AGREEMENT BY AND BETWEEN Albany Bank and Trust, N.A. Albany, Georgia and The Comptroller of the Currency
Exhibit
10.21
AGREEMENT
BY AND BETWEEN
Albany
Bank and Trust, N.A.
Albany,
Georgia
and
The
Comptroller of the Currency
Albany
Bank and Trust, N.A., Albany, Georgia (“Bank”) and the Comptroller of the
Currency of the United States of America (“Comptroller”) wish to protect the
interests of the depositors, other customers, and shareholders of the Bank,
and,
toward that end, wish the Bank to operate safely and soundly and in accordance
with all applicable laws, rules and regulations.
The
Comptroller, through his National Bank Examiner, has examined the Bank and
identified deficiencies in the Bank's operations including unsafe and unsound
banking practices and violations of law. His findings are contained in the
Report of Examination dated October 3, 2005 (“▇▇▇”).
In
consideration of the above premises, it is agreed, between the Bank, by and
through its duly elected and acting Board of Directors (“Board”), and the
Comptroller, through his authorized representative, that the Bank shall operate
at all times in compliance with the articles of this Agreement.
ARTICLE
I -- JURISDICTION
(1) This
Agreement shall be construed to be a “written agreement entered into with the
agency” within the meaning of 12 U.S.C. § 1818(b)(1).
(2) This
Agreement shall be construed to be a “written agreement between such depository
institution and such agency” within the meaning of 12 U.S.C.
§ 1818(e)(1) and 12 U.S.C. § 1818(i)(2).
(3) This
Agreement shall be construed to be a “formal written agreement” within the
meaning of 12 C.F.R. § 5.51(c)(6)(ii). See
12 U.S.C. § 1831i.
(4) This
Agreement shall be construed to be a “written agreement” within the meaning of
12 U.S.C. § 1818(u)(1)(A).
(5) All
reports or plans which the Bank or Board has agreed to submit to the Assistant
Deputy Comptroller (ADC) pursuant to this Agreement shall be forwarded
to:
▇▇▇▇▇
▇▇▇▇▇▇
Assistant
Deputy Comptroller
Birmingham
▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
ARTICLE
II -- COMPLIANCE COMMITTEE
(1) Within
thirty (30) days of the date of this Agreement, the Board shall appoint a
Compliance Committee of at least three (3) directors, all of
which
shall be outside directors (i.e., not employees of the Bank or any of its
affiliates, as the term “affiliate” is defined in 12 U.S.C.
§ 371c(b)(1). Upon appointment, the names of the members of the Compliance
Committee and, in the event of a change of the membership, the name of any
new
member, shall be submitted in writing to the ADC. The Compliance Committee
shall
be responsible for monitoring and coordinating the Bank's adherence to the
provisions of this Agreement.
(2) The
Compliance Committee shall meet at least monthly.
(3) Within
sixty (60) days of the date of this Agreement and every thirty (30) days
thereafter, the Compliance Committee shall submit a written progress report
to
the Board setting forth in detail:
(a) a
description of the action needed to achieve full compliance with each
Article
of this Agreement;
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(b) actions
taken to comply with each Article of this Agreement; and
(c) the
results and status of those actions.
(4) The
Board
shall forward a copy of the Compliance Committee's report, with any additional
comments by the Board, to the ADC within fifteen (15) days of receiving such
report.
ARTICLE
III -- BOARD TO ENSURE COMPETENT MANAGEMENT
(1) Within
ninety (90) days, the Board shall ensure that the Bank has competent management
in place on a full-time basis in its Chief Executive Officer, President, and
Senior Loan Officer positions to carry out the Board’s policies, ensure
compliance with this Agreement, applicable laws, rules and regulations, and
manage the day-to-day operations of the Bank in a safe and sound manner.
(2) Within
sixty (60) days, the Board shall review the capabilities of the Bank’s
management to perform present and anticipated duties and the Board will
determine whether management changes will be made, including the need for
additions to or deletions from current management.
(3) For
incumbent officers in the positions mentioned in this Article, the Board shall
within sixty (60) days assess each of these officers’ experience, other
qualifications and performance compared to the position’s description, duties
and responsibilities.
(4) If
the
Board determines that an officer will continue in his/her position but that
the
officer’s depth of skills needs improvement, the Board will, within ninety (90)
days, develop and implement a written program, with specific time frames, to
improve the officer’s supervision and management of the Bank. At a minimum the
written program shall include:
(a) an
education program designed to ensure that the officer has skills
and abilities
necessary to supervise effectively;
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(b) a
program
to improve the effectiveness of the officer;
(c) objectives
by which the officer’s effectiveness will be measured; and
(d) a
performance appraisal program for evaluating performance according to
the
position’s description and responsibilities and for measuring performance
against the Bank’s goals and objectives.
Upon
completion, a copy of the written program shall be submitted to the
ADC.
(5) If
a
position mentioned in this Article is vacant now or in the future, including
if
the Board realigns an existing officer’s responsibilities and a position
mentioned in this Article becomes vacant, the Board shall within ninety (90)
days of such vacancy appoint a capable person to the vacant position who shall
be vested with sufficient executive authority to ensure the Bank’s compliance
with this Agreement and the safe and sound operation of functions within the
scope of that position’s responsibility.
(6) Prior
to
the appointment of any individual to an executive officer position, the Board
shall submit to the ADC the following information:
(a) the
information sought in the “Changes in Directors and Senior
Executive Officers”
and “Background Investigations” booklets of the Comptroller’s Licensing
Manual,
together with a legible fingerprint card for the proposed
individual;
(b) a
written
statement of the Board's reasons for selecting the proposed officer;
and
(c) a
written
description of the proposed officer's duties and responsibilities.
