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FDIC Enforcement Decisions and Orders

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   [10,149] In the Matter of Dakota Heritage State Bank, Chancellor, South Dakota, Docket No. FDIC-90-249b (12-7-90).

   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 inadequate loan documentation; engaging in practices which produce inadequate operating income; failing to provide adequate supervision over the affairs of the Bank; paying excessive cash dividends; operating with inadequate allowance for loan and lease losses; and failing to submit Reports of Condition and Income as required. (This order was terminated by order of the FDIC dated 3-2-92; see ¶ 15,398.)

   [.1] Management — Qualifications — Review
   [.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
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   [.6] Capital—Equity Capital—Increase/Maintain—Review
   [.7] Loan Loss Reserve—Maintain
   [.8] Assets—Adversely Classified—Reduce/Eliminate—Review
   [.9] Loans—Risk Position—Reduce—Plan—Minimum Requirements
   [.10] Loans—Extensions of Credit—Existing Borrowers—Curtail
   [.11] Loans—Accrual of Interest—Overdue
   [.12] Technical Exceptions—Correct
   [.13] Loan Policy—Revision—Minimum Requirements
   [.14] Profit Plan—Minimum Requirements—Review
   [.15] Investment Policy—Revision—Minimum Requirements—Review
   [.16] Funds Management Policy—Revision—Minimum Requirements—Review
   [.17] Audit—External—FDIC Policy—Minimum Requirements—Review
   [.18] Affiliated Organizations—Transactions Restricted
   [.19] Dividends—Restricted
   [.20] Violations of Law—Eliminate/Correct
   [.21] Bank Branches—Appraisal Required
   [.22] Shareholders—Disclosure—Cease and Desist Order
   [.23] Compliance—Progress Reports—Frequency

In the Matter of

DAKOTA HERITAGE STATE BANK
CHANCELLOR, SOUTH DAKOTA
(Insured State Nonmember Bank)
ORDER TO CEASE
AND DESIST

   Dakota Heritage State Bank, Chancellor, South Dakota ("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) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(b), 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 November 15, 1990, 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 institution-affiliated parties, as that term is defined in Section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns cease and desist from the following unsafe and unsound banking practices and violations of law and/or 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 documentation, including but not limited to current financial statements, insurance coverage, title searches or legal opinions, and cash flow and/or operating information;
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   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 regulations;
   H. paying excessive cash dividends in relation to the Bank's net income and/or capital position;
   I. operating with an inadequate allowance for loan and lease losses for the volume, kind and quality of loans held; and
   J. failing to submit Reports of Condition and Income in accordance with prevailing instructions.
   IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

   [.1] 1. (a) (i) No more than 90 days from the effective date of this ORDER, the Bank shall have and 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 policies of the Bank. The chief executive officer shall have an appropriate level of 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") of the identity of said chief executive officer. Prior to the addition of any individual to the board of directors or the employment of any individual as a senior executive officer, the Bank shall comply with the requirements of section 32 of the Act, 12 U.S.C. § 1831i; and section 303.14 of the FDIC's Rules and Regulations, 54 Fed. Reg. 53040 and 53043 (to be codified at 12 C.F.R. § 303.14).

       (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.

   [.2] (b) The board of directors shall in no more than 60 days from the effective date of this ORDER develop a written analysis and assessment of the Bank's management and staffing needs ("management plan"), which shall include, at a minimum:
       (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.
   (c) The written management plan and any subsequent modification thereto shall be submitted to the Regional Director for review and comment. No more than 30 days from the receipt of any comment from the Regional Director, and after consideration of such comment, the board of directors shall approve the written management plan and/or any subsequent modification thereto which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall implement and follow the written management plan and/or any subsequent modification.

   [.3] (d) (i) Within 90 days from the effective date of this ORDER, the board {{2-28-91 p.C-677}}
   of directors shall prepare a list of potential candidates for the board of directors for consideration by the shareholders of the Bank. The list of candidates shall include individuals who are independent with respect to the Bank, in such number that, if elected, would cause a majority of the board of directors to be independent with respect to the Bank. The actions taken in identifying potential candidates, including any communication with such individuals, 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 within 120 days from the effective date of this ORDER.

