Exhibit 10.1

 

AGREEMENT BY AND BETWEEN Polonia Bank

Huntingdon Valley, Pennsylvania

and

The Comptroller of the Currency

 

 

The Comptroller of the Currency of the United States ("Comptroller"), through
his national bank examiners and other staff of the Office of the Comptroller of
the Currency ("OCC"), has conducted an examination of Polonia Bank, Huntingdon
Valley, Pennsylvania ("Bank") and has found unsafe or unsound banking practices
relating to strategic planning, asset/liability management, interest rate risk,
earnings, and internal controls.

 

The Bank and the 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.

 

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) The Bank is a federal savings association examined by the OCC pursuant to
the Home Owners' Loan Act of 1933, as amended, 12 U.S.C. § 1461 et seq. and is a
"Federal savings association" within the meaning of 12 U.S.C. § 1813(b) and an
"insured depository institution" within the meaning of 12 U.S.C. §§ 1813(c) and
1818(b)(l).

 

(2) The Comptroller is "the appropriate Federal banking agency" regarding the
Bank pursuant to 12 U.S.C. § 1813(q) and within the meaning of §1818(b).

 

 

 

  

(3) 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)(l).

 

(4) 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)(l) and 12 u.s.c. § 1818(i)(2).

 

(5) This Agreement shall be construed to be a "formal written agreement" within
the meaning of 12 C.F.R.§ 163.555. See 12 U.S.C. § 1831i.

 

(6) This Agreement shall be construed to be a "written agreement" within the
meaning of 12 U.S.C. § 1818(u)(l)(A).

 

ARTICLE II

COMPLIANCE COMMITTEE

 

(1) Within ten (10) days of the date of this Agreement, the Board shall appoint
a Compliance Committee of at least three (3) directors, the majority of whom
shall not be employees, former employees, or controlling shareholders of the
Bank or any of its affiliates (as the term "affiliate" is defined in 12 U.S.C. §
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 promptly 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.

 

(2) The Compliance Committee shall meet at least monthly.

 

(3) Within thirty (30) days of the date of this Agreement and thereafter within
thirty (30) days of the end of each calendar quarter, or within such other time
period as required by the Assistant Deputy Comptroller in writing, the
Compliance Committee shall submit a written progress report to the Board setting
forth in detail:

 

2

 

  

(a)a description of the action needed to achieve full compliance with each
Article of this Agreement, Bank personnel responsible for implementing the
corrective actions, and the timeframes for completion;

 

(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 written comments by the Board, to the Assistant Deputy
Comptroller within ten (10) days of receiving such report.

 

ARTICLE III

BOARD TO ENSURE COMPETENT MANAGEMENT

 

(1) The Board shall ensure the Bank has competent management in place on an
ongoing and full-time basis in all senior executive officer and executive
officer positions, including the Bank's President/Chief Executive Officer, Chief
Financial Officer, and Chief Lending Officer positions, and that officers are
vested with sufficient authority to fulfill the duties and responsibilities of
the position, 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 safe and sound manner within the scope of that
position's responsibilities.

 

(2) Within ninety (90) days of this Agreement, and annually thereafter or when
required by the Assistant Deputy Comptroller in writing, the Board shall review
the capabilities of the Bank's management to perform present and anticipated
duties. This review shall include consideration of each individual's past actual
performance, experience, and qualifications compared to their position
descriptions, duties, and responsibilities. Based on this review, the Board
shall determine whether management changes will be made, including the need for
additions to or deletions from current management. The Board shall document its
review and determinations in writing, provide a copy to the Assistant Deputy
Comptroller for review, and retain such documentation in the Bank's records.

 

3

 

  

(3) If the Board determines that an officer will continue in his or her position
but that the officer's depth of skills needs improvement, the Board shall within
sixty (60) days of such determination 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 perform his or her responsibilities and supervise
effectively;

 

(b)objectives by which the officer's effectiveness will be measured; and

 

(c)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, consistent with the requirements of
Article IX.