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(7) The
ADC
shall have the power to disapprove the appointment of the proposed new officer.
However, the lack of disapproval of such individual shall not constitute an
approval or endorsement of the proposed officer.
(8) The
requirement to submit information and the prior disapproval provisions of this
Article are based on the authority of 12 U.S.C. § 1818(b)(6)(E) and do
not require the Comptroller to complete his/her review and act on any such
information or authority within ninety (90) days.
ARTICLE
IV -- ALLOWANCE FOR LOAN AND LEASE LOSSES
(1) The
Board
shall review the adequacy of the Bank's Allowance for Loan and Lease Losses
(“Allowance”) and shall establish a program for the maintenance of an adequate
Allowance. This review and program shall be designed in light of the comments
on
maintaining a proper Allowance found in the “Allowance for Loan and Lease
Losses” booklet of the Comptroller’s
Handbook,
and
shall focus particular attention on the following factors:
(a) results
of the Bank's internal loan review;
(b) results
of the Bank's external loan review;
(c) an
estimate of inherent loss exposure on each credit in excess of
seventy-five
thousand dollars ($75,000);
(d) loan
loss
experience;
(e) trends
of
delinquent and nonaccrual loans;
(f) concentrations
of credit in the Bank; and,
(g) present
and prospective economic conditions.
(2) The
program shall provide for a review of the Allowance by the Board at least once
each calendar quarter. Any deficiency in the Allowance shall be remedied in
the
quarter it
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is
discovered, prior to the filing of the Consolidated Reports of Condition and
Income, by additional
provisions from earnings. Written documentation shall be maintained indicating
the factors considered and conclusions reached by the Board in determining
the
adequacy of the Allowance.
(3) A
copy of
the Board's program shall be submitted to the ADC for review and prior written
determination of no supervisory objection. Upon receiving a determination of
no
supervisory objection from the ADC, the Bank shall implement and adhere to
the
program.
ARTICLE
V -- CAPITAL PLAN AND HIGHER MINIMUMS
(1) The
Bank
shall achieve by September 30, 2006, and thereafter maintain the following
capital levels (as defined in 12 C.F.R. Part 3):
(a) Tier
1
capital at least equal to eleven percent (11%) of risk-weighted assets;
(b) Tier
1
capital at least equal to eight percent (8%) of adjusted total
assets.
(2) The
requirement in this Agreement to meet and maintain a specific capital level
means that the Bank may not be deemed to be “well capitalized” for purposes of
12 U.S.C. § 1831o and 12 C.F.R. Part 6 pursuant to 12 C.F.R.
§ 6.4(b)(1)(iv).
(3) Within
ninety (90) days, the Board shall develop, implement, and thereafter ensure
Bank
adherence to a three year capital program. The program shall
include:
(a) specific
plans for the maintenance of adequate capital that may in no event be
less
than the requirements of subparagraph (1);
(b) projections
for growth and capital requirements based upon a detailed analysis
of the Bank's assets, liabilities, earnings, fixed assets, and off-balance
sheet activities;
6
(c) projections
of the sources and timing of additional capital to meet the Bank's
current and future needs;
(d) the
primary source(s) from which the Bank will strengthen its
capital structure
to meet the Bank's needs;
(e) contingency
plans that identify alternative methods should the primary source(s)
under (d) above not be available; and
(f) a
dividend policy that permits the declaration of a dividend only:
(i) when
the
Bank is in compliance with its approved capital program;
(ii) when
the
Bank is in compliance with 12 U.S.C. §§ 56 and 60; and,
(iii) with
the
prior written determination of no supervisory objection by the
ADC.
(4) Upon
receiving a determination of no supervisory objection from the ADC, the Bank
shall implement and adhere to the dividend policy.
(5) Upon
completion, the Bank's capital program shall be submitted to the ADC for prior
determination of no supervisory objection. Upon receiving a determination of
no
supervisory objection from the ADC, the Bank shall implement and adhere to
the
capital program. The Board shall review and update the Bank's capital program
on
an annual basis, or more frequently if necessary. Copies of the reviews and
updates shall be submitted to the ADC.
ARTICLE
VI -- CREDIT AND COLLATERAL EXCEPTIONS
(1) Within
sixty (60) days the Board shall obtain current and satisfactory credit
information on all loans lacking such information, including those listed in
the
▇▇▇, in any subsequent Report of Examination, in any internal or external loan
review, or in any listings of
7
loans
lacking such information provided to management by the National Bank Examiners
at the conclusion of an examination.
(2) Within
sixty (60) days the Board shall ensure proper collateral documentation is
maintained on all loans and correct each collateral exception listed in the
▇▇▇,
in any subsequent Report of Examination, in any internal or external loan
review, or in any listings of loans lacking such information provided to
management by the National Bank Examiners at the conclusion of an
examination.
(3) Effective
immediately, the Bank may grant, extend, renew, alter or restructure any loan
or
other extension of credit only
after:
(a) documenting
the specific reason or purpose for the extension of credit;
(b) identifying
the expected source of repayment in writing;
(c) structuring
the repayment terms to coincide with the expected source of repayment;
(d) obtaining
and analyzing current and satisfactory credit information, including
cash flow analysis, where loans are to be repaid from operations;
(i) Failure
to obtain the information in (3)(d) shall require a majority of
the
full Board (or a delegated committee thereof) to certify in writing
the specific reasons why obtaining and analyzing the information
in (3)(d) would be detrimental to the best interests of the
Bank,
and,
(ii) A
copy of
the Board certification shall be maintained in the credit of
the
affected borrower(s). The certification will be reviewed by
this
Office in subsequent examinations of the Bank;
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(e) documenting,
with adequate supporting material, the value of collateral and
properly perfecting the Bank's lien on it where applicable.
