EX-10.2






Exhibit 10.2


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

	)	 	 
	ORDER TO CEASE AND DESIST
	COMPANY OF YOUNGSTOWN, OHIO

	)	 	 
	 
	 

	)	 	 
	FDIC-08-175b

	YOUNGTOWN, OHIO

	)	 	 
	 
	 

	)	 	 
	 
	(Insured State Nonmember Bank)


	)	 	 
	 
	 	)	 	 
	 






          The Home Savings and Loan Company of Youngstown, Ohio, Youngstown, Ohio (“Bank”), having been
advised of its right to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking
practices and violations of law, rule, or regulation 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, Ohio Rev.
Code Ann. §1163.03 (Anderson), regarding hearings before the Division of Financial Institutions for
the State of Ohio (“Division”), and having waived those rights, entered into a STIPULATION AND
CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST
(“CONSENT AGREEMENT”) with representatives of the Federal




 









 







Deposit Insurance Corporation (“FDIC”)
and the Division, dated                     , ___, whereby, solely for the purpose of this proceeding and
without admitting or denying the charges of unsafe or unsound banking practices, and violations of
law, rule or regulation, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST
(“ORDER”) by the FDIC and the Division.




     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 violations of law, rule, or
regulation. The FDIC and the Division, 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 or unsound banking practices:




	 	A.
	 	Operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits.

	 
	 	B.
	 	Operating with a board of directors that has failed to provide adequate
supervision over and direction to the management of the Bank to prevent unsafe or unsound banking practices.

	 





 









 






	 	C.
	 	Violating laws, rules, or regulations, including:







	 	•
	 	The State of Ohio loan-to-value ratios and maturities requirements for
acquisition and development loans Ohio Revised Code (“ORC”) Section 1161.39(B)
and (C);

	 
	 	•
	 	The State of Ohio amortization requirements for construction loans ORC
1161.36 (B);

	 
	 	•
	 	The FDIC and State of Ohio appraisal requirements of Section 323 of the FDIC
Rules and Regulations and Section 1161.38(F)) of the ORC;

	 
	 	•
	 	The FDIC restrictions on pledging to non-public deposits in Part 362 of the
FDIC Rules and Regulations;

	 
	 	•
	 	The custody requirements for retail repurchase agreements of 17 CFR 403.5 of
the Treasury regulations.









	 	D.
	 	Engaging in hazardous lending and lax collection practices, including, but not
limited to:







	 	•
	 	Extending credit with inadequate diversification of risk;

	 
	 	•
	 	The failure to obtain proper loan documentation;

	 
	 	•
	 	The failure to establish and enforce adequate loan repayment programs;






 









 






	 	•
	 	The failure to obtain current and complete financial information;

	 
	 	•
	 	Other poor credit administration practices.







	 	E.
	 	Operating with an excessive level of adversely classified loans and delinquent
loans.

	 
	 	F.
	 	Operating with an inadequate allowance for loans and lease losses and
calculation methodology for the volume, kind, and quality of loans and leases held.

	 
	 	G.
	 	Operating with inadequate risk management systems for the level and complexity
of the bank’s risk profile.

	 
	 	H.
	 	Operating with inadequate net interest margins.

	 
	 	I.
	 	Operating with an inadequate level of capital protection for the kind and
quality of assets held.

	 
	 	J.
	 	Operating with inadequate asset/liability/funds management procedures.


	 
	 	K.
	 	Operating with excessive operational risk.






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



MANAGEMENT STUDY 




     1. (a) Within 30 days from the effective date of this ORDER, the Bank shall retain a bank
consultant acceptable to the Regional Director of the FDIC’s Chicago Regional Office



 









 




(“Regional
Director”), and the Division. The consultant shall develop a written analysis and assessment of
the Bank’s management needs (“Assessment”) for the purpose of providing qualified management for
the Bank. The Bank shall provide the Regional Director and the Division a copy of the proposed
engagement letter or contract with the consultant for review before it is executed.




