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FDIC Enforcement Decisions and Orders



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[12,394] In the Matter of EastBank, Minneapolis, Minnesota, Docket No. 05-046b (4-26-05).

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

[.1] Management—Qualifications Specified

[.2] Capital—Tier 1 Capital Increase/Maintain

[.3] Dividends—Dividends Restricted

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

[.5] Assets—Charge-off or Collection

[.6] Assets—Problem Assets—Reduce Substandard Assets

[.7] Loans—Extensions of Credit—To Borrowers with Existing Adversely Classified Credit
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[.8] Loans—Collections—Written Policy Required

[.9] Loans—Risk Position—Technical Deficiencies Corrected

[.10] Assets—Special Mention—Eliminate Deficiencies

[.11] Loan Committee—Duties Specified

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

[.13] Bank Operations—Internal Review and Control Procedures—Establish

[.14] Loan Concentrations—Reduction Required

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

[.16] Strategic Plan—Preparation of Required

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

[.18] Customer Due Diligence Program—Establishment Required

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

[.20] Board of Directors—Monitoring and Written Confirmation of Compliance with Cease and Desist Order Required

[.21] Progress Report—Written Report Required

In the Matter of
EASTBANK
MINNEAPOLIS, MINNESOTA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-05-046b

EastBank, Minneapolis, Minnesota ("Bank"), having been advised of its right to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices and violations of law and regulations alleged to have been committed by the Bank, and of its right to a hearing on such charges under section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") dated April 21, 2005, with counsel for the Federal Deposit Insurance Corporation ("FDIC"), whereby, solely for the purpose of this proceeding and without admitting or denying any unsafe or unsound banking practices or violations of law or regulations, or any omission or commission by the board of directors, 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 has reason to believe that the Bank has engaged in unsafe and unsound banking practices and violations of law and regulations. The FDIC, therefore, accepts the CONSENT AGREEMENT and issues 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 and regulations:

    A. operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;

    B. operating with a board of directors that has failed to provide adequate supervision over and direction to the management of the Bank;

    C. failing to make provision for an adequate allowance for possible loan and lease losses;

    D. operating with an inadequate allowance for loan and lease losses for the volume, kind, and quality of loans and leases held;

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

      (1) failing to obtain proper loan documentation;


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      (2) failing to obtain adequate collateral;

      (3) failing to establish and monitor collateral margins of secured borrowers;

      (4) failing to establish and enforce adequate loan repayment programs;

      (5) extending and renewing credit without obtaining current and complete financial information; and

      (6) allowing excessive overdraft activity;

    F. operating with an excessive level of adversely classified loans and assets, delinquent loans, and non-accrual loans;

    G. operating with inadequate liquidity in light of the Bank's asset and liability mix;

    H. operating with an inadequate funds management and liquidity policy; and

    I. violating laws and regulations, including:

      (1) the legal lending limit restrictions of the State of Minnesota as set forth in M.S.A. §48.24;

      (2) the Suspicious Activities Reporting requirements of section 353.3(a) of the FDIC Rules and Regulations, 12 C.F.R. §353.3(a); and

      (3) the Bank Secrecy Act requirements of section 326.8 of the FDIC Rules and Regulations, 12 C.F.R. §326.8.

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

MANAGEMENT

[.1] 1. (a)(i) No more than 90 days from the effective date of this ORDER, the Bank shall have and thereafter retain qualified management, who shall be provided the necessary written authority to implement the provisions of this ORDER. At a minimum, such management shall include a chief executive officer with proven ability in managing a bank of comparable size and experience in upgrading a low-quality loan portfolio. Each member of management shall have 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:

    (A) comply with the requirements of this ORDER;

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

    (C) comply with applicable laws and regulations; and

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

(ii) The Bank shall notify the FDIC's Kansas City Regional Office ("Regional Office") and the Commissioner of the Minnesota Department of Commerce ("Commissioner") (collectively "Supervisory Authorities"), in writing, of the resignation or termination of any of the Bank's directors or senior executive officers within ten days of the event. "Senior executive officer" shall be defined as in section 32 of the Act, 12 U.S.C. §1831(i), and section 303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. §303.101(b).

(iii) Prior to the addition of any individual to the board of directors, the employment of any individual as a senior executive officer, or changing the responsibilities of any senior executive officer so that the person would assume a different senior executive officer position, the Bank shall comply with the requirements of section 32 of the Act, 12 U.S.C. §1831(i), and Subpart F of Part 303 of the FDIC Rules and Regulations, 12 C.F.R. §§ 303.100–303.104.

