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[¶11,864] In the Matter of Savanna State Bank, Savanna, Illinois, Docket No.
01-119b (11-16-01).
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. (This order was terminated by order of the FDIC dated 6-28-02; see ¶16,315.)
[.1] Capital—Maintain Tier 1 Capital
[.2] Management—Management Plan Required
[.3] Management—Qualifications Specified
[.4] Board of Directors—Outside Directors Added to Board
[.5] Dividends—Dividends Restricted
[.6] Loans—Extensions of Credit—To Borrowers with Existing Adversely
Classified Credits
[.7] Assets—Charge-off or Collection
[.8] Loan Loss Reserve—Establishment of or Increase Required
[.9] Loans—Risk Position—Written Plan Required
[.10] Loans—Special Mention
[.11] Technical Exceptions—Correction of Technical Exceptions Required
[.12] Loans—Collections, Written Policy Required
[.13] Loan Committee—Duties Specified
[.14] Loan Policy—Preparation or Revision of Policy Required
[.15] Investments and Investment Policy—Investment Policy, Preparation or
Revision Required
[.16] Violations of Law—Correction of Violations Required
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[.17] Interagency Policy Statement on External Auditing
Programs—Implementation Required
[.18] Profit Plan—Preparation of Plan Required
[.19] Shareholders—Disclosure of Cease and Desist Order Required
[.20] Board of Directors—Program to Review Compliance with Cease and Desist
Order Required
In the Matter of
SAVANNA STATE BANK
SAVANNA, ILLINOIS
An Illinois State Chartered
Nonmember Bank
ORDER TO CEASE AND DESIST
No. 2001-BBTC-31
FDIC-01-119b
The Savanna State Bank, Savanna, Illinois ("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
laws and regulations alleged to have been committed by the Bank, and of
its right to a hearing on the charges under 38 Ill. Adm. Code, section
392.30, regarding hearings before the Office of Banks and Real Estate
for the State of Illinois ("OBRE"), and under section 8(b)(1) of
the Federal Deposit Insurance Act (the "FDI 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 (the
"STIPULATION") with representatives of OBRE and the Federal
Deposit Insurance Corporation ("FDIC"), dated October 22, 2001,
whereby solely for the purpose of this proceeding and without admitting
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nor denying the charges of unsafe or unsound banking practices or
violations of laws and regulations, consented to the issuance of an
ORDER TO CEASE AND DESIST ("ORDER") by OBRE and the FDIC.
OBRE and the FDIC considered the matter and determined that, based
upon the findings of the examination of the Bank by OBRE dated May 14,
2001 ("OBRE Report"), there was reason to believe that the Bank
had engaged in unsafe or unsound banking practices and violations of
laws and regulations. OBRE and the FDIC, therefore, accepted the
STIPULATION 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 FDI Act, 12
U.S.C. 1813(u), and its successors and assigns, cease and desist from
the following unsafe or unsound banking practices and violations of
laws and regulations:
A. Engaging in hazardous lending and lax collection practices,
including, but not limited to, the following:
— The failure to obtain proper loan documentation;
— The failure to obtain adequate collateral;
— The failure to establish and monitor collateral margins of secured
borrowers;
— The failure to establish and enforce adequate loan repayment
programs;
— The failure to obtain current and complete financial information;
— The failure to enforce loan policy guidelines;
— The failure to follow acceptable credit administration practices;
— The failure to follow generally accepted accounting principles and
the Financial Institutions Examination Council's (the "FFIEC")
Instructions for the Report of Condition and Income for non-accrual
loans;
— The failure to establish and maintain an adequate credit risk
grading system and credit review program; and
— The failure to maintain an adequate internal loan watch list.
B. Operating with an inadequate level of capital protection for the
kind and quality of assets held.
C. Operating with a high level of adversely classified assets as well
as delinquent and nonaccrual loans.
D. Operating with an inadequate allowance for loan and lease losses for
the volume, kind and quality of loans and leases held.
E. Operating with inadequate internal routines and controls.
F. Operating with weak lending guidelines and practices.
G. Operating with an inadequate audit program.
H. Operating with an inadequate investment policy.
I. Operating with management whose policies and practices are
detrimental to the Bank and jeopardize the safety of its deposits.
