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[¶12,074] In the Matter of Lakeside Community Bank, Sterling Heights,
Michigan, Docket No. 03-079b (8-12-03).
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] Capital—Maintain Tier 1 Capital
[.2] Management—Qualifications Specified
[.3] Consultants—Retention Required
[.4] Loans—Extensions of Credit—To Borrowers with Existing Adversely Classified Credits
[.5] Loans—Charge Offs Recovery Required
[.6] Loan Policy—Preparation or Revision of Policy Required
[.7] Report of Examination—Written Plan Required
[.8] Board of Directors—Review Loan Policy
[.9] Loans—Special Mention
[.10] Loans—Concentrations of Credit—Reduction Required
[.11] Loans—Collections—Written Plan Required
[.12] Liquidity Ratio—Written Plan Required
[.13] Strategic Plan—Preparation of Required
[.14] Violations of Law—Correction of Violations Required
[.15] Payments—Restricted
[.16] Audit—Written Policy Required
[.17] Budget Plan—Preparation Required
[.18] Shareholders—Disclosure of Cease and Desist Order Required
[.19] Compliance Program—Compliance Reports
[.20] Progress Report—Written Report Required
In the Matter of
LAKESIDE COMMUNITY BANK
STERLING HEIGHTS, MICHIGAN
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-03-079b
Lakeside Community Bank, Sterling Heights, Michigan
("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, rule, or regulation alleged to have been committed
by the Bank, and of
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its right to a hearing on the charges
under section 8(b) of the Federal Deposit Insurance Act ("Act"),
12 U.S.C. §1818(b), and under section 2304 of the Banking Code of
1999, Mich. Comp. Laws §487.12304, and having waived those rights,
entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO
CEASE AND DESIST ("CONSENT AGREEMENT") with representatives of
the Federal Deposit Insurance Corporation ("FDIC") and the Office
of Financial and Insurance Services for the State of Michigan
("OFIS"), dated July 22, 2003, whereby, solely for the purpose of
this proceeding and without admitting or denying the charges of unsafe
or unsound banking practices and violations of law, rule, or
regulation, the Bank consented to the issuance of an ORDER TO CEASE AND
DESIST ("ORDER") by the FDIC and OFIS.
The FDIC and OFIS considered the matter and determined that they had
reason to believe that the Bank had engaged in unsafe or unsound
banking practices and had violated laws, rules, or regulations. The
FDIC and OFIS, 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 or unsound banking practices and violations of law,
rule, or regulation as more fully set out in numbered paragraphs 1
through 20 below:
A. Engaging in hazardous lending and lax collection practices,
including, but not limited to:
• 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; and
• Extending credit with inadequate diversification of risk.
B. Operating with an inadequate level of capital protection for the
kind and quality of assets held.
C. Violating law, rule, or regulation, including:
• The collateral restrictions of section 23A of the Federal Reserve
Act ("section 23A"), 12 U.S.C. §371c(c);
• The safe and sound banking practice requirements of section 23A, 12
U.S.C. §371c(a)(4); and
• The comparable terms restrictions of section 23B of the Federal
Reserve Act ("section 23B"), 12 U.S.C. §371c-1.
D. Operating with an excessive level of adversely classified loans.
E. Operating with inadequate liquidity in light of the Bank's asset
and liability mix.
F. Operating with an inadequate allowance for loan and lease losses
("ALLL") for the volume, kind, and quality of loans and leases
held.
G. Operating with an inadequate audit program.
H. Operating with inadequate earnings.
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 which has failed to provide
adequate supervision over and direction to the management of the Bank
to prevent unsafe or unsound banking practices and violations of law,
rule, or regulation.
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 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 8.0 percent,
the Bank shall, within 60 days of the date of the required
determination, increase its capital ratio to not less than 8.0 percent
calculated as of the end of that preceding quarterly period. For
purposes
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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.
