Federal Deposit
Insurance Corporation

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   [¶11,659] In the Matter of Peoples Bank and Trust Company, Ryan, Oklahoma, Docket No. 99-082b, OSBD-99-C&D-3 (10-12-99)

(This order was terminated by order of the FDIC dated 7-31-03; see ¶16,346.)

   A cease and desist order was issued, based on findings by the FDIC that it had reason to believe that respondent had engaged in unsafe and unsound practices.

   [.1] Assets—Adversely Classified Assets—Reduction Required
   [.2] Loan Loss Reserve—Establishment of or Increase in Required
   [.3] Loans—Extensions of Credit—To Borrowers with Existing Adversely Classified Credits
   [.4] Loan Policy—Review Committee Established
   [.5] Technical Exceptions—Correction of Technical Exceptions Required
   [.6] Management—Qualifications Specified
   [.7] Board of Directors—Outside Directors Added to Board
   [.8] Funds Management and Liquidity—Preparation or Revision of Funds Management Policy Required
   [.9] Assets—Tier 1 Capital
   [.10] Violations of Law—Correction of Violations Required
   [.11] Profit Plan—Preparation of Plan Required
   [.12] Board of Directors—Committee to Review Compliance with Cease and Desist Order Required
   [.13] Shareholders—Disclosure of Cease and Desist Order Required

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In the Matter of

PEOPLES BANK AND TRUST
COMPANY
RYAN, OKLAHOMA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-99-082b
OSBD-99-C&D-3
   The Peoples Bank and Trust Company, Ryan, Oklahoma ("Bank"), through its board of directors, having been advised of its right to the issuance and service of 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 the alleged charges under section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b), and section 204(B) of the Oklahoma Banking Code (the "Code"), 6 O.S. §204(B), and the provisions of the Oklahoma Administrative Procedures Act (75 O.S. Section 250 et seq.), 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") and the Banking Commissioner of the State of Oklahoma ("Commissioner") dated____, 1999, whereby, solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and/or regulations, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC and the Commissioner.
   The FDIC and the Commissioner 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, and the Commissioner, therefore, accepted the CONSENT AGREEMENT and issued the following:

   IT IS ORDERED, that the Bank and institution-affiliated parties of the Bank cease and desist from the following unsafe or unsound banking practices and violations of laws and/or regulations:

   (a) Operating the Bank with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;
   (b) Operating the Bank without adequate supervision and direction by the board of directors over the management of the Bank;
   (c) Operating the Bank with an excessive level of adversely classified assets;
   (d) Engaging in hazardous lending and ineffective and lax collection practices;
   (e) Failing to provide an adequate allowance for loan and lease losses;
   (f) Operating the Bank in contravention of written loan policies and procedures;
   (g) Renewing or extending credit without adequate and appropriate supporting documentation;
   (h) Operating the Bank without adequate liquidity or proper regard for funds management;
   (i) Operating the Bank with inadequate earnings to fund growth, support dividend payments, and augment capital;
   (j) Operating the Bank with insufficient capital for the kind and quality of assets held;
   (k) Operating the Bank in violation of applicable Federal and State laws and regulations as more fully set forth on pages 27-28 of the Report of Examination of the Bank as of April 19, 1999, and
   (l) Failing to accurately reflect the condition of the Bank in published statements and Consolidated Reports of Condition and Income.

   [.1]1. (a) Upon the effective date of this ORDER, the Bank shall, to the extent that it has not previously done so, eliminate from its books, by charge-off or collection, all assets or portions of assets classified Loss and one-half of the assets classified Doubtful by the FDIC as a result of its examination of the Bank as of April 19, 1999. Reduction of these assets through proceeds of loans made by the Bank shall not be considered "collection" for the purpose of this paragraph.
   (b) Within 60 days after the effective date of this ORDER, the Bank shall submit a written plan to the Regional Director and the Commissioner to reduce the remaining as- {{12-31-99 p.C-4810}}sets classified Doubtful and Substandard as of April 19, 1999. The plan shall address each asset so classified with a balance of $50,000 or greater and provide the following:

   (i) The name under which the asset is carried on the books of the Bank;
   (ii) Type of asset;
   (iii) Actions to be taken designed to reduce the classified asset;
   (iv) Timeframes for accomplishing the proposed actions.

   (i) charge-off;
   (ii) collection;
   (iii) sufficient improvement in the quality of adversely classified assets so as to warrant removing any adverse classification, as determined by the FDIC; or
   (iv) increase of total equity capital and reserves.

   [.2]2. (a) Within 10 days after the effective date of this ORDER, the Bank shall establish and thereafter maintain an adequate allowance for loan and lease losses. Such allowance shall be funded by charges to current operating income. Prior to the end of each calendar quarter, the board of directors of the Bank shall review the adequacy of the Bank's allowance for loan and lease losses. Such reviews shall include, at a minimum, the Bank's loan loss experience, an estimate of potential loss exposure in the portfolio, trends of delinquent and non-accrual loans and prevailing and prospective economic conditions. The minutes of the board meetings at which such reviews are undertaken shall include complete details of the reviews and the resulting recommended increases in the allowance for loan and lease losses.
   (b) Within 30 days after the effective date of this ORDER, the Bank shall review Consolidated Reports of Condition and Income filed with the FDIC on or after March 31, 1999, and amend said reports if necessary to properly reflect the financial condition of the Bank as of the date of each such report. In particular, such reports shall contain an adequate allowance for loan and lease losses. Reports filed after the effective date of this ORDER shall also accurately reflect the financial condition of the Bank as of the reporting date.

