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FDIC Enforcement Decisions and Orders



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   [11,967] In the Matter of Brickyard Bank, Lincolnwood, Illinois, Docket No. 02-103b (9-9-02)

   A cease and desist order was issued, based on findings by the FDIC that it had reason to believe that respondent had engaged in unsafe and unsound practices. (This order was terminated by order of the FDIC dated 7-1-05; see ¶16,426.)

   [.1] Capital—Increase Required

   [.2] Dividends—Dividends Restricted

   [.3] Management—Qualifications Specified

   [.4] Management—Management Plan Required

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

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

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

   [.8] Assets—Special Mention—Eliminate Deficiencies

   [.9] Risk Management—Plan Required

   [.10] Loans—Specific Categories of Loans, Review or Reduction Required—Third Party

   [.11] Broker Services—Activities Restricted

   [.12] Assets—Charge-off or Collection

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

   [.14] Asset/Liability Management—Preparation or Revision of Asset/Liability Management Policy Required

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

   [.16] Conflicts of Interest—Written Policy Required

   [.17] Board of Directors—Review Bonus Program

   [.18] Compensation—Specific Individual—Prohibited

   [.19] Profit Plan and Budget—Preparation of Required

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

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

In the Matter of
BRICKYARD BANK
LINCOLNWOOD, ILLINOIS
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-02-103b
OBRE No. 2002-BBTC-56(b)

   WHEREAS, the Federal Deposit Insurance Corporation ("FDIC"), on August 26, 2002, issued to Brickyard Bank, Lincolnwood, Illinois ("Bank"), a NOTICE OF CHARGES AND OF HEARING ("NOTICE") pursuant to section 8(b) of the Federal
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   Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b); and

   WHEREAS, the NOTICE charged the Bank with having engaged in unsafe or unsound banking practices and violations of law, rule, or regulation; and

   WHEREAS, the Office of Banks and Real Estate for the State of Illinois ("OBRE"), on August 26, 2002, issued an Order To Cease And Desist, OBRE No. 2002-BBTC-56, against the Bank pursuant to section 48(6)(b) of the Illinois Banking Act, 205 ILCS 5/48(6)(b), as a result of alleged unsafe or unsound banking practices and violations of law, rule, or regulation; and

   WHEREAS, the Bank has been advised 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 under 38 Ill. Adm. Code §392.40, regarding hearings before the OBRE, and has waived those rights; and

   WHEREAS, the Bank entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with representatives of the FDIC and OBRE, dated September 3, 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, rule, or regulation, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC and OBRE.

   NOW, THEREFORE, the FDIC and OBRE considered the matter and determined that they had reason to believe that the Bank had engaged in unsafe or unsound banking practices and had violated laws, rules, or regulations. The FDIC and OBRE, 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 law, rule, or regulation:

   A. Operating with an inadequate level of capital protection for the kind and quality of assets held and the overall risk profile of the Bank.

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

   C. Operating with a board of directors which has failed to provide adequate supervision over and direction to the management of the Bank to prevent unsafe or unsound banking practices and violations of law, rule, or regulation.

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

    •   The failure to obtain and analyze proper loan and indirect lease 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 and analyze current and complete financial information;

    •   Extending credit with inadequate diversification of risk;

    •   The failure to adequately monitor construction loans;

    •   The failure to conduct due diligence reviews on indirect leasing companies and brokers; and

    •   Other poor credit administration practices.

   E. Failing to properly monitor the operations of Check 'n Go Financial, Inc., or subsidiaries thereof, in conducting credit brokerage services for the Bank.

   F. Failing to properly monitor the Bank's relationship with Tele-Track in conducting credit reporting services for the Bank.

   G. Operating with an excessive level of adversely classified loans and leases, delinquent loans, and nonaccrual loans.

   H. Operating with an inadequate loan policy.

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

   J. Violating Federal and State banking
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   laws, rules, and regulations, including but not limited to:

    •   The requirement that the prior approval of OBRE be obtained before a change in control is effected, as set forth in sections 18(a) & (b) of the Illinois Banking Act, 205 ILCS §5/18(a) & (b).

    •   The prohibitions against preferential treatment and more than normal risk of repayment contained in section 215.4(a) of Regulation O of the Board Governors of the Federal Reserve System ("Regulation O"), 12 C.F.R. §215.4(a).

    •   The prior approval requirements for loans to bank insiders as set forth in section 215.4(b) of Regulation O, 12 C.F.R. §215.4(b) and section 37 of the Illinois Banking Act, 205 ILCS 5/37, and 38 Illinois Administrative Code section 340.30.