(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 total
risk-based capital as a percentage of its total assets ("risk-based
capital ratio") for that calendar quarter. If the risk-based capital
ratio is less than 10.0 percent, the Bank shall, within 60 days of the
date of the required determination, increase its risk-based capital
ratio to not less than 10.0 percent calculated as of the end of that
preceding quarterly period.
(c) Any 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; or
(ii) The elimination of all or part of the assets classified "Loss
as of January 27, 2003 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 pursuant
to this ORDER; or
(iii) The collection in cash of assets previously charged off; or
(iv) The direct contribution of cash by the directors and/or the
shareholders of the Bank; or
(v) Any other means acceptable to the Regional Director of the Chicago
Regional Office of the FDIC ("Regional Director") and OFIS; 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
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 other material
disclosures necessary to comply with Federal and State 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 OFIS, 611 Ottawa Street, Lansing,
Michigan 48909, for review. Any changes requested to be made in the
materials by the FDIC or OFIS shall be made prior to their
dissemination.
(e) In complying with the provisions of this paragraph, the Bank shall
provide to any subscriber and/or purchaser of Bank securities written
notice of any planned or existing development or other changes which
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) During the life of this ORDER, the Bank shall have and
thereafter retain qualified management. Each member of management shall
have the qualifications and experience commensurate with his or her
duties and responsibilities at the Bank. 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, rules, 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
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Bank shall notify the
Regional Director and OFIS in writing of any changes in any of the
Bank's directors or senior executive officers. For purposes of this
ORDER, "senior executive officer" is defined as in section 32 of
the Act ("section 32"), 12 U.S.C. §1831(i), and section
303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. §303.101(b),
and includes any person identified by the FDIC and OFIS, whether or not
hired as an employee, with significant influence over, or who
participates in, major policymaking decisions of the Bank.
[.3]3. (a) Within 10 days from the effective date of this ORDER, the Bank
shall retain a bank consultant acceptable to the Bank, the Regional
Director and OFIS. The consultant shall develop a written analysis and
assessment of the Bank's management and staffing needs for the purpose
of providing qualified management for the Bank ("Consultant's
Report").
(b) The Bank shall provide the Regional Director and OFIS 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 completion of the work;
(vii) Any restrictions on the use of the reported findings; and
(viii) A provision for unrestricted access to work papers by examiners
employed by the FDIC and OFIS conducting examinations of the Bank.
(c) The Consultant's Report shall be consistent with the
provisions of this ORDER and shall be developed within 60 days from
notification to the Bank of the acceptance of the bank consultant by
the Regional Director and OFIS. The Consultant's Report 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 maintenance of the Bank in a safe and sound condition; and
(iv) 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 this paragraph of
this ORDER.
(d) The Bank shall require the consultant to deliver the
Consultant's Report to the Bank's board of directors, which shall
review the Consultant's Report. Any comments or revisions to the
Consultant's Report which the board deem advisable shall be reduced to
writing. Within 15 days of the Bank's receipt of the Consultant's
Report, the Bank shall submit to the Regional Director and OFIS a copy
of the Consultant's Report, as originally submitted to the board,
together with the board's written proposals for management based on
the Consultant's Report (the Consultant's Report and board written
proposals together constituting the "Management Plan"). Within 15
days from the receipt of any comments from the Regional Director and
OFIS, and after consideration of such comments, the Bank shall approve
the Management Plan, which approval shall be recorded in the minutes of
the board of directors' meeting. Thereafter, the Bank, its directors,
officers, and employees shall implement and follow the Management Plan
and/or any subsequent modification.
[.4]4. (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
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thereof) that has been charged off the books of the Bank or
classified "Loss," so long as such credit remains 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 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.
[.5]5. 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" as of January 27, 2003 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
Regional Director and OFIS. 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.
[.6]6. (a) Within 15 days from the effective date of this ORDER, the Bank
shall replenish its ALLL in an amount equal to those loans required to
be charged off by this ORDER.
