:

       • The State of Mississippi requirements to reflect all real estate parcels owned by a bank at book value, as set forth in Section 81-5-87 of the Mississippi Code, Miss. Code Ann. §81-5-87.

       • The requirements of section 103.27(d) of the Treasury Department's Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulation, 31 C.F.R. §103.27(d).

       • The requirements of section 325.3(b)(2) of the FDIC Rules and Regulations, 12 C.F.R. §325.3(b)(2).

       • The Requirements of section 32 of the Act, 12 U.S.C. 1831(i), and its implementing regulations, Part 303, Subpart F of the FDIC Rules of Practice and Procedure, 12 C.F.R. §§ 303.100-303.104.

   D. Operating with an excessive level of adversely classified assets.

   E. Operating with inadequate liquidity in light of the Bank's asset and liability mix.

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

   G. Operating with excessive overhead costs.

   H. Operating with inadequate internal routines and controls.

   I. Operating with an inadequate audit program.

   J. Operating with an inadequate asset/liability policy.

   K. Engaging in hazardous and speculative security activities/transactions.

   L. Failing to post the general ledger timely.

   M. Failing to keep accurate books and records.

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

   O. 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 laws or regulations.

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

   [.1]1. (a) During the life of this ORDER, the Bank shall have and thereafter retain qualified management. At a minimum, such management shall include a chief executive officer, chief operating officer and 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. Each member of management shall have the qualifications and experience commensurate with his or her duties and responsibilities at the Bank. 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, and liquidity.

   (b) During the life of this ORDER, the Bank shall notify the Regional Director of the Memphis Regional Office of the FDIC ("Regional Director") and the Commissioner of Banking and Consumer Finance for the State of Mississippi ("Commissioner") in writing of any changes in any of the Bank's directors or senior executive officers. For purposes of this ORDER, "senior executive officer" is defined as in section 32 of the Act ("section 32"), 12 U.S.C. §1831(i), and section 303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. §303.101(b). Prior to the addition of any individual to the board of directors or the employment of any individual as a senior executive officer, the Bank shall comply with the requirements of section 32 and Subpart F of Part 303 of the FDIC Rules and Regulations, 12 C.F.R. §§ 303.100-303.104.

   [.2]2. (a) By June 30, 2002, the Bank shall achieve and thereafter maintain Tier 1 capital equal to or greater than 7.0 percent of its total assets as defined in Part 325 of the FDIC Rules and Regulations ("Part 325"), 12 C.F.R. Part 325.
{{7-31-02 p.C-5445}} (b) Any such increase in Tier 1 capital may be accomplished by the following:

       (i) The sale of common stock and noncumulative perpetual preferred stock constituting Tier 1 capital under Part 325;

       (ii) The elimination of all or part of the assets classified "Loss" as of October 9, 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;

       (iv) The direct contribution of cash by the directors and/or the shareholders of the Bank;

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

       (vi) Any combination of the above means.

   (c) 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 20 days prior to the dissemination of such materials, the materials used in the sale of the securities shall be submitted to the FDIC Registration and Disclosure Section, or its successor, 550 17th Street, N.W., Washington, D.C. 20429, for its review. Any changes requested to be made in the materials by the FDIC shall be made prior to their dissemination.

   (d) In complying with the provisions of this Paragraph 2, the Bank shall provide to any subscriber and/or purchaser of Bank securities written notice of any planned or existing development or other changes which are materially different from the information reflected in any offering materials used in connection with the sale of Bank securities. The written notice required by this paragraph shall be furnished within 10 calendar days of the date any material development or change was planned or occurred, whichever is earlier, and shall be furnished to every purchaser and/or subscriber of the Bank's original offering materials.

   (e) 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.

   [.3]3. (a) Within 60 days from the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director and Commissioner for review and comment a written profit plan and a realistic, comprehensive budget for all categories of income and expense for calendar year 2002. The plan required by this paragraph shall contain formal goals and strategies, consistent with sound banking practices, to reduce discretionary expenses and to improve the Bank's overall earnings, and shall contain a description of the operating assumptions that form the basis for major projected income and expense components.

   (b) The written profit plan shall address, 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) 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;

       (iii) A description of the operating assumptions that form the basis for, and adequately support, major projected income and expense components; and

       (iv) Periodic salary reviews.

   (c) Within 30 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 in relation to the plan and budget, record the results of the evaluation, and note any actions taken by the Bank in the minutes of the
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   board of directors' meeting at which such evaluation is undertaken.

   (d) A written profit plan and budget shall be prepared for each calendar year for which this ORDER is in effect and shall be submitted to the Regional Director and Commissioner for review and comment at least 30 days before the end of each year. Within 30 days of receipt of any comments from the Regional Director and Commissioner 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 follow the plan.