J. Operating with a board of directors that has failed to exercise
adequate supervision over Bank management.
K. Failing to implement and monitor appropriate Bank policies.
L. Failing to implement timely corrective measures to resolve
continuing asset problems.
M. Paying excessive dividends in relation to the Bank's capital
position, earnings capacity and asset quality.
N. Failing to obtain an annual external audit, in contravention of the
Interagency Policy Statement on External Auditing Programs of Banks and
Savings Associations (October 15, 1999).
O. Failing to conduct periodic asset quality reviews, establish
reserves that are sufficient to absorb estimated losses, and provide
periodic asset reports with adequate information for management and the
directorate to assess the level of asset risk, as set forth in Appendix
A to Part 364 of the FDIC Rules and Regulations, 12 C.F.R. Part 364,
Appendix A.
P. Violating laws or regulations, including:
— Funding or providing loans or extensions of credit to senior
officers, employees or directors of the Bank in violation of the
requirements provided under Section 17 of the Illinois Banking Act (the
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"Act"), [205 ILCS 5/37], and 38 Ill. Adm. Code, Part 340;
— Declaring and paying a dividend in violation of the requirements
provided under Section 14(8) of the Act, [205 ILCS 5/14];
— Funding or providing loans and extensions of credit to executive
officers, directors or principal shareholders of the Bank in violation
of Section 215.4(b) of Regulation O of the Board of Governors of the
Federal Reserve System ("Regulation O"), 12 C.F.R. 215.4(b);
— Funding or providing loans and extensions of credit to executive
officers, directors or principal shareholders of the Bank in violation
of Section 215.4(c) of Regulation O, 12 C.F.R. 215.4(c);
— Funding and providing loans and extensions of credit to executive
officers of the Bank in violation of the requirement that such loans or
extensions of credit contain a "due and payable clause," as
provided by Section 215.5(d)(4) of Regulation O, 12 C.F.R. 215.5(d)(4);
— Funding or providing loans and extensions of credit to executive
officers, directors or principal shareholders of the Bank in violation
of Section 215.6 of Regulation O, 12 C.F.R. 215.6;
— Operating with executive officers who have failed to file written
reports of indebtedness at other bank(s) in violation of Section 215.9
of Regulation O, 12 C.F.R. 215.9;
— Purchasing low-quality assets from an affiliate in violation of
Section 35.2(a)(3) of the Act, [205 ILCS 5/35.2], and Section
23A(a)(3) of the Federal Reserve Act, 12 U.S.C. 371c(a)(3);
— Funding or providing unsecured loans or extensions of credit to an
affiliate in violation of Section 35.2(c)(1) of the Act, [205 ILCS
5/35.2], and 23A(c)(1) of the Federal Reserve Act, 12 U.S.C.
371c(c)(1);
— Funding or providing extensions of credit to executive officers,
directors or principal shareholders of the Bank in violation of the
requirements of Section 337.3 of the FDIC Rules and Regulations,
12 C.F.R. 337.3, regarding limits on extensions of credit;
— Failing to obtain an appraisal for a real estate-related financial
transaction in violation of Section 323.3(a( of the FDIC Rules and
Regulations, 12 C.F.R. 323.3(a); and
— Failing to file a Suspicious Activity Report relating to an apparent
check kiting scheme, as required by Section 353.3 of the FDIC Rules and
Regulations, 12 C.F.R. 353.3.
IT IS FURTHER ORDERED, that the Bank, its institution-affiliated
parties, and its successors and assigns, take affirmative action as
follows:
[.1]1. (a) Within 90 days from the effective date of this ORDER, the Bank
shall develop and submit to OBRE and the FDIC a plan to maintain its
Tier 1 leverage capital ratio at a level of not less than 8 percent of
total assets.
(b) Within 30 days from the last day of each calendar quarter following
the effective date of this ORDER, the Bank shall determine from its
Report of Condition and Income its level of Tier 1 capital as a
percentage of its total assets ("capital ratio") for that
calendar quarter. If the capital ratio is less than 8 percent, the Bank
shall, within 60 days from the date of the required determination,
increase its capital ratio to not less than 8 percent calculated as of
the end of that preceding quarterly period. For purposes of this ORDER,
Tier 1 capital and total assets shall be calculated in accordance with
Part 325 of the FDIC Rules and Regulations ("Part 325"), 12
C.F.R. Part 325.