(b) 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 board of directors, reflects the
potential for further losses in the remaining loans or leases
classified "Substandard" and all other loans and leases in its
portfolio. In making this determination, the board of directors shall
consider the Interagency Policy Statement on Allowance for Loan and
Lease Losses Methodologies and Documentation for Banks and Savings
Institutions ("Interagency Policy Statement") and any analysis of
the Bank's ALLL provided by the FDIC or OFIS.
(c) Within 30 days from the effective date of this ORDER, Reports of
Condition and Income required by the FDIC and filed by the Bank
subsequent to January 27, 2003, but prior to the effective date of this
ORDER, shall be amended and refiled if they do not reflect a provision
for loan and lease losses and an ALLL which are adequate considering
the condition of the Bank's loan portfolio, and which, at a minimum,
incorporate the adjustments required by this paragraph.
(d) Prior to submission or publication of all Reports of Condition and
Income required by 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 ALLL
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 Interagency Policy Statement and any analysis of the
Bank's ALLL provided by the FDIC or OFIS.
(e) ALLL entries required by this paragraph shall be made prior to any
Tier 1 capital determinations required by this ORDER.
[.7]7. (a) Within 60 days from the effective date of this ORDER, and within
60 days of receipt of all FDIC or OFIS Reports of Examination while
this ORDER is in effect, the Bank shall formulate and submit to the
Regional Director and OFIS for review and comment a written plan to
reduce the Bank's risk position in each asset in excess of $100,000
which is classified "Substandard" or "Doubtful" in the
Joint Report of Examination as of January 27, 2003 ("Joint
Report") or subsequent Report of Examination while this ORDER is in
effect. 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.
(b) Such plan shall include, but not be limited to:
(i) Dollar levels to which the Bank shall reduce each asset
within 6 and 12 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
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(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 OFIS.
(d) Within 30 days from the receipt of any comment from the Regional
Director and OFIS, and after the consideration 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.
[.8]8. (a) Within 90 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 Regional Director and OFIS for review and comment upon its
completion.
(b) The initial revisions to the Bank's loan policy required by this
paragraph, at a minimum, shall include provisions:
(i) Establishing review and monitoring procedures to ensure that
all lending personnel are adhering to established lending procedures
and that the directorate is receiving timely and fully documented
reports on loan activity, including any deviations from established
policy;
(ii) Requiring the establishment and maintenance of an adequate loan
review program and a loan grading system and internal loan watch list;
(iii) Addressing concentrations of credit and diversification of risk,
including goals for portfolio mix, establishment of limits within loan
and other asset categories, and development of a tracking and
monitoring system for the economic and financial condition of specific
geographic locations, industries, and groups of borrowers; and
(iv) Establishing guidelines for timely recognition of loss through
charge-off.
[.9]9. Within 90 days from the effective date of this ORDER, the Bank shall
take all steps necessary to correct all deficiencies in the loans
listed for "Special Mention" in the Joint Report and in all FDIC
and OFIS Reports of Examination of the Bank while this ORDER is in
effect.
[.10]10. (a) Within 90 days from the effective date of this ORDER, the Bank
shall formulate and submit to the Regional Director and OFIS for review
and comment a written plan to reduce concentrations of credit
identified on page 2 of the Joint Report. Such plan shall prohibit any
additional advances that would increase the concentrations or create
new concentrations and shall include, but not be limited to:
(i) Dollar levels to which the Bank shall reduce each
concentration within 6 and 12 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. As used in this paragraph,
"reduce" means to lower the ratio of each construction and
development loan concentration to Tier 1 capital.
(b) Within 30 days from receipt of any comment from the Regional
Director and OFIS, and after the consideration 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.
[.11]11. Within 30 days from the effective date of this ORDER, the Bank
shall adopt and implement a written plan for the reduction and
collection of delinquent loans. The plan shall include, but not be
limited to, provisions which:
(a) prohibit the extension of credit for the payment of interest;
(b) establish acceptable guidelines for the collection of delinquent
credits;
(c) establish dollar levels to which the Bank shall reduce
delinquencies within 6 and 12 months from the effective date of this
ORDER;
(d) prohibit the renewal of any delinquent loan without the full
payment of principal and interest due; and
(e) require 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.
