Federal Deposit
Insurance Corporation

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   [¶10,001A] In the Matter of The Community Bank of Nebraska, Omaha, Nebraska, Docket No. FDIC 89-163b (8-10-89).

   Bank to cease and desist from operating with an excessive volume of adversely classified assets; engaging in hazardous lending and lax collection practices; engaging in violations of applicable laws and regulations; operating with management whose policies and practices are detrimental to the Bank; operating with deficient loan documentation; engaging in practices which produce inadequate operating income; failing to provide adequate supervision over the affairs of the Bank; operating with inadequate allowance for loan and lease losses; failing to maintain complete minutes of meetings; failing to keep accurate books and records; and failing to maintain adequate controls over assets, records and documents. (This order was terminated by order of the FDIC dated 3-31-92; see ¶ 15,428.)

   [.1] Management—Qualifications
   [.2] Management—Management Plan—Minimum Requirements—Review
   [.3] Board of Directors—Election—Independent Directors
   [.4] Definition—"Independent with Respect to the Bank"
   [.5] Board of Directors—Meetings—Frequency—Minutes
   [.6] Assets—Adversely Classified—Reduce/Eliminate
   [.7] Capital—Equity Capital—Increase/Maintain
   [.8] Allowance for Loan and Lease Losses—Report
   [.9] Loans—Risk Position—Written Plan—Minimum Requirements— Review
   [.10] Loans—Extensions of Credit—Existing Borrowers—Curtail
   [.11] Loan Policy—Revision Required
   [.12] Profit Plan—Minimum Requirements—Review
   [.13] Funds Management Policy—Minimum Requirements—Review
   [.14] Dividends—Restricted
   [.15] Bank Operations—Control Deficiencies—Eliminate/Correct
   [.16] Shareholders—Disclosure—Cease and Desist Order
   [.17] Technical Exceptions—Correct
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   [.18] Violations of Law—Eliminate/Correct
   [.19] Compliance—Progress Reports—Frequency

In the Matter of
THE COMMUNITY BANK OF
NEBRASKA
OMAHA, NEBRASKA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
   The Community Bank of Nebraska, Omaha, Nebraska ("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, 12 U.S.C. § 1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated July 20, 1989, 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 an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.
   The FDIC considered the matter and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices and had violated laws and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Bank, its directors, officers, employees, agents, successors, assigns, and other persons participating in the conduct of the affairs of the Bank, cease and desist from the following unsafe and unsound banking practices and violations of law and regulations:

   A. operating with an excessive volume of adversely classified assets;
   B. engaging in hazardous lending and lax collection practices, including maintaining an excessive volume of adversely classified loans;
   C. engaging in violations of applicable laws and regulations;
   D. operating with management whose policies and practices are detrimental to the Bank;
   E. operating with deficient or inadequate loan or other real estate documentation, including but not limited to current financial statements, insurance coverage, title searches or legal opinions, appraisals, and cash flow and/or operating information;
   F. engaging in practices which produce inadequate operating income;
   G. failing to provide adequate supervision and direction over the affairs of the Bank to prevent unsafe or unsound practices and violations of law and or regulation;
   H. operating with an inadequate allowance for loan and lease losses for the volume, kind and quality of loans held;
   I. failing to maintain accurate and complete minutes of board of director meetings;
   J. failing to keep accurate books and records with respect to correspondent bank accounts; and
   K. failing to maintain adequate controls over bank assets, records and documents.

   [.1] 1. (a)(i) No more than 60 days from the effective date of this ORDER, the Bank shall have and thereafter retain qualified management. Such management shall include a qualified chief executive officer who shall be given stated written authority by the Bank's board of directors, including responsibility for implementing and maintaining the lending policies of the Bank. The chief executive officer shall have an appropriate level of lending, collections,
{{2-28-91 p.C-6.2}}and loan supervision experience to perform the duties assigned to that individual by the Bank's board of directors. The Bank shall promptly notify the Regional Director of the FDIC's Kansas City Regional Office ("Regional Director") and the Director of Banking and Finance for the State of Nebraska ("Director") of the identity of said chief executive officer. The Bank shall promptly notify the Regional Director and the Director in writing of changes in the Bank's management. The notification shall include the name and background of any replacement management personnel and shall be submitted prior to the date the individual assumes the management position.

   (ii) The assessment of whether the Bank has "qualified management" shall be based upon management's conduct, both individual and joint, with respect to the Bank in: (A) complying with the requirements of this ORDER; (B) complying with applicable laws and regulations; and (C) not engaging in any unsafe or unsound banking practice which has an adverse effect on the Bank's asset quality, capital adequacy, earnings, or liquidity.

   (i) identification of both the type and number of officer positions needed to manage and supervise properly 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 each Bank officer, and in particular the chief executive officer, and staff member 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; and
   (iv) a plan of action to recruit and hire any additional or replacement personnel with the requisite ability, experience and other qualifications, which the board of directors determines are necessary to fill Bank officer or staff member positions consistent with the board's analysis, evaluation and assessment as provided in paragraphs 1(b)(i) and 1(b)(iii) of this ORDER.