   [.4]4. As of the effective date of this ORDER, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified "Loss" as of October 9, 2001, that have not been previously collected or charged off. Any such charged-off asset shall not be rebooked without the prior written consent of the Regional Director and Commissioner. Elimination or reduction of these assets with the proceeds of other Bank extensions of credit is not considered collection for the purpose of this paragraph.

   [.5]5. (a) Within 60 days from the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director and Commissioner for review and comment a written plan to reduce the Bank's risk position in each asset in excess of $50,000 which is classified "Substandard" or "Doubtful" in the Report. In developing such plan, the Bank shall, at a minimum:

       (i) Review the financial position of each such borrower, including source of repayment, repayment ability, and alternative repayment sources; and

       (ii) Evaluate the available collateral for each such credit, including possible actions to improve the Bank's collateral position.

   (b) Such plan shall include, but not be limited to, the following:

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

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

   (c) As used in this paragraph, "reduce" means to: (1) collect; (2) charge off; or (3) improve the quality of such assets so as to warrant removal of any adverse classification by the FDIC.

   (d) Within 30 days from the receipt of any comments from the Regional Director and Commissioner, and after the adoption of any recommended changes, the Bank shall approve the written plan, which approval shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank shall implement and follow this written plan.

   [.6]6. (a) As of the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower who is already obligated in any manner to the Bank on any extensions of credit (including any portion thereof) that has been charged off the books of the Bank or classified "Loss" so long as such credit remains uncollected.

   (b) As of the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower whose loan or other credit has been classified "Substandard" and is uncollected unless the Bank's board of directors has adopted, prior to such extension of credit, a detailed written statement giving the reasons why such extension of credit is in the best interest of the Bank. Such statement shall include an analysis of the borrower's current financial and income information. 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.

   [.7]7. (a) Within 30 days from the effective date of this ORDER, the Bank shall replenish its ALLL in the amount of at least $173,000.

   (b) Within 60 days from the effective date of this ORDER, the Bank shall make an additional provision for loan and lease losses which, after review and consideration by the board of directors, reflects the potential for further losses in the remaining loans or leases classified "Substandard" and all other loans and leases in its portfolio. In making this determination, the board of directors shall consider the Federal Financial Institutions Examination Council ("FFIEC") Instructions for the Reports of Condition and Income and any analysis of the Bank's ALLL provided by the FDIC.

   (c) Within 90 days from the effective date of this ORDER, Reports of Condition and Income required by the FDIC and filed by the
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   Bank subsequent to October 9, 2001, but prior to the effective date of this ORDER, shall be amended and refiled if they do not reflect a provision for loan and lease losses and an ALLL which are adequate considering the condition of the Bank's loan portfolio, and which, at a minimum, incorporate the adjustments required by this paragraph.

   (d) Prior to submission or publication of all Reports of Condition and Income required by the FDIC after the effective date of this ORDER, the board of directors of the Bank shall review the adequacy of the Bank's ALLL, provide for an adequate ALLL, and accurately report the same. The minutes of the board meeting at which such review is undertaken shall indicate the findings of the review, the amount of increase in the reserve recommended, if any, and the basis for determination of the amount of ALLL provided. In making these determinations, the board of directors shall consider the FFIEC Instructions for the Reports of Condition and Income and any analysis of the Bank's ALLL provided by the FDIC.

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

   [.8]8. (a) Within 60 days from the effective date of this ORDER, and annually thereafter, the board of directors of the Bank shall review the Bank's loan policies and lending procedures for adequacy and, based upon this review, shall make all appropriate revisions to the policies and procedures necessary to strengthen them and abate additional loan deterioration. The revised written loan policies and lending procedures shall be submitted to the Regional Director and Commissioner for review and comment upon their completion.

   (b) The initial revisions to the Bank's loan policies and lending procedures required by this paragraph, at a minimum, shall include provisions:

       (i) Requiring the approval of the Bank's board of directors for all exceptions to the loan policy, which approval shall be reflected in the minutes of the board of directors meetings and in the appropriate loan files; and

       (ii) Establishing procedures to ensure that current and accurate financial information for all loan files is maintained on an ongoing basis.

   (c) Within 30 days from the receipt of any comments from the Regional Director and Commissioner, and after the adoption of any recommended changes, the board of directors shall approve the written loan policy and any subsequent modification thereto, which approval shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank shall implement and follow the amended written loan policy.

   [.9]9. Within 60 days from the effective date of this ORDER, and annually thereafter, the board of directors of the Bank shall review the Bank's investment policy for adequacy and shall make the necessary revisions to address the actual and contemplated condition of the Bank's investment portfolio and any of its trading accounts. The revised policy shall, at a minimum, address the exceptions noted in the Report and shall be consistent with the Supervisory Policy Statement on Investment Securities and End-User Derivatives Activities, generally accepted accounting principles, and the Bank's loan, liquidity and asset/liability management policies. A copy of the revised policy shall be submitted to the Regional Director and Commissioner upon its adoption.