       (ii) 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] (iii) For purposes of this ORDER, an individual who is "independent with respect to the Bank" shall be any individual (A) who is not an officer of the Bank, any subsidiary of the Bank, or any of its affiliated organizations and who does not own more than 5 percent of the outstanding shares of the Bank or any of its affiliated organizations, (B) who is not related by blood, marriage or common financial interest to an officer of the Bank, any subsidiary of the Bank, or any of its affiliated organizations or to any stockholder owning more than 5 percent of the outstanding shares of the Bank, any subsidiary of the Bank, or any of its affiliated organizations, and (C) 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 5 percent of the Bank's total equity capital and allowance for loan and lease losses.

       [.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. (a) (i) During the period this ORDER is in effect, the Bank shall have total equity capital, exclusive of the allowance for loan and lease losses required to be maintained in accordance with paragraph 3 of this ORDER, at or in excess of 6 percent of the Bank's total assets ("equity capital ratio") and shall thereafter maintain its equity capital ratio at or in excess of such level as calculated herein while this ORDER is in effect. The terms "total equity capital" and "total assets" shall have the same meaning as those terms have in the prevailing Instructions for Preparation of Reports of Condition ("Instructions").
       (ii) The equity capital ratio shall be calculated as of Report Date, as that term is used in the Instructions. For the purpose of calculating the equity capital ratio as of a given Report Date:
       (A) total equity capital shall be the amount of total equity capital required to be included in the Bank's Report of Condition for the Report Date;
       (B) total assets shall be the average of total assets required to be included in the Bank's Report of Condition for the Report Date and is found in the Call Report Schedule of quarterly averages;
       (C) total equity capital and total assets reported in the Bank's Report of Condition are to be calculated in accordance with the prevailing Instructions; and
       (D) the Bank shall have an adequate allowance for loan and lease losses in accordance with paragraph 3 of this ORDER.
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       (b) If during the period this ORDER is in effect, the Bank's equity capital ratio, exclusive of the allowance for loan and lease losses, declines below 6 percent, the Bank, within 30 days after the date on which such ratio declined, shall:
         (i) develop a written plan acceptable to the Regional Director to increase such equity capital ratio up to or in excess of 6 percent, which plan shall include a date specific by which the ratio shall be equaled or exceeded; and
         (ii) submit such written plan to the Regional Director for approval.
       The Bank shall implement the approved plan upon receipt of the Regional Director's approval. From and after the date specified in such plan upon which the equity capital shall equal or exceed 6 percent, the Bank shall maintain such ratio, exclusive of the allowance for loan and lease losses, at or in excess of 6 percent as calculated herein while this ORDER is in effect.
       (c) 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 2(a) and 2(b) of this ORDER.

   [.7] 3. (a) The Bank shall maintain an allowance for loan and lease losses in accordance with the prevailing requirements of the Instructions.
       (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 June 30, 1990, 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, 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; (i) review the adequacy of the Bank's allowance for loan and lease losses, (ii) provide for an adequate allowance, and (iii) 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.

   [.8] 4. 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 April 30, 1990. Reduction of these assets through use of proceeds of loans made by the Bank does not constitute collection for the purpose of this paragraph.

   [.9] 5. (a) Within 30 days from the effective date of this ORDER, the board of directors shall develop a written plan of action to lessen the Bank's risk position in each line of credit aggregating $40,000 or more which was classified "Substandard" as of April 30, 1990. 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" 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, "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.
   (b) The written plan of action described by paragraph 5(a) and any subsequent modification thereto shall be submitted to the Regional Director and the South Dakota Director of Banking and Finance ("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 plan of action, which approval shall be recorded in the minutes of the board of directors. There- {{2-28-91 p.C-679}}after, the Bank and its institution-affiliated parties shall follow the written plan of action and/or any subsequent modification.

