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{{5-31-93 p.TC-189}}
   [15,624] Docket No. FDIC-91-206b (3-4-93)

In the Matter of

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

   Ipswich Savings Bank, Ipswich, 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 July 25, 1991, Docket No. FDIC-91-206b ("ORDER"), and having waived those {{5-31-93 p.TC-190}}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 February 24, 1993, whereby solely for the purpose of 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 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 3(a) 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 six (6.0) percent and thereafter 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. Toward this end, the Bank shall have submitted a Capital Plan to the Regional Director and the Commissioner for approval by February 2, 1993. 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 purpose of this ORDER, the terms "Tier 1 capital" and "total assets" shall have the meanings 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.
Paragraph 4(a) is hereby stricken, and in its stead, is inserted the following:
   4. (a) By April 30, 1993, the Board of Trustees shall cause to be developed and implemented, under its supervision, 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 $500,000 and each parcel of other real estate ("ORE") with book value in excess of $500,000 which debt or ORE was classified "Substandard" or "Doubtful," in whole or in part, as of November 9, 1992. The Bank shall add to its written plan of action loans and other real estate in excess of $500,000 which are so classified in any subsequent examination. In developing such plan, the Bank shall, at a minimum:
       (i) in the case of loans: 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.
       (iii) in the case of ORE: evaluate the property and provide cost/benefit analyses of holding the property verses current liquidation value.
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 August 31, 1993 and February 28, 1994; (B) provide for the submission of written quarterly progress reports to the Bank's Board of Trustees for review and notation in the Board minutes; and (C) provide for the submission of written monthly summary progress reports to the Board of Trustees for review and notation in the Board minutes. Exhibit A provides the form for the quarterly progress report. As used in this paragraph 4, "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 the Massachusetts Department of Banking. Payment of loans with the proceeds of other loans made by the Bank, other than loans to qualified third party borrowers, will not constitute "reduction" or "collection" for purposes of this ORDER.
   (b) The written plan of action shall be submitted to the Regional Director and the Commissioner for review and comment by April 30, 1993. No sooner than thirty (30) days, but under no circumstances more than sixty (60) days after such submission, the Board of Trustees {{5-31-93 p.TC-191}}shall approve the written plan of action, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the Board of Trustees. Subsequent modifications to the written plan of action may be made only after giving the Regional Director and the Commissioner written notice of the proposed modification, and after consideration of any responsive comments submitted by the Regional Director and/or the Commissioner within thirty (30) days from their receipt of the notice of proposed modification. No such modification shall become effective until approved by the Board of Trustees, and such approval shall be recorded in the minutes of the Board of Trustees. The Bank, its trustees, officers, and employees shall follow the written plan of action and/or any subsequent modification thereto.
Paragraph 6 is hereby stricken, and in its stead, is inserted the following:
   6. (a) By March 30, 1993, the Bank shall have revised its written loan policy to include, at a minimum:
       (i) goals for portfolio mix and risk diversification;
       (ii) plans for loan monitoring and taking appropriate corrective action, as deemed necessary, on any concentrations of credit;
       (iii) guidelines for treatment of restructured debt and in-substance foreclosure; and
       (iv) procedures to be followed on foreclosure of properties, including definitive plans for the disposal of ORE, projected holding period and a requirement that the holding of a parcel longer than the projected period be explained and documented.
   (b) The revised written loan policy shall be submitted to the Regional Director and the Commissioner for review and comment by March 30, 1993. No sooner than thirty (30) days, but under no circumstances more than sixty (60) days after such submission, the Board of Trustees shall approve the revised written loan policy, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the Board of Trustees. Subsequent modifications of the Board of Trustees. Subsequent modifications to the revised written loan policy may be made only after giving the Regional Director and the Commissioner written notice of the proposed modification, and after consideration of any responsive comments submitted by the Regional Director and/or the Commissioner within thirty (30) days from their receipt of the notice of proposed modification. No such modification shall become effective until approved by the Board of Trustees, and such approval shall be recorded in the minutes of the Board of Trustees. The Bank, its trustees, officers, and employees shall follow the revised written loan policy and/or any subsequent modification thereto.
Paragraph 9 is hereby stricken, and in its stead, is inserted the following:
    9. (a) If not previously accomplished, by March 17, 1993 the Bank shall revise its written profit plan to include more conservative scenarios, including a worst case scenario.
       (b) The revised written profit plan shall be submitted to the Regional Director and the Commissioner for review and comment by March 17, 1993. No sooner than thirty (30) days, but under no circumstances more than sixty (60) days after such submission, the Board of Trustees shall approve the revised written profit plan, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the Board of Trustees. Subsequent modifications to the revised written profit plan may be made only after giving the Regional Director and the Commissioner written notice of the proposed modification, and after consideration of any responsive comments submitted by the Regional Director and/or the Commissioner within thirty (30) days from their receipt of the notice of proposed modification. No such modification shall become effective until approved by the Board of Trustees, and such approval shall be recorded in the minutes of the Board of Trustees. The Bank, its trustees, officers, and employees shall follow the revised written profit plan and/or any subsequent modification thereto.
Paragraph 14 is hereby stricken, and in its stead, is inserted the following:
   14. By March 15, 1993, the Bank shall eliminate and correct the remediable viola- {{5-31-93 p.TC-192}}tions of law and regulations committed by the Bank as described on pages 6 of the FDIC Report of Examination of the Bank as of November 9, 1992 and the Bank shall establish written controls and procedures to ensure compliance with applicable law 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 revised 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 4th day of March, 1993.
   Pursuant to delegated authority.

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