 

Upon completion, a copy of the written program shall be submitted to the
Assistant Deputy Comptroller for review.

 

(4) If any senior executive officer (as defined in 12 C.F.R. § 163.555) position
is vacant now or in the future, the Board shall within sixty (60) days of the
date of this Agreement or the future vacancy, respectively, identify and provide
notice to the Assistant Deputy Comptroller, of a competent, permanent, and
full-time candidate for the position who has sufficient prior relevant
experience. The Board shall comply with the prior notice requirements of 12
U.S.C. § 1831i and 12 C.F.R. Part 163, subpart H when selecting an individual to
serve in any senior executive officer position. Pursuant to 12 U.S.C. § 1831i
and 12 C.F.R. Part 163, subpart H, the Bank must receive a written
non-disapproval from the Assistant Deputy Comptroller before appointing an
individual to a senior executive officer position.

 

4

 

  

(5) Prior to the appointment of any individual to an executive officer position
(other than a senior executive officer as defined in 12 C.F.R. § 163.555 covered
under paragraph (4) of this Article), the Board shall submit to the Assistant
Deputy Comptroller in writing information regarding the proposed candidate's
identity, personal history, business background, and experience, and any other
information that the Assistant Deputy Comptroller requires in writing, and
receive the Assistant Deputy Comptroller's written non-disapproval. The
Assistant Deputy Comptroller's failure to exercise her authority to disapprove
the appointment of the proposed executive officer shall not constitute an
approval or endorsement of the proposed candidate. The requirement to submit
information and the prior non-disapproval provisions of this paragraph (5) are
based upon the authority of 12 U.S.C. § 1818(b) and do not require the
Comptroller or the Assistant Deputy Comptroller to complete his or her review
and act on any such information or authority within thirty (30) days.

 

(6) Within thirty (30) days of receiving the Assistant Deputy Comptroller's
written non-disapproval of a senior executive officer proposed pursuant to
paragraph (4) of this Article or an executive officer proposed pursuant to
paragraph (5) of this Article, the Board shall appoint the individual to the
respective senior executive officer or executive officer position and the
individual shall be vested with sufficient executive authority to fulfill the
duties and responsibilities of the position, carry out the Board's policies,
ensure compliance with this Agreement, applicable laws, rules and regulations,
and ensure the safe and sound operation of the Bank within the scope of that
position's responsibilities.

 

5

 

  

ARTICLE IV

STRATEGIC PLAN

 

(1) Within one hundred and twenty (120) days of the date of this Agreement, the
Board shall submit a written updated Strategic Plan to the Assistant Deputy
Comptroller for a prior written determination of no supervisory objection. The
Strategic Plan shall cover at least a three (3) year period, and shall establish
objectives for the Bank's overall risk profile, earnings performance, growth,
balance sheet mix, off-balance sheet activities, liability structure, capital
and liquidity adequacy, product line development, outsourcing, and market
segments that the Bank intends to promote or develop, together with strategies
to achieve those objectives. The Strategic Plan shall include the following as a
minimum:

 

(a)a mission statement that forms the framework for the establishment of
strategic goals and objectives;

 

(b)an assessment of the Bank's current and future operating environment,
including a description of the Bank's intended geographic market area, and the
competitive factors and economic environment the Bank faces in the intended
market;

 

(c)identification of strategic goals and objectives to be accomplished over the
short- and long-run, including the Bank's growth or expansion plans and short-
and long-term merger or acquisition strategy, if applicable, and identification
of new and future market segments and new or expanded business or product lines
that will be utilized to accomplish the strategic goals and objectives;

 

6

 

 

(d)a detailed analysis of how the Bank intends to accomplish the goals
identified in paragraph (l)(c) of this Article, including executive management
responsibilities and target dates for achievement;

 

(e)a management plan that identifies any proposed changes in management
personnel and their responsibilities and qualifications, consistent with the
requirements of Article III, and provides for appropriate succession planning;

 

(f)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 paragraph (l)(c) of this Article;

 