(c) Any such increase in Tier 1 capital may be accomplished by the
following:
(i) The sale of common stock and noncumulative perpetual
preferred stock constituting Tier 1 capital under Part 325;
(ii) The elimination of all or part of the assets classified
"Loss" in the OBRE Report without loss or liability to the Bank,
provided any such collection on a partially charged-off asset shall
first be applied to that portion of the asset which was not charged off
previously pursuant to this ORDER;
(iii) The collection in cash of assets previously charged off;
(iv) The direct contribution of cash by the directors and/or the
shareholders of the Bank or its holding company;
(v) Any other means acceptable to the Commissioner of OBRE
("Commissioner") and the Regional Director of the
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Chicago Regional Office of the FDIC ("Regional Director"); or
(vi) Any combination of the above means.
(d) if all or part of the increase in capital required by this
paragraph is to be accomplished by the sale of new securities, the
board of directors of the Bank shall adopt and implement a plan for the
sale of such additional securities, including the voting of any shares
owned or proxies held by or controlled by them in favor of said plan.
Should the implementation of the plan involve public distribution of
the Bank securities, including a distribution limited only to the
Bank's existing shareholders, 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 the
circumstances giving rise to the offering, and any other material
disclosures necessary to comply with the Federal securities laws. Prior
to the implementation of the plan and, in any event, not less than 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, 550 17th Street, N.W., Washington,
D.C., 20429, and to OBRE, 500 E Monroe Street, Suite 900, Springfield,
Illinois, 62701 for review. Any changes requested to be made in the
materials by OBRE or the FDIC shall be made prior to their
dissemination.
(e) In complying with the provisions of this paragraph of this ORDER,
the Bank shall provide to any subscriber and/or purchaser of Bank
securities written notice of any planned or existing development or
other changes that are 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 shall be
furnished within 10 calendar days of the date any material development
or change was planned or occurred, whichever is earlier, and shall be
furnished to every purchaser and/or subscriber of the Bank's original
offering materials.
(f) The capital ratio analysis required by this paragraph shall not
negate the responsibility of the Bank and its board of directors for
maintaining throughout the year an adequate level of capital protection
for the kind, quality and degree of market depreciation of assets held
by the Bank.
[.2]2. (a) Within 30 days from the effective date of this ORDER, the Bank
shall retain a bank consultant acceptable to the Commissioner and the
Regional Director. The consultant shall develop a written analysis and
assessment of the Bank's management and staffing needs ("Management
Plan") for the purpose of providing qualified management for the
Bank.
(b) The Bank shall provide the Commissioner and the Regional Director
with a copy of the proposed engagement letter or contract with the
consultant for review before it is executed. The contract or engagement
letter, at a minimum should include:
(i) A description of the work to be performed under the contract
or engagement letter;
(ii) The responsibilities of the consultant;
(iii) An identification of the professional standards covering the work
to be performed;
(iv) Identification of the specific procedures to be used when carrying
out the work to be performed;
(v) The qualifications of the employee(s) who are to perform the work;
(vi) The time frame for the completion of the work;
(vii) Any restrictions on the use of the reported findings; and
(viii) A provision for unrestricted examiner access to work papers.
(c) The Management Plan required by this paragraph shall be
developed within 60 days from the effective date of this ORDER. The
Management Plan shall include, at a minimum:
(i) Identification of both the type and number of officer
positions needed to properly manage and supervise 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 all Bank officers and staff members 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 restoration and
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maintenance of the Bank in a safe and sound
condition;
(iv) A review of the compensation level of the Bank's officers and
staff members, with consideration given as to whether the current
compensation level is adequate to attract and retain qualified
employees; and
(v) A plan to recruit and hire any additional or replacement personnel
with the requisite ability, experience and other qualifications to fill
those officer or staff member positions identified by the Management
Plan.
(d) The Management Plan shall be submitted to the Commissioner and
the Regional Director for review and comment upon its completion.
Within 30 days from the receipt of any comment from the Commissioner or
the Regional Director and after the adoption of any recommended
changes, the Bank shall approve the Management Plan or any subsequent
modifications, which approval shall be recorded in the minutes of a
board of directors' meeting. Thereafter, the Bank, its directors,
officers, and employees shall implement and follow the approved
Management Plan.