(b) Within 30 days from the effective date of this ORDER, the Bank shall develop a written plan ("Management Plan") for the purpose of providing qualified management for the Bank. The Management Plan shall include, at a minimum:

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

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

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

    (iv) a plan to recruit and hire any additional or replacement personnel with the requisite ability, experience and other


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    qualifications necessary to fill officer or staff member positions consistent with the board's evaluation and assessment pursuant to this paragraph.

(c) The Management Plan (and any subsequent modification) shall be submitted to the Supervisory Authorities for review and comment. No more than 30 days from the receipt of any comments from the Regional Office, and after consideration of such comments, the board of directors shall approve the written management plan (or any subsequent modification), which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall implement and follow the written management plan (or any properly approved subsequent modification).

CAPITAL ADEQUACY

[.2] 2. (a) For purposes of this ORDER, "capital ratio" means the level of Tier 1 capital as a percentage of total assets. Tier 1 capital and total assets shall be calculated in accordance with Part 325 of the FDIC Rules and Regulations ("Part 325"), 12 C.F.R. Part 325.

(b) After appropriate entries for an adequate allowance for loan and lease losses ("ALLL") are made in accordance with the requirements of this ORDER, but no later than 30 days from the effective date of this ORDER, the Bank shall have and thereafter maintain a capital ratio in excess of 8 percent.

(c) Within 30 days from the last day of each calendar quarter after December 31, 2004, the Bank shall determine, from its Reports of Condition and Income, its capital ratio for that calendar quarter. If its capital ratio is less than 8 percent, within 60 days from said required determination, the Bank shall submit a written plan to the Supervisory Authorities, describing the means and timing by which the Bank shall increase such ratio up to or in excess of 8 percent.

(d) 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.

RESTRICTION ON DIVIDENDS

[.3] 3. The Bank shall not declare or pay any cash dividend, capital distribution or earnings distribution without the prior written consent of the Supervisory Authorities.

ALLOWANCE FOR LOAN AND LEASE LOSSES

[.4] 4. (a) For purposes of this ORDER and in making the determinations mandated by this paragraph, the board of directors of the Bank shall consider the Federal Financial Institutions Examination Council's Instructions for Preparation of Consolidated Reports of Condition and Income, the Interagency Statement of Policy on the Allowance for Loan and Lease Losses ("ALLL") and any analysis of the Bank's ALLL provided by the FDIC.

(b) Within 30 days from the effective date of this ORDER, the Bank shall replenish its ALLL in the amount of at least $644,000.

(c) Prior to the submission of any Report 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 each review is undertaken shall indicate the findings of the review, the amount of increase in the ALLL recommended, if any, and the basis for determination of the amount of the ALLL provided.

(d) The Bank shall submit to the Supervisory Authorities the analysis supporting the determination of the adequacy of its ALLL. These submissions shall be made with the progress reports otherwise required by this ORDER.

(e) The Bank shall provide for an adequate ALLL prior to any Tier 1 capital determinations required by this ORDER.

ASSET CHARGE-OFF

[.5] 5. No more than 10 days from the effective date of this ORDER, the Bank shall:

(a) eliminate from its books, by charge-off or collection, all assets or portions of assets classified "Loss" as of November 29, 2004; and

(b) eliminate from its books, by charge-off or collection, 50 percent of all assets or portions of assets classified "Doubtful" as of November 29, 2004, that have not been previously collected or charged off.
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Elimination or reduction of assets with the proceeds of other Bank extensions of credit is not considered collection for the purpose of this paragraph.

REDUCTION OF SUBSTANDARD ASSETS

[.6] 6. (a) For purposes of this ORDER and as used in this paragraph, "reduce" means to collect, charge off, or improve the quality of "Substandard" assets so as to warrant removal of any adverse classification by the FDIC and the term "asset" shall include the Bank's entire direct or indirect lending relationship with the borrower, including extensions of credit to related interests, as that term is defined in 12 C.F.R. §215.2(n), of the borrower. Furthermore, in developing the plan mandated by this paragraph, the Bank shall, at a minimum, review the financial position of each such borrower, including source of repayment, repayment ability, and alternative repayment sources, and evaluate the available collateral for each such credit, including possible actions to improve the Bank's collateral position.

