EXHIBIT 10.19

UNITED STATES OF AMERICA
DEPARTMENT OF THE TREASURY
COMPTROLLER OF THE CURRENCY

In the Matter of:
Bay National Bank
Lutherville, MD
)
)
)
 

CONSENT ORDER

The Comptroller of the Currency of the United States of America (“Comptroller”),
through his National Bank Examiner, has supervisory authority over Bay National
Bank, Lutherville, MD (“Bank”).
 
The Bank, by and through its duly elected and acting Board of Directors
(“Board”), has executed a “Stipulation and Consent to the Issuance of a Consent
Order,” dated February 6, 2009, that is accepted by the Comptroller.  By this
Stipulation and Consent, which is incorporated by reference, the Bank has
consented to the issuance of this Consent Order (“Order”) by the Comptroller.
 
Pursuant to the authority vested in it by the Federal Deposit Insurance Act, as
amended, 12 U.S.C. § 1818, the Comptroller hereby orders that:

 
ARTICLE V
                             
COMPLIANCE COMMITTEE
 
(1) Within thirty (30) days of the date of this Order, the Board shall appoint a
Compliance Committee of at least five (5) 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. § 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 Order.
 
(2) The Compliance Committee shall meet at least monthly.
 

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(3) Within thirty (30) days of the date of this Order and every thirty (30) days
thereafter, the Compliance Committee shall submit a written progress report to
the Board setting forth in detail:
 
(a)  
a description of the action needed to achieve full compliance with each Article
of this Order;
 

(b)  
actions taken to comply with each Article of this Order; 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 comments by the Board, to the Assistant Deputy Comptroller within
ten (10) days of receiving such report.
 
(5) All reports or plans which the Bank or Board has agreed to submit to the
Assistant Deputy Comptroller pursuant to this Order shall be forwarded, by
overnight mail, to the following:
 

 
MaryAnn H. Kennedy
 
Assistant Deputy Comptroller
 
Washington DC Satellite Office
 
250 E Street SW
 
Mail Stop DCFO
 
Washington, D.C., 20219

 
 

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ARTICLE VI
 
STRATEGIC PLAN
 
(1)           Within thirty (30) days of the date of this Order, the Board shall
provide the Assistant Deputy Comptroller, for review and prior written
determination of no supervisory objection, with a written analysis on the
Board’s decision whether to sell, merge or liquidate the Bank or remain an
independent national bank.  The Board must consider and document in this written
analysis various scenarios, including, but not limited to:
 
(a)           resolution of problem assets (including related costs);
 
(b)           viable sources of liquidity (including related costs);
 
 
(c)
achievement and maintenance of capital requirements as defined in Article III –
Capital Plan and Higher Minimums detailed below; and
 

 
(d)
ongoing viability of the bank based on current financial and market conditions.
 

 
(2)           Should the Board decide to sell, merge or liquidate the Bank, the
written analysis required under Paragraph (1) of this Article must also include
timeframes and procedures for achieving the sale, merger or liquidation of the
Bank, and the means by which the Board shall value and market the Bank.
 
(3)           Should the Board decide the Bank is to remain independent and the
OCC has advised the Bank in writing that there is no supervisory objection to
the Bank’s written analysis as provided in Paragraph (1) of this Article, the
Board must within sixty (60) days of the date of this Order, adopt, implement,
and thereafter ensure Bank adherence to a written strategic plan for the Bank
covering at least a three-year period.  That period shall correspond to the
three-year period of the Capital Plan required by Article III below.  The
strategic plan shall establish objectives for the Bank's overall risk profile,
earnings performance, growth, balance sheet mix, off-balance sheet activities,
liability structure, capital adequacy, reduction in the volume of nonperforming
assets, product line development and market segments that the
 

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Bank intends to promote or develop, together with strategies to achieve those
objectives and, at a minimum, include:
 
 
(a)
a mission statement that forms the framework for the establishment of strategic
goals and objectives;
 

(b)           an assessment of the Bank's present and future operating
environment;
 
 
(c)
the development of strategic goals and objectives to be accomplished over the
short and long term;
 

 
(d)
an identification of the Bank’s present and future product lines (assets and
liabilities) that will accomplish the strategic goals and objectives established
in (1)(c) of this Article;
 

 
(e)
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 (1)(c) of this Article;
 

 
(f)
a management employment and succession program to promote the retention and
continuity of capable management and attraction of new Board members;
 

 
(g)
product line development and market segments that the Bank intends to promote or
develop;
 

