Exhibit 10.1

FEDERAL DEPOSIT INSURANCE CORPORATION

WASHINGTON, D.C.

AND

STATE OF OHIO

DEPARTMENT OF COMMERCE

DIVISION OF FINANCIAL INSTITUTIONS

 

     )   

In the Matter of

   )       )   

THE HOME SAVINGS AND LOAN COMPANY

   )   

OF YOUNGSTOWN

   )                CONSENT ORDER    )   

YOUNGSTOWN, OHIO

   )                FDIC-12-022b    )   

(STATE CHARTERED INSURED

   )   

SAVINGS BANK)

   )         )   

The Home Savings and Loan Company of Youngstown, Youngstown, Ohio, (“Bank”),
having been advised of its right to a NOTICE OF CHARGES AND OF HEARING detailing
the unsafe or unsound banking practices alleged to have been committed by the
Bank, and of its right to a hearing on the charges under section 8(b) of the
Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b), and under section
1163.03 of the Ohio Revised Code regarding hearings before the Division of
Financial Institutions for the State of Ohio (“Division”), and having waived
those rights, by and through its duly elected and acting Board of Directors
(“Board”) entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT
ORDER (“STIPULATION”) with representatives of the Federal Deposit Insurance
Corporation (“FDIC”) and the Division, dated March 29, 2012, whereby, solely for
the purpose of this proceeding and without admitting or denying any charges of
unsafe or unsound banking practices relating to weaknesses in capital, asset
quality, and earnings, the Bank consented to the issuance of a CONSENT
ORDER(“ORDER”) by the FDIC and the Division.

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The FDIC and the Division considered the matter and determined that they had
reason to believe that the Bank had engaged in unsafe or unsound banking
practices and therefore accepted the STIPULATION.

Having also determined that the requirements for issuance of an order under 12
U.S.C. § 1818(b) and Ohio Revised Code § 1163.03, have been satisfied, the FDIC
and the Division HEREBY ORDER that the Bank, its institution-affiliated parties,
as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its
successors and assigns, take the affirmative actions as follows:

 

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MANAGEMENT

1. (a) While this ORDER remains in effect, the Bank shall continue to retain
qualified management. Management shall be provided the necessary written
authority to implement the provisions of this ORDER. The qualifications of
management shall be assessed on its ability to:

 

  (i) Comply with the requirements of this ORDER;

 

  (ii) Operate the Bank in a safe and sound manner;

 

  (iii) Comply with applicable laws, rules, and regulations; and

 

  (iv) Restore all aspects of the Bank to (or, as applicable, maintain) a safe
and sound condition, including capital adequacy, asset quality, management
effectiveness, earnings, liquidity, and sensitivity to interest rate risk.

(b) While this ORDER is in effect, prior to the addition of any individual to
the Board or the employment of any individual as a senior executive officer, the
Bank shall request and obtain the written approval of the Regional Director of
the Chicago Regional Office of the FDIC (“Regional Director”) and the Division.
For purposes of this ORDER, “senior executive officer” is defined as in section
32 of the Act (“section 32”), 12 U.S.C. § 1831(i), and section 303.101(b) of the
FDIC Rules and Regulations, 12 C.F.R. § 303.101(b).

 

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CAPITAL

2. (a) By June 30, 2012, the Bank, after establishing an appropriate Allowance
for Loan and Lease Losses, shall increase and maintain its Tier 1 Leverage
Capital ratio equal to or greater than 9.00 percent (9%) of the Bank’s Average
Total Assets. The bank shall also increase and maintain its Total Risk-Based
Capital ratio equal to or greater than 12.00 percent (12%) of the Bank’s Total
Risk-Weighted Assets. For purposes of this ORDER, Tier 1 capital, qualifying
total capital, total assets, and risk-weighted assets shall be calculated in
accordance with Part 325 of the FDIC Rules and Regulations (“Part 325”), 12
C.F.R. Part 325. If any such capital ratios are less than the percentages
required by this ORDER, as determined as of the date of any Report of Condition
and Income, or any amendments thereto, or at an examination or visitation by the
FDIC or the Division, the Bank shall, within sixty (60) days from the date of
such filing (without regard to amendments), restore the Bank’s Tier 1 Leverage
Capital and Total Risk-Based Capital ratios to the minimums prescribed by this
ORDER.