ARTICLE
VII -- CREDIT RISK
(1) Within
sixty (60) days, the Board shall develop, implement, and thereafter ensure
Bank
adherence to a written program to reduce the high level of credit risk in the
Bank.
(2) The
program shall include, but not be limited to:
(a) procedures
to strengthen credit underwriting, particularly in the commercial
real estate loan portfolio;
(b) procedures
to strengthen management of loan operations and to maintain
an adequate, qualified staff in all lending functional areas;
(c) procedures
for strengthening collections; and
(d) an
action
plan to control loan growth.
The
Board
shall promptly submit a copy of the program to the ADC.
(3) At
least
quarterly, the Board shall prepare a written assessment of the bank’s credit
risk, which shall evaluate the Bank’s progress under the aforementioned program.
The Board shall submit a copy of this assessment to the ADC.
ARTICLE
VIII -- INTEREST RATE RISK POLICY
(1) Within
sixty (60) days, the Board shall adopt, implement, and thereafter ensure Bank
adherence to a written interest rate risk policy. In formulating this policy,
the Board shall refer to the “Interest Rate Risk” booklet of the Comptroller’s
Handbook.
The
policy shall provide for a coordinated interest rate risk strategy and, at
a
minimum, address:
(a) the
establishment of adequate management reports on which to base
sound interest
rate risk management decisions;
9
(b) establishment
and guidance of the Bank’s strategic direction and tolerancefor
interest rate risk;
(c) implementation
of effective tools to measure and monitor the Bank’s performance
and overall interest rate risk profile;
(d) employment
of competent personnel to manage interest rate risk;
(e) prudent
limits on the nature and amount of interest rate risk that can be taken;
and,
(f) periodic
review of the Bank's adherence to the policy.
(2) Upon
adoption, a copy of the written policy shall be forwarded to the ADC for
review.
ARTICLE
IX -- INTERNAL AUDIT
(1) Within
sixty (60) days, the Board shall adopt, implement, and thereafter ensure Bank
adherence to an independent, internal audit program sufficient to:
(a) detect
irregularities and weak practices in the Bank's operations;
(b) determine
the Bank's level of compliance with all applicable laws, rules and
regulations;
(c) assess
and report the effectiveness of policies, procedures, controls, and management
oversight relating to accounting and financial reporting;
(d) evaluate
the Bank's adherence to established policies and procedures, with particular
emphasis directed to the Bank's adherence to its loan policies concerning
underwriting standards and problem loan identification and classification;
10
(e) review
and provide an opinion regarding whether regulatory reports beginning
with the quarter ending June 30, 2006, contain “material misstatements”
within thirty (30) days of filing; for purposes of this Article,
“material misstatements” has the same meaning as the term is used
in
the SEC’s Staff Accounting Bulletin No. 99 on Materiality (“SAB 99”).
(f) adequately
cover all areas; and
(g) establish
an annual audit plan using a risk based approach sufficient to achieve
these objectives.
(2) As
part
of this audit program, the Board shall evaluate the audit reports of any party
providing services to the Bank, and shall assess the impact on the Bank of
any
audit deficiencies cited in such reports.
(3) The
Board
shall ensure that the audit function is supported by an adequately staffed
department or outside firm, with respect to both the experience level and number
of the individuals employed.
(4) The
Board
shall ensure that the audit program is independent. The persons responsible
for
implementing the internal audit program described above shall report directly
to
the Board, which shall have the sole power to direct their activities. All
reports prepared by the audit staff shall be filed directly with the Audit
Committee of the Board and not through any intervening party. All audit reports
shall be in writing. The Board shall ensure that immediate actions are
undertaken to remedy deficiencies cited in audit reports, and that auditors
maintain a written record describing those actions.
11
(5) The
audit
staff shall have access to any records necessary for the proper conduct of
its
activities. National bank examiners shall have access to all reports and work
papers of the audit staff and any other parties working on its behalf.
(6) Upon
adoption, a copy of the internal audit program shall be promptly submitted
to
the ADC.
ARTICLE
X -- INVESTMENT POLICY
(1) Within
sixty (60) days, the Board shall review and revise the Bank's investment policy
and implement the revised policy, and thereafter ensure Bank adherence to the
policy. The policy shall contain the basic elements of a sound investment policy
consistent with regulatory guidance provided in An
Examiner’s Guide to Investment Products and Practices
(Dec.,
1992), 12 C.F.R. Part 1, and OCC Bulletin 98-20 (Apr. 27, 1998) and shall
include:
(a) an
investment portfolio strategy that is consistent with Board approved
Bank
asset and liability management policies and interest rate risk tolerances;
(b) individual
and committee investment portfolio purchase and sale authority;
(c) approval
procedures that will include dollar size limits, quality limitations,
maturity
limitations, and concentration or diversification guidelines;
(d) a
requirement that investment securities be supported by adequate credit
and
interest rate risk measurement information as described in the “Interest
Rate Risk” booklet of the Comptroller’s
Handbook and
in
OCC ▇▇▇▇▇▇▇▇
▇▇-▇▇ (▇▇▇. ▇▇, ▇▇▇▇);
(e) required
reviews and use of securities dealers;
12
(f) periodic
reports to and approval by the Board for all investment portfolio purchases
and sales and strategy changes; and
(g) monthly
review by the Board's investment committee of the Bank's investment
portfolio activity to ensure adherence to the investment policy and
to
applicable banking and securities laws and regulations.
(2) The
revised investment policy shall be implemented and a copy shall be forwarded
to
the ADC.