    •   The individual lending limit restrictions of section 215.4(c) of Regulation O, 12 C.F.R. §215.4(c).

    •   The recordkeeping requirements of section 215.8 of Regulation O, 12 C.F.R. §215.8.

    •   The lending limit restrictions of section 23A of the Federal Reserve Act ("section 23A"), 12 U.S.C. §371c(a)(1), and section 35.2(a)(1) of the Illinois Banking Act, 205 ILCS §5/35.2(a)(1).

    •   The collateral requirements of section 23A, 12 U.S.C. §371c(c)(1), and section 35.2(c)(1) of the Illinois Banking Act, 205 ILCS §5/35.2(c)(1).

    •   The substantially same terms requirement of section 23B of the Federal Reserve Act, 12 U.S.C. §371c-1(a)(1)(A).

    •   The notice requirements of section 7(c) of the Bank Service Company Act, 12 U.S.C. §1867(c), and section 48(2.5)(b) of the Illinois Banking Act, 205 ILCS §5/48(2.5)(b), with respect to the performance of bank services by a third party.

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

   L. Offering incentive compensation to management in a manner which encourages management to engage in high risk activities.

   M. Failing to adopt a comprehensive written profit plan and budget.

   N. Operating with an inadequate asset/liability management policy.

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

   [.1]1. (a) Within 90 days from the effective date of this ORDER, the Bank shall increase:

       (i) its level of Tier 1 capital as a percentage of its total assets ("capital ratio") to not less than 7.0 percent calculated as of the end of the preceding calendar quarter; and

       (ii) its level of Total Risk Based capital as a percentage of its total risk based assets ("Total Risk Based capital ratio") to not less than 10.0 percent calculated as of the end of the preceding calendar quarter.

   For purposes of this ORDER, Tier 1 capital, Total Risk Based capital, total assets, and total risk based assets shall be calculated in accordance with Part 325 of the FDIC Rules and Regulations ("Part 325"), 12 C.F.R. Part 325, except that the Bank shall deduct the average outstanding balance of its payday loan portfolio (net of the ALLL provided for the payday loan portfolio) for the calendar quarter from Tier 1 capital, Total Risk Based capital, total assets, and total risk based assets prior to calculating its capital ratio and Total Risk Based capital ratio.

   (b) Within 30 days of the end of each calendar quarter following the effective date of this ORDER, the Bank shall determine from its Report of Condition and Income its capital ratio for that calendar quarter. If the capital ratio as calculated is less than 7.0 percent, the Bank shall, within 90 days of the date of the required determination, increase its capital ratio to not less than 7.0 percent calculated as of the end of that preceding quarterly period.

   (c) Within 30 days from the last day of each calendar quarter following the effective date of this ORDER, the Bank shall determine from its Report of Condition and Income Total Risk Based capital ratio for that calendar quarter. If the Total Risk Based capital ratio is less than 10.0 percent, the Bank shall, within 90 days of the date of the required determination, increase its Total Risk Based capital ratio to not less than 10.0 percent calculated as of the end of that preceding quarterly period.
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   (d) Any 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; or

       (ii) The elimination of all or part of the assets classified "Loss" as of January 22, 2002, 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; or

       (iii) The collection in cash of assets previously charged off; or

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

       (v) Any other means acceptable to the Regional Director of the FDIC Chicago Regional Office ("Regional Director") and the Commissioner of Banks and Real Estate for the State of Illinois ("Commissioner"); or

       (vi) Any combination of the above means.

   (e) 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 and state 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, 550 17th Street, N.W., Washington, D.C. 20429 and to Scott D. Clarke, Assistant Commissioner, Office of Banks and Real Estate, 500 East Monroe, Springfield, Illinois 62701, for their review. Any changes requested to be made in the materials by the FDIC or OBRE shall be made prior to their dissemination.

   (f) In complying with the provisions of this paragraph, the Bank shall provide to any subscriber and/or purchaser of Bank securities written notice of any planned or existing development or 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.

   (g) 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.

   [.2]2. 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 the Commissioner.

   [.3]3. (a) Within 90 days from the effective date of this ORDER, the Bank shall have and retain qualified management. 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, rules, 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 and the 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
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   Regulations, 12 C.F.R. §303.101(b), including any person identified by the FDIC and OBRE, whether or not hired as an employee, with significant influence over, or who participates in, major policymaking decisions of the Bank. Prior to the addition of any individual to the board of directors or the employment of any individual as a senior executive officer, the Bank shall comply with the requirements of section 32 and Subpart F of Part 303 of the FDIC Rules and Regulations, 12 C.F.R. §§ 303.100–303.104. Prior to the addition of any director or the employment of any senior executive officer, the Bank shall also request and obtain the written approval of the Commissioner.