(b) Within 60 days from the effective date of this ORDER, the Bank shall submit to the Supervisory Authorities, for review and comment, a written plan to reduce the Bank's risk position in each asset in excess of $75,000 which is classified "Substandard" or "Doubtful" in the FDIC's Report of Examination as of November 29, 2004. Within 30 days from the receipt of any comment from the Regional Office, and after due consideration of any recommended changes, the Bank shall approve the plan, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank shall implement and follow the plan.

(c) The plan mandated by this paragraph shall include, but not be limited to, the following:

    (i) the dollar levels to which risk in each classified asset will be reduced;

    (ii) a description of the risk reduction methodology to be followed;

    (iii) provisions for the submission of monthly written progress reports to the Bank's board of directors;

    (iv) provisions requiring the board of directors to review the progress reports; and

    (v) provisions requiring the board review to be recorded by notation in the minutes of the board of directors.

PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS

[.7] 7. The Bank shall not, directly or indirectly, extend any additional credit to, or for the benefit of, any borrower who is already obligated in any manner to the Bank on any extension of credit that has been charged-off the books of the Bank or classified "Loss," in whole or in part, so long as such credit remains uncollected. Additionally, the Bank shall not, directly or indirectly, extend any additional credit to, or for the benefit of, any borrower whose loan or other credit has been classified "Substandard" or "Doubtful," or is listed for Special Mention, and remains uncollected, unless the board of directors adopts a detailed written statement giving the reasons why such extension of credit is in the best interest of the Bank. A copy of such statement shall be placed in the appropriate loan file and shall be incorporated in the minutes of the board of directors.

REDUCTION OF DELINQUENCIES

[.8] 8. Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement a written plan for the reduction and collection of delinquent loans. The plan shall include, but not be limited to, provisions which:

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

    (b) delineate areas of responsibility;

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

    (d) establish dollar levels to which the Bank shall reduce delinquencies within three and six months from the effective date of this ORDER; and

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

Additionally, any exceptions to the written plan for the reduction and collection of delinquent loans shall be supported by a detailed written statement by the board of directors giving the reasons why such exception is in the best interest of the Bank. A copy of such statement shall be placed in the
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appropriate loan file and shall be incorporated in the minutes of the board of directors.

CORRECTION OF TECHNICAL DEFICIENCIES

[.9] 9. (a) Within 60 days from the effective date of this ORDER, the Bank shall correct the deficiencies in the assets noted on pages 56 through 66, "Assets with Credit Data or Collateral Documentation Exceptions," in the FDIC Report of Examination of the Bank as of November 29, 2004. "Correct" shall include documented attempts to collect missing information.

(b) Within 30 days from the effective date of this ORDER, the Bank shall implement a program to ensure its credit files contain complete, adequate and current documentation.

SPECIAL MENTION

[.10] 10. Within 60 days from the effective date of this ORDER, the Bank shall correct all deficiencies in the assets listed for "Special Mention" in the FDIC Report of Examination of the Bank as of November 29, 2004.

LOAN COMMITTEE

[.11] 11. (a) The Bank's loan committee shall meet at least monthly. The loan committee shall include at least one director who is not an officer of the Bank or any bank subsidiary.

(b) The loan committee shall, at a minimum, perform the following functions:

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

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

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

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

      (C) be maintained in the borrower's credit file;

    (iii) review and monitor the status of repayment and collection of past due and maturing loans, of all loans classified "Substandard" or "Doubtful" in the FDIC's Report of Examination as of November 29, 2004, or subsequent regulatory examination, and of all loans included on the Bank's internal watch list; and

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

(c) All loan committee minutes shall be submitted to, and reviewed by, the Bank's board of directors at their next scheduled meeting.

LOAN POLICY

[.12] 12. (a) Within 30 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.

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

    (i) establishing officer lending limits and limitations on the aggregate level of credit to any one borrower which can be granted without the prior approval of the Bank's loan committee;

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

    (iii) requiring that all extensions of credit originated or renewed by the Bank:

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

      (B) have current financial information, profit and loss statements or copies of tax returns, and cash flow projections, which information shall be maintained throughout the term of the loan; and

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

    (iv) 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" and "Doubtful" in reports of examination by the Supervisory Authorities;


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    (v) 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;

    (vi) 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," whether in whole or in part, in reports of examination by the Supervisory Authorities, 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;

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

    (viii) 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; and

    (ix) requiring that collateral appraisals be completed prior to the making of secured extensions of credit, and that no less than annual collateral valuations be performed for all secured loans.

