Exhibit 10.2


 


FEDERAL DEPOSIT INSURANCE
CORPORATION


 


WASHINGTON, D.C.


 


OREGON DIVISION OF FINANCE
AND CORPORATE SECURITIES


 


SALEM, OREGON


 


	
   

  	
  )

  	
   

  
	
  In the Matter of

  	
  )

  	
   

  
	
   

  	
  )

  	
  ORDER TO CEASE AND DESIST

  
	
  WEST
  COAST BANK

  	
  )

  	
   

  
	
  LAKE
  OSWEGO, OREGON

  	
  )

  	
  FDIC-09-453b

  
	
   

  	
  )

  	
   

  
	
  (INSURED
  STATE NONMEMBER BANK)

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  



 


West Coast Bank, Lake Oswego, Oregon (“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 alleged charges under section 8(b)(1) of the Federal
Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b)(1), and section 706.580(2) of
the Oregon Revised Statutes, and having waived those rights, entered into a
STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST (“CONSENT
AGREEMENT”) with counsel for the Federal Deposit Insurance Corporation (“FDIC”),
and with counsel for the Oregon Division of Finance and Corporate Securities (“DFCS”),
dated                               ,
2009, whereby solely for the purpose of this proceeding and without admitting
or denying the alleged charges of unsafe or unsound banking practices and
violations of law and/or regulations, the Bank consented to the issuance of an
ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC and the DFCS.


 


The FDIC and the DFCS considered the matter and determined that they
had reason to believe that the Bank had engaged in unsafe or unsound banking
practices.  The FDIC and the DFCS,
therefore, accepted the CONSENT AGREEMENT and issued the following:


 

















 


ORDER TO CEASE AND DESIST


 


IT IS HEREBY ORDERED, 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, cease and desist
from the following unsafe and unsound banking practices, as more fully set
forth in the Joint FDIC and DFCS Report of Examination dated March 30,
2009 (“ROE”):


 


(a)                                  operating with
management whose policies and practices are detrimental to the Bank;


 


(b)                                 operating with
a board of directors which failed to provide adequate supervision over and
direction to the active management of the Bank;


 


(c)                                  operating with
inadequate capital in relation to the kind and quality of assets held by the
Bank;


 


(d)                                 operating with
a large volume of poor quality loans;


 


(e)                                  engaging in
unsatisfactory lending and collection practices;


 


(f)                                    operating in
such a manner as to produce operating losses;


 


(g)                                 operating with
inadequate provisions for liquidity; and


 


(h)                                 operating in
violation of Part 323 of the FDIC Rules and Regulations, 12 C.F.R. Part 323,
concerning appraisals; and


 


(i)                                     operating in
violation of Part 353 of the FDIC Rules and Regulations, 12 C.F.R. Part 353,
concerning suspicious activity reporting.


 


IT IS
FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its
successors and assigns, take affirmative action as follows:


 


1.                                       The Bank shall have and retain qualified management.


 


(a)                                  Each member of management shall have qualifications and experience
commensurate with his or her duties and responsibilities at the Bank.  Each member of


 


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management
shall be provided appropriate written authority from the Bank’s Board to
implement the provisions of this ORDER.


 


(b)                                 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 and regulations; and


 


(iv)                              restore all aspects of the Bank to a safe and sound condition,
including asset quality, capital adequacy, earnings, management effectiveness,
liquidity, and sensitivity to market risk.


 


(c)                                  During the life of this ORDER, the Bank shall notify the Regional
Director of the FDIC’s San Francisco Regional Office (“Regional Director”) and
the Administrator of the Oregon Division of Finance and Corporate Securities (“Administrator”)
in writing when it proposes to add any individual to the Bank’s Board or employ
any individual as a senior executive officer. 
The notification must be received at least 30 days before such addition
or employment is intended to become effective and should include a description
of the background and experience of the individual or individuals to be added
or employed.


