Date: | 01/25/2010 |
---|---|
Organization: | Division of Banks |
Docket Number: | FDIC - 10 - 019b |
Location: | Stoneham, MA |
This Consent Order was terminated August 17, 2012.
Date: | 01/25/2010 |
---|---|
Organization: | Division of Banks |
Docket Number: | FDIC - 10 - 019b |
Location: | Stoneham, MA |
This Consent Order was terminated August 17, 2012.
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
and
COMMONWEALTH OF MASSACHUSETTS DIVISION OF BANKS
CONSENT ORDER
FDIC - 10 - 019b
In the Matter of
STONEHAM SAVINGS BANK
STONEHAM, MASSACHUSETTS
(INSURED STATE NONMEMBER BANK)
The Federal Deposit Insurance Corporation ("FDIC") is the appropriate Federal banking agency for Stoneham Savings Bank, Stoneham, Massachusetts ("Bank"), under 12 U.S.C. § 1813(q), and the Commonwealth of Massachusetts Division of Banks ("Division") is the appropriate State regulatory authority under Massachusetts General Laws (M.G.L.).
The Bank, by and through its duly elected and acting Board of Trustees ("Board"), has executed a Stipulation and Consent to the Issuance of a Consent Order ("Consent Agreement"), dated January 25, 2010, that is accepted by the FDIC and the Division. With the Consent Agreement, the Bank has consented, without admitting or denying any charges of unsafe or unsound banking practices and violations of laws and/or regulations relating to deterioration in the quality of the loan and investment portfolios, management's failure to act to improve the Bank's overall financial condition, and failure to ensure compliance with statutory and regulatory requirements and internal policies, to the issuance of this Consent Order ("ORDER") by the FDIC and the Division.
Having determined that the requirements for issuance of an order under 12 U.S.C. § 1818(b) and Massachusetts General Laws Chapters 167 and 168 have been satisfied, the FDIC and the Division hereby order that:
BOARD PARTICIPATION
1. Within thirty (30) days from the effective date of this ORDER, the Board shall increase its participation in the affairs of the Bank, assuming full responsibility for the approval of sound policies and objectives and for the supervision of all of the Bank's activities, consistent with the role and expertise commonly expected for trustees of banks of comparable size. At a minimum, the Board shall conduct monthly meetings at which it shall review and approve policies and procedures relating to the following areas: reports of income and expenses; new, overdue, renewal, insider, charged-off, and recovered loans; investment activity; operating policies; and individual committee actions. The Board shall also review no less than annually each of the plans, policies, and programs required by this ORDER, and revise them as necessary. The Board's minutes shall document these reviews and approvals, including the names of any dissenting trustees.
MANAGEMENT
2. (a) Within fifteen (15) days from the effective date of this ORDER, the Bank shall retain a bank consultant acceptable to the Area Director of the Boston Area Office of the FDIC Area Director) and the Commonwealth of Massachusetts Commissioner of Banks ("Commissioner"). The consultant shall develop a written analysis and assessment of the Bank's senior management, Board, and staffing needs ("Consultant's Staffing Report").
(b) The Bank shall provide the Area Director and the Commissioner 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:
(c ) Within ninety (90) days from the effective date of this ORDER, the Board, assisted by external consultants, shall complete an independent written assessment of the Bank's Board, senior management, and staffing requirements, incorporating its review of the Consultant's Staffing Report, to restore the Bank to a satisfactory financial condition, including, but not limited to, capital adequacy, asset quality, management effectiveness, earnings, liquidity, sensitivity to market risk, and compliance with applicable laws and regulations ("Management Plan"). The Management Plan shall include, at a minimum:
(d) The Bank shall submit the Management Plan and the Consultant's Staffing Report to the Area Director and the Commissioner for review and comment. At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Bank shall approve the Management Plan, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and fully comply with the Management Plan.
3. The Bank shall notify the Area Director and the Commissioner in writing of any resignations or terminations of any members of its Board or any of its senior executive officers within fifteen (15) days of the event. The Bank also shall comply with section 32 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831i, and Subpart F of Part 303 of the FDIC's Rules and Regulations, 12 C.F.R. §§ 303.100 through 303.103.
VIOLATIONS OF LAWS AND REGULATIONS
4. Within sixty (60) days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of laws, rules, and regulations, and contraventions of policy cited in the Report of Examination. The Bank shall also implement policies and procedures to ensure future compliance with all applicable laws, rules, regulations, and statements of policy.
