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FDIC Enforcement Decisions and Orders

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{{9-30-93 p.TC-218}}
   [15,684] Docket No. FDIC-92-35b (6-9-93).

In the Matter of

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

   Quincy Savings Bank, Quincy, 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 January 31, 1992, Docket No. FDIC-92-35b ("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 April 15 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:
   (1) The following subparagraphs (f) and (g) are hereby added to paragraph 1 of the ORDER:

       (f) On or before July 31, 1993, the Bank shall have qualified senior management in charge of lending with proven ability and experience in upgrading a low quality loan portfolio in a bank of comparable size. Such management shall have an appropriate level of lending, collection and loan supervision experience of the type and quality of the Bank's loans and shall be provided the necessary written authority to implement the provisions of this ORDER. The qualifications of this management shall be assessed in accordance with the factors listed in paragraph 1(a).
       (g) On or before June 30, 1993, the Board of Directors shall develop a supplement to the management plan (the "supplemental plan") consisting of an analysis and assessment of the Bank's management and staffing of the lending activities of the Bank, which shall include with regard to the lending activities, in addition to the elements specified in subparagraph (b) hereof, a review of the changes in the management of the lending function made as a result of the management plan and of their effectiveness, and an evaluation of the senior management in charge of lending and lending 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 maintenance of the bank in a safe and sound condition. The supplemental plan shall be submitted to the Deputy Regional Director and the Commissioner in accordance with subparagraph (c) hereof.
   (2) Paragraph 2 is hereby stricken and, in its stead, is inserted the following:
{{8-31-93 p.TC-219}}
   2. (a) On or before March 31, 1993, the Bank shall have eliminated from its books, by charge-off or collection, or through the creation of a specific Reserve, all assets or portions of assets classified "Loss" and fifty (50.0) percent of all assets or portions of assets classified "Doubtful" in the FDIC Report of Examination of the Bank as of October 26, 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 loans to qualified third party borrowers, does not constitute "collection" or "elimination" for the purpose of this paragraph.
   (b) Thereafter, the Bank shall maintain its Reserve in accordance with the prevailing requirements of the Instructions for the Reports of Condition and Income ("Instructions").
   (3) The following subparagraph (c) is hereby added to paragraph 4 of the ORDER:
       (c) On or before June 30, 1993, the Bank shall review and revise its written Action Plan. The revised Action Plan will include a plan 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 $100,000 and each parcel of other real estate ("ORE") with book value in excess of $100,000 which debt or ORE was classified "Substandard" or "Doubtful," in whole or in part, as of October 26, 1992. The Bank will submit the revised Action Plan to the Deputy Regional Director and the Commissioner as provided in paragraph 4(b). In developing the Revised Action plan, the Bank shall, in the case of ORE, evaluate the property and provide cost/benefit analyses of holding the property versus current liquidation. The revised Action Plan shall include target dollar levels to which the Bank shall reduce the aggregate dollar volume of "Substandard" and "Doubtful" classifications. The Bank shall add to its Action Plan loans and ORE in excess of $100,000 which are so classified in any subsequent examinations promptly following receipt of the reports of such examinations and shall add other loans and ORE which are classified in such categories as a result of the Bank's loan review procedures from time to time. Except as specifically stated herein, the Revised Action Plan shall comply with all of the requirements of this paragraph 4.
   (4) Paragraph 11 is hereby stricken and, in its stead, is inserted the following:
   11. On or before October 31, 1993, the Bank shall eliminate and/or correct all remediable violations of law and regulations committed by the Bank as described on pages 6-a through 6-a-2 of the Examination, provided that the Bank is not required by this ORDER to charge off or foreclose upon the collateral for any of the loans listed on such pages solely in order to comply with this paragraph.
   (5) The following paragraph 13 is hereby added to the ORDER:
   13. On or before May 31, 1993, the Bank shall develop a written other real estate policy and shall submit such policy to the Deputy Regional Director and the Commissioner for review and comment. No sooner than thirty (30) days, but under no circumstances more than sixty (60) days after such submission, the Board of Directors shall approve the written other real estate policy, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the Board of Directors. Subsequent modifications to the written other real estate policy may be made only after giving the Deputy Regional Director and the Commissioner written notice of the proposed modification, and after consideration of any responsive comments submitted by the Deputy 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 Directors, and such approval shall be recorded in the minutes of the Board of Directors. The Bank, its directors, officers, and employees shall follow the written other real estate policy and/or any subsequent modification thereto.
   (6) The following paragraph 14 is hereby added to the ORDER:
14. (a) On or before May 31, 1993, the Bank shall revise its written funds management policy which shall include, at a minimum:
       (i) the Bank's liquidity needs and plans for insuring that such needs are met on an ongoing basis;
       (ii) goals and strategies for managing {{8-31-93 p.TC-220}}and/or improving the Bank's interest rate risk exposure;
       (iii) monitoring of the interest rate sensitivity of present investments and deposits and projections of the types of investments and deposits to improve such liquidity position; and
       (iv) coordination of the Bank's loan, investment, operating, and budget and profit planning policies with the written funds management policy.
   (b) On or before May 31, 1993 the revised written funds management policy shall be submitted to the Deputy Regional Director and the Commissioner for review and comment. No sooner than thirty (30) days, but under no circumstances more than sixty (60) days after such submission, the Board of Directors shall approve the revised written funds management policy, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the Board of Directors. Subsequent modifications to the written funds management policy may be made only after giving the Deputy Regional Director and the Commissioner written notice of the proposed modification, and after consideration of any responsive comments submitted by the Deputy 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 Directors, and such approval shall be recorded in the minutes of the Board of Directors. The Bank, its directors, officers, and employees shall follow the written funds management policy and/or any subsequent modification thereto.
   (7) This MODIFICATION shall become effective immediately upon its issuance.
   (8) The provisions of the ORDER as modified by this MODIFICATION shall be binding upon the Bank and its institution-affiliated parties.
   (9) This MODIFICATION has been revised and concurred in by the Commissioner.
   (10) 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 9th day of June, 1993.
   Pursuant to delegated authority.

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