 


(d)                                 Within 90 days after the effective date of this ORDER, the Bank’s Board
shall obtain an independent study of the management and personnel structure of
the Bank to determine whether additional personnel are needed for the safe and
profitable operation of the Bank.  Such a
study shall include, at a minimum, a review of the duties, responsibilities,
qualifications, and compensation of the Bank’s executive officers.  The Bank shall formulate and a plan to
implement the recommendations of the study. 
The plan shall be acceptable to the Regional Director and the
Administrator as determined at subsequent examinations and/or visitations.


 


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2.                                       During the life of this ORDER, the Board and management shall ensure
that management reports are sufficient to provide the Board with timely and
adequate information for making business decisions on the basis of fully
informed and meaningful deliberation and that such reports address the deficiencies
detailed in the ROE.


 


3.                                       No later than December 31, 2009 and during the life of this ORDER,
the Bank shall maintain:


 


(a)                                  A Tier 1 capital to total assets leverage ratio (“leverage ratio”) at
least equal to or greater than 10 percent and;


 


(b)                                 A ratio of qualifying total capital to risk-weighted assets (“total
risk-based capital ratio”) at least equal to or greater than 12 percent.


 


(c)                                  The level of capital to be maintained during the life
of this ORDER pursuant to Subparagraph 3(a) shall be in addition to a
fully funded allowance for loan and lease losses, the adequacy of which shall
be satisfactory to the Regional Director and the Adminstrator as determined at
subsequent examinations and/or visitations.


 


(d)                                 Any increase in capital necessary to meet the requirements of Paragraph
3 of this ORDER may be accomplished by the following:


 


(i)                                     the sale of common stock; or


 


(ii)                                  the sale of noncumulative perpetual preferred stock; or


 


(iii)                               the direct contribution of cash by the Bank’s parent holding company;
or


 


(iv)                              any other means acceptable to the Regional Director and the
Administrator; or


 


(v)                                 any combination of the above means.


 


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Any increase in capital necessary to meet the requirements of Paragraph
3 of this ORDER may not be accomplished through a deduction from the Bank’s
allowance for loan and lease losses.


 


(e)                                  If all or part of the increase in capital required by Paragraph 3 of
this ORDER is accomplished by the sale of new securities issued by the Bank,
the Bank’s Board shall forthwith take all necessary steps to adopt and
implement a plan for the sale of such additional securities, including the
voting of any shares owned or proxies held or controlled by them in favor of
the plan.  Should the implementation of
the plan involve a public distribution of the Bank’s securities, the Bank shall
prepare offering materials fully describing the securities being offered,
including an accurate description of the financial condition of the Bank and
the circumstances giving rise to the offering, and any other material
disclosures necessary to comply with the Federal securities laws.  Prior to the implementation of the plan and,
in any event, not less than 15 days prior to the dissemination of such
materials, the plan and any materials used in the sale of the securities shall
be submitted to the FDIC, Registration and Disclosure Unit, Washington, D.C.
20429 and the Administrator, for review. 
Any changes requested to be made in the plan or materials by the FDIC
shall be made prior to their dissemination. 
If the increase in capital is provided by the sale of noncumulative
perpetual preferred stock issued by the Bank, then all terms and conditions of
the issue, including but not limited to those terms and conditions relative to
interest rate and convertibility factor, shall be presented to the Regional
Director and the Administrator for prior approval.


 


(f)                                    In complying with the provisions of Paragraph 3 of this ORDER, the Bank
shall provide to any subscriber and/or purchaser of the Bank’s securities, a
written notice of any planned or existing development or other changes which
are materially different from the information reflected in any offering
materials used in connection with the sale of Bank securities.  The written notice required by this paragraph
shall be furnished within 10 days from


 


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the date such material
development or change was planned or occurred, whichever is earlier, and shall
be furnished to every subscriber and/or purchaser of the Bank’s securities who
received or was tendered the information contained in the Bank’s original
offering materials.