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A copy of the written plan shall be submitted to the Regional
Director and OFIS upon its completion. As used in this paragraph,
"reduction" means lowering the total dollar volume.
[.12]12. (a) Within 90 days from the effective date of this ORDER, the Bank
shall develop and submit to the Regional Director and OFIS for review
and comment a written plan addressing the Bank's liquidity, its
relationship of volatile liabilities to temporary investments, and its
dependence on non-core funding. Annually thereafter during the life of
this ORDER, the Bank shall review this plan for adequacy and, based
upon such review, shall make appropriate revisions to the plan that are
necessary to maintain adequate provisions to meet the Bank's liquidity
needs. The initial plan shall include, at a minimum, provisions:
(i) Limiting the Bank's ratio of total loans to total assets to
not more than 90 percent;
(ii) Establishing a desirable range for its net non-core funding ratio
as computed in the Uniform Bank Performance Report;
(iii) Identifying the source and use of borrowed and/or volatile funds;
(iv) Establishing appropriate lines of credit at correspondent banks,
including the Federal Reserve Bank of Chicago and the Federal Home Loan
Bank of Indianapolis, that would allow the Bank to borrow funds to meet
depositor demands if the Bank's other provisions for liquidity proved
to be inadequate;
(v) Requiring the retention of securities and/or other identified
categories of investments that can be liquidated within one day in
amounts sufficient (as a percentage of the Bank's total assets) to
ensure the maintenance of the Bank's liquidity posture at a level
consistent with short- and long-term liquidity objectives;
(vi) Establishing a minimum liquidity ratio and defining how the ratio
is to be calculated;
(vii) Establishing contingency plans by identifying alternative courses
of action designed to meet the Bank's liquidity needs;
(viii) Addressing the proper use of borrowings (e.g., seasonal credit
needs, match funding mortgage loans, etc.) and providing for
appropriate tenor commensurate with the use of the borrowed funds,
addressing concentration of funding sources, pricing and collateral
requirements with specific allowable funding channels identified (e.g.,
brokered deposits, internet deposits, Fed funds purchased and other
correspondent borrowings); and
(ix) Establishing procedures for managing the Bank's sensitivity to
interest rate risk which comply with the Joint Agency Statement of
Policy on Interest Rate Risk (June 26, 1996), and the Joint Supervisory
Statement on Investment Securities and End-user Derivative Activities
(April 23, 1998).
(b) Within 30 days from the receipt of all such comments from the
Regional Director and OFIS, and after revising the plan as necessary,
the Bank shall adopt the plan, which adoption shall be recorded in the
minutes of a board of directors meeting. Thereafter, the Bank shall
implement the plan.
[.13]13. (a) Within 90 days from the effective date of this ORDER, the Bank
shall formulate and adopt a realistic, comprehensive strategic plan.
The plan required by this paragraph shall contain an assessment of the
Bank's current financial condition and market area, and a description
of the operating assumptions that form the bases for major projected
income and expense components.
(b) The written strategic plan shall address, at a minimum:
(i) Strategies for pricing policies and asset/liability
management; and
(ii) Financial goals, including pro forma statements for asset growth,
capital adequacy, and earnings.
(c) The Bank will submit the strategic plan to the Regional
Director and OFIS for review and comment. After consideration of all
such comments, 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 strategic plan.
(d) Within 30 days from 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 strategic
plan 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.
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(e) The strategic plan required by this ORDER shall be revised and
submitted to the Regional Director and OFIS 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
Regional Director and OFIS, and after consideration of all such
comments, the Bank shall approve the revised plan, which approval shall
be recorded in the minutes of a board of directors meeting. Thereafter,
the Bank shall implement the revised plan.