STRATEGIC PLANNING
5. (a) Within one hundred twenty (120) days from the effective date of this ORDER, the Bank shall develop and submit to the Area Director and the Commissioner a written three-year strategic plan ("Strategic Plan"), supported by an operating budget and consisting of goals and strategies, consistent with sound banking practices, and taking into account the Bank's other written plans, policies, or other actions as required by this ORDER.
(b) The written Strategic Plan shall include, at a minimum:
(c) The Strategic Plan shall be supported by an operating budget and shall include at a minimum specific goals for the dollar volume of total loans, total investments securities, and total deposits. The Strategic Plan shall also specify the anticipated average maturity and average yield on loans and securities; the average maturity and average cost of deposits; the level of earning assets as a percentage of total assets; and the ratio of net interest income to average earning assets. The Bank shall establish procedures to quarterly evaluate management's performance against the Strategic Plan and revise the plan if changes are deemed necessary.
(d) The Strategic Plan and any subsequent amendments thereto shall be submitted to the Area Director and the Commissioner for review and comment. At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Bank shall approve the Strategic Plan, which approval shall be recorded in the minutes of the Board. Thereafter, the Bank shall implement and fully comply with the Strategic Plan and all amendments thereto.
CAPITAL PLAN
6. (a) The Bank shall achieve and maintain the following minimum capital levels (as defined in Part 325 of the FDIC's Rules and Regulations, 12 C.F.R. Part 325), after establishing an adequate Allowance:
(b) In addition, the Bank shall comply with Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325.
(c) If, after achieving the minimum capital levels set forth in subparagraph (a), any of the specified ratios falls below the established minimum in a quarter-end Report of Condition and Income ("Call Report"), the Bank shall notify the Area Director and the Commissioner and shall, within thirty (30) days thereafter, submit for review and comment a plan for increasing such capital in an amount sufficient to comply with the requirements of this paragraph ("Capital Increase Plan"). At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Bank shall approve the Capital Increase Plan, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and fully comply with the Capital Increase Plan.
(d) The Bank shall not initiate a plan to increase total assets by more than two and one-half percent (2.5%) during any consecutive three-month period, or more than eight percent (8.0%) during any consecutive twelve-month period.
7. (a) Within ninety (90) days from the effective date of this ORDER, the Bank shall develop a written capital plan ("Capital Plan"). At a minimum, the Capital Plan shall include:
(b) The Bank shall submit the Capital Plan to the Area Director and the Commissioner for review and comment. At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Bank shall approve the Capital Plan, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and fully comply with the Capital Plan.
(c) The Board shall review the Bank's adherence to the Capital Plan, at minimum, on a monthly basis. Copies of the reviews and updates shall be submitted to the Area Director and the Commissioner as part of the progress reports required by this ORDER. The Board shall ensure that the Bank has processes, personnel, and control systems in place to ensure implementation of and compliance with the Capital Plan.
PROFIT PLAN
8. (a) Within sixty (60) days from the effective date of this ORDER, the Bank shall develop a written profit plan ("Profit Plan"). At a minimum, the Profit Plan shall include:
(b) The Bank shall submit the Profit Plan and subsequent amendments thereto to the Area Director and the Commissioner for review and comment. At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Bank shall approve the Profit Plan, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and fully comply with the Profit Plan and all amendments thereto.
(c) The Board shall review the Bank's adherence to the Profit Plan, at a minimum, on a monthly basis. Copies of the reviews and updates shall be submitted to the Area Director and the Commissioner as part of the progress reports required by this ORDER.
CHARGE-OFF
9. Within thirty (30) days from 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" by the Division and which have not been previously collected or charged off. Elimination or reduction of such assets through proceeds of loans of loans made by the Bank shall not be considered "collection" for purposes of this paragraph. Thereafter, within thirty (30) days after the receipt of any Report of Examination of the Bank from the FDIC or the Division, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified "Loss" in any Report of Examination that have not been previously collected or charged off.