 
(h)
an action plan to improve bank earnings and accomplish identified strategic
goals and objectives, including individual responsibilities, accountability and
specific time frames;
 

 
(i)
a financial forecast to include projections for major balance sheet and income
statement accounts and desired financial ratios over the period covered by the
strategic plan;
 

 
(j)
control systems to mitigate risks associated with planned new products, growth,
or any proposed changes in the Bank’s operating environment;
 

 

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  (k)
specific plans to establish responsibilities and accountability for the
strategic planning process, new products, growth goals, or proposed changes in
the Bank’s operating environment;
 
 
(l)
systems to monitor the Bank’s progress in meeting the plan’s goals and
objectives; and
 

 
(m)
contingency plans that identify alternative methods should established strategic
objectives not be achieved as described in (a) through (l) above.  The
contingency plans must also include an option to sell, merge or liquidate the
bank with corresponding triggers, timeframes and a detailed process.
 

(4)           Prior to adoption of the strategic plan by the Board, a copy shall
be forwarded to the Assistant Deputy Comptroller for review and determination of
supervisory non-objection. Such determination will be made within thirty (30)
days of receipt of the strategic plan. Immediately upon receiving a
determination of supervisory non-objection, the strategic plan shall be
implemented.
 
(5)           The Bank must give the Assistant Deputy Comptroller at least sixty
(60) days advance written notice of its intent to deviate significantly from the
strategic plan.  The Board shall obtain the OCC’s written determination of no
supervisory objection before the Bank deviates significantly from the strategic
plan.
 
(6)           For purposes of this Article, changes that may constitute a
significant deviation from the strategic plan include, but are not limited to,
any significant deviations from marketing strategies, marketing partners,
acquisition channels; underwriting practices and standards, account management
strategies and test programs; collection strategies, partners or operations; fee
structure, pricing, or fee application methods; accounting processes and
practices; funding strategy; or any other changes in personnel, operations or
external factors that may have a material impact on the Bank's operations or
financial performance.
 
(7)           Prior to making any changes that significantly deviate from the
Bank's strategic plan, the Board shall perform an evaluation of the adequacy of
the Bank's organizational structure, staffing,
 

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management information systems, internal controls and written policies and
procedures to identify, measure, monitor, and control the risks associated with
the new product or service. The evaluation shall include an assessment of the
impact of such change on the Bank's condition, including a profitability
analysis.  For the purpose of this Order, a significant deviation shall have the
same meaning as that phrase is further described in Appendix G (Significant
Deviations After Opening) of the “Charters” booklet of the Comptroller’s
Licensing Manual (January 2005).
 
(8)           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.
 
(9)           If the OCC determines, in its sole judgment, that the Bank has
failed to submit an acceptable strategic plan as required by Paragraph (3) of
this Article or has failed to implement or adhere to the Bank’s specific,
measurable, and verifiable objectives included in the strategic plan, for which
the OCC has taken no supervisory objection pursuant to Paragraph (4) of this
Article, will be deemed an unsafe and unsound banking practice and a violation
of this Order.

ARTICLE VII
 
CAPITAL PLAN AND HIGHER MINIMUMS
 
(1) The Bank shall achieve by April 30, 2009, and thereafter maintain the
following capital levels (as defined in 12 C.F.R. Part 3):
 
(a)  
Total risk based capital equal to twelve (12.0%) percent of risk-weighted
assets;
 

(b)  
Tier 1 capital equal to eleven (11.0%) percent of risk weighted assets; and
 

(c)  
Leverage ratio equal to nine (9.0%) percent of adjusted total assets.
 

(2) The requirement in this Order to meet and maintain a specific capital level
means that the Bank may not be deemed to be “well capitalized” for purposes of
12 U.S.C. § 1831o and 12 C.F.R. Part 6 pursuant to 12 C.F.R. § 6.4(b)(1)(iv).
 
(3) Within sixty (60) days, the Board shall develop, implement, and thereafter
ensure Bank adherence to a three year capital program.  The program shall
include:
 

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(a)  
specific plans for the maintenance of adequate capital that may in no event be
less than the requirements of Paragraph (1);
 

(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. §§ 56 and 60; and
 

(iii)  
with the prior written determination of no supervisory objection by the
Assistant Deputy Comptroller.
 

(iv)  
Upon receiving a determination of no supervisory objection, the Bank shall
implement and adhere to the dividend policy.
 