(b) Within thirty (30) days of the effective date of this ORDER, the bank shall
revise and submit its capital plan to ensure compliance with Paragraph 2(a) to
the Regional Director and the Division for review and comment. Within thirty
(30) days of receipt of any comments from the Regional Director or the Division
the Bank shall incorporate any changes required by the Regional Director or the
Division and thereafter adopt, implement, and adhere to the plan.

 

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(c) Any increase in Tier 1 capital may be accomplished by the following:

 

  (i) The sale of common stock and noncumulative perpetual or preferred stock
constituting Tier 1 capital under Part 325; or

 

  (ii) The elimination of all or part of the assets classified as “Loss”
provided any such collection on a partially charged-off asset shall first be
applied to that portion of the asset which was not charged off pursuant to this
ORDER; or

 

  (iii) The collection in cash of assets previously charged off; or

 

  (iv) The direct contribution of cash by the directors or the shareholders of
the Bank; or

 

  (v) Any other means acceptable to the Regional Director and the Division; or

 

  (vi) Any combination of the above means.

(d) Should the Bank be unable to reach the required capital levels within the
time frames specified in subparagraph (a) above, or be unable to maintain those
levels, then within thirty (30) days of receipt of written direction from the
Regional Director and the Division, the Bank shall develop, adopt, and implement
a written contingency plan to sell or merge itself into another
federally-insured financial institution or to otherwise provide for a sufficient
capital investment into the Bank. A copy of the plan required by this paragraph
shall be submitted to, and determined to be acceptable by, the Regional Director
and the Division.

 

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DIVIDEND RESTRICTION

3. As of the effective date of this ORDER, the Bank shall not declare or pay any
dividend without the prior written consent of the Regional Director and the
Division.

PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS

4. (a) As of the effective date of this ORDER, the Bank shall not extend,
directly or indirectly, any additional credit to, or for the benefit of, any
borrower who is already obligated in any manner to the Bank on any extensions of
credit (including any portion thereof) that has been charged off the books of
the Bank or classified “Loss” in the June 13, 2011 Joint Report of Examination
(“Joint Report”), or which is classified “Loss” in any subsequent examination or
visitation, so long as such credit remains uncollected, without the prior
written consent of the Regional Director and Division.

(b) As of the effective date of this ORDER, the Bank shall not extend, directly
or indirectly, any additional credit to, or for the benefit of, any borrower
whose loan or other credit has been classified “Substandard”, “Doubtful”, or is
listed for “Special Mention” in the Joint Report or any subsequent visitation or
examination, and remains uncollected unless the Bank’s Board Loan Committee has
adopted, prior to such extension of credit, a detailed written statement giving
the reasons why such extension of credit is in the best interest of the Bank. A
copy of the statement shall be signed by each Director who is a member of the
Board Loan Committee with their approval or disapproval noted thereon, the
statement shall be incorporated into the minutes of the applicable Board Loan
Committee meeting, and a copy thereof placed into the appropriate loan file.

 

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REDUCTION OF CLASSIFIED ASSETS

5. (a) The Bank shall revise its written plan to reduce the Bank’s risk position
in each asset in excess of $500,000 which is classified “Substandard” or
“Doubtful” in the Joint Report, or in any subsequent reports of examination,
external loan review, or by management in the internal loan review process.

(b) Within six (6) months of the effective date of this ORDER, the Bank shall
reduce and maintain total adversely classified assets at a level no greater than
seventy-five (75%) percent of the total dollar amount of adversely classified
assets stated in the Joint Report, and within twelve (12) months shall further
reduce and maintain adversely classified assets at a level no greater than fifty
(50%) percent of the total dollar amount of adversely classified assets stated
in the Joint Report.

 

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(c) While this ORDER is in effect, the Bank shall update the Classified Asset
Plan to reflect any assets subsequently classified as Doubtful or Substandard by
the Bank internally or by the FDIC or the Division in any subsequent visitation
or examination. Such updated plans shall include, but not be limited to, the
following:

 

  (i) A schedule, completed on a quarterly basis, illustrating portfolio risk
targets and showing the expected consolidated balance of all adversely
classified assets, and the ratio of the consolidated balance to the Bank’s
projected Tier 1 Capital plus Allowance for Loan and Lease Losses;

 

  (ii) Dollar levels to which the Bank will strive to reduce individual lending
relationships on a quarterly basis; and

 

  (iii) Provisions for the submission of monthly written progress reports to the
Bank’s Board for review and notation in the board of director’s minutes.

