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EXHIBIT 10.2
UNITED STATES OF AMERICA
BEFORE THE
OFFICE OF THRIFT SUPERVISION
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)
In the Matter of ) Order No.: CN 09-34
)
)
PARK VIEW FEDERAL ) Effective Date: October 19, 2009
SAVINGS BANK )
)
Solon, Ohio )
OTS Docket No. 01195 )
)
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ORDER TO CEASE AND DESIST
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WHEREAS, Park View Federal Savings Bank, Solon, Ohio, OTS Docket No.
01195 (Association), by and through its Board of Directors (Board), has executed
a Stipulation and Consent to Issuance of an Order to Cease and Desist
(Stipulation); and
WHEREAS, the Association, by executing the Stipulation, has consented
and agreed to the issuance of this Order to Cease and Desist (Order) by the
Office of Thrift Supervision (OTS) pursuant to 12 U.S.C. ss. 1818(b); and
WHEREAS, pursuant to delegated authority, the OTS Regional Director for
the Central Region (Regional Director) is authorized to issue Orders to Cease
and Desist where a savings association has consented to the issuance of an
order.
NOW, THEREFORE, IT IS ORDERED THAT:
CEASE AND DESIST.
1. The Association and its directors, officers, and employees shall cease
and desist from any action (alone or with others) for or toward, causing,
bringing about, participating in, counseling, or aiding and
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abetting all unsafe or unsound practices that resulted in the Association
operating with an excessive level of adversely classified assets; an inadequate
allowance for loan and lease losses (ALLL) for the volume, type, and quality of
loans held; and an inadequate level of capital protection for the volume, type,
and quality of assets held by the Association.
CAPITAL.
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2. (a) By December 31, 2009, the Association shall meet and maintain: (i)
a Tier 1 (Core) Capital Ratio of at least eight percent (8%) and (ii) a
Total Risk-Based Capital Ratio of at least twelve percent (12%) after
the funding of an adequate ALLL.
(b) The requirement in Subparagraph (a) above to meet and maintain a
specific capital level means that the Association may not be deemed to
be "well-capitalized" for purposes of 12 U.S.C. ss. 1831o and 12 C.F.R.
Part 565, pursuant to 12 C.F.R. ss. 565.4(b) (1) (iv).
3. (a) By October 31, 2009, the Board shall adopt and submit to the
Regional Director for review and comment a written plan to achieve and
maintain the Association's capital levels prescribed in Paragraph 2 of
this Order (Capital Plan). The Capital Plan shall cover the period
beginning with the quarter ending September 31, 2009 through the
quarter ending December 31, 2011. At a minimum, the Capital Plan shall:
(i) address the requirements and restrictions imposed by this
Order;
(ii) detail capital enhancement strategies with specific
narrative goals, which shall result in new equity and a
capital infusion;
(iii) consider and address the amount of additional capital that
would be necessary to meet the capital requirements of
Paragraph 2 of this Order under different forward-looking
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scenarios involving progressively stressed economic
environments;
(iv) identify the specific sources of additional capital;
(v) detail timeframes by which the additional capital will be
raised and provide specific target month-end capital
levels; and
(vi) provide for alternative methods to strengthen capital,
should the primary sources identified under Paragraph 3(a)
(iv) of this Order not be available.
(b) Within thirty (30) days after receiving any written comments from
the Regional Director, the Board shall revise and adopt the Capital
Plan based on such comments. The Board shall ensure that the
Association implements and adheres to the Capital Plan. A copy of the
Capital Plan shall be provided to the Regional Director within five (5)
days after the Board meeting.
(c) Once the Capital Plan is implemented, the Association shall
operatewithin the parameters of its Capital Plan. Any proposed material
deviations from or changes to the Capital Plan must be submitted for
the prior, written non-objection of the Regional Director. Requests for
any material deviations or changes must be submitted at least sixty
(60) days before a proposed change is implemented.