          (b) Within 90 days from the effective date of this ORDER the Bank’s board of directors,
working from the Assessment, shall develop a management plan (“Management Plan”) for the bank and
submit the Management Plan to the Regional Director and the Division for review and comment. The
Management Plan shall include, at a minimum:





	 	(i)
	 	Identification of both the type and number of
officer positions needed to properly manage and supervise the affairs of
the bank;

	 
	 	(ii)
	 	Identification and establishment of such board and
internal operating committees as
are needed to provide guidance and oversight to active management;

	 
	 	(iii)
	 	Evaluation of all Bank senior officers to
determine whether these individuals possess the ability, experience and
other qualifications required to perform present





 









 






	 	 
	 	and anticipated duties,
including adherence to the Bank’s established policies and practices, and
to restore the Bank to and maintain the Bank in a safe and sound
condition; and

	 
	 	(iv)
	 	A plan to recruit and hire any additional or
replacement personnel with the requisite ability, experience and other
qualifications to fill those officer positions identified by this
paragraph.






          (c) Within 30 days from the receipt of any written comments from the Regional Director and the
Division and after the adoption of any recommended changes, the Bank shall approve the Management
Plan, and record its approval in the minutes of the board of directors’ meeting. Thereafter, the
Bank, its directors, officers, and employees shall implement and follow the Management Plan.




MANAGEMENT




     2. 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 management shall be provided
appropriate written authority from




 









 







the Bank’s board of directors 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) Prior to the addition of any individual to the board of directors or the employment of any
individual as a senior executive officer, the Bank shall comply with the requirements of section 32
and Subpart F of Part 303 of the FDIC Rules and
Regulations, 12 C.F.R. §§ 303.100-303.104. Further, prior to the addition of any individual
to the board of directors or the employment of any individual as a senior executive officer the
Bank shall also submit to the Division the same information as 


 









 




the Bank submitted to the FDIC and
request and obtain the Division’s written approval.



PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS




     3. (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 extension of credit that has been charged off the books of the
Bank or classified “Loss”, either in whole or in part, in the Joint Report of Examination dated
January 28, 2008 (“Joint Report”), so long as such credit remains uncollected.



          (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 extension of
credit has been classified “Substandard”, “Doubtful”, or is listed for Special Mention in the Joint
Report, or whose loan is classified in any subsequent examination of the Bank by the FDIC or the
Division, so long as such loan or other extension of credit remains classified.




ALLOWANCE FOR LOAN AND LEASE LOSSES




     4. (a) Within 30 days from the effective date of the ORDER, the Bank shall establish an
Allowance for Loan and Lease Loss methodology that fully complies with the July 2001 and



 








 




December
2006 Interagency Policies on Allowance for Loan and Lease Losses.




          (b) Prior to submission or publication of all Reports
of Condition and Income required by the FDIC and the Division after the effective date of this
ORDER, the board of directors of the Bank shall review the adequacy of the Bank’s ALLL, provide for
an adequate ALLL, and accurately report the same. The minutes of the board meeting at which such
review is undertaken shall indicate the findings of the review, the amount of increase in the ALLL
recommended, if any, and the basis for determination of the amount of ALLL provided. In making
these determinations, the board of directors shall consider the FFIEC Instructions for the Reports
of Condition and Income and any analysis of the Bank’s ALLL provided by the FDIC or the Division.




          (c) ALLL entries required by this paragraph shall be made prior to any Tier 1 capital
determinations required by this ORDER.




RISK MANAGEMENT PROGRAMS




     5. Within 90 days from the effective date of this ORDER, the bank shall submit to the Regional
Director and the Division a written plan to strengthen and improve management of the



 









 




overall risk
exposures of the bank. The plan shall, at a minimum, address:




          (a) Enhanced policies and procedures designed to identify, assess, manage, and monitor risk
exposures, including but not limited to the areas of credit, liquidity and operational risks;




          (b) Measures to strengthen board and senior management oversight of risk management policies
and procedures;




          (c) Management information systems and reporting procedures designed to ensure that managers,
directors, and committees receive timely and accurate reports necessary to effectively manage
risks, monitor compliance with laws, rules and regulations, and correct any weaknesses.




          (d) Within 30 days from the receipt of any written comments from the Regional Director or the
Division, and after adoption of any recommended changes, the board of directors shall approve the
written plan, which approval shall be recorded in the minutes of the board of directors’ meeting.
Thereafter, the Bank shall implement and follow the written plan.




REDUCTION OF ADVERSELY CLASSIFIED ASSETS




     6. (a) Within 45 days from the effective date of this ORDER, the Bank shall adopt and
implement a written plan to reduce the Bank’s risk position in each asset in excess of $500,000
that is classified “Substandard” or “Doubtful” in the



 









 




Joint Report, and submit a copy of the plan
to the Regional Director and the Division. In developing such plan, the Bank shall, at a minimum:





	 	(i)
	 	Review the financial position of each such
borrower, including source of repayment, repayment ability, and
alternative repayment sources; and

	 
	 	(ii)
	 	Evaluate the available collateral for each such
credit, including possible actions to improve the Bank’s collateral
position.