(g)identification of control systems to mitigate risks associated with planned
new products, new services, alterations or modifications to existing products or
services, growth, outsourcing arrangements, or any proposed changes in the
Bank's operating environment;

 

(h)an action plan to improve bank earnings and accomplish identified strategic
goals and objectives that includes specific time frames for achievement,
identifies individual responsibilities, appropriately considers impact to the
Bank's current risks, and provides for regular reporting to the Board to
establish management accountability;

 

(i)a forecast for the three-year period covered by the Strategic Plan, broken
down on a quarterly basis, to include projections for major balance sheet and
income statement accounts, capital and liquidity statements, earnings and
profit, and desired financial ratios (collectively, an "Operating Budget");

 

7

 

 

(j)the specific business assumptions forming the basis of the Operating Budget,
and a process for Bank management to track and address changes to those
assumptions throughout the period covered by the Operating Budget;

 

(k)provisions for Board review and assessment of the adequacy of the Bank's
earnings, capital position, liquidity position, fidelity bond insurance and
errors and omissions insurance; and

 

(1) systems to monitor the Bank's progress in meeting the Strategic Plan's goals
and objectives.

 

(2) Once the Bank receives the prior written determination of no supervisory
objection from the Assistant Deputy Comptroller required by paragraph (1) of
this Article, the Board shall promptly adopt and the Bank, subject to Board
review and ongoing monitoring, shall implement and thereafter adhere to the
Strategic Plan.

 

(3) Once the Strategic Plan is adopted, the Bank shall not make a material
change to or significantly deviate from the Strategic Plan unless the Bank has
first given the OCC at least thirty (30) days prior written notice of its intent
to do so, and obtained the Assistant Deputy Comptroller's prior written
determination of no supervisory objection to such action. The Bank's request for
prior written determination of no supervisory objection to a material change or
significant deviation shall include, at a minimum:

 

(a)an assessment of the proposed significant deviation's impact on the Bank's
condition, including a profitability analysis;

 

8

 

 

(b)an assessment of the adequacy of the Bank's management, staffing levels,
organizational structure, financial condition, capital adequacy, funding
sources, management information systems, internal controls, and written policies
and procedures with respect to the proposed significant deviation; and

 

(c)the Bank's evaluation of its capability to identify, measure, monitor, and
control the risks associated with the proposed significant deviation.

 

(4) Once the Bank receives the Assistant Deputy Comptroller's prior written
determination of no supervisory objection for a material change to or
significant deviation from the Strategic Plan, the Bank shall revise the
Strategic Plan to reflect the change and the Bank, subject to Board review and
ongoing monitoring, shall implement and thereafter adhere to the revised
Strategic Plan. If, after receiving a written determination of no supervisory
objection from the Assistant Deputy Comptroller for a significant deviation from
or change to its Strategic Plan, the Bank decides not to make such change, the
Bank shall, within ten (10) days of its decision, provide written notice to the
OCC.

 

(5) For purposes of this Article, significant deviations or changes that may
have a material impact on the Strategic Plan include, but are not limited to,
any significant deviations from or material changes consistent with the
description provided in Appendix G (Significant Deviations After Opening) of the
"Charters" booklet of the Comptroller's Licensing Manual (February 2009) or any
subsequent updates, and include in particular, any significant deviations from
or material changes to the following:

 

(a)the current business focus, including entering into or exiting from a
business segment;

 

9

 

 

(b)new products or services to be offered, and any outsourcing arrangements
related to such product or service;

 

(c)alterations or modifications, including changes in terms, to existing
products or services;

 

(d)funding strategies and capital maintenance;

 

(e)marketing strategies, marketing partners, or acquisition channels;

 

(f)accounting processes and practices;

 

(g)projected capital and liquidity levels and income; and/or

 

(h)any other changes in personnel or operations, including outsourcing
arrangements, that may have a material impact on the Bank's operations or
financial performance.

