Federal Deposit
Insurance Corporation

{{5-31-96 p.TC-339}}
   [¶16,075] Docket No. FDIC-94-16b (2-21-96)

In the Matter of

MECHANICS SAVINGS BANK
HARTFORD, CONNECTICUT
(Insured State Nonmember Bank)
MODIFICATION OF THE ORDER
TO CEASE AND DESIST
   Mechanics Savings Bank, Hartford, Connecticut ("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 February 22, 1994, Docket No. FDIC-94-16b ("ORDER"), and having been advised of its right to receive a Notice detailing the FDIC's factual support which forms the basis for modifying the ORDER, and of its right to a hearing on such alleged charges under section 8(b)(1) of the Act, 12 U.S.C. § 1818(b)(1), and Part 308 of the FDIC's Rules of Practice and Procedures, 12 C.F.R. Part 308, 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 February 7, 1996, 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:

   3. (a) (i) By no later than December 31, 1996, the Bank shall have Tier 1 capital at or in excess of six (6.0) percent of the Bank's total assets ("Tier 1 leverage capital ratio"), maintaining in the interim (A) a minimum Tier 1 leverage capital ratio of three and one-half (3.5) percent, and (B) a minimum ratio of qualifying total capital to risk-weighted assets ("risk-based capital ratio") of six and one-half (6.5) percent. On December 31, 1996, and continuing thereafter while this ORDER is in effect, the Bank shall have and continue to maintain its Tier 1 leverage capital ratio at or in excess of six (6.0) percent, and its risk based capital ratio shall comply with the FDIC's Statement of Policy on Risk Based Capital found in Appendix A to Part 325 of the FDIC's Rules and Regulations, 12 C.F.R. Part 325, App. A.
   (ii) For purposes of this ORDER, the terms "Tier 1 capital" and "total assets" shall have the meanings ascribed to them in Part 325 of the FDIC's Rules and Regulations, 12 C.F.R. Part 325, and the terms "qualifying total capital" and "risk-weighted assets" shall have the meanings ascribed to them in the FDIC's Statement of Policy on Risk Based Capital found in Appendix A to Part 325 of the FDIC's Rules and Regulations, 12 C.F.R. Part 325, App. A.
   (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 com- {{5-31-96 p.TC-340}}ponent 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 direct contribution of cash by the directors of the Bank;
   (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 Directors' 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 Tier 1 leverage capital ratio specified in paragraph 3(a)(i), such ratio declines below three and one-half (3.5) percent at any time before December 31, 1996, or below six (6.0) percent at any time thereafter, the Bank, within thirty (30) days after the date on which 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 sixty (60) 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) 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.
   (f) In complying with the provisions of paragraph 3(e) 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. The written notice required by this paragraph 3(f) shall be furnished within ten (10) calendar days from the date 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.
   (g) The Bank's Board of Directors 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(f) 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.