   [.4]4. (a) Within 30 days from the effective date of this ORDER, the Bank shall retain a bank consultant acceptable to the Regional Director and Commissioner. The consultant shall develop a written analysis and assessment of the Bank's management and staffing needs ("Management Plan") for the purpose of providing qualified management for the Bank.

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

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

       (ii) The responsibilities of the consultant;

       (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 is (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 workpapers.

   (c) The Management Plan shall be developed within 60 days from the effective date of this ORDER. The Management Plan shall include, at a minimum:

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

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

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

       (iv) A plan to recruit and hire any additional or replacement personnel with the requisite ability, experience, and other qualifications to fill those officer or staff member positions identified by this paragraph of this ORDER.

   (d) The Management Plan shall be submitted to the Regional Director and Commissioner for review and comment upon its completion. 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 Management Plan, and record its approval in the minutes of the board of directors' meeting. Thereafter, the Bank, its directors, officers, and employees shall implement and follow the Management Plan and/or any subsequent modification.

   [.5]5. (a) Within 45 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 $200,000 which is classified "Substandard" or "Doubtful" in the Joint FDIC and OBRE Report of Examination as of January 22, 2002 ("Report"). A copy of the written plan shall be submitted to the Regional Director and Commissioner upon its completion. 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.


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

       (i) Dollar levels to which the Bank shall reduce each asset within 12, 24, and 36 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 and OBRE.

   (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, an additional credit to, or for the benefit of, any borrower whose loan or other credit has been classified "Substandard," "Doubtful," or is listed for Special Mention 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. 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 45 days from the effective date of this ORDER, and annually thereafter, the board of directors of the Bank shall review the bank's loan policy and procedures for adequacy and, based upon this review, shall make all appropriate revisions to the policy necessary to strengthen lending procedures and abate additional loan deterioration. The revised written loan policy shall be submitted to the Regional Director and Commissioner for review and comment upon its completion.

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

       (i) Prohibiting the use of appraisals performed for the borrower, including, but not limited to, the re-direction of appraisals from any appraiser that has done work for the borrower;

       (ii) Establishing review and monitoring procedures to ensure that all lending personnel are adhering to established lending procedures and that the directorate is receiving timely and fully documented reports on loan activity, including any deviations from established policy;

       (iii) Requiring loan committee review and monitoring of the status of repayment and collection of overdue and maturing loans, as well as all loans classified "Substandard" in the Report;

       (iv) Requiring a written plan to lessen the risk position in each line of credit identified as a problem credit on the Bank's internal loan watch list;

       (v) Prohibiting the capitalization of interest or loan-related expenses unless the board of directors provides, in writing, a detailed explanation of why said deviation is in the best interest of the Bank;

       (vi) Requiring that extensions of credit to any of the Bank's executive officers, directors, or principal shareholders, or to any related interest of such person, be thoroughly reviewed for compliance with all provisions of Regulation O and applicable state law;

       (vii) Addressing concentrations of credit and diversification of risk, including goals for portfolio mix, establishment of limits within loan and other asset categories, and development of a tracking and monitoring system for the economic and financial condition of specific geographic locations, industries, and groups of borrowers;

       (viii) Establishing standards for extending unsecured credit, including limits on volume of credit in relation to the borrowers' cash flow cycle and asset liquidity;

       (ix) Incorporating collateral valuation requirements, including: (a) maximum
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       loan-to-collateral-value limitations; (b) a requirement that the valuation be completed prior to a commitment to lend funds; (c) a requirement for periodic updating of valuations; and (d) a requirement that the source of valuations be documented in Bank records;

       (x) Prohibiting the extension of a maturity date, advancement of additional credit, or renewal of a loan to a borrower whose obligations to the Bank were classified "Substandard," "Doubtful," or "Loss," whether in whole or in part, as of December 31, 2001, or by the FDIC or OBRE in a subsequent Report, without the full collection in cash of accrued and unpaid interest, unless the loans are well secured and/or are adequately supported by current and complete financial information, and the renewal or extension has first been approved in writing by a majority of the Bank's board of directors;

       (xi) Requiring appropriate guidelines for purchasing indirect leases including, but not limited to, consideration of available ratings on leases from major credit rating agencies and of the presence of insurance coverage on leased property; and

       (xii) Addressing any other deficiencies in the Bank's loan policy as identified in the Report.