ARTICLE
XI -- LOAN REVIEW
(1) The
Board
shall employ or designate a sufficiently experienced and qualified person(s)
or
firm to ensure the timely and independent identification of problem loans and
leases.
(2) Within
sixty (60) days from the effective date of this Agreement, the Board shall
establish an effective, independent and on-going loan review system to review,
at least quarterly, the Bank's loan and lease portfolios to assure the timely
identification and categorization of problem credits. The system shall provide
for a written report to be filed with the Board after each review and shall
use
a loan and lease grading system consistent with the guidelines set forth in
Rating Credit Risk, A-RCR, of the Comptroller’s
Handbook.
Such
reports shall, at a minimum, include:
(a) conclusions
regarding the overall quality of the loan and lease portfolios;
(b) the
identification, type, rating, and amount of problem loans and
leases;
(c) the
identification and amount of delinquent loans and leases;
(d) the
identification of credit and collateral documentation exceptions;
(e) the
identification of loans meeting the criteria for nonaccrual status;
13
(f) the
identification and status of credit related violations of law, rule or
regulation;
(g) the
identification of loans and leases not in conformance with the Bank's
lending
and leasing policies, including approved exceptions to the Bank’s lending
and leasing policies;
(h) the
identity of the loan officer who originated or is responsible for each
loan
reported in accordance with subparagraphs (b) through (g) of this paragraph;
(i) the
identification of concentrations of credit; and
(j) the
identification of loans and leases to executive officers, directors,
principal shareholders (and their related interests) of the Bank.
(3) The
Board
shall evaluate the loan review report(s) and shall ensure that immediate,
adequate, and continuing remedial action, if appropriate, is taken upon all
findings noted in the report(s).
(4) A
copy of
the reports submitted to the Board, as well as documentation of the action
taken
by the Bank to collect or strengthen assets identified as problem credits,
shall
be preserved in the Bank.
ARTICLE
XII -- LENDING POLICY
(1) Within
sixty (60) days, the Board shall review and revise the Bank's written loan
policy. In revising this policy, the Board shall refer to “Loan Portfolio
Management” booklet of the Comptroller’s
Handbook.
This
policy shall incorporate, but not necessarily be limited to, the
following:
14
(a) a
description of acceptable types of loans;
(b) a
provision that current and satisfactory credit information will be obtained
on each borrower;
(c) maturity
scheduling related to the anticipated source of repayment, the purpose
of the loan, and the useful life of the collateral;
(d) maximum
ratio of loan value to appraised value or acquisition costs of collateral
securing the loan;
(e) collection
procedures, to include follow-up efforts, that are systematically and
progressively stronger;
(f) a
pricing
policy that takes into consideration costs, general overhead, and probable
loan losses, while providing for a reasonable margin of profit;
(g) a
definition of the Bank's trade area;
(h) guidelines
and limitations for loans originating outside of the Bank's trade area;
(i) a
limitation on aggregate outstanding loans in relation to other balance
sheet
accounts;
(j) distribution
of loans by category;
(k) a
prohibition regarding the use of brokered deposits to fund loan growth or
support
criticized loans;
(l) guidelines
for loans to insiders, including a statement that such loans will not
be
granted on terms more favorable than those offered to similar outside
borrowers;
(m) guidelines
and limitations on concentrations of credit;
15
(n) a
limitation on the type and size of loans that may be made by loan officers
without prior approval by the Board or a committee established by the
Board
for this purpose;
(o) measures
to correct the deficiencies in the Bank's lending procedures noted
in
any ▇▇▇; and,
(p) guidelines
designed to improve Board oversight of the loan approval process,
specifically with regard to credits exhibiting significant risk.
At
a
minimum, the policy shall:
(i) establish
dollar limits on extensions of credit to any one borrower,
above which the prior approval of the Board, or a committee
thereof, would be required;
(ii)
establish
dollar limits on aggregate extensions of credit to any
one
borrower, above which any new extensions of credit
to
that borrower, regardless of amount, would require the
prior
approval of the Board, or a committee thereof; and
(iii)
require
that all credits which deviate from the Bank’s normal
course of business, including all credits which deviate from the
Bank’s written strategic plan, receive the prior approval of the Board,
or
a committee thereof;
(iv)
require
that all new, renewed, extended, restructured or altered credits
in excess of fifty thousand dollars ($50,000) which deviate from
the
Bank’s lending policy receive the prior approval of the Board,
or
a committee thereof. A copy of the Board or committee
16
approval
shall be maintained in the credit file of the affected borrower(s),
and shall state the reason for deviating from the lending policy
to
include an assessment of why the deviation is in the best interest
of the bank.
(v) require
that all new, renewed, extended, restructured or altered credits
in the amount of fifty thousand dollars ($50,000) or less which
deviate from the Bank’s lending policy receive the prior written
approval of the bank’s senior lending officer. A copy of the written
approval shall be maintained in the credit file of the affected borrower(s),
and shall state the reason for deviating from the lending policy
to
include an assessment of why the deviation is in the best interest
of the bank.
(q) guidelines
consistent with Banking Circular 255, setting forth the criteria under
which renewals of extensions of credit may be approved. At a minimum
the policy shall:
(i) ensure
that renewals are not made for the sole purpose of reducing the
volume of loan delinquencies; and
(ii) provide
guidelines and limitations on the capitalization of interest:
(r) charge-off
guidelines, by type of loan or other asset, including Other Real Estate
Owned, addressing the circumstances under which a charge-off would
be
appropriate and ensuring the recognition of losses within the
quarter
of discovery; and
17
(s) guidelines
for periodic review of the Bank's adherence to the
revised lending policy.