[.3]3. (a) Within 90 days from the effective date of this ORDER, the Bank
shall have and retain qualified management. Each member of management
shall have the qualifications and experience commensurate with his or
her duties and responsibilities at the Bank. At a minimum, such
management shall include: (i) a president and chief executive officer
with proven ability in managing a bank of comparable size and
experience in upgrading a low-quality loan portfolio; and (ii) a senior
lending officer with an appropriate level of lending, collection, and
loan supervision experience for the type and quality of the Bank's
loan portfolio. Such persons shall be provided the necessary written
authority to implement the provisions of this ORDER. The qualifications
of management shall be assessed on its ability to:
(i) Comply with the requirements of this 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, and liquidity.
(b) During the life of this ORDER, the Bank shall notify the
Commissioner and the Regional Director in writing of any changes in any
of the Bank's management. For purposes of this ORDER, management
includes any "director," as defined in section 303.101(a) of the
FDIC Rules and Regulations, 12 C.F.R. 303.101(a), and any "senior
executive officer," as defined in section 303.101(b) of the FDIC
Rules and Regulations, 12 C.F.R. 303.101(b), including any person
identified by the FDIC and OBRE, whether or not hired as an employee,
with significant influence over, or who participates in, major
policymaking decisions of the Bank.
(c) Prior to the addition of any director or the employment of any
senior executive officer, the Bank shall comply with the requirements
of section 32 of the FDI Act ("Section 32"), 12 U.S.C. 1831(i),
and Subpart F of Part 303 of the FDIC Rules and Regulations
("Subpart F"), 12 C.F.R. Part 303, Subpart F. In addition, prior
to the addition of any director or the employment of any senior
executive officer including any person identified by the FDIC and OBRE,
whether or not hired as an employee, with significant influence over,
or who participates in, major policymaking decisions of the Bank, the
Bank shall request and obtain the written approval of the Commissioner.
[.4]4. Within 90 days from the effective date of this ORDER, the Bank shall
add to its board of directors two new members who are independent
directors. For purposes of this ORDER, a person who is an independent
director shall be an individual: (a) who is not an officer of the Bank
or any of its affiliated organizations; (b) who does not own more than
5 percent of the outstanding shares of the Bank; (c) who is not related
by blood or marriage to an officer or director of the bank or to any
shareholder owning more than 5 percent of the Bank's outstanding
shares, and who does not otherwise share a common financial interest
with such officer, director or shareholder; and (d) who is not indebted
to the Bank directly or indirectly by blood, marriage or common
financial interest, 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 Tier 1 capital and allowance
for loan and lease losses. The addition of any new Bank directors
required by this paragraph may be accomplished, to
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the extent permissible by Illinois law and the Bank's bylaws, by means of
appointment or by election at a regular or special meeting of the
Bank's shareholders.
[.5]5. As of the effective date of this ORDER, the Bank shall pay no cash
dividends that would result in a Tier 1 capital ratio of less than 8
percent, without the prior written consent of the Commissioner and the
Regional Director.
[.6]6. (a) As of the effective date of this ORDER, the Bank shall not
extend, directly or indirectly, any additional credit to, or for the
benefit of, any borrower who is already obligated in any manner to the
Bank on any extensions of credit (including any portion thereof) that
have been charged off the books of the Bank or classified "Loss"
so long as such credits remain uncollected.
(b) As of the effective date of this ORDER, the Bank shall not
extend, directly or indirectly, any additional credit to, or for the
benefit of, any borrower whose loan or other credit has been classified
"Substandard," or is listed for special Mention in the OBRE
Report and is uncollected unless the Bank's board of directors has
adopted, prior to such extension of credit, a detailed written
statement giving the reasons why such extension of credit is in the
best interest of the Bank. A copy of the statement shall be placed in
the appropriate loan file and shall be incorporated in the minutes of
the applicable board of directors' meeting.
