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{{1-31-93 p.TC-164}}
   [15,560] Docket No. FDIC-90-105b (11-24-92)

In the Matter of

RANDOLPH SAVINGS BANK
RANDOLPH, MASSACHUSETTS
(Insured State Nonmember Bank)
MODIFICATION OF THE ORDER
TO CEASE AND DESIST

   Randolph Savings Bank, Randolph, Massachusetts ("Bank"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Bank and of its right to a hearing on such alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b)(1), prior to the issuance of the ORDER TO CEASE AND DESIST dated June 6, 1990, Docket No. FDIC-90-105b ("ORDER"), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A MODIFICATION TO THE ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated November 17, 1992, whereby solely for the purpose of settling this proceeding and without admitting or denying any unsafe or unsound banking practices or violations of law and/or regulations, the Bank consented to the issuance of a MODIFICATION OF THE ORDER TO {{1-31-93 p.TC-165}}
CEASE AND DESIST ("MODIFICATION") by the FDIC.
   The FDIC accepted the CONSENT AGREEMENT and hereby modifies the ORDER TO CEASE AND DESIST as follows:

Paragraph 2 is hereby stricken, and in its stead is inserted the following:

    2. (a) If not previously accomplished, by November 17, 1992, the Bank shall increase its allowance for loan and lease losses ("Reserve") existing as of March 31, 1992 by $305,000 at a minimum.
       (b) Immediately after complying with paragraph 2(a), the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified "Loss" and fifty (50.0) percent of all assets or portions of assets classified "Doubtful" in the joint Commonwealth/ FDIC Report of Examination of the Bank as of April 20, 1992 ("Examination"), which have not been previously collected or charged off. Reduction of these assets through use of proceeds of loans made by the Bank, other than to qualified third party borrowers, does not constitute "collection" or "elimination" for the purpose of this paragraph.
Paragraph 3 is hereby stricken and, in its stead, is inserted the following:
    3. (a) (i) By June 30, 1993, the Bank shall have Tier 1 capital at or in excess of five (5.0) percent of the Bank's total assets ("Tier 1 leverage capital ratio") and thereafter shall continue to maintain its Tier 1 leverage capital ratio at or in excess of such level until December 31, 1993; by December 31, 1993, the Bank shall have a Tier 1 leverage capital ratio at or in excess of five and one half (5.5) percent and thereafter, shall continue to maintain its Tier 1 leverage capital ratio at or in excess of such level until June 30, 1994; by June 30, 1994, the Bank shall have a Tier 1 leverage ratio at or in excess of six (6.0) percent and shall continue to maintain its Tier 1 leverage capital ratio at such level while this ORDER is in effect. Toward this end the Bank shall develop a Capital Plan which will be submitted to the Regional Director and the Commissioner for approval by December 31, 1992. The Capital Plan should address both internal and external sources of capital augmentation, including capital infusions, retention of earnings, restrictions of asset growth and asset sales.
       (ii) For purposes of this ORDER, the terms "Tier 1 capital" and "total assets" shall have the meaning ascribed to them in the revised Part 325 of the FDIC's Rules and Regulations, 12 C.F.R. Part 325, which became effective April 10, 1991.
   (b) In calculating the Bank's Tier 1 leverage capital ratio under paragraph 3(a) initially, the Bank shall first comply fully with paragraphs 2(a) and (b) of this ORDER. Thereafter, such ratio and its component parts shall be determined only after the Bank has made such additions to its Reserve so as to bring the Reserve into compliance with the prevailing requirements of the Instructions and charged off any losses identified subsequent to the Examination.
   (c) Any increase in the Tier 1 leverage capital ratio made by the Bank in order to meet the requirements of paragraph 3(a) of this ORDER may be accomplished by:
       (i) the sale of new offerings of common stock or perpetual preferred stock;
       (ii) the retention of earnings;
       (iii) the collection of all or part of assets classified "Loss" within the Examinations without loss or liability to the Bank. Reductions to loans and leases classified "Loss" shall first be credited to the Bank's Reserve and, if the Board of Trustees' review of the adequacy of the Reserve required by paragraph 2 of this ORDER indicates that such Reserve has a balance in excess of that required for adequacy, any such excess may be transferred to equity capital through a negative provision to the Reserve;
       (iv) the collection in cash of assets previously charged off;
       (v) any combination of the above means; or
       (vi) any other means acceptable to the Regional Director and the Commissioner.
   (d) If, after having achieved the final Tier 1 leverage capital ratio specified in paragraph 3(a)(i), such ratio declines below six (6.0) percent, the Bank, within sixty (60) days after the date on which {{1-31-93 p.TC-166}} said ratio so declined, shall submit a written plan to the Regional Director and the Commissioner for increasing such ratio up to or in excess of six (6.0) percent within one hundred and twenty (120) days after the written plan is implemented. Thereafter, the Bank shall continue to maintain its Tier 1 leverage capital ratio at or in excess of such level as calculated herein while this ORDER is in effect. Upon approval by the Regional Director and the Commissioner, the Bank shall immediately implement the written plan.
   (e) In addition to the requirements of paragraphs 3(a)-(d), the Bank shall comply with the FDIC's Statement of Policy on Risk-Based Capital found in Appendix A to Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325, App. A.
   (f) If all or part of any increase in capital made by the Bank in order to meet the requirements of this paragraph 3 involves an offering, other than an offering deemed not to be a public securities offering pursuant to 17 C.F.R. § 230.506 as currently in effect or as hereafter amended, of the Bank's securities, 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 of this ORDER as well as the circumstances giving rise to the offering, and any other material disclosures necessary to comply with the Federal securities laws. Prior to the sale of the securities, and, in any event not less than twenty (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, Washington, D.C. 20429, for review. Any changes requested to be made in the materials by the FDIC shall be made prior to their dissemination.
   (g) In complying with the provisions of paragraph 3(f) of this ORDER, the Bank shall provide to any subscriber and/or purchaser of Bank stock, written notice of any planned or existing development or other change which is materially different from the information reflected in any offering materials used in connection with the sale of Bank securities if such development or change is planned or occurs prior to the closing of the offering. The written notice required by this paragraph 3(g) shall be furnished within ten (10) calendar days from the date that such material development or change was planned or occurred, whichever is earlier, to every purchaser and/or subscriber of Bank stock who received or was tendered the information contained in the Bank's original offering materials.
   (h) The Bank's Board of Trustees shall maintain in its minutes a written record of all actions taken by the Bank to comply with the capital requirements of paragraphs 3(a) through 3(g) of this ORDER, including, at a minimum, any action to increase its Tier 1 capital by each of the methods specified in paragraphs 3(c)(i) through 3(c)(vi) of this ORDER.