(2) Upon
adoption, the policy shall be implemented, the Board shall thereafter ensure
Bank adherence to the policy, and a copy of the policy shall be forwarded to
the
ADC for review.
ARTICLE
XIII -- LIQUIDITY
(1) The
Board
shall immediately increase the liquidity of the Bank to a level that is
sufficient to sustain the Bank's current operations and to withstand any
anticipated or extraordinary demand against its funding base. Such actions
may
include, but are not necessarily limited to:
(a) selling
assets;
(b) obtaining
lines of credit from the Federal Reserve Bank;
(c) obtaining
lines of credit from correspondent banks;
(d) recovering
charged-off assets; and
(e) injecting
additional equity capital.
(2) The
Board
shall review the Bank's liquidity on a monthly basis. Such reviews shall
consider:
(a) a
maturity schedule of certificates of deposit, including large uninsured
deposits;
(b) the
volatility of demand deposits including escrow deposits;
(c) the
amount and type of loan commitments and standby letters of credit;
(d) an
analysis of the continuing availability and volatility of present funding
sources;
18
(e) an
analysis of the impact of decreased cash flow from the Bank's loan portfolio
resulting from delinquent and non-performing loans;
(f) an
analysis of the impact of decreased cash flow from the sale of loans or
loan
participations; and
(g) geographic
disbursement of and risk from brokered deposits.
(3) The
Board
shall take appropriate action to ensure adequate sources of liquidity in
relation to the Bank's needs. Monthly reports shall set forth liquidity
requirements and sources and establish a contingency plan. Copies of these
reports shall be forwarded to the ADC in the Bank’s monthly report to the
ADC.
ARTICLE
XIV -- LOAN PORTFOLIO MANAGEMENT
(1) The
Board
shall, within sixty (60) days, develop, implement, and thereafter ensure Bank
adherence to a written program to improve the Bank's loan portfolio management.
The program shall include, but not be limited to:
(a) procedures
to ensure satisfactory and perfected collateral documentation;
(b) procedures
to ensure that extensions of credit are granted, by renewal or otherwise,
to any borrower only
after
obtaining and analyzing current and satisfactory
credit information;
(c) procedures
to ensure conformance with loan approval requirements;
(d) a
system
to track and analyze exceptions;
(e) procedures
to ensure conformance with Call Report instructions;
(f) procedures
to ensure the accuracy of internal management information systems;
19
(g) a
performance appraisal process, including performance appraisals, job
descriptions,
and incentive programs for loan officers, which adequately consider
their performance relative to policy compliance, documentation standards,
accuracy in credit grading, and other loan administration matters;
and
(h) procedures
to track and analyze concentrations of credit, significant economic
factors, and general conditions and their impact on the credit quality
of the Bank’s loan and lease portfolios.
Upon
completion, a copy of the program shall be forwarded to the ADC.
(2) Within
sixty (60 ) days, the Board shall develop, implement, and thereafter ensure
Bank
adherence to systems which provide for effective monitoring of:
(a) early
problem loan identification to assure the timely identification and rating
of
loans and leases based on lending officer submissions;
(b) statistical
records that will serve as a basis for identifying sources of problem
loans and leases by industry, size, collateral, division, group, indirect
dealer, and individual lending officer;
(c) previously
charged-off assets and their recovery potential;
(d) compliance
with the Bank's lending policies and laws, rules, and regulations
pertaining to the Bank's lending function;
(e) adequacy
of credit and collateral documentation; and
(f) concentrations
of credit.
(3) Beginning
August 31, 2006, on a monthly basis, management will provide the Board with
written reports including, at a minimum, the following information:
20
(a) the
identification, type, rating, and amount of problem loans and
leases;
(b) the
identification and amount of delinquent loans and leases;
(c) credit
and collateral documentation exceptions;
(d) the
identification and status of credit related violations of law, rule or
regulation;
(e) the
identity of the loan officer who originated each loan reported in accordance
with subparagraphs (a) through (d) of this Article and Paragraph;
(f) an
analysis of concentrations of credit, significant economic factors, and
general
conditions and their impact on the credit quality of the Bank’s loan
and
lease
portfolios;
(g) the
identification and amount of loans and leases to executive officers,
directors,
principal shareholders (and their related interests) of the Bank; and
(h) the
identification of loans and leases not in conformance with the Bank's
lending
and leasing policies, and exceptions to the Bank’s lending and leasing
policies.
ARTICLE
XV -- MANAGEMENT FEES TO AFFILIATES
(1) Prior
to
the payment of any management and other fees to any affiliate of the Bank as
defined in 12 U.S.C. § 221a and 12 U.S.C. § 371c
(“Affiliate”), the Board, or delegated committee of the Board, shall document
and support, in writing, that such fees:
(a) are
reasonable;
(b) have
a
direct relationship to, and are based solely upon, the fair value of
goods
and
services received by the Bank; and
21
(c) compensate
the Affiliate only for providing goods and services which meet
the
legitimate needs of the Bank.
(2) All
documentation supporting the payment of management and other fees to an
Affiliate, shall be preserved in the Bank.
ARTICLE
XVI -- TRANSACTIONS BETWEEN AFFILIATES
(1) The
Bank
may, directly or indirectly, pay money or its equivalent to or for the benefit
of, or extend credit in any form to or for the benefit of, its affiliates,
or
transfer assets between the Bank and its affiliates, or enter into or engage
in
any transaction that obligates the Bank to do the same only after:
(a) the
Board
has conducted an independent review of the action, which review
is
documented in writing; and,
(b) the
Board
has determined in writing that it is advantageous for the Bank to engage
in
such action, and
that the
action complies with all applicable laws,
rules, regulations, and Comptroller’s issuances, including, but not limited
to 12 C.F.R. Part 223.