 

(6) Until the Strategic Plan required under paragraph (1) of this Article has
been submitted to the Assistant Deputy Comptroller, received a written
determination of no supervisory objection from the Assistant Deputy Comptroller,
and is being implemented by the Bank, the Bank shall not significantly deviate
from the market, products, services, asset composition and size, funding
sources, structure or operations in existence at the time of this Agreement's
execution.

 

(7) The Bank shall not operate or conduct business in a manner inconsistent with
the most recent Strategic Plan that has received the Assistant Deputy
Comptroller's written determination of no supervisory objection.

 

(8) The Board shall ensure that the Bank has senior executive officers and other
management with sufficient experience and expertise to implement the Strategic
Plan, in a safe and sound manner. The Bank shall not commence offering a product
or service included in the Strategic Plan until the Bank has appropriate
management, staffing, systems, and risk controls fully in place for the product
or service.

 

10

 

  

(9) The Board shall ensure that performance under the Strategic Plan is reviewed
at least quarterly. The Bank shall report any material deviation from the
Strategic Plan or any material deviation from the Operating Budget required
under paragraph (l)(i) above to the OCC within ten (10) days of the discovery of
the deviation. The report shall describe and provide an explanation of any
material deviations.

 

(10) Unless otherwise necessary or required in writing by the Assistant Deputy
Comptroller, the Board shall ensure that the Strategic Plan is reviewed and
updated annually, no later than one month prior to the end of the Bank's current
fiscal year, to cover the next three (3) year fiscal period. The Bank shall
submit the updated annual Operating Budget included in the Strategic Plan under
paragraph (l)(i) above to the Assistant Deputy Comptroller within ten (10) days
of the Board's review and update. If there is no material change to the
Strategic Plan in the annual update other than the updated Operating Budget, the
Bank shall so certify to the Assistant Deputy Comptroller within ten (10) days
of the Board's review and update. If the Bank proposes a material change or
significant deviation to the Strategic Plan in the annual update, the Bank shall
submit the amended Strategic Plan to the Assistant Deputy Comptroller for a
prior written determination of no supervisory objection and shall not implement
any proposed material change or significant deviation until it has received the
Assistant Deputy Comptroller's written determination of no supervisory
objection.

 

ARTICLE V

ASSET LIABILITY MANAGEMENT

 

(1) Within ninety (90) days of the date of this Agreement, the Board shall adopt
and the Bank, subject to Board review and ongoing monitoring, shall implement
and thereafter adhere to a revised asset liability management program that
includes at a minimum:

 

11

 

  

(a)controls to ensure the Board and management evaluate and quantitatively
assess, prior to execution, how loan funding commitments will impact the Bank's
interest rate risk exposure;

 

(b)controls to ensure the Bank does not exceed Board approved risk limits when
executing such commitments;

 

(c)an interest rate risk reduction strategy that includes quantitative and
qualitative objectives consistent with the Strategic Plan required to be
developed under Article IV, assigned responsibilities and accountability, and
regular progress reporting to the Board; and

 

(d)standards for validating the Bank's interest rate risk model and model
validation consistent with OCC Bulletin 2011-12, Sound Practices for Model Risk
Management; Supervisory Guidance on Model Risk Management (April 4, 2011).

 

(2) Upon adoption, the Board shall submit a copy of the revised asset liability
management program to the Assistant Deputy Comptroller for review.

 

ARTICLE VI

MORTGAGE BANKING OPERATIONS RISK MANAGEMENT

 

(1) Within ninety (90) days of the date of this Agreement, the Board shall adopt
and the Bank, subject to Board review and ongoing monitoring, shall implement
and thereafter adhere to a written mortgage banking operations risk management
program that shall include at a minimum:

 

12

 

 

(a)Board approved strategies outlining targeted growth for each mortgage banking
operation, consistent with the Strategic Plan required to be developed under
Article IV;

 

(b)detailed policies, procedures and standards, that are reviewed periodically
by management, and annually reviewed and approved by the Board, addressing loan
production, loan servicing and secondary marketing, including specific
parameters for selling loans, retaining loans· and retaining servicing rights,
and specific parameters for introducing new mortgage banking products;