(d) Once the total dollar amount of adversely classified assets has been reduced
as required by provision 5(b), the Bank may petition the Regional Director and
the Division to ease the capital requirement of Paragraph 2(a) to be
commensurate with the present risk profile.

 

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LOSS CHARGE-OFF

6. As of the effective date of this Order the Bank shall charge off from its
books and records any assets classified “Loss” in the Joint Report, except with
respect to any amount that had been classified “Loss” for any real estate owned
by the Bank, for which a reserve allowance may be established, and shall
immediately charge off any other assets classified “Loss” in any subsequent
visitation or examination.

REDUCTION OF DELINQUENCIES

7. The Bank shall adopt, adhere to, and revise as necessary, its written plan
for the reduction and collection of delinquent loans, and shall submit a copy of
the plan and any revisions to the Regional Director and the Division. The plan
and revisions thereto shall include, but not be limited to, provisions which:

(a) Prohibit the extension of credit for the payment of interest;

(b) Establish acceptable guidelines for the collection of delinquent credits;

(c) Establish dollar levels to which the Bank shall reduce delinquencies within
six and twelve months periods; and

 

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(d) Provide for the submission of monthly written progress reports to the Bank’s
board of directors for review and notation in minutes of the meetings of the
board of directors. If the Regional Director or the Division recommend in
writing changes to the plan or revisions, the Bank shall make modifications in
accordance with the recommendations and thereafter implement the modified plan.

CONCENTRATIONS OF CREDIT

8. (a) Within sixty (60) days after the effective date of this ORDER, the Bank
shall formulate and submit to the Regional Director and the Division for review
and comment a written plan to reduce each concentration identified in the Joint
Report. Within thirty (30) days of receipt of any comments from the Regional
Director or the Division, the Bank shall incorporate any changes required by the
Regional Director or the Division and thereafter adopt, implement, and adhere to
the plan. The plan shall include, at a minimum:

 

  (i) Dollar levels to which the Bank shall reduce each concentration for twelve
(12) and twenty-four (24) month intervals and the methods by which the target
levels will be attained;

 

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  (ii) Effective risk management practices and measures as outlined in
regulatory guidance to manage concentration risks. These practices need to
include portfolio stress testing and incorporate these results into a
comprehensive capital analysis; and

 

  (iii) Provisions for the submission of monthly written progress reports to the
Bank’s Board for review and notation in minutes of the Bank’s Board meetings.

(b) The written plan shall be updated to include any concentrations identified
by the FDIC or the Division in any subsequent examination or visitation.

 

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ALLOWANCE FOR LOAN AND LEASE LOSSES (“ALLL”)

9. Within thirty (30) days from the effective date of this ORDER, the Board
shall ensure the establishment of a comprehensive policy and methodology for
determining the adequacy of the ALLL. The Bank’s policy shall fully address the
ALLL deficiencies identified in the Joint Report, and shall be updated to
address any later deficiencies identified in subsequent examinations or
visitations. The policy shall provide for a Board review of, the adequate
provision for, and the accurate reporting of, the ALLL prior to the submission
or publication of all Reports of Condition and Income required by the FDIC or
Division. Such Board reviews shall, at a minimum, ensure that the Bank’s policy
is in compliance with the following:

 

  (i) The Federal Financial Institutions Examination Council’s Instructions for
the Reports of Condition and Income;

 

  (ii) The Interagency Statement of Policy on the Allowance for Loan and Lease
Losses; applicable accounting guidance, including Financial Accounting Standards
Board Accounting Standards Codification (“FASB ASC”) Subtopic 450-10 and FASB
ASC Subtopic 310-10 (which now supersede prior FAS 5 and 114 guidelines); and

 

  (iii) Other applicable regulatory guidance that addresses the adequacy of the
Bank’s allowance.

 

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STRATEGIC PLAN

10. (a) Within sixty (60) days from the effective date of this ORDER, the Bank
shall amend its written strategic plan. The plan required by this paragraph
shall contain an assessment of the Bank’s current financial condition and market
area, and a description of the operating assumptions that form the basis for
major projected income and expense components. The written strategic plan shall
address, at a minimum:

 

  (i) Strategies for pricing policies and asset/liability management; and

 

  (ii) Financial goals, including pro forma statements for asset growth, capital
adequacy, and earnings.