[.7]7. As of the effective date of this ORDER, the Bank shall eliminate
from its books, by charge-off or collection, all assets or portions of
assets classified "Loss" in the OBRE Report that have not been
previously collected or charged off. Any such charged-off asset shall
not be rebooked without the prior written consent of the Commissioner
and the Regional Director. Elimination or reduction of these assets
with the proceeds of other Bank extensions of credit is not considered
collection for the purpose of this paragraph.
[.8]8. (a) Within 30 days from the effective date of this ORDER, the Bank
shall make an additional provision for loan and lease losses which,
after review and consideration by the Bank's board of directors,
reflects the potential for further losses in the remaining loans and
leases classified "substandard" and all other loans and leases in
the Bank's loan portfolio.
(b) Within 60 days from the effective date of this ORDER, Reports
of Condition and Income required by OBRE and the FDIC and filed by the
Bank subsequent to December 31, 2000 shall be amended and refiled if
they do not reflect a provision for loan and lease losses and an
allowance for loan and lease losses ("ALLL") which are adequate
considering the condition of the Bank's loan portfolio, and which, at
a minimum, incorporate any adjustment required by this paragraph.
(c) Prior to submission or publication of all Reports of
Condition and Income required by OBRE and the FDIC after the effective
date of this ORDER, the board of directors of the Bank shall review the
adequacy of the Bank's ALLL, provide for an adequate ALLL, and
accurately report the same. The minutes of the board meeting at which
such review is undertaken shall indicate the findings of the review,
the amount of increase in the reserve recommended, if any, and the
basis for determination of the amount of ALLL provided. In making these
determinations, the board of directors shall consider the FFIEC's
Instructions for the Reports of Condition and Income and any analysis
of the Bank's ALLL provided by OBRE and the FDIC.
(d) While this ORDER is in effect, the Bank shall submit to OBRE and
the FDIC the analysis supporting the determination of the adequacy of
its ALLL. These submissions may be made at such times as the Bank files
the progress reports required by this ORDER.
(e) ALLL entries required by this paragraph shall be made prior to any
Tier 1 capital determinations required by this ORDER.
[.9]9. (a) Within 60 days from the effective date of this ORDER, the Bank
shall formulate and submit to the Commissioner and the Regional
Director for review and comment, a written plan to reduce the Bank's
risk position in each asset in excess of $50,000 which is classified
"Substandard" in the OBRE Report. 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.
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(b) Such plan shall include, but not be limited to, the following:
(i) Dollar levels to which the Bank shall reduce each asset
within six and twelve months from the effective date of this ORDER; and
(ii) Provisions for the submission of monthly written progress reports
to the Bank's board of directors for review and notation in minutes of
the meetings of the board of directors.
(c) 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 and
OBRE.
(d) Within 30 days from the receipt of any comment from the
Commissioner or the Regional Director and after the adoption of any
recommended changes, the Bank shall approve the written plan, which
approval shall be recorded in the minutes of a board of directors'
meeting. Thereafter, the Bank shall implement and follow this written
plan.
[.10]10. Within 60 days from the effective date of this ORDER, the Bank
shall correct all deficiencies in the loans listed for "Special
Mention" in the OBRE Report.
[.11]11. Within 60 days from the effective date of this ORDER, the Bank
shall correct the technical exceptions identified in the OBRE Report.
[.12]12. (a) Within 60 days from the effective date of this ORDER, the Bank
shall formulate and submit to the Commissioner and the Regional
Director for review and comment a written plan for the reduction and
collection of delinquent and nonaccrual loans. Said plan shall include,
at a minimum, provisions which prohibit the extension of credit for the
payment of interest; prohibit the extension and/or renewal of loan
terms and loan payments, especially in regard to classified borrowers,
without prior board approval; delineate areas of responsibility for
loan officers, and establish acceptable guidelines for the collection
of delinquent credits. Such plan shall include, but not be limited to,
the following:
(i) Dollar levels to which the Bank shall reduce delinquencies
within six and twelve months from the effective date of this ORDER; and
(ii) Provisions for the submission of monthly written progress reports
to the Bank's board of directors for review and notation in minutes of
the meetings of the board of directors.
(b) Within 30 days from receipt of any comment from the
Commissioner or the Regional Director, and after the adoption of any
recommended changes, the Bank shall approve the plan, which approval
shall be recorded in the minutes of a board of directors' meeting.
Thereafter, the Bank shall implement and follow the plan.