(2) For
purposes of this Article, “affiliate” shall have the meaning set forth in and
12 C.F.R. Part 223.
ARTICLE
XVII -- STRATEGIC PLAN
(1) Within
one hundred and twenty (120) days, the Board shall adopt, implement, and
thereafter ensure Bank adherence to a written strategic plan for the Bank
covering at least a three-year period. The strategic plan shall establish
objectives for the Bank's overall risk profile,
22
earnings
performance, growth, balance sheet mix, off-balance sheet activities, liability
structure, capital adequacy, reduction in the volume of nonperforming assets,
product line development and
market segments that the Bank intends to promote or develop, together with
strategies to achieve those objectives and, at a minimum, include:
(a) a
mission
statement that forms the framework for the establishment of strategic
goals and objectives;
(b) an
assessment of the Bank's present and future operating environment;
(c) the
development of strategic goals and objectives to be accomplished over
the
short
and long term;
(d) an
identification of the Bank’s present and future product lines (assets and
liabilities)
that will be utilized to accomplish the strategic goals and objectives
established in (1 )(c) of this Article;
(e) an
evaluation of the Bank's internal operations, staffing requirements,
board
and
management information systems and policies and procedures for
their
adequacy and contribution to the accomplishment of the goals and
objectives developed under (1)(c) of this Article;
(f) a
management employment and succession program to promote the retention
and continuity of capable management;
(g) product
line development and market segments that the Bank intends to promote
or develop;
(h) an
action
plan to improve bank earnings and accomplish identified strategic
goals and objectives, including individual responsibilities, accountability
and specific time frames;
23
(i) a
financial forecast to include projections for major balance sheet and
income
statement accounts and desired financial ratios over the period covered
by the strategic plan;
(j) control
systems to mitigate risks associated with planned new products, growth,
or any proposed changes in the Bank’s operating environment; specific
plans to establish responsibilities and accountability for the strategic
planning process, new products, growth goals, or proposed changes
in the Bank’s operating environment; and
(k) systems
to monitor the Bank’s progress in meeting the plan’s goals and objectives.
(2) Upon
adoption, a copy of the plan shall be forwarded to the ADC for review and prior
written determination of no supervisory objection. Upon receiving a
determination of no supervisory objection from the ADC, the Bank shall implement
and adhere to the strategic plan.
ARTICLE
XVIII -- BOOKS AND RECORDS
(1) The
Board
shall immediately take all necessary actions to ensure that, within thirty
(30)
days, the Bank’s books, records and management information systems (MIS) are in
a complete and accurate condition.
(2) Within
sixty (60) days, the Board shall submit to the ADC an action plan detailing
how
the Board will maintain the Bank’s books, records and MIS in a complete and
accurate condition, setting forth a timetable for the plan. In the event the
ADC
recommends changes to the action plan, the Board shall immediately incorporate
those changes into the plan.
(3) The
Board
shall ensure that the Bank’s books, records and MIS are maintained in a complete
and accurate condition.
24
ARTICLE
XIX -- INFORMATION TECHNOLOGY
(1) The
Board
shall immediately take all steps necessary to improve the management of the
Bank’s Information Technology (“IT”) activities and to correct each deficiency
cited in the Report of Examination (“▇▇▇”) or any supervisory
communication.
(2) Within
sixty (60) days, the Board shall ensure that the information technology manager
has the necessary skills and experience to supervise effectively the IT
area.
(3) Within
sixty (60) days, the Board shall develop, implement, and thereafter adhere
to a
written, well-documented, risk-based, internal IT audit program. At a minimum,
the IT audit program shall be performed by an independent and qualified party,
and shall include fundamental elements of a sound audit program as described
in
the “Audit” booklet of the FFIEC
Information Technology Examination Handbook.
(4) Within
sixty (60) days, the Board shall develop, implement, and thereafter ensure
adherence to a comprehensive, written information security program to ensure
the
safety and soundness of its operations and to support the Bank’s efforts to
comply with 12 C.F.R. Part 30, Appendix B, Safeguarding Customer Information.
The information security program shall include administrative, technical, and
physical safeguards to protect the security, confidentiality, and integrity
of
customer information. The information security program shall be consistent
with
the security process described in the “Information Security” booklet of the
FFIEC
Information Technology Examination Handbook.
At a
minimum, the information security program shall include:
(a) a
corporate-wide assessment of the risks to its customer information or
customer
information systems and a written report evidencing such assessment.
The assessment shall include:
25
(i) the
identification of reasonably foreseeable internal and external threats
that could result in unauthorized disclosure, misuse, alteration,
or destruction of customer information or customer information
systems;
(ii) an
assessment of the likelihood and potential damage of these threats,
taking into consideration the sensitivity of customer information;
and
(iii) an
assessment of the sufficiency of policies, procedures, customer information
systems, and other arrangements in place to control risks.
(b) a
process
to monitor and control the identified risks, commensurate with the
sensitivity of the information as well as the complexity and scope of
bank
activities;
(c) a
test
plan that provides for regular testing of key controls, systems and procedures
of its information security program. The frequency and nature of
such
tests shall be determined by the risk assessment. Such tests shall be
conducted or reviewed by independent third parties or staff independent
of
those
who develop or maintain the information security program.
(5) Within
sixty (60) days, the Board shall develop, implement, and thereafter adhere
to, a
written program to oversee and manage risks associated with outsourcing any
services to third party servicers, including technology service providers and
vendors. This third party management program shall be consistent with OCC
Bulletin 2001-47, “Third Party
26
Relationships,” dated November 1, 2001, and OCC Advisory
Letter 2000-12, “Risk Management of Outsourcing Technology Services” dated
November 28, 2000.