   [.10]10. (a) Within 90 days from the effective date of this ORDER, the Bank shall develop and submit to the Regional Director and Commissioner for review and comment a written plan addressing liquidity, market risk sensitivity and asset/liability management. Annually thereafter 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, reduce market risk sensitivity, and maintain adequate provisions to meet the Bank's liquidity needs.

   (b) Within 30 days from the receipt of all such comments from the Regional Director and Commissioner, and after revising the plan as necessary, the Bank shall adopt the plan, which adoption shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank shall implement the plan.

   [.11]11. Within 90 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of laws and regulations listed in the Report and implement procedures to ensure future compliance with all applicable laws and regulations.
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   [.12]12. Within 90 days from the effective date of this ORDER, the Bank shall correct the deficiencies in internal routines and controls which are listed in the Report. Additionally, the Bank shall establish policies to prevent the recurrence of any deficiencies noted.

   [.13]13. (a) Within 90 days from the effective date of this ORDER, the Bank shall formulate and adopt a realistic, comprehensive strategic plan. The plan required by this paragraph shall contain an assessment of the Bank's current financial condition and market area, and a description of the operating assumptions that form the basis for major projected income and expense components.

   (b) The Bank will submit the strategic plan to the Regional Director and Commissioner for review and comment. After consideration of any comments, the Bank shall approve the plan, which approval shall be recorded in the minutes of a board of directors' meeting.

   (c) Within 30 days from the end of each calendar quarter following the effective date of this ORDER, the Bank's board of directors shall evaluate the Bank's actual performance in relation to the strategic plan required by this paragraph and shall take such action as is necessary to revise the strategic plan to reflect the Bank's actual performance. The Bank 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.

   [.14]14. (a) Within 120 days from the effective date of this ORDER, the Bank shall cause an external audit of its financial statements and operating procedures to be performed by an independent public accounting firm acceptable to the Regional Director and Commissioner.

   (b) The Bank shall provide the Regional Director and Commissioner with a copy of the proposed engagement letter with the accounting firm for review before it is executed. The engagement letter, at a minimum, should include:

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

       (ii) The responsibilities of the accounting firm;

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

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

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

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

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

       (viii) A provision for unrestricted examiner access to work papers.

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

   [.15]15. (a) Within 30 days from the effective date of this ORDER, the Bank shall retain a certified public accounting firm acceptable to the Regional Director and Commissioner to perform an agreed-upon procedures examination ("examination"), including, but not limited to, reconciliation of the financial statements of the Bank and the Subsidiary, as of December 31, 2001.

   (b) At a minimum, the examination shall determine:

       (i) Whether the Bank has reconciled all accounts and the date of the most recent reconciliation of each account.

       (ii) For all accounts of the Bank:

   (A) Whether reconciliations are done in a timely manner based on the risk and volume of activity in each account;

   (B) Whether reconciliations adequately report the dollar amount and the description of any outstanding unreconciled transactions;

   (C) The adequacy of the segregation of duties of the personnel preparing the reconciliations; and

   (D) The collectibility of any unreconciled debits outstanding in excess of 90 days.

       (iii) Whether the Bank has adequate written reconciliation procedures for each account.

   (c) The accounting firm's initial written report, whether in draft or final form, shall be submitted concurrently to the Regional Director and Commissioner and the Bank.

   (d) Within 10 days from the Bank's receipt of the firm's written report, the Bank shall carry out all recommendations made therein.

   (e) Within 10 days from the effective date of this ORDER, and every 30 days thereafter, all outstanding debits that are unresolved for more than 90 days shall be charged off from the books of the Bank.
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   [.16]16. Within 30 days of the effective date of this ORDER, the Bank shall implement a training program to ensure all Bank employees involved in data processing operations are adequately trained on the operational features of the Bank's data processing platform.

   [.17]17. Within 30 days of the effective date of this ORDER, the Bank shall conduct a formal risk assessment that complies with the requirements set forth in section 501(b) of the Gramm-Leach-Bliley Act of 1999, 15 U.S.C. §6801.

   [.18]18. Within 30 days of the effective date of this ORDER, the Bank shall appoint a qualified individual to act as the Bank's information security officer. Within 180 days of being appointed, the security officer shall determine the security features that are available on the Bank's processing platform, and after consultation with management:

       (a) Implement the controls needed to restrict user access to only the level needed to perform assigned duties;

       (b) Provide for the daily production and review of system audit and exception logs/reports;

       (c) Develop procedures to ensure adequate password and security administration are in place;

       (d) Implement appropriate controls over wire transfer activities; and

       (e) Develop an organization-wide security policy that sets guidelines and procedures to ensure an adequately secured processing environment.