 

(c)designated personnel, who are not involved with the loan production function,
responsible for (i) the development of the policies, procedures and standards
required in paragraph (l)(b); (ii) oversight of the Bank's compliance with such
policies, procedures and standards; (iii) ongoing employee training; and (iv)
providing exception tracking reports to the Board on at least a quarterly basis;

 

(d)quality assurance and quality control operating policies and procedures that
(i) identify the parties that will perform the review(s); (ii) specify the
frequency of such review(s); (iii) specify how testing samples will be selected;
(iv) specify a minimum percentage of all new mortgage originations to be tested
on a monthly basis; and (v) require third party service agreements that
accurately reflect the parameters of the reviews;

 

13

 

 

(e)quarterly Board reports that enable the Board to determine whether the Bank
is complying with the Board's approved risk parameters, and whether risk
controls are effective, including the following:

 

(i)monthly loan quality and loan volume sold to each investor;

 

(ii)profitability analysis of each individual mortgage banking operation;

 

(iii)borrower debt-to-income and loan-to-value trends;

 

(iv)originations by loan purpose and product type;

 

(v)summary of denied loans;

 

(vi)investor scorecards;

 

(vii)as applicable, an indemnification and repurchase report, including
settlement amount and date, claim amount, and reasons/comments;

 

(viii)pre-funding Quality Assurance monthly review summary; and

 

(ix)post-funding Quality Control summary and responses.

 

(f)a process by which the Board will hold management accountable for timely
implementation of corrective action to address any reported deficiencies.

 

(2) Upon adoption, the Board shall submit a copy of the mortgage banking
operations risk management program to the Assistant Deputy Comptroller for
review.

 

ARTICLE VII

MORTGAGE ORIGINATION COMMITMENTS

 

(1) Within thirty (30) days of the date of this Agreement, the Board shall
review the Bank's existing funding commitment documents and confirm the terms of
the Bank's current outstanding obligation to fund third party originations. The
Board's review shall be in writing and articulate the basis on which the Board
arrived at its conclusion. Upon completion, the Board shall submit its review to
the Assistant Deputy Comptroller, who shall have sole discretion to determine
whether the Board has complied with the requirements of this paragraph.

 

14

 

  

(2) Within ninety (90) days of the date of this Agreement, the Board shall adopt
and the Bank, subject to Board review and ongoing monitoring, shall implement
and thereafter adhere to a detailed program for proper oversight of the Bank's
mortgage origination funding commitment relationship, including at a minimum:

 

(a)a requirement that management provide to the Board, prior to executing a
legally binding commitment to fund, a detailed analysis of the proposed funding
commitment's impact on the Bank's balance sheet and risk level;

 

(b)specific policies and procedures that identify the Board's risk parameters
for funding mortgage origination commitments, and controls to ensure the Bank's
adherence to established risk limits; and

 

(c)designated individuals responsible for direct oversight of mortgage
origination funding activities, with proper Board authorization to execute
funding commitments on the Bank's behalf.

 

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

 

15

 

  

ARTICLE VIII

AUDIT/INTERNAL CONTROLS OVERSIGHT

 

(1) Within sixty (60) days of the date of this Agreement, the Board shall adopt,
and the Bank, subject to Board review and ongoing monitoring, shall implement
and thereafter adhere to a revised written independent, internal audit program
consistent with the standards for Internal Audit Systems set forth in Section
II.B of the Interagency Guidelines Establishing Standards for Safety and
Soundness, Appendix A to 12 C.F.R. Part 1701 and 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;

 

(e)ensure accuracy of regulatory reporting; and

 

(f)adequately cover all areas, including mortgage banking and compliance risk
management;

 

(2) As part of the audit program, the Board shall:

 

(a)establish controls to ensure adherence to an annual risk-based audit plan
sufficient to achieve the objectives in paragraph (1), and ensure audits are
completed timely and according to the audit plan; and

 

(b)develop a risk-based, independent audit work paper review process to ensure
audits performed are consistent with the terms of the audit engagement.