(c) The revised loan policy (and any subsequent modification) shall be submitted to the Supervisory Authorities for review and comment. No more than 30 days from the receipt of any comments from the Regional Office, and after consideration of such comments, the board of directors shall approve the revised loan policy (or any subsequent modification), which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall follow the revised loan policy (or any properly approved subsequent modification).

LOAN REVIEW SYSTEM

[.13] 13. (a) Within 90 days of the effective date of this ORDER, the Bank shall establish an effective internal loan review and grading system ("System") to periodically review the Bank's loan portfolio and identify and categorize problem credits. At a minimum, the System shall require:

    (i) evaluation of the overall quality of the loan portfolio;

    (ii) the identification and amount of each delinquent loan;

    (iii) the identification of loans that warrant the special attention of management, and for each loan identified, a statement of the amount and an indication of the degree of risk that the loan will not be fully repaid according to its terms and the reason(s) why the particular loan merits special attention;

    (iv) the identification of credit and collateral documentation exceptions;

    (v) the identification and status of each violation of law, rule or regulation;

    (vi) the identification of loans not in conformance with the Bank's lending policy and exceptions to the Bank's lending policy;

    (vii) the identification of insider loan transactions; and

    (viii) a mechanism for reporting periodically, no less than quarterly, to the board of directors on the status of each loan identified and the action(s) taken by management.

(b) A written report of the Bank's internal loan review shall be submitted to the board of directors quarterly, as well as documentation of the action taken by the Bank to collect or strengthen assets identified as problem credits. The quarterly internal loan review and grading report shall be kept with the minutes of the board of directors.

REDUCTION OF CONCENTRATIONS OF CREDIT

[.14] 14. Within 30 days from the effective date of this ORDER, management will review concentrations of credit to identify level of risk and formulate and adopt a written plan of action to manage the risk of each concentration. This will be accomplished, where appropriate, through strengthened administration or risk reduction. The written plan of action shall be included in the affected loan file(s).
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FUNDS MANAGEMENT PLAN

[.15] 15. (a) Within 60 days from the effective date of this ORDER, the Bank shall submit to the Supervisory Authorities, for review and comment, a written funds management plan addressing liquidity, contingent funding, and asset/liability management. Within 30 days from the receipt of any comments from the Regional Office, and after due consideration of any recommended changes, the board of directors shall approve the funds management plan, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank shall implement and follow the plan.

(b) The plan shall include, at a minimum, provisions:

    (i) establishing an acceptable range for its noncore funding ratio as computed in the Uniform Bank Performance Report;

    (ii) establishing a minimum liquidity ratio and defining how the ratio is to be calculated;

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

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

    (v) addressing the proper use of borrowings and providing for appropriate tenor commensurate with the use of the borrowed funds, addressing concentration of funding sources, pricing and collateral requirements, with specific allowable funding channels identified; i.e., brokered deposits, internet deposits, federal funds purchased and other correspondent borrowings;

    (vi) establishing long-term liquidity goals;

    (vii) establishing a management reporting mechanism to project liquidity needs, monitor compliance with the Bank's funds management plan, and define approval procedures for exceptions to policy limits; and

    (viii) incorporating the recommendations detailed in the November 29, 2004, FDIC Report of Examination for improving the Bank's Funds Management & Liquidity Policy.

(c) The Bank shall review the funds management plan for adequacy at least annually and, based upon such review, shall revise the plan if necessary to strengthen funds management procedures and maintain adequate provisions to meet the Bank's liquidity needs. The revised funds management plan shall be submitted to the Supervisory Authorities for review and comment. Within 30 days from the receipt of any comments from the Regional Office, and after due consideration of any recommended changes, the board of directors shall approve the revised funds management plan, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall follow the revised funds management plan.

STRATEGIC PLAN, PROFIT PLANS, AND BUDGETS

[.16] 16. (a) Within 90 days from the effective date of this ORDER, the Bank shall submit to the Supervisory Authorities a written strategic plan that establishes the Bank's goals and objectives, how the Bank will organize its resources to meet its goals, and how the Bank will measure progress under the plan. At a minimum, the strategic plan shall include:

    (i) a description of the Bank's business and any special marketing niche, including the Bank's products, market, services, and nontraditional activities;

    (ii) a marketing plan providing detailed information on:

      (A) product strategy for products and services to be offered;

      (B) the Bank's intended market and the demographics of the target market population;

      (C) current economic characteristics of the target market; and

      (D) planned approach to reach the target market.