 


(g)                                 For the purposes of this ORDER, the terms “leverage ratio”, “Tier 1
capital” and “total risk-based capital ratio” shall have, the meanings ascribed
to them in Part 325 of the FDIC’s Rules and Regulations, 12 C.F.R. §§
325.2(m), 325.2(v) and 325.2(y).


 


4.                                       (a)                                  Within 30 days from the effective date of this ORDER, the Bank shall
eliminate from its books, by charge-off or collection, all assets classified “Loss”
in the ROE that have not been previously collected or charged off.  Elimination of these assets through proceeds
of other loans made by the Bank is not considered collection for the purpose of
this paragraph.


 


(b)                                 Within 90 days from the effective date of this ORDER, the Bank shall
reduce all items classified “Substandard” in the ROE that have not been
previously charged off to 90% or less of Tier 1 Capital plus the Bank’s
Allowance for Loan and Lease Losses (“ALLL”).


 


(c)                                  Within 180 days from the effective date of this ORDER, the Bank shall
reduce all items classified “Substandard” in the ROE that have not been
previously charged off to 70% or less of Tier 1 Capital plus the ALLL.


 


(d)                                 Within 270 days from the effective date of this ORDER, the Bank shall
reduce all items classified “Substandard” in the ROE that have not been
previously charged off to 50% or less of Tier 1 Capital plus the ALLL.


 


(e)                                  The requirements of Subparagraphs 4(a) to 4(d) of this ORDER
are not to be construed as standards for future operations and, in addition to
the foregoing, the Bank shall reduce the total of all adversely classified
assets.  Reduction of these assets
through proceeds of other loans made to obligors on adversely classified assets
held by the Bank is not considered


 


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collection
for the purpose of this paragraph.  As
used in Subparagraphs 4(b) to 4(e) the word “reduce” means:


 


(i)                                     to collect;


 


(ii)                                  to charge-off; or


 


(iii)                               to sufficiently improve the quality of assets adversely classified to
warrant removing any adverse classification, as determined by the FDIC.


 


(f)                                    Within 60 days from the effective date of this ORDER, the Bank shall
develop written asset disposition plans for each adversely classified asset
greater than $750,000.  The plans shall
be reviewed and approved by the Board and acceptable to the Regional Director
and the Administrator as determined at subsequent examinations.


 


(g)                                 Within 60 days from the effective date of this ORDER, the Bank shall
ensure that it has in place effective policies and procedures for the reduction
and collection of delinquent loans.  The
plan shall be acceptable to the Regional Director and the Administrator as
determined at subsequent examinations.


 


5.                                       (a)                                  Beginning with the effective date of this ORDER, except with respect to
unfunded loan commitments then in effect, the Bank shall not extend, directly
or indirectly, any additional credit to, or for the benefit of, any borrower
who has a loan or other extension of credit from the Bank that has been charged
off or classified, in whole or in part, “Loss” and is uncollected.  Subparagraph 5(a) of this ORDER shall
not prohibit the Bank from renewing or extending the maturity of any credit in
accordance with the Financial Accounting Standards Board Statement Number 15 (“FASB
15”).


 


(b)                                 Beginning with the effective date of this ORDER, except with respect to
unfunded loan commitments then in effect, the Bank shall not extend, directly
or indirectly, any additional credit to, or for the benefit of, any borrower
who has a loan or other extension of


 


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credit
from the Bank that has been classified, in whole or part, “Substandard” and/or “Doubtful”
without the prior approval of a majority of the Bank’s Board or senior loan
committee of the Bank.


 


(c)                                  The loan committee or Board shall not approve any extension of credit,
or additional credit to a borrower in Paragraphs (b) above without first
collecting in cash all past due interest.


 


(d)                                 Within 90 days from the effective date of this ORDER, the Bank shall
correct all deficiencies detailed in the items listed as “Special Mention” in
the ROE.


 


6.                                       Within 30 days from the effective date of this ORDER, the Bank shall
strengthen the effectiveness of the internal loan review function to ensure
timely and adequate internal loan reviews and ensure that all of the loan
review deficiencies detailed in the ROE are corrected.


