AGREEMENT BY AND BETWEEN Colonial Bank FSB Vineland, NJ and The Comptroller of the Currency

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ARTICLE VI

 

 

(1)           Within ninety (90) days, the Board shall develop, implement, and thereafter ensure Bank adherence to a written profit plan to improve and sustain the earnings of the Bank.  This plan shall include, at minimum, the following elements:

 

(a)

identification of the major areas in and means by which the Board will seek to improve the Bank’s operating performance;

 

(b)

realistic and comprehensive budgets, including projected balance sheets and year-end income statements;

 

(c)

a budget review process to monitor both the Bank’s income and expenses, and to compare actual figures with budgetary projections; and,

 

(d)

a description of the operating assumptions that form the basis for major projected income and expense components.

 

(2)           The budgets and related documents required in paragraph (I) above for 2013 shall be submitted to the Assistant Deputy Comptroller upon completion.  The Board shall submit to the Assistant Deputy Comptroller annual budgets as described in paragraph (1) above for each year this Formal Agreement remains in effect.  The budget for each year shall be submitted on or before November 30, of the preceding year.

 

(3)           The Board shall forward comparisons of its balance sheet and profit and loss statement to the profit plan projections to the Assistant Deputy Comptroller on a quarterly basis.

 

 

(4)           Board shall ensure that the Bank has processes, personnel, and control systems to ensure implementation of and adherence to the plan developed pursuant to this Article.

 

ARTICLE VII

 

 

(1)           The Bank shall take immediate and continuing action to protect its interest in those assets criticized in the ROE, in any subsequent Report of Examination, by internal or external loan review, or in any list provided to management by the OCC examiners during any examination.

 

(2)           Within ninety (90) days, the Board shall adopt, implement, and thereafter ensure Bank adherence to a written program designed to eliminate the basis of criticism of assets criticized in the ROE, in any subsequent Report of Examination, or by any internal or external loan review, or in any list provided to management by the OCC examiners during any examination as “doubtful,” “substandard,” or “special mention.” This program shall include, at a minimum:

 

 (a)         an identification of the expected sources of repayment;

 

(b)

the appraised value of supporting collateral and the position of the Bank’s lien on such collateral where applicable;

 

(c)

an analysis of current and satisfactory credit information, including cash flow analysis where loans are to be repaid from operations; and,

 

(d)

the proposed action to eliminate the basis of criticism and the time frame for its accomplishment.

 

 

(3)           Upon adoption, a copy of the program for all criticized assets equal to or exceeding five hundred thousand dollars ($500,000) shall be forwarded to the Assistant Deputy Comptroller.

 

(4)           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 Article.

 

(5)           The Loan Workout Department shall take all steps necessary to improve the operation of the Bank’s workout function including, but not limited to:

 

(a)

the establishment of policies and procedures to distinguish assets that shall be managed by the Loan Workout Department from assets that shall be managed by the originating unit;

 

(b)

the development and implementation of management information systems to track workloads and staffing requirements within the Loan Workout Department; and,

 

(c)

the development and implementation of management information systems to measure the success of workout activities.

 

(6)           The Board shall ensure that the Loan Workout Department receives staffing and funding support necessary to maintain its sound operation.

 

(7)           The Board, or a designated Committee, shall conduct a review, on at least a quarterly basis, to determine:

 

(a)

the status of each criticized asset or criticized portion thereof that equals or exceeds five hundred thousand dollars ($500,000);

 

 

 (b)           management’s adherence to the program adopted pursuant to this Article;

 

 (c)          the status and effectiveness of the written program; and,

 

 (d)          the need to revise the program or take alternative action.

 

(8)           A copy of each review shall be forwarded to the Assistant Deputy Comptroller on a quarterly basis (in a format similar to Appendix A, attached hereto).

 

(9)           The Bank may extend credit, directly or indirectly, including renewals, extensions or capitalization of accrued interest, to a borrower whose loans or other extensions of credit are criticized in the ROE, in any subsequent Report of Examination, in any internal or external loan review, or in any list provided to management by the OCC examiners during any examination and whose aggregate loans or other extensions exceed  five hundred  thousand ($500,000) only if each of the following conditions is met:

 

(a)

the Board or designated committee finds that the extension of additional credit is necessary to promote the best interests of the Bank and that prior to renewing, extending or capitalizing any additional credit, a majority of the full Board (or designated committee) approves the credit extension and records, in writing, why such extension is necessary to promote the best interests of the Bank; and,

 

(b)

a comparison to the written program adopted pursuant to this Article shows that the Board’s formal plan to collect or strengthen the criticized asset will not be compromised.