          (b)   Such plan shall include, but not be limited to:



	 	(i)
	 	Dollar levels to which the Bank shall reduce
each asset within six months and twelve months from the effective date
of this ORDER; and

	 
	 	(ii)
	 	Provisions 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.







          (c) As used in this paragraph, “reduce” means to: (1) collect; (2) charge off; (3) establish
a specific reserve; or (4) improve the quality of such assets so as to warrant




 









 





removal of any
adverse classification by the FDIC or the Division.


          (d) If the Regional Director or the Division recommends in writing, changes to the plan, the
Bank shall modify the plan in accordance with the recommendations and thereafter implement the
modified plan.


REDUCTION OF CONCENTRATIONS


     7. (a) Within 60 days from the effective date of this ORDER, the Bank shall formulate,
adopt, and implement, and submit to the Regional Director and Superintendent for review and
comment, a written plan to reduce the nonowner-occupied commercial real estate concentration (Call
Report FFIEC 041 schedule RC-C, items 1.a.(1), 1.a.(2), 1.d., 1.e.(2), and Memorandum Item#3) and
separately the construction, land development, and land loan concentration (Call Report FFIEC 041
schedule RC-C, items 1.a.(1) and 1.a.(2)). Such plan shall prohibit any additional advances that
would increase the concentrations and shall include, but not be limited to:



	 	(i)
	 	Percentage levels to total capital to which each
concentration shall be reduced within six and twelve months from the
effective date of this ORDER; and

	 
	 	(ii)
	 	Provisions 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.





          (b) If the Regional Director or the Division recommends in writing, changes to the plan, the
Bank shall modify the plan in accordance with the recommendations and thereafter implement the
modified plan.




REDUCTION OF DELINQUENCIES




     8. Within 45 days from the effective date of this ORDER, the Bank shall adopt and implement a
written plan for the reduction and collection of delinquent loans, and submit a copy of the written
plan to the Regional Director and the Division. The plan 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 from the effective date of this ORDER; and




          (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, the Bank shall modify
the plan in accordance with the recommendations and thereafter implement the modified plan.




SPECIAL MENTION




     9. Within 60 days from the effective date of this ORDER, the Bank shall correct all
deficiencies in the loans listed for “Special Mention” in the Joint Report.



LOAN COMMITTEE




     10. (a) As of the effective date of this ORDER, the Bank’s board loan committee shall meet at
least monthly.



           (b) The board loan committee shall, at a minimum, perform the following functions:





	 	(i)
	 	Evaluate, grant and/or approve loans in accordance
with the Bank’s loan policy, as revised and amended in compliance with
this ORDER. The board loan committee shall provide a thorough written
explanation of
any deviations from the loan policy, which explanation shall
address how said exceptions are in the Bank’s best interest. The
written explanation shall be included in the minutes of the
committee meeting.

	 
	 	(ii)
	 	Review and monitor the status of repayment and
collection of overdue and maturing





 









 






	 	 	 	loans, as well as all loans classified
“Substandard” or “Doubtful” in the Joint Report or that are included on
the Bank’s internal watch list.

	 
	 	(iii)
	 	Review and give prior written approval for all
advances, renewals, or extensions of credit to any borrower or attributed
to any borrower pursuant to Ohio Administrative Code section
1301:12-3-05(D)), when the aggregate volume of credit extended or
attributed to the borrower exceeds five million dollars, ($5,000,000).

	 
	 	(iv)
	 	Maintain written minutes of the committee meetings,
including a record of the review and status of the aforementioned loans.






LOAN POLICY




     11. (a) Within 75 days from the effective date of this ORDER, and annually thereafter, the
board of directors of the Bank shall review the Bank’s loan policy and procedures for adequacy and,
based upon this review, propose all appropriate revisions to the policy necessary to strengthen
lending procedures and abate additional loan deterioration, and submit the revised loan policy to
the Regional Director and the Division for review and comment.



