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[¶11,736] In the Matter of The Findlay Savings Bank, Cincinnati, Ohio, Docket No.
00-103c&b (9-12-00).
A temporary 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. (This order was terminated by order of the FDIC dated 12-26-01; see ¶16,298.)
[.1] ManagementQualifications Specified
[.2] TransactionsModification of Prohibited
[.3] Bank OperationsInformation SystemsBackup Required
[.4] Disaster Recovery PlanRequired
[.5] Bank OperationsInformation SystemsAssessment of Activities Required
[.6] Bank OperationsInformation SystemsAudit Program Required
[.7] Bank RecordsRestore to a Complete and Accurate State
[.8] AccountingIndependent CPA Exam Required
[.9] DebitsCharge-off Unresolved Debits
[.10] Board of DirectorsMeetingsFrequency of Meetings Specified
[.11] ShareholdersDisclosure of Cease and Desist Order Required
In the Matter of
THE FINDLAY SAVINGS BANK
CINCINNATI, OHIO
(Insured State Nonmember Bank)
TEMPORARY ORDER TOCEASE AND DESIST
FDIC-00-103c&b
The Federal Deposit Insurance Corporation ("FDIC") has
determined that the unsafe or unsound banking practices which The
Findlay Savings Bank, Cincinnati, Ohio ("Bank") has engaged in or
which the FDIC has reason to believe the Bank is about to engage in, as
specified in the NOTICE OF CHARGES AND OF HEARING ("NOTICE")
attached hereto and incorporated herein by reference, and the
continuation thereof by the Bank, are likely to cause significant
dissipation of the assets or earnings of the Bank, or are likely to
weaken the condition of the Bank or otherwise prejudice the interests
of the depositors of the Bank prior to the completion of the
proceedings against the Bank conducted pursuant to section 8(b) of the
Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b).
The FDIC's safety and soundness examination and concurrent information
systems examination, which commenced July 10, 2000, have revealed major
deficiencies that require immediate resolution, including: incomplete
and inaccurate books and records that are and have been out of balance
over an extended period of time; multiple non-interfacing information
systems that lack security and access controls; inadequate auditing
systems and internal controls; no disaster recovery plan, and operating
without any senior bank management in place. As a result of these
deficiencies, the Bank is vulnerable to unauthorized or fraudulent
transactions and the ability of the Bank to survive a disaster
situation is severely compromised.
Therefore, the FDIC hereby issues this TEMPORARY ORDER TO CEASE AND
DESIST ("TEMPORARY ORDER") and hereby gives notice pursuant to
section 8(c)(1) of the Act, 12 U.S.C. § 1818(c)(1), that the Bank and
its institution-affiliated parties, successors and assigns, be and
hereby are ORDERED TO CEASE AND DESIST from and take affirmative
action, as follows:
[.1] 1. (a) During the life of this TEMPORARY ORDER, the Bank shall have and
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retain qualified management. Within 30 days of the effective date of
this TEMPORARY ORDER, the Bank shall submit Notifications of Addition
of a Senior Executive Officer under section 32 of the Act, 12 U.S.C.
§ 1831i for a new chief executive officer and a new chief financial
officer acceptable to the FDIC. The executive officers shall assume
duties immediately upon receipt of section 32 approval.
(b) Each member of management shall have the qualifications and
experience commensurate with his or her duties and responsibilities at
the Bank. The qualifications of Bank management shall be assessed on
its ability to: (i) comply with the requirements of this TEMPORARY
ORDER; (ii) ensure that the Bank's electronic or automated information
systems result in the books and records of the Bank and its
wholly-owned subsidiary FSB Funding, Inc. ("Subsidiary"), being
in and remaining in a complete and accurate state; (iii) provide
oversight of the data processing activities of the Bank and the
Subsidiary; (iv) provide staff experience in the types of computer
systems used by the Bank and the Subsidiary; and (v) operate the Bank
and the Subsidiary in a safe and sound manner.
[.2] 2. Effective immediately, the Bank shall eliminate the practice of
modifying and deleting posted transactions.
[.3] 3. The Bank shall immediately establish and implement adequate backup
and offsite storage procedures for data on in-house information
systems.
[.4] 4. Within 30 days from the effective date of this TEMPORARY ORDER, the
Bank shall develop and implement a disaster recovery plan, acceptable
to the Regional Director for the FDIC's Chicago Regional Office
("Regional Director"), that addresses all critical services and
operations which are provided by internal and external sources. At a
minimum, the plan shall address:
(a) recovery priorities;
(b) determination of when to use alternate sites;
(c) notification to employees;
(d) procedures for performing backup and offsite storage; and
(e) obtaining backup equipment, software, and current master file
backup.