   (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.

   [.8]8. Within 60 days from the effective date of this ORDER, the Bank shall take all steps necessary to correct the documentation deficiencies listed in the Assets with Credit Data or Collateral Documentation Exceptions pages of the Report.

   [.9]9. Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement risk management procedures with respect to all companies that sell or participate indirect leases and payday loans to the Bank, or conduct credit reporting services for the Bank. These risk management procedures shall address the concerns relating to due diligence and ongoing monitoring as discussed on pages 21 and 22 of the Report.

   [.10]10. As of the effective date of this ORDER, the Bank shall not securitize payday loans; enter into any agreement to underwrite, fund, and sell payday loans to third parties for future securitization or otherwise; or sell participations in payday loans to third parties without notifying the Regional Director and the Commissioner at least 60 days prior to entering into such activity and without receiving a non-objection notification from both the Regional Director and the Commissioner.

   (a) A decision by the Regional Director and the Commissioner not to object to the proposed activity shall be based on the Bank's having adequately minimized the following risks:

       (i) Credit risks, including liability due to Bank-provided credit enhancements, either explicit or implicit, in the form of residual interests or recourse as defined in Appendix A to Part 325 of the FDIC Rules and Regulations ("Part 325"), 12 C.F.R. Part 325, Appendix A;

       (ii) Operational risk, as affected by loan volume, adequacy of personnel and management information systems, reliance on outside parties, and application of financial accounting standards, specifically FAS 140;

       (iii) Legal risks, including but not limited to risks associated with the number of state jurisdictions in which the activity will be conducted and those risks associated with consumer compliance laws, rules, and regulations; and

       (iv) Reputational risk.

   (b) In deciding whether to issue their non-objection to the proposed activity, the Regional Director and the Commissioner will also consider:

       (i) The degree of the Bank's compliance with all other provisions of this ORDER;

       (ii) The reduction in the dollar volume of classified assets as determined by the FDIC or OBRE;

       (iii) The Bank's compliance with the standards and fundamental risk management practices contained in the Interagency Guidance on Asset Securitization Activities dated December 14, 1999; and

       (iv) Any formal policies adopted by the FDIC or OBRE on payday lending or other similar forms of lending.

   [.11]11. As of the effective date of this ORDER, the Bank shall not enter into any
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   new agreements with any broker servicer to offer payday loans, including, but not limited to, Check 'n Go Financial, Inc., or subsidiaries of Check 'n Go Financial, Inc., without the following:

   (a) Assuring that the contract addresses the concerns relating to due diligence and ongoing monitoring as discussed on pages 21 and 22 of the Report.

   (b) Notifying the Regional Director and the Commissioner at least 30 days prior to entering into such an agreement and contract; and,

   (c) Receiving a non-objection notification from the Regional Director and the Commissioner before entering into an agreement or contract. The Regional Director and the Commissioner will base their non-objection determination on the factors identified in Paragraph 10(a) and (b), above.

   [.12]12. As of the effective date of this ORDER, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified "Loss" and 50 percent of all assets classified "Doubtful" as of January 22, 2002 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.

   [.13]13. (a) Within 30 days from the effective date of this ORDER, the Bank shall replenish its ALLL in the amount of at least $4,170,000.

   (b) Within 30 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 and OBRE.

   (c) Within 60 days from the effective date of this ORDER, Reports of Condition and Income required by the FDIC and filed by the Bank subsequent to January 22, 2002 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 and OBRE.

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

   (f) While this ORDER is in effect, the Bank shall submit to the Regional Director and Commissioner a copy of all analysis supporting the calculation of the adequacy of the ALLL. These submissions may be made concurrently with required quarterly progress reports to the FDIC and OBRE.

   [.14]14. (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 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 ensure that the Bank's liquidity needs are met. A copy of the plan and each revision thereof shall also be submitted to the Regional Director and Commissioner upon completion. The initial plan shall include, at a minimum, provisions:

       (i) Establishing contingency plans by identifying alternative courses of action
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       designed to meet the Bank's liquidity needs;

       (ii) Establishing a maximum Net Non Core Funding Dependence ratio, calculated in accordance with the FFIEC Uniform Bank Performance Report;

       (iii) Establishing a plan to reduce the Net Non Core Funding Dependence Ratio to a level at or below the maximum ratio established above within 180 days of the effective date of this ORDER; and

       (iv) Establishing procedures for managing the Bank's sensitivity to interest rate risk which comply with the Joint Agency Statement of Policy on Interest Rate Risk (June 26, 1996), and the Joint Supervisory Statement on Investment Securities and End-user Derivative Activities (April 23, 1998).

