(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.
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(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
{{7-31-02 p.C-5446}}
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.
{{7-31-02 p.C-5448}}
[.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.
(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.
{{7-31-02 p.C-5449}}
[.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
{{7-31-02 p.C-5450}}
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.