(4) Upon completion, the Bank's capital program shall be submitted to the
Assistant Deputy Comptroller for prior determination of no supervisory
objection.  Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the capital
program.  The Board shall review and update the Bank's capital program on an
annual basis, or more frequently if necessary.  Copies of the reviews and
updates shall be submitted to the Assistant Deputy Comptroller.
 
(5) 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.
 

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(6) If the OCC determines, in its sole discretion, that the Bank is in
non-compliance with Paragraphs (1) or (3) of this Article, the Bank shall,
within thirty (30) days of receiving written notice from the OCC of such fact,
develop and submit to the OCC for its review and prior written determination of
no supervisory objection a Contingency Plan, which shall detail the Board’s
proposal to either: (i) sell or merge the Bank; or (ii) to liquidate the Bank in
conformance with 12 U.S.C. § 181, and in a manner that will result in no loss or
cost to the Federal Deposit Insurance Corporation.  In order to be deemed
acceptable, the contingency plan must, at a minimum, call for the execution of a
definitive agreement to sell or merge the Bank or a shareholder vote to enter
into liquidation under 12 U.S.C. § 181 within ninety (90) days of receipt of the
OCC’s supervisory non-objection.  The Bank agrees that it will not schedule a
vote of its shareholders so as to seek their approval to liquidate the Bank
prior to securing the OCC’s written determination of no supervisory objection to
the Contingency Plan.  After the OCC has advised the Bank in writing that it
does not take supervisory objection to the Contingency Plan, the Board shall
immediately implement, and shall thereafter ensure adherence to, the terms of
the Contingency Plan.  Failure to submit a timely, acceptable Contingency Plan
may be deemed by the OCC, in the exercise of its discretion, to constitute a
violation of this Order.

ARTICLE VIII
 
LIQUIDITY
 
(1)           The Board shall immediately increase the liquidity of the Bank to
a level that is sufficient to sustain the Bank's current operations and to
withstand any anticipated or extraordinary demand against its funding
base.  Such actions may include, but are not necessarily limited to:
 
(a)  
selling assets;
 

(b)  
establishing sub-limits on lines of credit from the Federal Reserve Bank and
correspondent banks for contingent funding needs;
 

(c)  
injecting additional equity capital.
 

 

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(2) The Board shall review the Bank's liquidity on a monthly basis.  Such
reviews shall consider:
 
(a)  
maturity schedule of certificates of deposit, including large uninsured
deposits;
 

(b)  
the volatility of demand deposits including escrow deposits;
 

(c)  
the amount and type of loan commitments and standby letters of credit;
 

(d)  
an analysis of the continuing availability and volatility of present funding
sources;
 

(e)  
an analysis of the impact of decreased cash flow from the Bank's loan portfolio
resulting from delinquent and non-performing loans;
 

(f)  
an analysis of the impact of decreased cash flow from the sale of loans or loan
participations; and
 

(g)  
geographic disbursement of and risk from brokered deposits.
 

(3) The Board shall take appropriate action to ensure adequate sources of
liquidity in relation to the Bank's needs.  Monthly reports shall set forth
liquidity requirements and sources and establish a contingency plan.  Copies of
these reports shall be forwarded to the Assistant Deputy Comptroller in the
Bank’s monthly report to the Assistant Deputy Comptroller.
 
(4) Within thirty (30) days, the Board shall revise their Contingency Funding
Plan to include at least the following:
 
(a)  
clear identification, quantification, availability and rank of all sources of
funding by preference;
 

(b)  
modification of the liability structure or increasing liabilities;
 

(c)  
use of other alternative for controlling balance sheet changes;
 

(d)  
asset sale strategies including when to sell longer term assets, fixed assets,
or certain lines of business; and
 

 

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(e)  liability funding strategies including potential capacity at the Federal
Reserve Bank discount window and developing strategies to manage nontraditional
funding sources.

ARTICLE IX
 
BOARD TO ENSURE COMPETENT MANAGEMENT
(1) Within sixty (60) days, the Board shall ensure that the Bank has competent
management in place on a full-time basis in its Credit Risk and Asset Liability
Risk Management functions, including the Chief Credit Officer and Chief
Financial Officer, to carry out the Board’s policies, ensure compliance with
this Order, applicable laws, rules and regulations, and manage the day-to-day
operations of the Bank in a safe and sound manner.
 
(2) Within ninety (90) days, the Board shall review the capabilities of the
Bank’s management to perform present and anticipated duties and the Board will
determine whether management changes will be made, including the need for
additions to or deletions from current management.
 