Paragraph 5 (a) is hereby stricken and, in its stead, is inserted the following:

    5. (a) By December 31, 1992, the Board of Trustees shall develop a written plan of action to lessen the Bank's risk position with respect to each borrower who or which had outstanding principal debt owing to the Bank in excess of $200,000 which was classified "Substandard" or "Doubtful," in whole or in part as of April 20, 1992. The Bank shall add to its written plan of action all borrowers with debt in excess of $200,000 so classified in any subsequent examination. 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.
    Based upon such review and evaluation, the written plan of action shall: (A) establish target dollar levels to which the Bank shall reduce the aggregate dollar volume of "Substandard" or "Doubtful" classifications by March 31, 1993, September 30, 1993, and December 31, 1993; and (B) provide for the submission of written monthly progress reports to the Bank's Board of Trustees for review and notation in the Board minutes. As used in this paragraph 5, "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 Commonwealth of Massachusetts Department of Banking. Payment of loans {{2-28-93 p.TC-167}} with proceeds of other loans made by the Bank will not constitute "reduction" or "collection" for purposes of this ORDER, provided that the foregoing shall not apply to loans made by the Bank in compliance with the terms of its lending policy to finance bona fide purchases of properties previously mortgaged to the Bank by third parties not related to or affiliated with the selling borrower.

Paragraph 10 (a) is hereby stricken and, in its stead, is inserted the following:
    10. (a) By January 31, 1993, the Bank shall correct the remediable technical exceptions on loans noted on pages 2-c through 2-c-1 of the Examination.
The following Paragraph 10(d) is hereby added to the ORDER:
    10. (d) By December 31, 1992, Bank management will develop and begin implementation of a plan to improve internal operations to ensure that current financial information for borrowing entities (excluding owner occupied 1-4 family residential properties) endorsers, or guarantors will be contractually required; that procedures will be in place for obtaining and analyzing such information on a regular and continuing basis as needed, but no less than once every twelve months, and that such procedures shall include a systematic process for following up with borrowers if such information is not received promptly.
Paragraph 11 is hereby stricken and, in its stead, is inserted the following:
    11. (a) By January 31, 1993, the Bank shall have eliminated and/or corrected all remediable violations of law and regulations committed by the Bank as described on pages 6-a of the Examination.
       (b) By December 31, 1992, the Bank shall develop and begin implementation of a plan to ensure future compliance with all state and federal governing laws, rules and regulations.
   This MODIFICATION shall become effective immediately upon its issuance.
   The provisions of the ORDER as modified by this MODIFICATION shall be binding upon the Bank and its institution-affiliated parties.
   This MODIFICATION has been reviewed and concurred in by the Commissioner.
   The provisions of the ORDER as modified by this MODIFICATION shall remain effective and enforceable except to the extent that, and until such time as, any provisions of the ORDER shall have been further modified, terminated, suspended, or set aside by the FDIC.
   Dated at Westwood, Massachusetts this 24th day of November, 1992.
   Pursuant to delegated authority.

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