 


7.                                       (a)                                  Within 30 days from the effective date of this ORDER,
the Bank shall revise its Concentration Policy to limit concentrations for
Commercial Real Estate (“CRE”) and Acquisition, Development, and Construction (“ADC”)
loans in order to comply with the following: (i) Interagency Guidelines
for Real Estate Lending Policies, 12 C.F.R. Part 365, Appendix A; and (ii) Commercial
Real Lending Joint Guidance, FIL-104-2006, dated December 12, 2006.   The Bank’s Concentration Policy and its
implementation shall be acceptable to the Regional Director and Administrator
as determined at subsequent examinations and/or visitations.


 


(b)                                 Within 30 days from the effective date of this ORDER, the Bank shall
develop a written plan for systematically reducing the amount of CRE and ADC
loans in compliance with the revised Concentration Policy required by this
paragraph.  The Bank shall not make any
new CRE or ADC loans unless:


 


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(i)                                     the loans are in compliance with the written plan required by this subparagraph;


 


(ii)                                  the loans are in compliance with the provisions of paragraph 5 of this
ORDER; and


 


(iii)                               the loans are approved by the Board or senior loan committee of the
Bank.


 


The plan
and its implementation shall be acceptable to the Regional Director and
Administrator as determined at subsequent examinations and/or visitations.


 


8.                                       Within 90 days of the effective date of this ORDER, the Bank shall
correct all credit data or collateral documentation exceptions, as more fully
set forth in the ROE.


 


9.                                       Within 60 days of the effective date of this ORDER, the Bank shall
develop and submit to the Regional Director and the Administrator a written
three-year strategic plan.  Such plan
shall include specific goals for the dollar volume of total loans, total investment
securities, and total deposits as of December 31, 2009, December 31,
2010, December 31, 2011, and December 31, 2012.  For each time frame, the plan will also
specify the anticipated average maturity and average yield on loans and
securities; the average maturity and average cost of deposits; the level of
earning assets as a percentage of total assets; and the ratio of net interest
income to average earning assets.  The
plan shall be in a form and manner acceptable to the Regional Director and the
Administrator as determined at subsequent examinations and/or visitations.


 


10.                                 Within 60 days from the effective date of this ORDER, the Bank shall
develop and implement a written profit plan. 
The plan shall be in a form and manner acceptable to the Regional
Director and the Administrator as determined at subsequent examination and/or
visitations.


 


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11.                                 (a)                                  Within 30 days from the effective date of this ORDER, the Bank shall
eliminate and/or correct all violations of law, as more fully set forth in the
ROE.  In addition, the Bank shall take
all necessary steps to ensure future compliance with all applicable laws and
regulations.


 


(b)                                 The Bank shall strengthen all aspects of its appraisal
review processes to ensure compliance with Part 323 of the FDIC’s Rules and
Regulations and the October 23, 2003, Financial Institution Letter
entitled Independent Appraisal and Evaluation Functions (FIL-84-2003).


 


(c)                                  The Bank shall strengthen its Suspicious Activity
Reporting to ensure compliance with Part 353 of the FDIC’s Rules and
Regulations and ensure timely investigation of unusual or suspicious activity
and filing of Suspicious Activity Reports.


 


12.                                 Beginning with the effective date of this ORDER, the Bank shall cease
business activities with any brokers, appraisers, contractors, builders,
realtors, architects, processors, former employees, or others individuals or
companies identified as having been involved in or suspected of fraudulent
activities, unless the Bank can show appropriate reasons, in relation to its
potential risk exposure, for continuing such business or banking
relationship(s).  Such reasons shall be
acceptable to the Regional Director and the Administrator.


 


13.                                 Within 120 days from the effective date of this ORDER, the Bank shall
provide training in suspicious activity detection and reporting to all
employees, officers, and directors of the Bank; thereafter, such training shall
be provided to employees every year.