(d) The Association shall notify the Regional Director regarding any
material event affecting or that may affect the capital or capital
projections of the Association within five (5) days after such event.
4. (a) On a monthly basis, beginning with the month ending December 31,
2009, the Board shall review by the last day of each month, a written
report that compares projected operating results contained within the
Capital Plan to actual results for the previous month (Capital Plan
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Variance Report). The Board's review of the Capital Plan Variance
Report and assessment of the Association's compliance with the Capital
Plan shall be fully documented in the appropriate Board meeting
minutes.
(b) On a monthly basis, beginning with December 31, 2009, the
Board shall provide to the Regional Director, by the 30th day of each
succeeding month, a copy of the Capital Plan Variance Report.
5. Within fifteen (15) days after: (a) the Association fails to meet the
capital requirements prescribed in Paragraph 2 beginning December 31, 2009; (b)
the Association fails to comply with the Capital Plan prescribed in Paragraph 3;
or (c) any written request from the Regional Director, the Board shall prepare
and submit a written Contingency Plan that is acceptable to the Regional
Director. The Contingency Plan shall detail the actions to be taken, with
specific time frames, to achieve one of the following results by the later of
the date of receipt of all required regulatory approvals or sixty (60) days
after the implementation of the Contingency Plan: (i) merger with, or
acquisition by another federally insured depository institution or holding
company thereof; or (ii) voluntary liquidation by filing an appropriate
application with OTS in conformity with federal laws and regulations.
6. Upon receipt of written notification from the Regional Director, the
Association shall implement the Contingency Plan immediately. The Board shall
provide the Regional Director with written status reports detailing the
Association's progress in implementing the Contingency Plan by no later than the
1st and 15th of each calendar month following implementation of the Contingency
Plan (Contingency Status Reports).
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LIQUIDITY.
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7. (a) Within sixty (60) days, the Board shall adopt revisions to the
Association's Liquidity Policy, which, at a minimum, shall include:
(i) separate ratios and target limits for on-balance sheet
liquid assets;
(ii) an increase in the Association's minimum liquidity
ratio;
(iii) management of liquidity in accordance with OTS Thrift
Bulletin 77 and OTS Examination Handbook ss. 530;
(iv) periodic stress testing of the availability of all
funding sources under specific scenarios and various
market conditions;
(v) compliance with Paragraph 16 of this Order regarding the
restrictions on brokered deposits, including, but not
limited to the monitoring of interest rates paid on
deposits for compliance with 12 C.F.R. ss. 337.6; and
(vi) Board oversight of the Association's liquidity needs and
available sources of liquidity, including a requirement
that the Regional Director be notified immediately of
any event that would limit the Association's funding
sources or available liquidityamounts.
(b) The Association shall provide a copy of the Liquidity Policy to
the Regional Director within five (5) days of Board approval.
ASSET QUALITY.
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8. (a) Within forty-five (45) days, the Board shall adopt a schedule of
quarterly reduction targets which: (i) reduces the level of adversely
classified assets at the Association to no more than 50% of core capital
plus ALLL by December 31, 2010; and (ii) reduces the level of adversely
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classified assets and assets designated as special mention at the
Association (Criticized Assets) to no more than sixty-five percent (65%)
of core capital plus ALLL by December 31, 2010. The Board shall send a
copy of the reduction targets implemented by the Board to the Regional
Director within seven (7) days of Board approval.
(b) On a quarterly basis, beginning with the quarter ending December
31, 2009, the Board shall review a written report comparing the
projected reduction targets to actual results (Problem Assets Variance
Report). If the Board determines that a material deviation exists
between a quarterly reduction target and actual results, it shall
approve a Board resolution directing specific remediation steps to
achieve compliance with the reduction targets by the following quarter.
The Board's review of the quarterly Problem Assets Variance Report shall
be fully documented in the Board minutes. (c) Within sixty (60) days of
the close of each quarter, the Board shall provide the Regional Director
with a copy of the Problem Assets Variance Report.