   (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.

   [.15]15. (a) Within 90 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law, rule, and regulation listed in the Report.

   (b) Within 60 days from the effective date of this ORDER, the bank shall implement procedures to ensure future compliance with all applicable laws, rules, and regulations.

   [.16]16. (a) Within 45 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 conflict of interest policy to: (i) identify all transactions with Bank insiders; (ii) review proposed and existing transactions with or benefiting insiders of the Bank to determine whether such transactions are in the best interest of the Bank; and (iii) deny or take steps to eliminate any transactions with insiders which are determined not to be in the best interest of the Bank. For purposes of this Paragraph, "insiders" shall be defined as that term is used in Regulation O.

   (b) Within 30 days from the receipt of all such comments from the Regional Director and Commissioner, and after revising the plan as necessary to address such comments, 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 and follow the plan.

   [.17]17. Within 60 days of the effective date of this ORDER, the Board of Directors shall review and revise as necessary the Bank's bonus program to assure that the program encourages safe and sound operation of the Bank. The Bank shall document the review and revision of the bonus program in the minutes of the meeting of the board of directors.

   [.18]18. As of the effective date of this ORDER, the Bank shall not pay any compensation such as a finders fee or any other type of direct or indirect compensation to Dr. James Desnick or any other third party for an introduction to payday lending servicers or any other business opportunity.

   [.19]19. (a) Within 90 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 the next two calendar years. The plan and budget required by this paragraph shall contain formal goals and strategies. consistent with sound banking practices, to control 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) Within 30 days of receipt of comments from the Regional Director and Commissioner, and after consideration of all such comments, the Bank shall approve the revised plan and budget, which approval shall be recorded in the minutes of a board of directors' meeting. Thereafter, the Bank shall implement and follow the revised plan and budget.

   (c) Within 30 days from the end of each calendar quarter following submission 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 board of directors' meeting at which such evaluation is undertaken. A written summary of the evaluation of performance shall be submitted to the Regional Director and Commissioner within
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   ten days of the meeting of the Bank's board of directors.

   [.20]20. 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 Brickyard Bancorp, Inc.'s next shareholder communication; and (2) in conjunction with its notice or proxy statement preceding Brickyard Bancorp, Inc.'s next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, notice, or statement shall be sent to the FDIC Registration and Disclosure Section 550 17th Street, N.W., Washington, D.C. 20429 and to Scott D. Clarke, Assistant Commissioner, Office of Banks and Real Estate, 500 East Monroe, Springfield, Illinois 62701, for review at least 20 days prior to dissemination to shareholders. Any changes requested to be made by the FDIC or OBRE shall be made prior to dissemination of the description, communication, notice, or statement. Disclosure by Brickyard Bancorp, Inc., through Form 10-k and Form 10-QSB filings with the Securities and Exchange Commission describing this ORDER shall constitute compliance with the provisions of this paragraph.

   [.21]21. Within 30 days from the effective date of this ORDER, the Bank shall establish a compliance committee comprised of at least three directors who are not officers of the Bank or principal shareholders, as those terms are defined in sections 215.2(e)(1) and (m) of Regulation O, 12 C.F.R. §§ 215.2(e)(1) and (m). The committee shall monitor compliance with this ORDER and, within 45 days from the effective date of this ORDER and every 30 days thereafter, shall submit to the board of directors for consideration at its regularly scheduled meeting a written report detailing the Bank's compliance with this ORDER. The compliance report shall be incorporated into the minutes of the board of directors' meeting. Establishment of this committee does not in any way diminish the responsibility of the entire board of directors to ensure compliance with the provisions of this ORDER.

   22. Within 30 days from the end of each calendar quarter following the effective date of this ORDER, the Bank shall furnish to the Regional Director and Commissioner written progress reports signed by each member of the Bank's board of directors, detailing the actions taken to secure compliance with the ORDER and the results thereof. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director and Commissioner have, in writing, released the Bank from making further reports.

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

   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 provision has been modified, terminated, suspended, or set aside by the FDIC and OBRE.

   The Order to Cease and Desist issued by the OBRE on August 26, 2002, OBRE No. 2002-BBTC-56, is hereby replaced by this ORDER as of this ORDER's effective date.

   Pursuant to delegated authority.

   Dated: September 9, 2002.



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