   If the appropriate controls are not available through the processing platform, the security officer shall ensure adequate compensating controls are implemented.

   [.19]19. Within 30 days of the effective date of this ORDER, the Bank shall appoint an Information Systems Steering Committee ("IS Committee"). The IS Committee shall be composed of a representative of senior management and the Bank's board of directors, the Bank's IS manager, and personnel from the primary user department. There shall be a non-voting position on the committee for a representative of the Bank's employees who are responsible for the Bank's audit function. The IS Committee shall meet monthly, and shall monitor overall IS activities and provide guidance to ensure IS activities and plans are consistent with the Bank's strategic plan and the requirements of this ORDER.

   [.20]20. Within 60 days of the effective date of this ORDER, the Bank shall arrange for a comprehensive external audit of its data processing environment to be conducted by a qualified audit firm, and shall implement procedures to ensure adequate internal audit procedures are in place which complement the external audit.

   [.21]21. Within 60 days of the effective date of this ORDER, the Bank shall make backup processing arrangements with a backup site to ensure the ability to continue operations in the event an emergency or disaster results in the current processing system becoming unavailable. Within 30 days of entering into an agreement for backup processing, the Bank's Contingency Plan shall be amended to reflect the arrangement. The plan shall be submitted to the Regional Director and the Commissioner for review and comment. At a minimum, the plan shall address:

       (a) Recovery priorities and procedures;

       (b) Criteria for using backup sites;

       (c) Procedures for notifying employees; and

       (d) Procedures for retrieving backup programs, data files and appropriate supplies from the offsite storage location.

   [.22]22. (a) Within 60 days of the Bank's receipt of any comments from the Regional Director and the Commissioner, and annually thereafter, the Bank shall test the disaster recovery plan and report the results of the test to the board of directors or designated committee. The test of the plan shall include:

       (i) Testing of all critical business units and functions;

       (ii) The use of a realistic volume of activity;

       (iii) The use of actual backup system and data files from the offsite storage location; and

       (iv) Participation and review by bank personnel.

   (b) Within 30 days of completion of the test, the Bank shall adopt and implement a
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   corrective plan of action for all problems encountered during the test.

   [.23]23. Within 90 days of the effective date of this ORDER, the Bank shall adopt and implement written operating procedures and policies for the various activities relating to its information systems. At a minimum, these procedures and policies shall:

       (a) Ensure implementation of adequate controls and daily operating procedures;

       (b) Address the level of risk being experienced by the Bank with respect to its processing platform; and

       (c) Detail risk management practices relating to the Bank's network, microcomputers, Internet access, overall security, and contingency planning.

   [.24]24. Following the effective date of this ORDER, the Bank shall send to its shareholders or otherwise furnish a description of this ORDER: (1) in conjunction with the Bank's next shareholder communication; and (2) in conjunction with its notice or proxy statement preceding the Bank's next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, notice or statement shall be sent to the FDIC Registration and Disclosure Section, or its successor, 550 17th Street, N.W., Washington, D.C. 20429 for review at least 20 days prior to dissemination to shareholders. Any changes requested to be made by the FDIC shall be made prior to dissemination of the description, communication, notice or statement.

   [.25]25. (a) Within 30 days from the effective date of this ORDER the Bank's 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 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.

   (b) For the purposes of this ORDER, an "outside director" shall be an individual who shall:

       (i) Not be employed, in any capacity, by the Bank or its affiliates other than as a director of the Bank or an affiliate;

       (ii) Not own or control more than 5 percent of the voting stock of the Bank or its holding company;

       (iii) Not be indebted to the Bank or any of its affiliates in an amount greater than 5 percent of the Bank's equity capital and reserves;

       (iv) Not be related to any Bank directors, principal shareholders of the Bank or affiliates of the Bank; and

       (v) Be a resident of, or engage in business in, the Bank's trade area.

   (c) While this ORDER is in effect, the Bank's board of directors will meet monthly to review the Bank's performance and its compliance with the terms of this ORDER and record its review in the minutes of each regularly scheduled board of directors' meeting.

   [.26]26. As of the effective date of this ORDER, the Bank shall not declare or pay any cash dividend without the prior written consent of the Regional Director and Commissioner.

   27. On the fifteenth day of the second month following the effective date of this ORDER, and on the fifteenth 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 has released the Bank in writing from making further reports.

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

   The provisions of this ORDER shall be binding upon the Bank, its institution-affiliated parties, and any successors and assigns thereof.

   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions has been modified, terminated, suspended, or set aside by the FDIC.

   Pursuant to delegated authority.

   Dated: May 15th, 2002.

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Last Updated 12/7/2003 legal@fdic.gov