[.14]14. (a) Within 15 days from the effective date of this ORDER, the Bank
shall eliminate and/or correct all violations of law, rule, and
regulation listed in the Joint Report.
(b) Within 30 days from the effective date of this ORDER, the Bank
shall implement procedures to ensure future compliance with all
applicable laws, rules, and regulations.
[.15]15. (a) As of the effective date of this ORDER, the Bank shall not make
any payment, directly or indirectly, including but not limited to
dividend payments, to or for the benefit of the Bank's holding company
or any other Bank affiliate, without the prior written consent of the
Regional Director and OFIS.
(b) The Bank shall not enter into any contract with its holding company
or any other Bank affiliate without the prior written approval of the
Regional Director and OFIS.
[.16]16. Within 45 days from the effective date of this ORDER, the Bank's
board of directors shall formulate and submit to the Regional Director
and OFIS for review and comment a comprehensive written audit program.
At a minimum, the audit program shall provide that: (a) the internal
auditor make written quarterly reports of audit findings directly to
the Bank's board of directors, which findings and any action taken as
a result of the findings shall be recorded in the minutes of the
meetings of the board; and (b) the Bank provide the Regional Director
and OFIS with a copy of all external audit reports within 10 days of
the Bank's receipt of such report(s). The Bank shall thereafter
implement and enforce an effective system of internal and external
audits.
[.17]17. (a) Within 60 days from the effective date of this ORDER, the Bank
shall formulate and submit to the Regional Director and OFIS for review
and comment a written profit plan and a realistic, comprehensive budget
for all categories of income and expense for calendar years 2003 and
2004. The plans required by this paragraph shall contain formal goals
and strategies, consistent with sound banking practices, to reduce
discretionary expenses and to improve the Bank's overall earnings and
net interest income, and shall contain a description of the operating
assumptions that form the basis for major projected income and expense
components.
(b) Within 30 days from the end of each calendar quarter following
completion of the profit plan and budgets required by this paragraph,
the Bank's board of directors shall evaluate the Bank's actual
performance in relation to the plan and budget, record the results of
the evaluation, and note any actions taken by the Bank in the minutes
of the board of directors meeting at which such evaluation is
undertaken.
(c) A written profit plan and budget shall be prepared for each
calendar year for which this ORDER is in effect and shall be submitted
to the Regional Director and OFIS for review and comment within 30 days
of the end of each year. Within 30 days of receipt of all such comments
from the Regional Director and OFIS and after consideration 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.
[18.]18. Following the effective date of this ORDER, the Bank shall send to
its shareholders a copy or description of this ORDER: (1) in
conjunction with the Bank's next shareholder communications; and
(2) in conjunction with the Bank's notice or proxy statement
preceding its next shareholder meeting. The description shall fully
describe this ORDER in all material respects. The description and any
accompanying communication, notice or statement shall be sent to the
FDIC Accounting and Securities Disclosure Section 550 17th Street,
N.W., Washington, D.C. 20429 and to OFIS, 611 Ottawa Street, Lansing,
Michigan 48909, for review at least 20 days prior to dissemination to
shareholders. Any changes requested to be made by the FDIC and OFIS
shall be made prior to dissemination of the description, communication,
notice or statement.
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[.19]19. (a) Within 75 days from the effective date of this ORDER, the
Bank's board of directors shall have in place 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) of
this paragraph, 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 board of directors meeting.
[.20]20. Within 30 days from the end of each calendar quarter following the
effective date of this ORDER, the Bank shall furnish to the Regional
Director and OFIS 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 Regional Director and OFIS have, in writing,
released the Bank from making further reports.
The effective date of this ORDER shall be 10 calendar days after its
issuance by the FDIC and OFIS.
The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.
The provisions of this ORDER shall remain effective and enforceable
except to the extent that, and until such time as, any provision has
been modified, terminated, suspended, or set aside by the FDIC and
OFIS.
Dated: August 12, 2003.