   [.3] (d)(i) Within 60 days from the effective date of this ORDER, the board of directors shall prepare a list of potential qualified candidates for the board of directors who are independent with respect to the Bank, and shall take such steps as are necessary, consistent with the Bank's bylaws and the laws of the State of Nebraska to cause a majority of the board of directors to be independent with respect to the Bank, including (i) appointing such independent director(s) pursuant to section 8-124.01 of the Reissue Revised Statutes of Nebraska, 1943, R.R.S. 1943 § 8.124.01, to fill existing vacancies on the board of directors, if any, and/or (ii) calling, or otherwise causing to be held, a general and/or special shareholders meeting under said bylaws and laws for the purpose of electing directors such that a majority of the board will be independent with respect to the Bank. The actions taken in identifying potential candidates, including any communication with such individuals, and the steps taken to comply with this section shall be documented and made a part of the minutes of the board of directors. Copies of these board minutes shall be provided to the Regional Director with 90 days from the effective date of this ORDER.
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   (ii) During the period this ORDER is in effect, the board of directors shall not appoint a director to fill any vacancies who is not independent with respect to the Bank unless after such appointment a majority of the board is independent.
   (iii) At the next meeting of the shareholders of the Bank, and at each succeeding meeting of the shareholders at which Bank directors are to be elected, the members of the board of directors who are also shareholders shall nominate and support the election of candidates to the board of directors who are independent with respect to the Bank and who have agreed to stand for election to the board of directors, in such number as are necessary to cause a majority of the board of directors to be and to remain independent with respect to the Bank.

   [.4] (iv) For purposes of this ORDER, an individual who is "independent with respect to the Bank" shall be any individual (1) who is not an officer of the Bank or any of its affiliated organizations and who does not own more than five (5) percent of the outstanding shares of the Bank or any of its affiliated organizations, (2) who is not related by blood, marriage or common financial interest to an officer of the Bank or any of its affiliated organizations or to any stockholder owning more than five (5) percent of the outstanding shares of the Bank or any of its affiliated organizations, (3) who is not indebted to the Bank, directly or indirectly (including the indebtedness of any entity in which the individual has a substantial financial interest), in an amount exceeding five (5) percent of the Bank's total equity capital and allowance for loan and lease losses, and (4) who was not a member of the board of directors as of March 17, 1989.
   (v) The Bank may achieve an independent board as required by this paragraph through expansion of the board and/or resignations, however, nothing in this ORDER requires any specific director or directors to resign his position.

   [.5] (e) Effective the date of this ORDER, the Bank's board of directors shall meet at least monthly. The board shall prepare in advance and shall follow a detailed written agenda at each meeting, which shall include consideration of actions of any committees. Nothing in the foregoing sentence shall preclude the board from considering matters other than those contained in the agenda. Detailed written minutes of all board meetings shall be maintained and recorded on a timely basis.

   [.6] 2. No more than 10 days from the effective date of this ORDER, the Bank shall eliminate from its books, by charge-off, collection, or other proper entries, all assets or portions of assets classified "Loss" as of March 17, 1989, which have not been previously collected, charged off, or otherwise eliminated by other proper entries. Reduction of these assets through use of proceeds of loans made by the Bank does not constitute collection for the purpose of this paragraph.

   [.7] 3. (a)(i) No more than 30 days from the effective date of this ORDER, the Bank shall have equity capital, exclusive of the allowance for loan and lease losses, at or in excess of 6 percent of the Bank's average total assets ("equity capital ratio") and shall continue to maintain its equity capital ratio at or in excess of such level as calculated herein while this ORDER is in effect.

   (ii) For the purposes of calculating the equity capital ratio required by paragraph 3(a)(i) of this ORDER: (A) The Bank's average total assets shall be the average of the sum of the Bank's daily total assets for the month ending June 30 or December 31, whichever nearest precedes the date of calculation; and (B) The terms "equity capital", "allowance for loan and lease losses" and "total assets" shall have the same meaning as those terms have in the prevailing Instructions for Preparation of Reports of Condition and Income. Subsequent to the effective date of this ORDER, the equity capital ratio shall be computed as of June 30 and December 31, as appropriate.

   (b) If, during the period this ORDER is in effect, the ratio specified in paragraph 3(a)(i) declines below 6 percent, the Bank, within 30 days after the date {{2-28-91 p.C-6.4}}on which the said ratio so declined, shall submit a written plan to the Regional Director and the Director for increasing the ratio up to or in excess of 6 percent within 60 days after the written plan is implemented. Upon approval by the Regional Director and the Director, the Bank shall immediately implement the written plan.
   (c) The Banks 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 paragraph 3(a) through 3(c) of this ORDER.