(6) Within
sixty (60) days, the Board shall develop and implement a formal enterprise-wide
business continuity process that complies with the requirements set forth in
the
“Business Continuity Planning” booklet of the FFIEC
Information Technology Examination Handbook.
At a
minimum, the business continuity process shall include:
(a) a
business impact analysis that includes:
(i) the
identification of the potential impact of uncontrolled, non-specific
events on the institution’s business processes and its customers;
and
(ii) an
estimation of the maximum allowable downtime and acceptable levels
of
data, operations, and financial losses.
(b) a
risk
assessment process that includes:
(i) the
prioritization of potential business disruptions based upon severity
and likelihood of occurrence;
(ii)
a
gap
analysis comparing the institution’s existing business resumption
plans, if any, to what is necessary to achieve recovery time
and
point objectives; and
(iii)
an
analysis of threats based upon the impact on the institution, its customers,
and the financial markets, not just the nature of the treat.
(c) a
risk
management process that includes the development of a written, enterprise-wide
business continuity plan (BCP); and
27
(d) a
risk
monitoring process that includes:
(i) testing
of the BCP on at least an annual basis;
(ii) independent
audit and review of the BCP; and
(iii) updating
the BCP based upon changes to personnel and the internal and
external environments.
(7) The
Board
shall provide a quarterly written progress report on each of the requirements
of
this Article to the ADC.
(8) The
Board
shall ensure that the Data Center has processes, personnel and control systems
sufficient to ensure implementation of and adherence to the procedures and
programs developed pursuant to this Article.
ARTICLE
XX -- DEPENDENCE ON CREDIT SENSITIVE LIABILITIES
(1) Within
forty-five (45) days the Bank shall improve the Bank’s liquidity position and
maintain adequate sources of stable funding given the Bank’ s anticipated
liquidity and funding needs. Such actions shall include, but not be limited
to:
(a) reduction
of wholesale or credit sensitive liabilities and/or increase of liquid
assets; and
(b) revision
of the Bank's strategic plan in light of the requirement of this Article.
ARTICLE
XXI -- CONFLICT OF INTEREST POLICY
(1) Within
sixty (60) days, the Board shall adopt, implement, and thereafter ensure Bank
adherence to a written, comprehensive conflict of interest policy applicable
to
the Bank’s and the Bank’s holding company’s directors, principal shareholders,
executive officers, affiliates, and
28
employees (collectively “Insiders”) and related interests of
such Insiders. The policy, in addition to defining a conflict of interest,
shall
address:
(a) avoidance
of conflicts of interest and breaches of fiduciary duty, and the appearance
of conflicts of interest;
(b) involvement
in the loan approval process of Insiders who may benefit directly
or indirectly from the decision to grant credit;
(c) disclosure
of actual and potential conflicts of interest to the Board, and periodic
disclosure of "related interests" as defined by 12 C.F.R. Part
215;
(d) requirements
for arms-length dealing in any transactions by Insiders, or their
related organizations, involving the Bank's sale, purchase, or rental of
property
and services;
(e) disclosure
of any Insider’s material interest in the business of a
borrower, an
applicant, or other customer of the Bank; and
(f) restrictions
on and disclosure of receipt of anything of value by Insiders, directly
or indirectly, from borrowers, loan applicants, other customers, or suppliers
of the Bank.
(2) Upon
adoption, a copy of this conflict of interest policy shall be forwarded to
the
ADC for review.
(3) Within
sixty (60) days, the Compliance Committee shall conduct a review of the Bank's
existing relationships with its and its holding company’s directors, executive
officers, affiliates, principal shareholders, employees and their related
interests for the purpose of identifying relationships not in conformity with
the policy. The Board shall ensure that:
29
(a) any
nonconforming relationships are brought into conformity with the policy
within thirty (30) days; and
(b) that
within thirty (30) days the Bank is properly reimbursed for:
(i) any
excess or improper payments to Insiders and their related interests;
and,
(ii) any
excess or improper payments for services provided by Insiders and
their
related interests.
(4) Thereafter,
the Board shall review all proposed transactions, or modifications of existing
relationships, between the Bank and any of its or its holding company’s
directors, executive officers, affiliates, principal shareholders, employees
and
their related interests. (5) Documentation
supporting these reviews shall be in writing and preserved in the Bank.
ARTICLE
XXII -- INTERNAL CONTROLS
(1) Within
sixty (60) days from the effective date of this Agreement, the Board shall
adopt, implement, and thereafter ensure Bank adherence to sound internal control
policies and procedures.
(2) Internal
controls shall include, but not be limited to:
(a) approval
of more than one bank employee or signature of a supervising bank
employee for the processing of general ledger tickets;
(b) procedures
to ensure that loan officers cannot use personal funds to make payments
on a borrower’s loans or cover the borrower’s overdrafts;
(c) procedures
to ensure purpose and disbursement of loan proceeds as noted in
loan
documents is consistent with actual use of proceeds;
30
(d) procedures
and management information systems to identify and monitor suspected
check kiting activities on a daily basis;
(e) independent
and objective process to request and approve expense payments,
particularly those to reimburse Covered Persons, including supporting
invoices or receipts which readily identify the expense as “business
related”; and,
(f) independent
and objective process to monitor the validity of charges on bank
credit cards, especially those issued to executive officers, which should
include supporting receipts or other documentation to justify the business
purpose of the charge, prior to payment of expenses.