9. Withinthirty (30) days, the Board shall revise the Association's ALLL
methodologies and policies taking into account the methodology revisions
contained in the Matters Requiring Board Attention section of the OTS Report of
Examination dated May 4, 2009.
BUSINESS PLAN.
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10. (a) Within sixty (60) days, the Board shall adopt and submit to the
Regional Director for review and comment a comprehensive business plan
for the period beginning with the quarter ending September 30, 2009
through the quarter ending December 31, 2011 (Business Plan). At a
minimum, the Business Plan shall include the requirements contained
within this Order and shall include:
(i) well supported and realistic strategies to achieve
consistent profitability by September 30, 2010;
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(ii) the maintenance of capital levels required by Paragraph
2 of this Order;
(iii) the Liquidity Policy revisions provided for in Paragraph
7 of this Order;
(iv) strategies to stress-test and adjust earnings forecasts
based on continuing operating results, economic
conditions and credit quality of the loan portfolio; and
(vi) quarterly pro forma balance
sheets and income statements for the period beginning
with the quarter ending September 30, 2009 through the
quarter ending December 31, 2011.
(b) The Business Plan shall include all assumptions used in the pro
formas, such as: (i) the assumed interest rate scenarios; (ii)
assumptions used for noninterest income and noninterest expense; (iii)
assumptions used to determine the ALLL; (iv) assumptions for loan
origination rates, using recent experience and taking into consideration
current national and regional economic conditions; and (v) assumptions
supporting the cost of funds projections.
(c) Within thirty (30) days after receiving the Regional Director's
written comments, the Board shall revise and adopt the Business Plan
based on such comments. Thereafter, the Association shall implement and
comply with the Business Plan. Within five (5) days of Board approval of
the Business Plan, the Association shall provide a copy of the adopted
Business Plan to the Regional Director.
(d) Once the Business Plan is implemented, the Association shall
operate within the parameters of its Business Plan. Any proposed
material deviations from or changes to the Business Plan must be
submitted for the prior, written non-objection of the Regional Director.
Requests for
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any material deviations or changes must be submitted at least sixty (60)
days before a proposed change is implemented.
(e) The Association shall notify the Regional Director regarding any
material event affecting or that may affect the balance sheet, capital,
or the cash flow of the Association within five (5) business days after
such event.
11. (a) On a quarterly basis, beginning with the quarter ending December
31, 2009, the Association shall prepare and submit to the Board a report
that compares projected operating results contained within the Business
Plan to actual results (Business Plan Variance Report). The Board shall
review each Business Plan Variance Report and address external and
internal risks that may affect the Association's ability to successfully
implement the Business Plan. This review shall include, but not be
limited to, adverse scenarios relating to asset or liability mixes,
interest rates, staffing levels and expertise, operating expenses,
marketing costs, and economic conditions in the markets in which the
Association is operating. The Board shall discuss and approve corrective
actions, if needed, to ensure the Association's adherence to its
Business Plan. The Board's review of the Business Plan Variance Report
and assessment of the Association's compliance with the Business Plan
shall be fully documented in the appropriate Board meeting minutes.
(b) Within sixty (60) days after the close of each quarter beginning
with the quarter ending December 31, 2009, the Board shall provide the
Regional Director with a copy of each Business Plan Variance Report.
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COMPLIANCE COMMITTEE AND PROGRESS REPORTS.
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12. Within thirty (30) days, the Board shall appoint a committee of three
(3) or more directors to monitor and coordinate the Association's compliance
with the Order (Compliance Committee). The Compliance Committee may be an
existing Board Committee that meets the criteria of this provision. The
Committee shall be comprised of independent(1) directors.
13. Within forty-five (45) days of the end of each quarter, beginning with
the quarter ending December 31, 2009, the Compliance Committee shall provide a
written progress report to the Board, describing the actions taken by the
Association to comply with each provision of this Order and the results of those
actions. The Board's consideration of the Compliance Committee's progress report
for the period, including comments and questions concerning the progress report
and additional actions taken or directed by the Board, shall be reflected in the
minutes of the Board's meetings.