   [.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 (a) determines that such advance is in the best interest of the Bank, (b) determines that the Bank has satisfied the requirements set out in paragraph 5 of this ORDER as to such borrower, and (c) approves such advance. A written record of the board of directors' determination and approval of any advance under the terms of this paragraph 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 paragraph do not prohibit the Bank from renewing any credit already extended to the borrower.

   [.11] 7. Effective the date of this ORDER, the Bank shall not accrue interest on any loan that is, or becomes, 90 days or more delinquent as to principal or interest, unless the loan is both well secured and in the process of collection; "well secured" and "in the process of collection" shall have the same meaning as those terms have in the prevailing Instructions for the Reports of Condition and Income. The Bank shall reverse on its books all previously accrued but uncollected interest on any loan that has ceased to accrue interest pursuant to this provision.

   [.12] 8. No more than 60 days from the effective date of this ORDER, the Bank shall correct the technical exceptions on loans noted on page 2-d of the FDIC's Report of Examination of the Bank as of April 30, 1990, except for the following technical exceptions: the casualty insurance for the pre-1980 vehicles pledged on loans to Alan Armstrong, Robert Hegr and Sharon Kelley; the property statement of borrower Martin Benning and of the guarantor on the loan to Myron Neeman; the income tax returns or cash flow statements of borrower Darrin Ihnen; and, the profit and loss statement for borrower Town and Country Electric, Inc. The Bank shall take all reasonable measures to correct the technical exceptions on loans to the excepted borrowers, and shall document the measures taken in the minutes of the Bank's board of directors.

   [.13] 9. No more than 60 days from the effective date of this ORDER, the Bank shall revise its written loan policies to, at a minimum, correct those deficiencies noted on page 6 of the FDIC's Report of Examination of the Bank as of April 30, 1990. The revised written loan policies and any subsequent modification thereto shall be submitted to the Regional Director and 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 and its institution-affiliated parties shall follow the written loan policies and/or any subsequent modification thereto.

   [.14] 10. (a) No more than 60 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 assume both the consummation of the sale of the Bank's Brandon and Valley Springs branches ("branches") and, in the alternative, the Bank's retention of the branches, and which 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; and
   (b) The written profit plan and any subsequent modification thereto shall be submitted to the Regional Director and the Director for review and comment.
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    No more than 30 days after the receipt of any comment from the Regional Director, the board of directors shall approve the written profit plan and any subsequent modification thereto, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall follow the written profit plan and/or any subsequent modification thereto.

   [.15] 11. No more than 30 days from the effective date of this ORDER, the Bank shall revise its written investment policy to, at a minimum, correct deficiencies noted on page 6 of the FDIC's Report of Examination of the Bank as of April 30, 1990. The written investment policy and any subsequent modification thereto shall be submitted to the Regional Director and the Director for review and comment. No more than 30 days from the receipt of any comment from the Regional Director, the board of directors shall approve the written investment plan and any subsequent modification thereto, which approval shall be recorded in the minutes of the board. Thereafter, the Bank and its institution-affiliated parties shall follow the written investment plan and/or any subsequent modification thereto.

   [.16] 12. (a) No more than 30 days from the effective date of this ORDER, the Bank shall revise its written funds management policy which shall, at a minimum:

       (i) establish adequate recordkeeping systems to track the volume of (A) rate-sensitive assets and (B) rate-sensitive liabilities. Rate-sensitive assets and liabilities are generally defined as those that either mature or can be repriced during a specified time period (90 days, 180 days, one year);
       (ii) establish a range of acceptable ratios for rate-sensitive assets to rate-sensitive liabilities sufficient to protect the Bank against excessive interest-rate risk and ensure that an adequate net interest margin is maintained;
       (iii) establish adequate recordkeeping systems to track the volume of (A) stable or core deposits and (B) volatile deposits;
       (iv) establish guidelines for offsetting a substantial portion of the Bank's volatile deposits and borrowings with liquid, short-term assets;
       (v) establish investment guidelines for funds derived from negotiable-rate certificates of deposit and borrowings, including a maximum large liability dependency ratio. A large liability dependency ratio means the percentage of loans plus other long-term earning assets that may be funded by negotiable-rate certificates of deposit and borrowings;
       (vi) establish a range of acceptable loan-to-deposit ratios, taking into account seasonal deposit fluctuations;
       (vii) establish a borrowing policy which addresses: (A) when or under what conditions the Bank may borrow. (B) maximum amounts that may be borrowed, (C) a list of acceptable creditors, and (D) which officers are authorized to borrow;
       (viii) establish contingency plans for meeting large, unexpected withdrawals, which should include: (A) curtailing lending activity with priority given to specific types of credit and (B) establishing lines of credit with other financial institutions which will advance funds on short notice; and
       (ix) establish a funds-management committee to meet at least monthly to determine how best to allocate the Bank's available funding sources among various asset categories after reviewing: (A) the Bank's liquidity position, (B) outstanding commitments such as loan commitments and letters of credit, and (C) the Bank's rate-sensitivity position and net interest margin.
   (b) The funds management policy shall be coordinated with the Bank's loan, investment, operating, and budget and profit planning policies.
   (c) The written funds management policy and any subsequent modification thereto shall be submitted to the Regional Director and the Director for review and comment. No more than 30 days from the receipt of any comment from the Regional Director, the board of directors shall approve the written funds management policy and any subsequent modification thereto, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall follow the written funds management policy {{2-28-91 p.C-681}}and/or any subsequent modification thereto.

   [.17] 13. (a) No more than 90 days from the effective date of this ORDER, the Bank shall finalize and implement a written auditing procedure in accordance with the FDIC's Statement of Policy Regarding Independent External Auditing Programs of State Nonmember Banks, 53 Fed. Reg. 47871, and the FDIC's Statement of Policy Providing Guidance on External Auditing Procedures for State Nonmember Banks, 55 Fed. Reg. 2145, copies of which are attached to this Order as Appendices "A" and "B," respectively, and are incorporated herein by reference. (Appendices omitted. Ed.) The written auditing procedures shall at a minimum provide that the Bank:

       (i) follow the "Basic External Auditing Procedures" prescribed under the headings "Loans," "Allowance for Loan Losses," "Insider Transactions," "Internal Controls," and "Electronic Data Processing Controls" in Appendix B (FDIC's Statement of Policy Providing Guidance on External Auditing Procedures for State Nonmember Banks); and
       (ii) engage an independent auditor to perform an audit of the Bank in accordance with the Bank's written auditing procedures: (A) within 90 days of the effective date of this ORDER, and (B) thereafter at least once during each 12-month period.
   (b) The written auditing procedures and any subsequent modification thereto shall be submitted to the Regional Director and the Director for review and comment. No more than 30 days from the receipt of any comment from the Regional Director, the board of directors shall approve the written auditing procedure and any subsequent modification thereto, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank and its institution-affiliated parties shall follow the written auditing procedures and/or any subsequent modification thereto.
   (c) While this ORDER is in effect, the Bank shall provide the Regional Director and the Director with a copy of any auditor's report and any management letter received from the auditor. The Bank shall notify the Regional Director and the Director at least 7 days in advance of the time and date of any meetings between management and the auditor at which any auditing findings are to be discussed and/or presented so that a representative of the FDIC and the Director's Office may attend, if they choose to do so. No more than 90 days after receipt of any auditor's report and any management letter, the Bank shall provide the Regional Director and the Director with a written statement detailing the form and manner of any action taken or to be taken by the Bank and/or the institution-affiliated parties to correct any deficiencies noted in the auditor's report and/or management letter.

   [.18] 14. (a) As of the effective date of this ORDER, the Bank shall not engage in any transactions with, or for the benefit of, any subsidiary or affiliated organization except (i) on terms and under circumstances, including credit standards, that are substantially the same, or at least as favorable to the Bank or its subsidiary, as those prevailing at the time for comparable transactions with or involving other nonaffiliated companies, or (ii) in the absence of comparable transactions, on terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply to, non-affiliated companies.