   (b) Reports of Condition and Income required to be submitted by the Bank as of each Report date, as that term is used in the Instructions, between and including March 17, 1989, and the effective date of this ORDER, shall, at a minimum, reflect an allowance for loan and lease losses that should have been maintained in accordance with the Instructions. If necessary to comply with this paragraph 4(b), the Bank shall file amended Reports of Condition and Income within 10 days from the effective date of this ORDER.
   (c) Prior to the submission of any Report of Condition or Report of Income required to be filed by the Bank after the effective date of this ORDER, the board of directors of the Bank shall: (1) review the adequacy of the Bank's allowance for loan and lease losses, (2) provide for an adequate allowance, and (3) accurately report the allowance in any such Report of Condition and Income. The minutes of the board meeting at which such review is undertaken shall indicate the results of the review, including any increases in the allowance, and the basis for determining the amount of allowance provided.

   (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" classifications within 6 and 12 months from the effective date of this ORDER; and (B) provide for the submission of written monthly progress reports to the Bank's board of directors 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.

   [.10] 6. Effective the date of this ORDER, the Bank shall not extend, directly or indirectly, credit to, or for the benefit of, any borrower who has a loan or other extension of credit with the Bank that has been charged off or classified, in whole or in part, "Loss", "Doubtful", or "Substandard", and is uncollected, unless a majority of the Bank's board of directors first (1) determines that such advance is in the best interest of the Bank, (2) determines that the Bank has satisfied the requirements set out in paragraph 5 of this ORDER as to such borrower, and (3) approves such advance. A written record of the board of directors' determination and approval of any advance under the terms of this paragraph 6 shall be maintained in the credit file of the affected borrower(s) as well as the minutes of the board of directors. The requirements of this {{5-31-94 p.C-6.5}}
paragraph 6 do not prohibit the Bank from renewing any credit already extended to the borrower.

   [.11] 7. (a) No more than 60 days from the effective date of this ORDER, the Bank shall revise its written loan policies. The revised written loan policies and any subsequent modification thereto shall be submitted to the Regional Director and the Director for review and comment. No more than 30 days after the receipt of any comment from the Regional Director, the board of directors shall approve the written loan policies and/or any subsequent modification thereto which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank, its directors, officers, and employees shall follow the written loan policies and/or any subsequent modification thereto.
   (b) Paragraph 7(a) notwithstanding, the lending limit established by the Bank for George Rushing, of $75,000 for secured loans and $25,000 for unsecured loans, shall not be increased during the period this ORDER is in effect without the prior written approval of the Regional Director. Loans in excess of such limits may be made with the prior written approval of the board of directors or a committee thereof, consisting of not less than 3 board members exclusive of George Rushing, provided, however, that such approval is well documented in the minutes of the board of directors or of the committee, as applicable, and the loan file of the borrower.

   [.12] 8. (a) No more than 90 days from the effective date of this ORDER, the Bank shall develop a written profit plan consisting of goals and strategies for improving the earnings of the Bank, which written profit plan shall include, at a minimum:

   (i) identification of the major areas in, and means by, which the board of directors will seek to improve the Bank's operating performance;
   (ii) realistic and comprehensive budgets;
   (iii) a budget review process to monitor the income and expenses of the Bank to compare actual figures with budgetary projections; and
   (iv) a description of the operating assumptions that form the basis for, and adequately support, major projected income and expense components.

   [.13] 9. (a) No more than 60 days from the effective date of this ORDER, the Bank shall develop a 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 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.

   [.14] 10. The Bank shall not pay or declare any cash dividends without the prior written consent of the Regional Director and the Director.
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   [.15] 11. No more than 60 days from the effective date of this ORDER, the Bank shall eliminate and/or correct the internal routine and control deficiencies noted on page 6-a of the FDIC's Report of Examination of the Bank as of March 17, 1989.

   [.16] 12. Following the effective date of this ORDER, the Bank shall send to its shareholders a description of this ORDER, (1) in conjunction with the Bank's next shareholder communication, and also (2) 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, statement, or notice shall be sent to the FDIC, Registration and Disclosure Unit, Washington, D.C. 20429, for review at least 20 days prior to dissemination to shareholders. Any changes requested to be made by the FDIC shall be made prior to dissemination of the description, communication, notice, or statement.

   [.17] 13. No more than 60 days from the effective date of this ORDER, the Bank shall correct the technical exceptions on loans noted on pages 2-c and 2-c-1 of the FDIC's Report of Examination of the Bank as of March 17, 1989.

   [.18] 14. No more than 60 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law and regulations committed by the Bank as described on pages 6-1 through 6-3 of the FDIC's Report of Examination of the Bank as of March 17, 1989.

   [.19] 15. The Bank shall furnish written progress reports to the Regional Director and the Director detailing the form and manner of any action taken to secure compliance with this ORDER and the results thereof every 90 days, beginning 90 days from the effective date of the ORDER. In addition, the Bank shall furnish such reports on request of either the Regional Director or the Director. All progress reports and other written responses to this ORDER shall be reviewed by the board of directors of the Bank and made a part of the minutes of the board meeting.
   16. This ORDER shall become effective ten (10) days from the date of its issuance.
   The provisions of this ORDER shall be binding upon the Bank, its directors, officers, employees, agents, successors, assigns, and other persons participating in the conduct of the affairs of the Bank.
   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.
   Dated of issuance: 8-10-89
   Pursuant to delegated authority.