REDUCTION OF ADVERSELY CLASSIFIED ASSETS
10. (a) Within sixty (60) days from the effective date of this ORDER, the Bank shall formulate a written plan ("Risk Exposure Plan") to reduce the Bank's risk exposure in each asset relationship in excess of $750,000 dollars classified as "Substandard" in the Report of Examination. For purposes of this provision, "reduce" means to collect, charge off, or improve the quality of an asset so as to warrant its removal from adverse classification by the Division or the FDIC. In developing the Risk Exposure Plan, the Bank shall, at a minimum, with respect to each adversely classified loan or lease, review, analyze, and document the financial position of the borrower, including source of repayment, repayment ability, and alternative repayment sources, as well as the value and accessibility of any pledged or assigned collateral, and any possible actions to improve the Bank's collateral position.
(b) In addition, the Risk Exposure Plan shall also include, but not be limited to, the following:
(c) The Bank shall submit the Risk Exposure Plan to the Area Director and the Commissioner for review and comment. At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Board shall approve the Risk Exposure Plan, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and fully comply with the Risk Exposure Plan.
RESTRICTIONS ON ADVANCES TO ADVERSELY
CLASSIFIED BORROWERS
11. (a) The Bank shall not extend or renew, directly or indirectly, credit to, or for the benefit of, any borrower who has a loan or other extension of credit or obligation with the Bank that has been, in whole or in part, charged off or classified "Substandard," "Doubtful," or "Loss" in the 2009 Report of Examination, or in any subsequent reports of examination by the FDIC or the Division, and is uncollected. The requirements of this paragraph shall not prohibit the Bank from extending or renewing, after collecting in cash all interest and fees due from a borrower, any credit already extended to the borrower.
(b) This provision shall not apply if the Bank's failure to extend further credit to a particular borrower would be detrimental to the best interests of the Bank provided that, prior to extending such additional credit, whether in the form of a renewal, extension, or further advance of funds, such additional credit shall be approved by the Board, or a designated committee thereof, the members of which shall certify, in writing:
(c) The signed certification described in subparagraph (b) shall be noted in the minutes of the meeting of the Board, or designated Committee, with the original retained in the borrower's credit file.
LOAN POLICY
12. (a) Within ninety (90) days from the effective date of this ORDER, and annually thereafter, the Board shall conduct a review ("Loan Policy Review") of the Bank's loan policies and procedures for adequacy and, based upon the Loan Policy Review, shall make all appropriate revisions to the policies and procedures ("Loan Policy") necessary to address the lending deficiencies identified in the 2009 Report of Examination, including, at a minimum, the risks associated with warehouse lending. The Board shall also establish review and monitoring procedures to ensure that all lending personnel are adhering to the Loan Policy, and that the trustees are receiving timely and fully documented reports on loan activity, including reports that identify deviations from the Loan Policy.
(b) The Loan Policy should also include, at a minimum, the following:
(c) The Bank shall submit the revised Loan Policy to the Area Director and the Commissioner for review and comment. At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Bank shall approve the Loan Policy, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and fully comply with the Loan Policy.
ALLOWANCE FOR LOAN AND LEASE LOSSES
13. (a) Within thirty (30) days from the effective date of this ORDER, the Bank shall establish a comprehensive policy and methodology ("ALLL Policy") for determining the appropriateness of the Allowance for Loan and Lease Losses ("Allowance"). The ALLL Policy shall provide for a review of the Allowance by the Board at least once each calendar quarter and be completed at least fifteen (15) days prior to the end of each quarter in order that the results of the review conducted by the Board may be properly reported in the quarterly Reports of Condition and Income. Such reviews shall, at a minimum, include the following:
(b) A deficiency in the Allowance shall be remedied in the calendar quarter in which it is discovered by a charge to current operating earnings prior to any Tier 1 capital determinations required by this ORDER and prior to the Bank's submission of its Call Report. The Bank shall thereafter maintain an appropriate Allowance.
(c) The Bank shall submit the ALLL Policy to the Area Director and the Commissioner for review and comment. At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Bank shall approve the ALLL Policy, which approval shall be recorded in the minutes of the Board meeting. Thereafter, the Bank shall implement and fully comply with the ALLL Policy.
(d) The Bank shall submit to the Area Director and the Commissioner the analysis and documents sufficient to support the determination of the adequacy of the Allowance. These submissions may be made at such times as the Bank files the quarter-end progress reports otherwise required by this ORDER. In the event that the Area Director and/or the Commissioner determine that the Bank's Allowance is inadequate, the Bank shall increase the Allowance and amend its Call Report accordingly.
