Exhibit 10.1
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AGREEMENT BY AND BETWEEN
City National Bank of New Jersey
Newark, New Jersey
and
The Comptroller of the Currency
City National Bank of New Jersey, Newark, New Jersey ("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 his/her findings are contained in the Report of Examination ("ROE") for the
examination commenced on December 1, 2008. The Comptroller has found unsafe and
unsound banking practices relating to asset quality and credit risk management
at the Bank.
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
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This Agreement shall be construed to be a "written agreement entered into
with the agency" within the meaning of 12 U.S.C. ss.1818(b)(1).
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.
ss.1818(e)(1) and 12 U.S.C. ss.1818(i)(2).
This Agreement shall be construed to be a "formal written agreement"
within the meaning of 12 C.F.R. ss.5.51(c)(6)(ii). See 12 U.S.C. ss.1831i.
This Agreement shall be construed to be a "written agreement" within the
meaning of 12 U.S.C. ss.1818(u)(1)(A).
All reports or plans which the Bank or Board has agreed to submit to the
Assistant Deputy Comptroller pursuant to this Agreement shall be forwarded to
the:
Kristin A. Kiefer
Assistant Deputy Comptroller
New York Metro West Field Office
343 Thornall Street, Suite 610
Edison, New Jersey 08837
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Article II
COMPLIANCE COMMITTEE
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Within thirty (30) days of the date of this Agreement, the Board shall
appoint a Compliance Committee of at least three (3) directors, of which no more
than one (1) shall be an employee or controlling shareholder of the Bank or any
of its affiliates (as the term "affiliate" is defined in 12 U.S.C.
ss.371c(b)(1)), or a family member of any such person. 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 Assistant Deputy Comptroller. The Compliance Committee shall be responsible
for monitoring and coordinating the Bank's adherence to the provisions of this
Agreement.
The Compliance Committee shall meet at least monthly.
Within thirty days (30) of the appointment of the Compliance Committee and
quarterly thereafter, the Compliance Committee shall submit a written progress
report to the Board setting forth in detail:
(a) actions taken to comply with each Article of this Agreement;
(b) the results and status of those actions; and
(c) a description of the actions needed to achieve full compliance
with each Article of this Agreement.
The Board shall forward a copy of the Compliance Committee's report, with
any additional comments by the Board, to the Assistant Deputy Comptroller.
Article III
LOAN PORTFOLIO MANAGEMENT
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(1) The Board shall, within ninety (90) 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) an appraisal review process which includes the review and
testing of assumptions;
(c) 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;
(d) procedures to ensure conformance with loan approval
requirements;
(e) a system to track and analyze exceptions;
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(f) procedures to ensure the accuracy of internal management
information systems;
(g) procedures to ensure loan files are maintained with the most
current information;
(h) procedures to ensure annual review of credit relationships above
$500 thousand dollars;
(i) a performance appraisal process, including performance
appraisals and job descriptions which adequately consider their
performance relative to policy compliance, documentation standards,
accuracy in credit grading, and other loan administration matters;
and
(j) 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.
(2) Upon completion, a copy of the program shall be forwarded to the
Assistant Deputy Comptroller.
(3) Within ninety (90) 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 or
any other relevant measure;
(c) compliance with the Bank's lending policies and laws, rules, and
regulations pertaining to the Bank's lending function;
(d) adequacy of credit and collateral documentation; and
(e) concentrations of credit.
(4) Beginning June 30, 2009, on a quarterly basis management will provide
the Board with written reports including, at a minimum, the following
information:
(a) the identification, type, rating, and amount of problem loans
and leases;
(b) the identification and amount of delinquent loans and leases;
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(c) credit and collateral documentation, including financial
statement, 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; and
(g) the identification of loans and leases not in conformance with
the Bank's lending and leasing policies, including applicable
underwriting guidelines, and exceptions to the Bank's lending and
leasing policies.
(5) The Board shall ensure that the Bank has processes, personnel, and
control systems to ensure implementation of and adherence to the program and
systems developed pursuant to this Article.
Article IV
CREDIT AND COLLATERAL EXCEPTIONS
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(1) Within ninety (90) days, the Board shall obtain current and
satisfactory credit information on all loans lacking such information, including
those listed in the ROE, 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.
(2) 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.
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(ii) A copy of the Board certification shall be
maintained in the credit file of the affected
borrower(s). The certification will be reviewed by
this Office in subsequent examinations of the
Bank; and
(d) documenting, with adequate supporting material, the value of
collateral and properly perfecting the Bank's lien on it where
applicable.
Article V
LENDING POLICY
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(1) Within ninety (90) 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
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incorporate, but not necessarily be limited to, the following:
(a) a provision that current and satisfactory credit information
will be obtained and maintained on each borrower;
(b) maximum ratio of loan value to appraised value or acquisition
costs of collateral securing the loan, which limits will not exceed
supervisory loan-to-value limits;
(c) distribution of loans by category;
(d) guidelines and limitations on concentrations of credit;
(e) 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;
(f) measures to correct the deficiencies in the Bank's lending
procedures noted in any Report of Examination including, but not
limited to, participations, concentrations limits, and other real
estate owned;
(g) requirement that all credits which deviate from the Bank's
normal course of business, including all credits which deviate from
the Bank's written Loan Policy receive the prior approval of the
Board, or a committee thereof;
(h) guidelines for periodic review of the Bank's adherence to the
revised lending policy; and
(i) guidelines for the periodic aggregation and review of loans
granted in exception to the loan 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 Assistant Deputy Comptroller for review.