 

(10)         A copy of the approval of the Board or of the designated committee shall be maintained in the file of the affected borrower.

 

 

ARTICLE VIII

 

 

(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 Federal Financial Institutions Examination Council’s Interagency Policy Statement and Allowance for Loan and Lease Losses dated December 13, 2006, and shall focus particular attention on the following factors:

 

 (a)          results of the bank’s external loan review:

 

(b)

procedures to ensure the ALLL methodology conforms to accounting standards contained in FASB ASC 450-20 (Contingencies – Loss Contingencies); and,

 

(c)

procedures to ensure the ALLL methodology conforms to accounting standards contained in FASB 310-10 (Accounting by Creditors for Impairment of a Loan).

 

 

 

(3)           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 Article.

ARTICLE IX

 

(1)           Within sixty (60) days, the Board shall develop, implement, and thereafter ensure Bank adherence to a written program to improve credit risk management at the Bank.  The program shall include, but not be limited to:

 

(a)

procedures to ensure accuracy of risk ratings and proper and timely problem loan identification;

 

(b)

procedures governing the supervision and control of nonaccrual loans that,

 

(i)

are consistent with the accounting requirements contained in the Call Report Instructions;

 

(ii)

address the circumstances under which accrued interest due on a loan may be added to the outstanding principal amount when the loan is renewed or restructured;

 

(iii)

address circumstances under which restructured loans (TDRs) will be maintained on accruals status;

 

(iv)

require the monthly presentation to the Board of all loans meeting any of the nonaccrual criteria; and,

 

(v)

require the immediate reversal or charge off of that portion of the remaining accrued interest on such loans that, when combined with principal, is not protected by sound collateral values;

 

 

(c)

procedures to ensure an independent appraisal review process is in place;

 

(d)

procedures to ensure risk ratings are appropriately reflected on internal MIS;

 

(e)

procedures to ensure current financial statements are obtained and reviewed, including a global analysis of the borrower, in a timely manner;

 

(f)

procedures to ensure appraisals and re-appraisals are obtained in a timely manner; and,

 

(g)

procedures to ensure that appraisal dates are appropriately reflected on internal MIS.

 

(2)           The Board shall submit a copy of the program to the Assistant Deputy Comptroller.

 

(3)           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 Article.

 

 

ARTICLE X

 

 

(1)           Within sixty (60) days, the Board shall adopt, implement, and thereafter ensure Bank adherence to a policy to ensure that Other Real Estate Owned (“OREO”) is managed in accordance with 12 C.F.R. § 160.172 (Re-evaluation of OREO) and 12 C.F.R. Part 164 (Appraisals).  The policy shall address:

 

 (a)         responsibility and authority for OREO properties;

 

(b)

proper accounting procedures for OREO properties from transfer to the Bank and until and upon sale to a third party;

 

(c)

procedures to require timely appraisals pursuant to 12 C.F.R. §160.172 and 12 C.F.R. Part 164;

 

(2)           Upon adoption, the Board shall submit a copy of the policy to the Assistant Deputy Comptroller for review.

 

(3)           The Board shall ensure that the Bank has processes, personnel, and control systems to ensure implementation of and adherence to the policy developed pursuant to this Article.

ARTICLE XI

 

(1)           Although the Board has agreed to submit certain programs and reports to the Assistant Deputy Comptroller 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)           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.

 

(3)           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 Assistant Deputy Comptroller for good cause upon written application by the Board.

 

(4)           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.

 

(5)           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. § J 818(b)(l), 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 1 2 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 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.

 

IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller, has hereunto set his hand on behalf of the Comptroller.

Colonial Bank FSB

Vineland, NJ

 

CRITICIZED ASSET REPORT AS OF:
BORROWER(S):

 

ASSET BALANCE(S) AND OCC RATING (SM, SUBSTANDARD, DOUBTFUL OR LOSS):

 

FINANCIAL AND/OR COLLATERAL SUPPORT (include brief summary of most current financial information, appraised value of collateral and/or estimated value and date thereof, bank’s lien position and amount of available equity, if any, guarantor(s) info, etc.):

PROPOSED PLAN OF ACTION TO ELIMIATE ASSET CRITICISM(S) AND TIME FRAME FOR ITS ACCOMPLISHMENT:

IDENTIFIED SOURCE OF REPAYMENT AND DEFINED REPAYMENT PROGRAM (repayment program should coincide with source of repayment):

Use this form for reporting each criticized asset that exceeds _______ dollars ($____) and retain the original in the credit file for review by the examiners.  Submit your reports (monthly/quarterly) until notified otherwise, in writing, by the Assistant Deputy Comptroller.