ARTICLE
XXIII -- OVERDRAFT POLICY
(1) Within
sixty (60) days, the Board shall adopt, implement, and thereafter ensure Bank
adherence to a written policy concerning the extension of overdrafts that shall
include, at a minimum:
(a) conditions
and circumstances under which overdrafts will be allowed, taking
into consideration the requirements of 12 U.S.C. § 375b;
(b) charges
that will be levied against depositors using overdrafts;
(c) conditions
and circumstances under which overdrafts will be permitted to principal
shareholders or the related interests (as that term is defined in 12 C.F.R.
Part 215) of executive officers, directors or principal shareholders;
and
(d) conditions
and circumstances under which overdrafts will be charged off.
(2) Upon
adoption, a copy of this policy shall be forwarded to the ADC.
31
ARTICLE
XXIV -- INSIDER TRANSACTIONS & RECORDKEEPING
(1) Effective
immediately, the Board shall maintain adequate, centralized records of all
Business Transactions subject to this Agreement in a form and manner that
will
enable easy, independent review. These records shall identify all Insiders
and
shall also:
(a) specify
the names of the parties to the transaction other than the Bank,
(b) state
the
relationship of the parties to the Bank,
(c) provide
a
brief description of the transaction and its terms, and
(d) provide
a
notation of the approval of the transaction by the Board including
the vote of each director and the bases for any dissenting or abstaining
votes.
(2) The
Board
shall require each executive officer, director and principal shareholder to
provide at least annually and in writing, a listing of the preceding parties'
respective Related Interests as defined in 12 C.F.R. Part 215. The list of
these persons' Related Interests shall be maintained by the Board and any
changes to these listings of Related Interests shall be promptly reported to
the
Board and reflected in the centralized records.
ARTICLE
XXV -- VIOLATIONS OF LAW
(1) The
Board
shall immediately take all necessary steps to ensure that Bank management
corrects each violation of law, rule or regulation cited in the ▇▇▇ and in
any
subsequent Report of Examination. The progress reports required by this
Agreement shall include the date and manner in which each correction has been
effected during that reporting period.
(2) Within
sixty (60) days, the Board shall adopt, implement, and thereafter ensure Bank
adherence to specific procedures to prevent future violations as cited in the
▇▇▇ and shall
32
adopt, implement, and ensure
Bank
adherence to general procedures addressing compliance management which
incorporate internal control systems and education of employees regarding laws,
rules and regulations applicable to their areas of responsibility.
(3) Upon
adoption, a copy of these procedures shall be forwarded to the ADC.
ARTICLE
XXVI -- CLOSING
(1) Although
the Board has agreed to submit certain programs and reports to the ADC for
review or prior written determination of no supervisory objection, the Board
has
the ultimate responsibility for proper and sound management of the
Bank.
(2) The
Board
shall ensure that the Bank has processes, personnel, and control systems to
ensure implementation of and adherence to the program developed pursuant to
this
Agreement.
(3) It
is
expressly and clearly understood that if, at any time, the Comptroller deems
it
appropriate in fulfilling the responsibilities placed upon him/her by the
several laws of the United States of America to undertake any action affecting
the Bank, nothing in this Agreement shall in any way inhibit, estop, bar, or
otherwise prevent the Comptroller from so doing.
(4) Any
time
limitations imposed by this Agreement shall begin to run from the effective
date
of this Agreement. Such time requirements may be extended in writing by the
ADC
for good cause upon written application by the Board.
(5) The
provisions of this Agreement shall be effective upon execution by the parties
hereto and its provisions shall continue in full force and effect unless or
until such provisions are amended in writing by mutual consent of the parties
to
the Agreement or excepted, waived, or terminated in writing by the
Comptroller.
33
(6) In
each
instance in this Agreement in which the Board is required to ensure adherence
to, and undertake to perform certain obligations of the Bank, it is intended
to
mean that the Board shall:
(a) authorize
and adopt such actions on behalf of the Bank as may be necessary
for the Bank to perform its obligations and undertakings under the
terms
of this Agreement;
(b) require
the timely reporting by Bank management of such actions directed by
the
Board to be taken under the terms of this Agreement;
(c) follow-up
on any non-compliance with such actions in a timely and appropriate
manner; and
(d) require
corrective action be taken in a timely manner of any noncompliance
with such actions.
(7) This
Agreement is intended to be, and shall be construed to be, a supervisory
“written agreement entered into with the agency” as contemplated by 12 U.S.C. §
1818(b)(1), and expressly does not form, and may not be construed to form,
a
contract binding on the Comptroller or the United States. Notwithstanding the
absence of mutuality of obligation, or of consideration, or of a contract,
the
Comptroller may enforce any of the commitments or obligations herein undertaken
by the Bank under his supervisory powers, including 12 U.S.C. § 1818(b)(1),
and not as a matter of contract law. The Bank expressly acknowledges that
neither the Bank nor the Comptroller has any intention to enter into a contract.
The Bank also expressly acknowledges that no officer or employee of the Office
of the Comptroller of the Currency has statutory or other authority to bind
the
United States, the U.S. Treasury Department, the Comptroller, or any other
federal bank regulatory agency or entity, or any officer or employee
of
34
any
of those entities to a contract affecting the
Comptroller’s exercise of his supervisory responsibilities. The terms of this
Agreement, including this paragraph, are not subject to amendment or
modification by any extraneous expression, prior agreements or prior
arrangements between the parties, whether oral or written.
IN
TESTIMONY WHEREOF,
the
undersigned, authorized by the Comptroller, has hereunto set his hand on behalf
of the Comptroller.
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
Assistant
Deputy Comptroller
Birmingham
Office
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AND
IN FURTHER TESTIMONY WHEREOF,
the
undersigned, as the duly elected and acting Board of Directors of the Bank,
have
hereunto set their hands on behalf of the Bank.
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/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
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