 

(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.

 

 

 

________________________

1 Effective November 10, 2014, 12 C.F.R. Part 170 is removed and the Bank is
subject to12 C.F.R. Part 30, Appendix A. See 79 Fed. Reg. 54549.

 

16

 

  

(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 Board and not through any intervening party.

 

(5) All audit reports shall be in writing, cite any deficiencies identified,
include a description of the corrective action to which management has committed
for each deficiency cited in the audit report, and identify the party
responsible for such corrective action.

 

(6) The Board shall evaluate all audit reports and assess the impact on the Bank
of any deficiencies cited in such reports.

 

(7) The Board shall hold management accountable for implementing corrective
action in accordance with the commitments contained in the audit reports and
develop a process for ensuring corrective action is implemented and maintained.

 

(8) Upon adoption, the Board shall submit a copy of the internal audit program
to the Assistant Deputy Comptroller.

 

(9) Within sixty (60) days of the date of this Agreement, the Board shall adopt,
and the Bank, subject to Board review and ongoing monitoring, shall implement
and thereafter adhere to a process to ensure third party compliance review
findings are reported directly to the Board.

 

ARTICLE IX

COMPENSATION PROGRAM

 

(1) Within ninety (90) days of the date of this Agreement, the Board shall adopt
and the Bank, subject to Board review and ongoing monitoring, shall implement
and thereafter adhere to a compensation program that includes at a minimum:

 

17

 

 

(a)safeguards to prevent the payment of compensation, fees and benefits
(including postemployment benefits)(collectively "Compensation") to executive
officers, employees, directors and principal shareholders that are excessive or
that could lead to material financial loss;

 

(b)a comprehensive review of Compensation the Bank is paying to senior
management, considering the factors listed in 12 C.F.R. Part 170, Appendix A,
Section III.A.,2 and a requirement that the Board review Compensation
periodically to ensure it is not excessive;

 

(c)a requirement that, upon completion of each Compensation review, the Board
provide a written determination on whether or not Compensation amounts are
excessive, i.e. unreasonable or disproportionate to the services performed, and
why;

 

(d)a requirement that, to the extent the Board concludes as result of the
initial or any subsequent Compensation review that Compensation paid to any
individual is excessive, the Board will detail in writing what action it will
take to adjust the Compensation amount to a reasonable level;

 

(e)the establishment of a written annual performance evaluation process for all
members of senior management that includes measurable review standards, and
consideration of the duties and responsibilities of each respective position,
the Bank's size and complexity, and the individual's expertise; and

 

 

 

__________________________

2 Effective November 10, 2014, 12 C.F.R. Part 170 is removed and the Bank is
subject to 12 C.F.R. Part 30, Appendix A. See 79 Fed. Reg. 54549.

 

18

 

 

(f)a requirement that any changes in an individual's Compensation be supported
by the results of the written performance evaluation.

 

(2) Upon adoption, the Board shall submit a copy of the compensation program to
the Assistant Deputy Comptroller.

 

ARTICLE X

THIRD PARTY RISK MANAGEMENT

 

(1) Within ninety (90) days of the date of this Agreement, the Board shall adopt
and the Bank, subject to Board review and ongoing monitoring, shall implement
and thereafter adhere to a revised third party risk management program that is
consistent with OCC Bulletin 2013-29, Third-Party Relationships: Risk Management
Guidance (October 30, 2013) and any subsequent OCC guidance, that includes at a
minimum:

 

(a)Board review and approval of an updated vendor management policy that
delegates oversight responsibility for proper implementation of the Bank's third
party risk management program to appropriate management personnel;

 

(b)a list of all activities, functions, or responsibilities that are currently,
or will be, outsourced to third-parties, identifying the parties, noting any
affiliations, and describing the terms and conditions of the third party
agreements;

 

(c)a process to ensure third party relationships are governed by written
agreements that clearly outline and document the rights and responsibilities of
the parties;