[.5] 5. (a) Within 60 days from the Bank's receipt of the FDIC's final
July 10, 2000, Report of Examination, the Bank shall prepare a written
assessment of information systems ("IS") activities of the Bank
and the Subsidiary. This assessment shall address the findings with
respect to information systems and shall include the Bank's proposed
corrective measures.
(b) Within 10 days of the completion of the assessment described above,
the Bank's board of directors shall review, approve, and submit its
written assessment to the Regional Director for review and approval.
(c) Within 30 days of the Regional Director's approval of the written
assessment, the Bank will adopt and implement all corrective measures
detailed in the assessment.
[.6] 6. (a) Within 90 days from the effective date of this TEMPORARY ORDER,
the Bank shall formulate and submit to the Regional Director a written
IS audit program for review and comment. The program shall address:
(i) Whether IS auditing will be performed internally by the Bank
or by an independent auditing firm;
(ii) The frequency and scope of IS auditing;
(iii) Designation of qualified personnel to perform the audit; and
(iv) Requiring the reporting of findings to the Bank's board of
directors or a committee as designated by the Bank's board of
directors.
(b) Within 10 days of receipt of the Regional Director's
comments, the Bank will implement the written IS audit program.
[.7] 7. Within 30 days of the effective date of this Order, the Bank shall
have reconciled its books and records as of September 30, 2000, and
those of the Subsidiary, and shall continue to maintain accurate books
and records. Written documentation of the correction or reconciliation
shall be retained for future regulatory review.
[.8] 8. (a) Within 30 days from the effective date of this TEMPORARY ORDER,
the Bank shall retain an independent certified public accounting firm,
as that term is defined in paragraph 8(d) of this TEMPORARY ORDER,
acceptable to the Regional Director to conduct an agreed-upon
procedures examination ("examination"), including, but not
limited to, reconciliation of the
{{10-31-01 p.C-4994}}financial statements of the Bank and
the Subsidiary, as of September 30, 2000.
(b) At a minimum, the examination shall determine:
(i) Whether the Bank and the Subsidiary have reconciled all
accounts and the date of the most recent reconciliation of each
account;
(ii) For all accounts of the Bank and the Subsidiary, whether:
(1) Reconciliations are done in a timely manner based on the risk
and volume of activity in each account;
(2) Reconciliations adequately report the dollar amount and the
description of any outstanding unreconciled transactions;
(3) The adequacy of the segregation of duties of the personnel
preparing the reconciliations; and
(4) The collectibility of any unreconciled debits outstanding in excess
of 90 days, as of September 30, 2000.
(iii) Whether the Bank and the Subsidiary have adequate written
reconciliation procedures for each account.
(c) The Bank shall require, as part of its agreement with the
accounting firm retained to perform the examination, that the
accounting firm complete the examination within 45 days from the
effective date of the TEMPORARY ORDER. The accounting firm's initial
written report, whether in draft or final form, shall be submitted
directly to the Regional Director at the same time the report is
submitted to the Bank.
(d) For purposes of this TEMPORARY ORDER, an independent public
accounting firm shall be any firm where no partner or employee: (1) is
an officer or director of the Bank or any of its affiliated
organizations and owns more than 5 percent of the outstanding shares of
the Bank or any of its affiliated organizations or (2) is related by
blood, marriage or common financial interest to an officer or director
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 or any of its affiliates organizations; or (3) is indebted to the
Bank, directly or indirectly (including the indebtedness of any entity
in which any partner or employee has a financial interest), in an
amount exceeding 5 percent of the Bank's total equity capital and
allowance for loan and lease losses.
[.9] 9. Within 30 days of the effective date of this Order, and every 30
days thereafter, all outstanding debits that are unresolved for more
than 90 days shall be charged off from the books of the Bank and the
Subsidiary.
[.10] 10. During the life of this TEMPORARY ORDER regular board of director
meetings shall be held at least every other week and within 3 days
following every meeting of the Bank's board of directors, the Bank's
board of directors shall submit a written report to the Regional
Director detailing the Bank's compliance with this TEMPORARY ORDER.
[.11] 11. No more than 60 days from the effective date of this TEMPORARY
ORDER, the Bank shall send to its shareholders a description of this
TEMPORARY ORDER. The description shall fully describe this TEMPORARY
ORDER in all material respects. The description and any accompanying
communication, statement or notice shall be sent to the FDIC,
Registration and Disclosure Section, 550 17th Street, N.W., 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.
This TEMPORARY ORDER shall be effective immediately upon service on the
Bank and shall remain in full force and effect, pending the completion
of the administrative proceedings instituted pursuant to the foregoing
NOTICE.
Pursuant to delegated authority.
Dated at Washington, D.C., this 12th day of September, 2000.