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(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 VI
ALLOWANCE FOR LOAN AND LEASE LOSSES
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(1) The Board shall enhance its methodology to ensure the adequacy of the
Bank's Allowance for Loan and Lease Losses ("Allowance"). This methodology shall
focus particular attention on, but not be limited to, the following factors:
(a) establishment of criteria for individual loan impairments under
FAS 114 and implement into the Allowance process this is
inconsistent with the CRE SRC discussion);
(b) establishment of separate FAS 5 pools for each risk rating
category;
(c) validation of the methodology by an independent third party; and
(d) update the Allowance policy to include all items listed above.
(2) Written documentation shall be maintained indicating the factors
considered and conclusions reached by the Board in determining the adequacy of
the Allowance.
(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 VII
INTERNAL AUDIT
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(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) adequately cover all areas; in particular a risk-based approach
to OFAC and Bank Secrecy Act compliance that includes transactional
testing and verification of data for higher-risk accounts or
geographic areas of specific concern; and
(d) establish an annual audit plan using a risk based approach
sufficient to achieve these objectives.
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(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 Bank has processes, personnel, and
control systems to ensure implementation of and adherence to the program
developed pursuant to this Article.
(4) 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.
(5) The Board, or a designated committee of 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.
(6) Upon adoption, a copy of the internal audit program shall be promptly
submitted to the Assistant Deputy Comptroller.
Article VIII
CAPITAL AND PROFIT PLAN
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(1) Within ninety (90) days, the Board shall develop, implement, and
thereafter ensure Bank adherence to a three year capital plan. The program shall
include:
(a) specific plans for the maintenance of adequate capital;
(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;
(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.
ss.ss. 56 and 60.
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(2) Within (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;
(d) identification of the sources of funding, including limits on
specific types of wholesale funding. The bank shall not exceed a
maximum ten percent (10%) of brokered deposits to total deposits as
per the bank's existing policy limit, except for CDRS deposits in
existence on March 31, 2009, which, when combined with other
brokered deposits, shall not exceed fifteen percent (15%) of total
deposits. Any deviation from this limit must be presented in writing
from the Board to the Assistant Deputy Comptroller for approval.
(e) a description of the operating assumptions that form the basis
for major projected income and expense components.
(3) The budgets and related documents required in paragraph (2) above for
2009 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 (3) above for each year this Agreement remains in effect.
The budget for each year shall be submitted on or before November 30, of the
preceding year.
(4) 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.
(5) The 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 IX
CONSUMER COMPLIANCE/BSA PROGRAM
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(1) Within sixty (60) days, the Board shall adopt, implement, and
thereafter ensure adherence to a written consumer compliance/BSA program
designed to ensure that the Bank is operating in compliance with all applicable
consumer protection laws, rules and regulations. This program shall include, but
not be limited to:
(a) a written description of the duties and responsibilities of the
compliance/BSA officer;
(b) adequate internal controls to ensure compliance with consumer
protection laws, rules, and regulations;
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(c) the education and training of all appropriate Bank personnel in
the requirements of all federal and state consumer protection laws,
rules and regulations; and
(d) periodic reporting of the results of the consumer compliance
review to the Board or a committee thereof.
(2) The Board shall ensure that the program is supported by an adequately
staffed department or outside firm, with respect to both the experience level
and number of the individuals employed.
(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.
(4) Upon adoption, a copy of the program shall be forwarded to the
Assistant Deputy Comptroller for review.
Article X
CONTINGENCY FUNDING PLAN
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(1) Within sixty (60) days of the date, the Board shall expand and
document the bank's contingency funding plan (CFP). The plan shall provide for a
coordinated strategy and, at a minimum, address:
(a) identification of liquidity event triggers for CFP purposes;
(b) crisis liquidity scenarios, including which funding sources
would be available under various circumstances;
(c) projected sources and uses under stressed scenarios. Management
should identify and rank all prospective funding sources, both asset
and liabilities, including all rate sensitive and insensitive
funding as well as credit sensitive funding; and
(d) estimated timeframes for accessing funds.
(2) Upon adoption, a copy of the written plan shall be forwarded to the
Assistant Deputy Comptroller for review.
(3) The Board, or a committee thereof, 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.
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Article XI
CLOSING
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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.
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.
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.
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.
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. ss.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.
ss.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 her hand on behalf of the Comptroller.
/Kristin A. Kiefer/ June 29, 2009
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Kristin A. Kiefer Date
Assistant Deputy Comptroller
New York Metro West
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IN 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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Douglas Anderson Date
/Barbara Bell Coleman/ June 29, 2009
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Barbara Bell Coleman Date
/Eugene Giscombe/ June 29, 2009
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Eugene Giscombe Date
/Louis Prezeau/ June 29, 2009
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Louis Prezeau Date
/Lemar Whigham/ June 29, 2009
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Lemar Whigham Date
/H. O'Niel Williams/ June 29, 2009
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H. O'Niel Williams Date
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