[.13]13. As of the effective date of this ORDER, the Bank's loan committee
shall meet at least twice a month. The loan committee shall, at a
minimum, perform the following functions:
(a) Evaluate, grant, and/or approve loans in accordance with the
Bank's loan policy. The loan committee shall provide a thorough
written explanation of any deviations from the loan policy, which
statement shall address how said exceptions are in the Bank's best
interest and shall be reflected in the minutes of the corresponding
committee meeting.
(b) Review and monitor the status of repayment and collection of
overdue and maturing loans, as well as all other loans classified
"Substandard" in the OBRE Report, and any subsequent examinations
conducted by OBRE or the FDIC or that are included on the Bank's
internal watch list.
(c) Review and give prior written approval for all advances, renewals,
or extensions of credit to any borrower or the borrower's related
interests when the aggregate volume of credit extended to the borrower
and the borrower's related interests exceeds $100,000. For purposes of
this ORDER, the term "related interest" is defined pursuant to
Section 215.2(n) of Regulation O, 12 C.F.R. 215.2(n).
(d) Review all applications for new loans and renewals of
existing loans to Bank directors, executive officers, and their related
interests, and prepare a written opinion as to whether the credit is in
conformance with the Bank's loan policy and all applicable laws and
regulations. Such applications, renewals, and written opinions shall be
referred to the Bank's board of directors for consideration, with the
interested party abstaining from participation in any such
consideration.
(e) Maintain written minutes of the committee meetings that include a
record of the review and status of the aforementioned loans.
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[.14]14. (a) Within 60 days from the effective date of this ORDER, and
annually thereafter, the board of directors of the Bank shall review
the Bank's loan policy and procedures for adequacy and, based upon
this review, shall make all appropriate revisions to the policy
necessary to strengthen lending procedures and abate additional loan
deterioration. The revised written loan policy shall be submitted to
the Commissioner and the Regional Director for review and comment upon
completion.
(b) The initial revisions to the Bank's loan policy required by this
paragraph, at a minimum, shall include provisions:
(i) Establishing a system to clearly define each loan risk grade
used by the Bank and shall include risk grades that align with the
regulatory categories of "substandard," "doubtful" and
"loss";
(ii) Establishing and maintaining a formal, objective and documented
loan grading system;
(iii) Establishing a nonaccrual policy in accordance with the FFIEC
Instructions for the Consolidated Reports of Condition and Income, to
include charging off accrued interest when placing a loan on nonaccrual
status; and
(iv) Establishing review and monitoring procedures to ensure that all
lending personnel are adhering to established lending policies and
procedures, and that the directorate is receiving timely and fully
documented reports on loan activity, including any deviations from
established policy.
(c) Within 60 days from the receipt of any comments from the
Commissioner or the Regional Director, after the adoption of any
recommended changes, the board of directors shall approve the written
loan policy and any subsequent modification thereto, which approvals
shall be recorded in the minutes of a board of directors' meeting.
Thereafter, the Bank shall implement and follow the written loan policy
and any subsequent modifications thereto. The Bank shall notify the
Commissioner and the Regional Director, in writing, of the manner in
which it intends to implement this policy and ensure compliance
therewith.
[.15]15. (a) Within 60 days from the effective date of this ORDER, and
annually thereafter, the board of directors of the Bank shall review
the Bank's written investment guidelines for adequacy, and shall make
revisions which, at a minimum, address the exceptions noted in the OBRE
Report, and are consistent with the FDIC's Supervisory Policy
Statement on Investment Securities and End-User Derivatives Activities
(May 26, 1998).
(b) A copy of the revised policy guidelines shall be submitted to the
Commissioner and the Regional Director for review and comment. Within
30 days of the receipt of any comments from the Commissioner or the
Regional Director, and after the adoption of any recommended changes,
the Bank shall approve the policy, which approval shall be recorded in
the minutes of the board of directors' meeting. Thereafter, the Bank
shall implement and follow the policy.
[.16]16. (a) Within 60 days from the effective date of this ORDER, the Bank
shall eliminate and/or correct all violations of laws or regulations
listed in the OBRE Report.
(b) Within 60 days from the effective date of this ORDER, the Bank
shall implement procedures to ensure future compliance with all
applicable laws and regulations.