14. Within sixty (60) days of the end of each quarter beginning with the
quarter ending December 31, 2009, a copy of the progress report for the period
with any revisions or comments by the Board shall be provided to the Regional
Director.
GROWTH.
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15. Effective immediately, the Association is subject to and shall comply
with the requirements and provisions of OTS Regulatory Bulletin 3b. Without the
prior written approval of the Regional Director, the Association shall not
increase its total assets during any quarter beginning with the quarter ending
December 31, 2009 in excess of an amount equal to net interest credited on
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(1) For this purpose the term "independent" means that the director is not: (1)
a current or former officer or employee of the Association or of an affiliate or
service provider of the Association; (2) a member of the immediate family
(defined in 12 C.F.R. ss. 561.24) of a director, officer or employee of the
Association or its affiliates; (3) a controlling person of the Association as
defined in 12 C.F.R. ss. 561.14; (4) a borrower or obligor on any outstanding
extension of credit from the Association except for loans secured by a lien on
the borrower's primary residence, and (5) and has not served as a consultant,
advisor, underwriter, or legal counsel to the Association or its affiliates.
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deposit liabilities during the quarter. The growth restrictions imposed by this
Paragraph shall remain in effect until the Regional Director reviews and
approves the Association's Business Plan as required under Paragraph 10 of this
Order. Any growth in assets, including any growth proposed in the Business Plan,
should consider:
(a) the source, volatility and use of the funds that support asset
growth;
(b) any increase in credit risk or interest rate risk as a result
of growth; and
(c) the effect of such growth on the Association's capital.
BROKERED DEPOSITS AND INTEREST RATE RESTRICTION.
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16. Effective immediately, the Association shall comply with the
requirements of 12 C.F.R. ss. 337.6(b) and shall not, without obtaining the
prior written waiver of the Federal Deposit Insurance Corporation (FDIC)
pursuant to 12 C.F.R. ss. 337.6(c): (a) accept, renew or roll over any brokered
deposit, as that term is defined at 12 C.F.R. ss. 337.6(a)(2); or (b) act as a
deposit broker, as that term is defined at 12 C.F.R. ss. 337.6(a)(5).
DIVIDENDS.
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17. Effective immediately, the Board shall not declare or pay dividends or
make any other capital distributions, as that term is defined in 12 C.F.R. ss.
563.141, without receiving the prior written approval of the Regional Director.
The Association's written request for written approval should be submitted to
the Regional Director at least sixty (60) days prior to the anticipated date of
the proposed dividend or distribution of capital.
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SEVERANCE AND INDEMNIFICATION PAYMENTS.
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18. Effective immediately, the Association shall not make any golden
parachute payment(2) or any prohibited indemnification payment(3) unless, with
respect to each such payment, the Association has complied with the requirements
of 12 C.F.R. Part 359 and, as to indemnification payments, 12 C.F.R. ss.
545.121.
DIRECTORATE AND MANAGEMENT CHANGES.
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19. Effective immediately, the Association shall comply with the prior
notification requirements for changes in directors and Senior Executive
Officers(4) set forth in 12 C.F.R. Part 563, Subpart H.
EMPLOYMENT CONTRACTS AND COMPENSATION ARRANGEMENTS.
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20. (a) Effective immediately, the Association shall not enter into,
renew, extend, or revise any contractual arrangement relating to
compensation or benefits for any Senior Executive Officer or director of
the Association, unless it first provides the Regional Director with not
less than thirty (30) days prior written notice of the proposed
transaction. The notice to the Regional Director shall include a copy of
the proposed employment contract or compensation arrangement or a
detailed, written description of the compensation arrangement to be
offered to such officer or director, including all benefits and
perquisites. The Board shall ensure that any contract, agreement, or
arrangement submitted to the Regional Director fully complies with the
requirements of 12 C.F.R. Part 359, 12 C.F.R. ss.ss. 563.39 and
563.161(b), and 12 C.F.R. Part 570 - Appendix A.