 

(d)a risk assessment process to identify third party service providers that
perform critical activities for the Bank;

 

19

 

 

(e)a due diligence process for selecting third-party service providers and an
on-going process for monitoring third parties that require reviews of third
party financial information, service and other contracts governing the
relationship, and reports/attestations on third party controls;

 

(f)controls to ensure transactions with affiliated third parties comply with
affiliate laws and regulations and do not present conflicts of interest; and

 

(g)a cost-benefit analysis of the Bank's third-party relationships, that
includes ongoing monitoring of third party expenses, reports analyzing direct
and indirect costs of each relationship, and consideration of the Bank's in-
house expertise.

 

(2) Upon adoption, the Board shall submit a copy of the revised third party risk
management program to the Assistant Deputy Comptroller.

 

ARTICLE XI

OTHER PROVISIONS

 

(1) Although the Bank is by this Agreement required to submit certain proposed
plans, actions and programs for the review or prior written determination of no
supervisory objection of the Assistant Deputy Comptroller, the Board has the
ultimate responsibility for proper and sound management of the Bank.

 

(2) The Board shall ensure that the Bank has sufficient processes, personnel,
and control systems to effectively implement and adhere to all provisions of
this Agreement.

 

(3) In the event any regulation or guidance currently applicable to Federal
savings associations referenced in this Agreement is rescinded and/or amended,
revised, replaced or superseded because the OCC determines to make other
regulations or guidance applicable to Federal savings associations as part of
the OCC's regulatory integration process, or otherwise, the Bank shall comply
with such successor regulations and/or subsequent guidance.

 

20

 

  

(4) The provisions of this Agreement are effective upon execution of this
Agreement by the Comptroller, through his authorized representative whose hand
appears below, and the Board and shall remain effective and enforceable, except
to the extent that, and until such time as, any provisions of this Agreement
shall have been amended, suspended, waived, or terminated in writing by the
Comptroller, through his authorized representative.

 

(5) Except as otherwise expressly provided herein, any time limitations imposed
by this Agreement shall begin to run from the effective date of this Agreement.

 

(6) If the Bank requires a waiver or suspension of any provision or an extension
of any timeframe within this Agreement, the Board shall submit a written request
to the Assistant Deputy Comptroller asking for relief. Any written request
submitted pursuant to this Article shall include a statement setting forth in
detail, with relevant supporting documentation, the special facts and
circumstances that support the waiver or suspension of any of any provision or
an extension of a timeframe within this Agreement.

 

(7) This Agreement is intended to be, and shall be construed to be, a "written
agreement entered into with the agency" within the meaning of 12 U.S.C. §
1818(b)(l), and expressly does not form, and may not be construed to form, a
contract binding on the Comptroller or the United States.

 

(8) It is expressly and clearly understood that if, at any time, the Comptroller
deems it appropriate in fulfilling the responsibilities placed upon him 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.

 

21

 

  

(9) 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.

 

(10) All reports, programs or plans that the Bank or Board has agreed to submit
to the Assistant Deputy Comptroller pursuant to this Agreement shall be
forwarded, by overnight mail or via email, to the following:

 

Assistant Deputy Comptroller

Comptroller of the Currency

Philadelphia Field Office

1150 Northbrook Drive, Suite 303

Trevose, PA 19053

 

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

 

 

 

/s/ Julie A. Thieman   October 21, 2014 Julie A. Thieman   Date Assistant Deputy
Comptroller    

 

22

 

   

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.

 

 

 

/s/ Eugene Andruczyk   October 21, 2014 Eugene Andruczyk   Date             /s/
Frank J. Byrne   October 21, 2014 Frank J. Byrne   Date             /s/ Joseph
Callahan   October 21, 2014 Joseph Callahan   Date             /s/ Timothy
O'Shaughnessy   October 21, 2014 Timothy O'Shaughnessy   Date             /s/
Robert J. Woltjen   October 21, 2014 Robert J. Woltjen   Date

 

23