(3) For incumbent officers in the positions mentioned in Paragraph (1) of this
Article, the Board shall within ninety (90) days assess each of these officers’
experience, other qualifications and performance compared to the position’s
description, duties and responsibilities.
 
(4) If the Board determines that an officer will continue in his/her position
but that the officer’s depth of skills needs improvement, the Board will within
one hundred and twenty (120) days 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 supervise effectively;
 

(b)  
a program to improve the effectiveness of the officer;
 

(c)  
objectives by which the officer’s effectiveness will be measured; and
 

 

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(d)  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.
 
(5)           Upon completion, a copy of the written program required under
Paragraph (4) of this Article shall be submitted to the Assistant Deputy
Comptroller.
 
(6)           If a position mentioned in Paragraph (1) of this Article is vacant
now or in the future, including  if the Board realigns an existing officer’s
responsibilities and a position mentioned in Paragraph (1) of this Article
becomes vacant, the Board shall within ninety (90) days of such vacancy appoint
a capable person to the vacant position who shall be vested with sufficient
executive authority to ensure the Bank’s compliance with this Order and the safe
and sound operation of functions within the scope of that position’s
responsibility.
 
(7)           Prior to the appointment of any individual to an executive officer
position, the Board shall submit to the Assistant Deputy Comptroller the
following information:
 
 
(a)
the information sought in the “Changes in Directors and Senior Executive
Officers” and “Background Investigations” booklets of the Comptroller’s
Licensing Manual, together with a legible fingerprint card for the proposed
individual
 

 
(b)
a written statement of the Board's reasons for selecting the proposed officer;
and
 

(c)           a written description of the proposed officer's duties and
responsibilities.
 
(8)           The Assistant Deputy Comptroller shall have the power to
disapprove the appointment of the proposed new officer.  However, the lack of
disapproval of such individual shall not constitute an approval or endorsement
of the proposed officer.
 
(9)           The requirement to submit information and the prior disapproval
provisions of this Article are based on the authority of 12 U.S.C.
§ 1818(b)(6)(E) and do not require the Comptroller to complete his/her review
and act on any such information or authority within ninety (90) days.
 

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ARTICLE X
 
CRITICIZED ASSETS
 
(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 National Bank 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 National Bank 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 (“problem loan action plan”).
 

(3) Upon adoption, a copy of the program for all criticized assets equal to or
exceeding one hundred and fifty thousand dollars ($150,000) 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 Board, or a designated committee, shall conduct a review, on at least a
monthly basis, to determine:
 
(a)  
the status of each criticized asset or criticized portion thereof that equals or
exceeds one hundred and fifty thousand dollars ($150,000);
 

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

 
 

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(c)  
the status and effectiveness of the written program; and
 
(d)  
the need to revise the program or take alternative action.
 

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

ARTICLE XI
 
ALLOWANCE FOR LOAN AND LEASE LOSSES
 
(1)           By March 1, 2009, the Board shall review the adequacy of the
Bank’s Allowance for Loan and Lease Losses (“ALLL”) and shall adopt, implement,
and thereafter ensure adherence to written policies and procedures for
maintaining an adequate ALLL in accordance with generally accepted accounting
principles.  The ALLL policies and procedures shall be consistent with the
guidance set forth in the Federal Financial Institutions Examination Council’s
“Interagency Policy Statement on the Allowance for Loan and Lease Losses” dated
December 13, 2006 (OCC Bulletin 2006-47), and shall at a minimum include:
 
(a)  
procedures for determining whether a loan is impaired and measuring the amount
of impairment, consistent with FASB Statement of Financial Accounting Standards
No. 114, Accounting by Creditors for Impairment of a Loan;
 

(b)  
procedures for segmenting the loan portfolio and estimating loss on groups of
loans, consistent with FASB Statement of Financial Accounting Standards No. 5,
Accounting for Contingencies;
 

(c)  
procedures for validating the ALLL methodology;
 

(d)  
a process for summarizing and documenting, for the Board’s review and approval,
the amount to be reported in the Consolidated Reports of Condition and Income
(“Call Reports”) for the ALLL.  Any deficiency in the ALLL shall be remedied in
the quarter it is discovered, prior to the filing of the Call Reports, through
additional provision expense;
 

 

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(e)  
results of the Bank's internal loan review;
 
(f)  
results of the Bank's external loan review;
 

(g)  
an estimate of inherent loss exposure on each significant credit;
 

(h)  
trends of delinquent, non-performing, and nonaccrual loans;
 

(i)  
concentrations of credit in the Bank consistent with the segmentation and
analysis required in Article VIII (Concentrations of Credit); and
 

(j)  
present and prospective economic conditions and their impact on segmented loan
pools.
 