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(2) The term "golden parachute payment" is defined at 12 CFR ss. 359.1(f).
(3) The term "prohibited indemnification payment" is defined at 12 CFR ss. 359.1
(l).
(4) The term "Senior Executive Officer" is defined at 12 C.F.R. ss. 563.555.
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(b) Effective immediately, the Association shall not increase any
salaries, bonuses, or director's fees or make any other similar
payments, directly or indirectly, to the Association's directors or
Senior Executive Officers without prior written non-objection from the
Regional Director.
THIRD PARTY CONTRACTS.
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21. Effective immediately, the Association shall not enter into any
arrangement or contract with a third party service provider that is significant
to the overall operation or financial condition of the Association(5) or outside
the Association's normal course of business unless, with respect to each such
contract, the Association has: (a) provided the Regional Director with a minimum
of thirty (30) days prior written notice of such arrangement or contract; (b)
determined that the arrangement or contract complies with the standards and
guidelines set forth in OTS Thrift Bulletin 82a; and (c) received written notice
of non-objection from the Regional Director.
TRANSACTIONS WITH AFFILIATES.
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22. Effective immediately, the Association shall not engage in any
transaction with an affiliate unless, with respect to each such transaction, the
Association has complied with the notice requirements set forth in 12 C.F.R. ss.
563.41(c)(4), which shall include the information set forth in 12 C.F.R. ss.
563.41(c)(3). The Board shall ensure that all transactions with an affiliate for
which a notice is submitted pursuant to this Paragraph of the Order shall comply
with the requirements of 12 C.F.R. ss. 563.41 and 12 C.F.R. Part 223.
EFFECTIVE DATE, INCORPORATION OF STIPULATION.
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23. This Order is effective on the Effective Date as shown on the first
page. The Stipulation is made a part hereof and is incorporated herein by this
reference.
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(5) A contract will be considered significant to the overall operation or
financial condition of the Association where the annual contract amount equals
or exceeds two percent (2%) of the Association's total capital.
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DURATION.
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24. This Order shall remain in effect until terminated, modified, or
suspended, by written notice of such action by the OTS, acting by and through
its authorized representatives.
TIME CALCULATIONS.
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25. Calculation of time limitations for compliance with the terms of this
Order run from the Effective Date and shall be based on calendar days, unless
otherwise noted.
26. The Regional Director may extend any of the deadlines set forth in the
provisions of this Order upon written request by the Association that includes
reasons in support for any such extension. Any OTS extension shall be made in
writing.
SUBMISSIONS AND NOTICES.
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27. All submissions, including any reports, to the OTS that are required by
or contemplated by this Order shall be submitted within the specified
timeframes.
28. Except as otherwise provided herein, all submissions, requests,
communications, consents, or other documents relating to this Order shall be in
writing and sent by first class U.S. mail (or by reputable overnight carrier,
electronic facsimile transmission, or hand delivery by messenger) addressed as
follows:
(a) TO THE OTS:
Regional Director
Office of Thrift Supervision
One South Wacker Drive, Suite 2000
Chicago, Illinois 60606
Facsimile: (312) 917-5001
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(b) TO THE ASSOCIATION:
Chairman of the Board
Park View Federal Savings Bank
30000 Aurora Road
Solon, Ohio 44139-2728
Facsimile: (440) 914-3916
NO VIOLATIONS AUTHORIZED.
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29. Nothing in this Order or the Stipulation shall be construed as allowing
the Association, its Board, officers, or employees to violate any law, rule, or
regulation.
IT IS SO ORDERED.
OFFICE OF THRIFT SUPERVISION
By: /s/ Daniel T. McKee
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Daniel T. McKee
Regional Director, Central Region
Date: See Effective Date on page 1
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