Decisions on Bank Applications
GMAC Automotive Bank
FEDERAL DEPOSIT INSURANCE CORPORATION
RE: GMAC Automotive Bank
Application for Federal Deposit Insurance
The undersigned, acting on behalf of the Board of Directors pursuant to delegated authority, has fully considered all available facts and information relevant to the factors of Section 6 of the Federal Deposit Insurance Act and relating to the application for Federal deposit insurance with membership in the Bank Insurance Fund for GMAC Automotive Bank to be located at 6985 Union Park Center, Midvale, Salt Lake County, Utah 84047, and has concluded that the application should be approved.
Accordingly, it is hereby ORDERED that the application submitted by GMAC Automotive Bank for Federal deposit insurance be, and the same hereby is, approved subject to the following conditions:
1) That beginning paid-in capital funds of not less than $290,000,000 be provided, of which not less than $1,000,000 shall be allocated to common capital and not less than $289,000,000 shall be allocated to surplus and other segregations;
2) That a ratio of Tier 1 capital to total assets of at least 8% and an adequate allowance for loan and lease losses be maintained during the first three years of operation from the date insurance is effective;
3) That the bank obtain an annual audit of its financial statements by an independent auditor for at least the first three years after deposit insurance coverage is effective, furnish a-copy of any reports by the independent auditor (including management letters) to the New York Regional Director of the FDIC within 15 days after their receipt by the bank, and notify the Regional Director within 15 days when a change in its independent auditor occurs;
4) That until the conditional commitment of the FDIC becomes effective, the Corporation shall have the right to alter, suspend, or withdraw the said commitment should any interim development be deemed to warrant such action; and
5) That if deposit insurance has not become effective within one year from the date of this ORDER or unless, in the meantime, a request for an extension of time has been approved by the Corporation, the consent granted shall expire on said date;
6) That the bank shall maintain documentation demonstrating compliance with Sections 23A and 23B of the Federal Reserve Act which require that all transactions with affiliated companies be on terms and under circumstances, including credit standards, that are substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with nonaffiliated companies, or in the absence of comparable transactions, that in good faith would be offered to nonaffiliated companies;
7) That a majority of the members of the Executive Committee, which is empowered to exercise all powers of the Board of Directors during the intervals between meetings of the full Board, be comprised of outside directors, and that the Audit Committee of the Board meet no less frequently than quarterly;
8) That the bank shall operate within the parameters of the business plan submitted to the FDIC, which indicates the bank will originate only prime quality loans. Furthermore, during the first three years of operations, the bank shall notify the Regional Director of any proposed major deviation or material change from the submitted plan 60 days before consummation of the change;
9) That until such time - which shall not be less than two years - as the bank has sufficient data to develop/support its own methodology for determining the adequacy of the allowance for loan and lease losses ("ALLL"), the bank shall maintain the ALLL at a level equal to the average net charge-off rate experienced by GMAC over the past three years, this being approximately 1.0% for the three-year period ending December 31, 2003; and
10) That in addition to a Tier 1 capital to total assets ratio of at least 8% and an adequate allowance for loan and lease losses, capital be maintained at a level which qualifies the bank as "Well Capitalized" as defined by Section 325.103 of the FDIC Rules and Regulations, during the first three years of operation from the date insurance is effective.
Dated at New York, New York, this 25th day of June, 2004.
Christopher J. Spoth Regional Director