(2)           The program shall provide for a review of the Allowance by the
Board at least once each calendar quarter.  Any deficiency in the Allowance
shall be remedied in the quarter it is discovered, prior to the filing of the
Consolidated Reports of Condition and Income, by additional provisions from
earnings.  Written documentation shall be maintained indicating the factors
considered and conclusions reached by the Board in determining the adequacy of
the Allowance.
 
(3)           A copy of the Board's program shall be submitted to the Assistant
Deputy Comptroller for review and prior written determination of no supervisory
objection.  Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the
program.
 
(4)           The Board shall ensure that the Bank has processes, personnel, and
control systems to ensure implementation of and adherence to the policies and
procedures developed pursuant to this Article.

ARTICLE XII
 
LOAN PORTFOLIO MANAGEMENT
 
(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:
 

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(a)  
an independent review of the Bank’s credit structure to assess the quality and
effectiveness of lending supervision and credit administration, credit risk
management practices, and internal controls;
 

(b)  
procedures to ensure satisfactory and perfected collateral documentation;
 

(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;
 

(f)  
procedures to ensure conformance with Call Report instructions;
 

(g)  
procedures to ensure the accuracy of internal management information systems;
 

(h)  
a performance appraisal process, including performance appraisals, job
descriptions, and incentive programs for loan officers, which adequately
consider their performance relative to policy compliance, documentation
standards, accuracy in credit grading, and other loan administration matters;
and
 

(i)  
procedures to track and analyze concentrations of credit; including stress
testing for the significant economic factors and general conditions that impact
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 one hundred and twenty days (120) 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;
 

 

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(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;
 
(c)  
previously charged-off assets and their recovery potential;
 

(d)  
compliance with the Bank's lending policies and laws, rules, and regulations
pertaining to the Bank's lending function;
 

(e)  
adequacy of credit and collateral documentation; and
 

(f)  
concentrations of credit as described in the Report of Examination.

 
(4) Management will continue to provide the Board, on a monthly basis, 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;
   

(c)  
credit and collateral documentation 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;
   

(g)  
the identification and amount of loans and leases to executive officers,
directors, principal shareholders (and their related interests) of the Bank; and
   

(h)  
the identification of loans and leases not in conformance with the Bank's
lending and leasing policies, 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.

 
 

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ARTICLE XIII
 
CONCENTRATIONS OF CREDIT
 
(1) Within ninety (90) days, the Board shall adopt, implement, and thereafter
ensure Bank adherence to a written asset diversification program consistent with
OCC Bulletin 2006-46, Guidance on Concentrations in Commercial Real Estate
Lending, Sound Risk Management Practices.  The program shall include, but not
necessarily be limited to, the following:
 
(a)  
a review of the balance sheet to identify any concentrations of credit which
must include a meaningful segmentation of concentrations considering appropriate
risk characteristics such as:
 
 
(i)  product or property type;
 
 
(ii) geographic location; or
 
 
(iii) industry.
 

(b)  
a written analysis of any concentration of credit identified above in order to
identify and assess the inherent credit, liquidity, and interest rate risk;
 

(c)  
policies and procedures to control and monitor concentrations of credit; and
 

(d)  
an action plan approved by the Board to reduce the risk of any concentration
deemed imprudent in the above analysis.
 

(2) For purposes of this Article, a concentration of credit is as defined in the
“Loan Portfolio Management” booklet of the Comptroller's Handbook.
 
(3) The Board shall ensure that future concentrations of credit are subjected to
the analysis required by subparagraph (b) of Paragraph (1) of this Article and
that the analysis demonstrate that the concentration will not subject the Bank
to undue credit or interest rate risk.
 
(4) The Board shall forward a copy of any analysis performed on existing or
potential concentrations of credit to the Assistant Deputy Comptroller
immediately following the review.
 