[.17]17. (a) Within 60 days from the effective date of this ORDER, the Bank
shall conform to the Interagency Policy Statement on External Auditing
Programs of Banks and Savings Associations (October 15, 1999). The
steps taken by the Bank to implement the Interagency Policy shall be
recorded in its board of directors' minutes and forwarded to the
Commissioner and the Regional Director for review and comment.
(b) Within 30 days from the receipt of any comment from the
Commissioner or the Regional Director, and after the adoption of any
recommended changes, the Bank shall continue to implement the
Interagency Policy. The adoption of any such comments and changes
should be recorded in the minutes of the board of directors' meeting.
(c) Within 60 days from the effective date of this ORDER, and annually
thereafter, the Bank shall provide for an external audit of its
financial statements and operating procedures to be performed by an
independent public accounting firm acceptable to the Commissioner and
the Regional Director.
(d) During the life of this ORDER, the Bank shall forward copies of any
external audit reports required by this paragraph to
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the Commissioner
and the Regional Director within 10 days from the Bank's receipt of
such reports.
[.18]18. (a) By November 30, 2001, the Bank shall formulate and submit to
the Commissioner and the Regional Director for review and comment a
written profit plan and a realistic, comprehensive budget for all
categories of income and expense for calendar year 2002. The plan
required by this paragraph shall include formal goals and strategies,
consistent with sound banking practices, to improve the Bank's overall
earnings, and shall contain a description of the operating assumptions
that form the basis for major projected income and expense components.
(b) The written profit plan shall address, at a minimum, the following:
(i) Strategies to improve the Bank's earnings; and
(ii) All assumptions used in preparing the plan.
(c) At the end of each calendar quarter following the effective
date of this ORDER, the Bank's board of directors shall evaluate the
Bank's actual performance in relation to the plan and budget required
by this paragraph and record the results of the evaluation, and any
actions taken by the Bank, in the minutes of the board of directors
meeting at which such evaluation is undertaken.
(d) The written profit plan and budget required by this ORDER shall be
prepared and submitted to the Commissioner and the Regional Director
for review and comment 30 days prior to the end of each calendar year
for which this ORDER is in effect. Within 30 days of receipt of all
such comments from the Commissioner or the Regional Director and after
adoption of any recommended changes, the Bank shall approve the plan,
which approval shall be recorded in the minutes of a board of
directors' meeting. Thereafter, the Bank shall implement and follow
the plan.
[.19]19. Following the effective date of this ORDER, the Bank shall send to
its shareholders or otherwise furnish a description of this ORDER: (1)
in conjunction with the Bank's next shareholder communication; and (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, notice, or statement shall be sent to the FDIC
Registration and Disclosure Section, 550 17th Street, N.W., Washington,
D.C., 20429, and to OBRE, 500 E. Monroe Street, Suite 900, Springfield,
Illinois, 62701 for review at least 20 days prior to dissemination to
shareholders. Any changes requested to be made by the FDIC and OBRE
shall be made prior to dissemination of the description, communication,
notice, or statement.
[.20]20. (a) Within 30 days from the effective date of this ORDER, the
Bank's board of directors shall develop, adopt, and implement a
program that will provide for monitoring of the Bank's compliance with
this ORDER.
(b) Following the required date of compliance with subparagraph (a)
above, the Bank's board of directors shall review the Bank's
compliance with this ORDER and record its review in the minutes of each
regularly scheduled monthly board of directors' meeting.
21. Within 10 days after each board meeting following the effective
date of the ORDER, the Bank shall submit to the Commissioner and the
Regional Director the board packet from said board meeting.
22. Within 30 days from the end of each calendar quarter
following the effective date of this ORDER, the Bank shall furnish to
the Commissioner and the Regional Director written progress reports
signed by each member of the Bank's board of directors, detailing the
actions taken to secure compliance with the ORDER and the results
thereof. Such reports may be discontinued when the corrections required
by this ORDER have been accomplished and the Commissioner and the
Regional Director have, in writing, released the Bank from making
further reports.
23. The effective date of this ORDER shall be 10 days after its
issuance.
24. The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.
25. 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 OBRE and the FDIC.
Pursuant to delegated authority.
Dated this 16th day of November, 2001.