(b) Within thirty (30) days from the end of each calendar quarter following the
effective date of this ORDER, the Bank’s Board shall evaluate the Bank’s actual
performance in relation to the strategic plan required by this paragraph and
record the results of the evaluation, and any actions taken by the Bank, in the
minutes of the Board meeting at which such evaluation is undertaken.

(c) The strategic plan required by this ORDER shall be revised at the end of
each calendar year during which this ORDER is in effect and shall be completed
on or before December 31 of such year. The Board shall approve the revised plan,
which approval shall be recorded in the minutes of the applicable Board meeting,
and the Bank shall thereafter implement and adhere to the revised plan.

(d) While this ORDER is in effect, the Bank shall not enter into any new line of
business without the prior written consent of the Regional Director and the
Division.

(e) The plan and revisions thereto required by this paragraph shall be submitted
to the Regional Director and the Division for review and comment. Within thirty
(30) days of receipt of any comments from the Regional Director or the Division
the Bank shall incorporate any changes required by the Regional Director or the
Division and thereafter adopt, implement, and adhere to the plan.

 

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PROFIT PLAN AND BUDGET

11. (a) Within ninety (90) days from the effective date of this ORDER, the Bank
shall amend its written profit plan and prepare a realistic, comprehensive
budget for all categories of income and expense for calendar years 2012 and
2013. The plans required by this paragraph shall focus on earnings improvement
and shall contain formal goals and strategies, consistent with sound banking
practices, to reduce discretionary expenses and to improve the Bank’s overall
earnings, and shall contain a description of the operating assumptions that form
the basis for major projected income and expense components.

(b) The written profit plan shall address, at a minimum:

 

  (i) Realistic and comprehensive budgets;

 

  (ii) A budget review process to monitor the income and expenses of the Bank to
compare actual figures with budgetary projections;

 

  (iii) Identification of major areas in, and means by which, earnings will be
improved; and

 

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  (iv) A description of the operating assumptions that form the basis for and
adequately support major projected income and expense components.

(c) Within forty-five (45) days from the end of each calendar quarter following
completion of the profit plans and budgets required by this paragraph, the
Bank’s Board shall evaluate the Bank’s actual performance in relation to the
plan and budget, record the results of the evaluation, and note any actions
taken by the Bank in the minutes of the Board meeting at which such evaluation
is undertaken.

(d) A written profit plan and budget for the next two-year period shall be
prepared at the end of each calendar year during which this ORDER is in effect
and shall be completed not less than thirty (30) days prior to the beginning of
the next calendar year.

(e) The plans and budgets required by this paragraph shall be submitted to the
Regional Director and the Division for review and comment. Within thirty
(30) days of receipt of any comments from the Regional Director or the Division
the Bank shall incorporate any changes required by either of them and shall
thereafter adopt, implement, and adhere to the plan and budget.

 

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NOTIFICATION TO SHAREHOLDER

12. Following the effective date of this ORDER, the Bank shall send to its
shareholder a copy of this ORDER: (1) in conjunction with the Bank’s next
shareholder communication; or (2) in conjunction with its notice or proxy
statement preceding the Bank’s next shareholder meeting.

PROGRESS REPORTS

13. Within thirty (30) days from the end of each calendar quarter following the
effective date of this ORDER, the Bank shall furnish to the Regional Director
and the Division written progress reports signed by each member of the Bank’s
Board, detailing the actions taken to secure compliance with the ORDER and the
results thereof.

CLOSING PARAGRAPHS

This ORDER shall be effective upon the date of its issuance by the FDIC and the
Division.

The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.

The provisions of this ORDER shall remain effective and enforceable except to
the extent that, and until such time as, any provision has been modified,
terminated, suspended, or set aside by the FDIC and the Division.

 

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Pursuant to delegated authority.

Dated: March 30, 2012.

 

Federal Deposit Insurance

Corporation

   

State of Ohio

Division of Financial Institutions

By:       By:  

/s/    M. Anthony Lowe

   

/s/    Charles J. Dolezal

M. Anthony Lowe     Charles J. Dolezal Regional Director     Superintendent
Chicago Regional Office         And      

/s/    Kevin R. Allard

      Kevin R. Allard       Deputy Superintendent

 

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