 


14.                                 Within 60 days from the effective date of this ORDER, the Bank shall
develop or revise, adopt, and implement a written liquidity and funds
management policy.  Such policy shall require the Bank to maintain a
minimum Primary Liquidity Ratio of 15 percent and a plan for achieving
and maintaining the minimum Primary Liquidity Ratio.  In addition, the policy shall


 


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include
specific provisions to limit the Bank’s Net Non-Core Funding Dependency Ratio
to not more than 25 percent and a plan for achieving and maintaining the Net
Non-Core Funding Dependency Ratio.  The
liquidity and funds management policy shall be in a form and manner acceptable
to the Regional Director and the Administrator as determined at subsequent
examinations and/or visitations.  For
purposes of this ORDER, the term “Primary Liquidity Ratio” shall mean the
amount equal to the sum of net cash, short-term, and marketable assets divided
by the sum of net deposits and short-term liabilities.  The term “Net Non-Core Funding Dependency
Ratio” is as defined in the Uniform Bank Performance Report.


 


15.                                 The Bank shall not pay cash dividends without the prior written consent
of the Regional Director and the Administrator.


 


16.                                 (a)                                  During the life of this ORDER, the Bank shall not
solicit, accept, renew, or roll over brokered deposits unless it has applied
for and been granted a waiver of this prohibition by the FDIC in accordance
with the provisions of section 337.6 of the FDIC’s Rules and Regulations,
12 C.F.R.  §337.6.  In addition, the bank shall comply with the
interest rate restrictions under section 337.6 of the FDIC’s Rules and
Regulations, 12 C.F.R. § 337.6.


 


(b)                                 For purposes of this ORDER, brokered deposits are
defined as described in section 337.6(a)(2) of the FDIC’s Rules and Regulations,
12 C.F.R. §337.6(a)(2).


 


17.                                 Within 30 days of the end of the first quarter, following the effective
date of this ORDER, and within 30 days of the end of each quarter thereafter,
the Bank shall furnish written progress reports to the Regional Director and
the Administrator detailing the form and manner of any actions taken to secure
compliance with this ORDER and the results thereof.  Such reports shall include a copy of the Bank’s
Report of Condition and the Bank’s Report of Income.  Such reports may be discontinued when the
corrections required by this ORDER have been


 


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accomplished
and the Regional Director and the Administrator have released the Bank in
writing from making further reports.


 


18.                                 Following the effective date of this ORDER, the Bank shall either send
a copy of this ORDER to its shareholder West Coast Bancorp or otherwise furnish
a description of this ORDER in conjunction with the next board meeting of West
Coast Bancorp, in which case such description shall fully describe the ORDER in
all material respects.  The description
and any accompanying communication, statement, or notice shall be sent to the
FDIC, Accounting and Securities Section, Washington, D.C. 20429, at least 15
days prior to dissemination to shareholders. 
Any changes requested to be made by the FDIC shall be made prior to
dissemination of the description, communication, notice, or statement.


 


This ORDER will become effective upon its issuance by the FDIC and the
DFCS.  The provisions of this ORDER shall
remain effective and enforceable except to the extent that, and until such time
as, any provisions of this ORDER shall have been modified, terminated,
suspended, or set aside by the FDIC and the DFCS.


 


Pursuant to delegated authority.


 


Dated at San Francisco, California, this 22 day of October, 2009.


 


 


	
  /s/
  J. George Doerr

  	
   

  	
  /s/
  David C. Tatman

  
	
  J.
  George Doerr

  	
   

  	
  David
  C. Tatman

  
	
  Deputy
  Regional Director

  	
   

  	
  Administrator

  
	
  Risk
  Management

  	
   

  	
  Oregon
  Division of Finance and Corporate Securities

  
	
  Division
  of Supervision and Consumer Protection

  	
   

  	
   

  
	
  San
  Francisco Region

  	
   

  	
   

  
	
  Federal
  Deposit Insurance Corporation

  	
   

  	
   

  



 


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