   [.3]3. (a) While this ORDER is in effect, the Bank shall not extend, directly or indirectly, any additional credit to or for the benefit of any borrower who has an extension of credit with the Bank that has been classified Loss, either in whole or in part, and is uncollected, or to any borrower who is already obligated in any manner to the Bank on any extension of credit, including any portion thereof, that has been charged off the books of the Bank and remains uncollected. The requirements of this paragraph shall not prohibit the Bank from renewing credit already extended to a borrower after full collection, in cash, of interest due from the borrower.
   (b) While this ORDER is in effect, the Bank shall not extend, directly or indirectly, any additional credit to or for the benefit of any borrower whose extension of credit is classified Doubtful and/or Substandard, either in whole or in part, and is uncollected, unless the Bank's board of directors has signed a detailed written statement giving reasons why failure to extend such credit would be detrimental to the best interests of the Bank. The statement shall be placed in the appropriate loan file and included in the minutes of the applicable board of directors' meeting.

   [.4]4. Within 60 days after the effective date of this ORDER, the board of directors shall establish a loan review committee to periodically review the Bank's loan portfolio and identify and categorize problem credits. The committee shall file a report with the board of directors. This report shall include the following information:
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   (a) The overall quality of the loan portfolio;
   (b) The identification, by type and amount, of each problem or delinquent loan;
   (c) The identification of all loans not in conformance with the Bank's lending policy; and
   (d) The identification of all loans to officers, directors, principal shareholders or their related interests.

   [.6]6. (a) Within 90 days after the effective date of this ORDER, the Board shall cause a written review of the performance of bank management and position responsibilities as well as overall staffing requirements, and develop a plan to improve bank management. The review shall be conducted by an independent outside consulting firm. The Board shall then develop a plan to retain adequate management and qualified Bank personnel. The plan may include the addition, dismissal, or reassignment of Bank officers and staff. The review performed by the independent consulting firm and the final plan developed by the Board shall be submitted to the Regional Director and the Commissioner for review and comment.
   (b) Each member of management shall possess qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of management personnel shall be evaluated on their ability to:

   (i) comply with the requirements of the ORDER;
   (ii) operate the Bank in a safe and sound manner;
   (iii) comply with applicable laws and regulations, and
   (iv) restore all aspects of the Bank to a safe and sound condition, including asset quality, capital adequacy, earnings, management effectiveness, sensitivity to market risk, and liquidity.

   [.7]7. Within 90 days after the date of this ORDER, the Bank shall prepare a plan for submission to the shareholders at their next meeting to reorganize the board of directors by increasing the number of independent outside directors as defined herein.

(a) For the purposes of this ORDER, an "outside director" shall be an individual:
   (i) Who shall not be employed by the Bank or its affiliates other than as a director of the Bank or an affiliate;
   (ii) Who shall not own or control more than 5 percent of the voting stock of the Bank or its holding company;
   (iii) Who shall not be indebted to the Bank or any of its affiliates in an amount greater than $100,000.
   (iv) Who shall not be related to any director, principal shareholder of the Bank or to any director or principal shareholder of any affiliate of the Bank; and
   (v) Who shall be a resident of, or engage in business in, the Bank's trade area.

   (a) An asset/liability management strategy to achieve an acceptable rate sensitivity balance between investments and funding sources;
   (b) A plan to decrease the reliance of the Bank on short-term, potentially volatile liabilities for funding longer-term assets; and
   (c) Procedures which will enable the board and management to monitor the Bank's liquidity position and maintain liquidity at an adequate level.

   (i) The sale of securities in the form of common stock; or
   (ii) The direct contribution of cash by the directors and/or shareholders of the Bank; or
   (iii) Any other method approved by the Regional Director and the Commissioner.

   [.10]10. (a) After the effective date of this ORDER, the Bank, consistent with sound banking practices, shall take steps designed to eliminate and/or correct all violations of laws and/or regulations existing in the Bank as of April 19, 1999, as more fully set forth on pages 29 and 30 of the April 19, 1999, Report of Examination. In addition, the Bank {{12-31-99 p.C-4813}}shall ensure its future compliance with all applicable laws and regulations.

   [.11]11. Within 90 days of the date of this Order, the Board shall develop a written plan for the Bank to become profitable which includes a projected budget for at least twelve consecutive quarters. The plan shall require that the Board periodically review all general ledger items to determine methods for expense reduction or income enhancement. The Board's consideration of these areas shall be recorded in the official minutes.

   [.12]12. Within 60 days after the effective date of this ORDER, the board of directors shall establish a committee of the board of directors charged with the responsibility of ensuring that the Bank complies with the provisions of this ORDER. The committee shall report monthly to the entire board of directors, and a copy of the report and any discussion relating to the report or the ORDER shall be included in the minutes of the board of directors. Nothing contained herein shall diminish the responsibility of the entire board of directors to ensure compliance with the provisions of this ORDER.