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(5) 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 XIV
INDEPENDENT LOAN REVIEW
(1)           Within sixty (60) days of the date of this Order, the Board shall
establish an effective, independent and on-going loan review system to review,
at least quarterly beginning in the first calendar quarter of 2009, the Bank's
loan and lease portfolios to assure the timely identification and categorization
of problem credits.  The system shall provide for a written report to be filed
with the Board after each review and shall use a loan and lease grading system
consistent with the guidelines set forth in “Rating Credit Risk” and “Allowance
for Loan and Lease Losses” booklets of the Comptroller’s Handbook.  Such reports
shall include, at a minimum, conclusions regarding:
 
(a)  
the overall quality of the loan and lease portfolios;
 

(b)  
the identification, type, rating, and amount of problem loans and leases;
 

(c)  
the identification and amount of delinquent loans and leases;
 

(d)  
credit and collateral documentation exceptions;
 

(e)  
the identification and status of credit related violations of law, rule or
regulation;
 

(f)  
the identity of the loan officer who originated each loan reported in accordance
with subparagraphs (b) through (e) of the Article;
 

(g)  
concentrations of credit;
 

(h)  
loans and leases to executive officers, directors, principal shareholders (and
their related interests) of the Bank; and
 

(i)  
loans and leases not in conformance with the Bank's lending and leasing
policies, and exceptions to the Bank’s lending and leasing policies.
 

(2)           Within ninety (90) days, the Board shall develop, implement, and
thereafter ensure Bank adherence to a written program providing for the
independent review of problem loans and leases in the Bank's loan and lease
portfolios for the purpose of monitoring portfolio trends, on at least a
quarterly
 

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 basis.  The program shall require a quarterly report to the Board.  At a
minimum the program shall provide for an independent reviewer’s assessment of
the Bank’s:
 
(j)  
monitoring systems for early problem loan identification to assure the timely
identification and rating of loans and leases based on lending officer
submissions;
 

(k)  
statistical records that serve as a basis for identifying sources of problem
loans and leases by industry, size, collateral, concentration, indirect dealer,
and individual lending officer;
 

(l)  
system for monitoring previously charged-off assets and their recovery
potential;
 

(m)  
system for monitoring compliance with the Bank's lending policies and laws,
rules, and regulations pertaining to the Bank's lending function; and
 

(n)  
system for monitoring the adequacy of credit and collateral documentation.
 

(3)           A written description of the program called for in this Article
shall be forwarded to the Assistant Deputy Comptroller upon implementation.
 
(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 Board shall evaluate the internal loan and lease review
report(s) and shall ensure that immediate, adequate, and continuing remedial
action, if appropriate, is taken upon all findings noted in the report(s).
 
(6)           A copy of the reports submitted to the Board, as well as
documentation of the action taken by the Bank to collect or strengthen assets
identified as problem credits, shall be preserved in the Bank.

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ARTICLE XV
 
CLOSING
 
(1) Although the Board is by this Order required to submit certain proposed
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) It is expressly and clearly understood that if, at any time, the Comptroller
deems it appropriate in fulfilling the responsibilities placed upon it by the
several laws of the United States of America to undertake any action affecting
the Bank, nothing in this Order shall in any way inhibit, estop, bar or
otherwise prevent the Comptroller from so doing.
 
(3) Any time limitations imposed by this Order shall begin to run from the
effective date of this Order.  Such time limitations may be extended in writing
by the Assistant Deputy Comptroller for good cause upon written application by
the Board.
 
(4) The provisions of this Order are effective upon issuance of this Order by
the Comptroller, through his authorized representative whose hand appears below,
and shall remain effective and enforceable, except to the extent that, and until
such time as, any provisions of this Order shall have been amended, suspended,
waived, or terminated in writing by the Comptroller.
 
(5) In each instance in this Order in which the Board is required to ensure
adherence to, and undertake to perform certain obligations of the Bank, it is
intended to mean that the Board shall:
 
(a) authorize and adopt such actions on behalf of the Bank as may be necessary
for the Bank to perform its obligations and undertakings under the terms of this
Order;
 
(b) require the timely reporting by Bank management of such actions directed by
the Board to be taken under the terms of this Order;
 
(c) follow-up on any non-compliance with such actions in a timely and
appropriate manner; and
 

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(d) require corrective action be taken in a timely manner of any non-compliance
with such actions.
 
(6) This Order is intended to be, and shall be construed to be, a final order
issued pursuant to 12 U.S.C. § 1818(b), and expressly does not form, and may not
be construed to form, a contract binding on the Comptroller or the United
States.
 
(7) The terms of this Order, 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.

IT IS SO ORDERED, this            day of               ,          .

                                                                                             
MaryAnn H. Kennedy
Assistant Deputy Comptroller
Washington DC Satellite Office
 

 
 

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