INDEPENDENT LOAN REVIEW
14.(a) Within thirty (30) days of the effective date of this ORDER, the Bank shall develop a program of independent loan review ("Loan Review Program") that will provide for a periodic review of the Bank's loan portfolio and the identification and categorization of problem credits. At a minimum, the Loan Review Program shall provide for:
(b) The Bank shall submit the Loan Review Program to the Area Director and the Commissioner for review and comment. At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Board shall approve the Loan Review Program, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and fully comply with the Loan Review Program.
(c ) Upon implementation of the Loan Review Program, a copy of each report prepared pursuant thereto shall be submitted to the Board, as well as documentation of the actions taken by the Bank or recommendations to the Board that address identified deficiencies in specific loan relationships or in the Bank's policies, procedures, strategies, or other elements of the Bank's lending activities. Such reports and recommendations, as well as any resulting determinations by the Board, shall be recorded and retained in the minutes of the meeting of the Board.
LIQUIDITY
15. (a ) Within sixty (60) days of the effective date of this ORDER, the Bank shall develop a written plan ("Liquidity Plan") to improve the Bank's liquidity position and implement funds and liquidity management practices which address each of the weaknesses identified within the Report of Examination. At a minimum, the funds and liquidity management practices shall include:
(b)The Bank shall submit the Liquidity Plan to the Area Director and the Commissioner for review and comment. At the next Board meeting but within no more than thirty (30) days of receipt of all such comments from the Area Director and/or the Commissioner, and after incorporation and adoption of any required changes, the Bank shall approve the Liquidity Plan, which approval shall be recorded in the minutes of the meetings of the Board. Thereafter, the Bank shall implement and fully comply with the Liquidity Plan.
(c) The Board shall review the Bank's adherence to the Liquidity Plan, at a minimum, on a monthly basis. Copies of the reviews and updates shall be submitted to the Area Director and the Commissioner as part of the progress reports required by this ORDER.
OTHER ACTION
16. Within ninety (90) days of the effective date of this ORDER, the Bank shall address the remaining weaknesses and deficiencies identified in the 2009 Report of Examination, and implement the recommendations contained therein, to the extent that such weaknesses and deficiencies are not specifically referenced by paragraphs 1 through 15 of this ORDER.
ORDER COMPLIANCE MONITORING COMMITTEE
17. (a) Within thirty (30) days from the effective date of this ORDER, the Board shall establish a committee, consisting of at least five (5) Board members, responsible for ensuring compliance with the ORDER, overseeing corrective measures with respect to the ORDER, and reporting to the Board. More than fifty percent (50%) of the members of the committee shall be independent trustees as defined herein. The committee shall monitor compliance with this ORDER and, within thirty (30) days from the effective date of this ORDER, and every thirty (30) days thereafter, shall submit a written report detailing the Bank's compliance with this ORDER to the Board, for review and consideration during its regularly scheduled meeting. The compliance report and any discussion related to the report or this ORDER shall be incorporated into the minutes of the meeting of the Board. Nothing contained herein shall diminish the responsibility of the entire Board to ensure compliance with the provisions of this ORDER.
(b) For the purposes of this ORDER, an "independent trustee" shall be an individual who:
PROGRESS REPORTS
18. Within thirty (30) days of the effective date of this ORDER, and within thirty (30) days following the end of each calendar quarter thereafter, the Bank shall furnish written progress reports to the Area Director and the Commissioner detailing the form, manner, and results of any actions taken to secure compliance with this ORDER. In addition, the Bank shall furnish such other reports as requested by the Area Director and the Commissioner. All progress reports and other written responses to this ORDER shall be reviewed by the Board and made a part of the minutes of the Board meeting.
The provisions of this ORDER shall not bar, estop, or otherwise prevent the FDIC, the Commissioner, or any other state or federal agency from taking any other action against the Bank or any of the Bank's current or former institution-affiliated parties.
This ORDER shall be effective on the date of issuance.
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 Division and the FDIC.
Pursuant to Delegated Authority.
Dated at Boston, Massachusetts, this 25th day of January, 2010.
Federal Deposit Insurance Corporation
By Gregory P. Bottone
Acting Area DirectorCommonwealth of Massachusetts
Division of BanksBy Hon. Steven L. Antonakes
Commissioner of Banks