    (iii) capital and earnings goals and the means to achieve those goals, including a written profit plan and realistic and comprehensive budgets for all categories of income and expense for calendar years 2005 and 2006.

(b) Within 30 days from the end of each calendar quarter following adoption of the strategic plan required by this paragraph, the Bank's board of directors shall evaluate the Bank's actual performance against the strategic plan, including the profit plan and budget, and record the results of the evaluation and any actions taken by the Bank as a result
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of the evaluation in the minutes of the board of directors.

(c) Within the first 30 days of each calendar year after 2006, the board of directors shall develop and submit to the Supervisory Authorities a written profit plan consisting of goals and strategies for improving the earnings of the Bank for such calendar year, including a realistic and comprehensive budget for all categories of income and expense and a description of how the Bank will monitor adherence to the plan.

VIOLATIONS OF LAW AND REGULATION

[.17] 17. Within 30 days from the effective date of this ORDER, the Bank shall implement procedures to ensure future compliance with all applicable laws and regulations.

SUSPICIOUS ACTIVITY REPORTING AND CUSTOMER DUE DILIGENCE

[.18] 18. (a) Within 60 days from the effective date of this ORDER, the Bank shall submit to the Supervisory Authorities for review an acceptable written due diligence program designed to ensure the identification and timely, accurate, and complete reporting of all known or suspected violations of law and suspicious activities against or involving the Bank to law enforcement and supervisory authorities, as required by the suspicious activity reporting provisions of 353.3 of the FDIC Rules and Regulations, 12 C.F.R. §353.3. At a minimum, the program shall include:

    (i) a risk-focused assessment of the Bank's customer base to:

      (A) identify the categories of customers whose transactions and banking activities are routine and usual; and

      (B) determine the appropriate level of enhanced due diligence necessary for those categories of customers that the Bank has reason to believe pose a heightened risk of illicit activities at, or through, the Bank;

    (ii) for those customers whose transactions require enhanced due diligence, additional procedures to:

      (A) determine the appropriate documentation necessary to confirm the business activities of the customer; and

      (B) understand the normal and expected transactions of the customer; and

    (iii) procedures designed to ensure proper identification and reporting of all known or suspected violations of law and suspicious transactions, including, but not limited to:

      (A) effective monitoring of customer accounts and transactions;

      (B) detailed comprehensive procedures designed to ensure that suspicious activity is consistently identified and reported across business lines;

      (C) procedures to ensure that matters evaluated for risk of loss or litigation are also reviewed for potential suspicious activity;

      (D) appropriate participation by senior management in the process of identifying, reviewing, and reporting potentially suspicious activity; and

      (E) adequate referral of information about potentially suspicious activity through appropriate reporting lines and levels of management.

DISCLOSURE TO SHAREHOLDERS

[.19] 19. Following the effective date of this ORDER, the Bank shall send, or otherwise furnish, to its shareholders a description of this ORDER in conjunction with the Bank's next shareholder communication, and in conjunction with its notice or proxy statement preceding the Bank's next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, notice or statement shall be sent to the FDIC Registration and Disclosure Section, 550 17th Street, N.W., Room F-6043, Washington, D.C. 20429, for review at least 20 days prior to dissemination to shareholders. Any requests for changes made by the FDIC shall be made prior to dissemination of the description, communication, notice or statement.

COMPLIANCE WITH ORDER

[.20] 20. Within 30 days from the effective date of this ORDER, the Bank's board of directors shall have in place a program that will provide for monitoring of the Bank's compliance with this ORDER. Following the adoption of said program, the Bank's board of directors shall review the Bank's compliance with this ORDER and record its review in the minutes of each regularly scheduled board of directors' meeting.
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PROGRESS REPORTS

[.21] 21. Within 30 days from the end of each calendar quarter following the effective date of this ORDER, the Bank shall furnish written progress reports to the Supervisory Authorities, signed by each member of the Bank's board of directors, detailing the form and manner of any actions taken to secure compliance with this ORDER. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the FDIC has, in writing, released the Bank from making further reports.

The effective date of this ORDER shall be immediately 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 to the extent that, and until such time as, any provision has been modified, terminated, suspended, or set aside by the FDIC.

Issued Pursuant to Delegated Authority

Dated: April 26, 2005



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