       (b) The Bank shall support the basis for any such transactions with written documentation which shall be made a permanent part of the minutes of the board of directors' meeting at which such transactions were authorized, including, but not limited to, the following:
         (i) An itemization of the goods or services to be furnished by the subsidiary or affiliated organization:
         (ii) A comparison of the cost for obtaining the same, or substantially similar, goods or services from other nonaffiliated parties; and
         (iii) A written analysis supporting the transactions.
       (c) With respect to any and all transactions limited by paragraph 14(a) of this ORDER, complete details of each proposed transaction, including the documentation required by paragraph 14(b) and evidence of the prior approval of the entire board of directors of the Bank {{2-28-91 p.C-682}}shall be submitted to the Regional Director and the Director. Such information shall be received by the Regional Director and the Director at least 30 days prior to consummation of the proposed transaction for purposes of review and opportunity to comment. A written record of the board of directors' consideration, prior to consummation of any such transaction, of any comment received from the Regional Director and/or the Director during the 30-day period, shall be included in the minutes of the board of directors.
       (d) Paragraph 14 of this ORDER shall apply to all transactions covered by Section 23B of the Federal Reserve Act, 12 U.S.C. § 371c-1.

   [.19] 15. The Bank shall not declare or pay any cash dividends unless:
       (a) such declarations and payments are made in accordance with applicable State and Federal laws and regulations;
       (b) after payment of such dividends, the equity capital ratio specified in paragraph 2(a)(i) shall not be less than 6 percent and the Bank's allowance for loan and lease losses shall be adequate as described in paragraph 3 of this ORDER;
       (c) such declaration and payment of dividends shall be approved in advance by the board of directors of the Bank, which approval shall be recorded in the minutes of the board of directors; and
       (d) at least 30 days prior to the declaration of a cash dividend, written notice of the intention to declare such a dividend shall be given to the Regional Director for review and comment.

   [.20] 16. 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 page 6-1 of the FDIC's Report of Examination of the Bank as of April 30, 1990, except for the violations of section 23A(a)(3) of the Federal Reserve Act, 12 U.S.C. § 371c(a)(3), involving extensions of credit to Roger Ihnen. The Bank shall correct the excepted violations involving Roger Ihnen as soon as possible, and shall document the measures taken to effect correction in the minutes of the Bank's board of directors.

   [.21] 17. No more than 60 days from the effective date of this ORDER the Bank shall obtain an appraisal of the Bank's Brandon and Valley Springs branches by a qualified individual or firm that is independent with respect to the Bank. The Bank shall promptly notify the Regional Director of the identity of the individual or firm retained by the Bank to perform the appraisal. In addition, the Bank shall instruct said individual or firm to provide a separate copy of the appraisal to the Regional Director at the same time the completed appraisal is transmitted to the Bank. Following completion of the appraisal, the Bank's board of directors shall promptly hold a meeting of the board to review the appraisal and, in light thereof, to evaluate the reasonableness of the amount to be received by the Bank as premium for the deposits of the Brandon and Valley Springs branches and the Bank's covenant not to compete. A written record of the board of directors' review and evaluation shall be maintained in the minutes of the board of directors. For purposes of this paragraph. "independent with respect to the Bank" means the same as defined in paragraph 1(d)(iii) of this ORDER with respect to any individual retained or any of the officers. directors, principal shareholders and/or partners of a firm retained to perform the appraisal.

   [.22] 18. Following the effective date of this ORDER, the Bank shall send to its shareholders a description of this ORDER, (a) in conjunction with the Bank's next shareholder communication, and also (b) 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.

   [.23] 19. 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 this ORDER. In addition, the Bank shall furnish such reports on request of either the Regional Director or the Director. All progress reports {{10-31-92 p.C-683}}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.
   20. This ORDER shall become effective 10 days from the date of its issuance.
   The provisions of this ORDER shall be binding upon the Bank and its institution-affiliated parties, successors and assigns.
   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.
   Pursuant to delegated authority.
   Dated this 7th day of Dec., 1990.

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