 









 





          (b) The revisions to the Bank’s loan policy required by this paragraph, at a minimum, shall
include provisions:





	 	(i)
	 	Addressing concentrations of credit and
diversification of risk, including goals for portfolio mix, establishment
of limits within loan and other asset categories, and development of a
tracking and monitoring system for the economic and financial condition of
specific geographic locations, industries, and groups of borrowers;

	 
	 	(ii)
	 	Establishing review and monitoring procedures to
ensure that all lending personnel are adhering to established lending
procedures and that the directorate is receiving timely and fully
documented
reports on loan activity, including any deviations from established
policy;

	 
	 	(iii)
	 	Requiring loan committee review and monitoring of
the status of repayment and collection of overdue and maturing loans, as
well as all loans classified “Substandard” or “Doubtful” at this
examination as of January 28, 2008, or at any subsequent





 









 






	 	 	 	examination of the Bank by the FDIC or the Division;

	 
	 	(iv)
	 	Requiring a written plan to lessen the risk position
in each line of credit identified as a problem credit on the Bank’s
internal loan watch list;

	 
	 	(v)
	 	Requiring prior written approval by the Bank’s board loan committee or board of directors for any extension of credit, renewal,
or disbursement in an amount which, when aggregated with all other
extensions of credit made or attributed to that person, exceeds five
million dollars, ($5,000,000);

	 
	 	(vi)
	 	Establishing standards for initiating collection
efforts;

	 
	 	(vii)
	 	Prohibiting the extension of a maturity date,
advancement of additional credit or renewal of a loan to a borrower whose
obligations to the Bank are classified “Substandard” “Doubtful,” or
“Loss,” whether in whole or in part, at this examination as of January 28,
2008, or at any subsequent examination of the Bank by the FDIC or the
Division, without the full collection in





 









 






	 	 	 	cash of accrued and unpaid
interest, unless the loans are well secured and/or are adequately
supported by current and complete financial information, and the renewal
or extension has first been approved in writing by a majority of the
Bank’s board of directors;

	 
	 	(viii)
	 	Establishing appropriate guidelines to address underwriting and credit
administration deficiencies in the Joint Report, including financial
analyses and use of covenants;

	 
	 	(ix)
	 	Establishing appropriate guidelines for construction
and interest only lending;

	 
	 	(x)
	 	Requiring all loan policy exceptions to be approved
by the loan committee or board of directors.






          (c) Within 30 days from the receipt of any written comments from the Regional Director and the
Division, and after the adoption of any recommended changes, the board of directors shall approve
the amended loan policy, which approval shall be recorded in the minutes of a board of directors’
meeting. Thereafter, the Bank shall implement and follow the amended loan policy.




 









 








STRATEGIC PLAN




     12. (a) By December 31, 2008, the Bank shall develop and submit to the Regional Director and
the Division, for review and comment, a written comprehensive 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.



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





	 	(i)
	 	Strategies for providing sufficient staff levels;

	 
	 	(ii)
	 	Strategies for providing sufficient management
succession;

	 
	 	(iii)
	 	Strategies for providing sufficient staff training;

	 
	 	(iv)
	 	Strategies for increasing earnings performance and
sustaining satisfactory earnings performance;

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

	 
	 	(vi)
	 	Strategies for improving capital and maintaining
capital at a level consistent with the risk profile of the Bank;





 









 






	 	(vii)
	 	Strategies for identifying new lines of business and
new areas of lending, as well as identifying management’s expertise in
each new area;

	 
	 	(viii)
	 	Strategies for improving asset quality and sustaining satisfactory asset
quality;

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






          (c) Within 30 days from the receipt of all such written comments from the Regional Director
and the Division, and after revising the plan as necessary, the Bank shall adopt the plan, which
adoption shall be recorded in the minutes of a
board of directors’ meeting. Thereafter, the Bank shall implement the plan.




          (d) Within 30 days from the end of each calendar quarter following the completion of the
strategic plan, the Bank’s board of directors 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 of directors’ meeting at which such
evaluation is undertaken.




          (e) The board of directors shall review the strategic plan at least annually, and submit
proposed changes to the




 









 







strategic plan to the Regional Director and the Division for review and
comment. Within 30 days of receipt of all such written comments from the Regional Director and the
Division, and after consideration of all such comments, the board of directors shall approve the
revised plan, which approval shall be recorded in the minutes of the board of directors’ meeting.
Thereafter, the Bank shall implement the revised plan.




BUDGET AND PROFIT PLAN




     13. (a) Within 60 days from the effective date of this ORDER, the Bank shall formulate and
submit to the Regional Director and the Division, for review and comment, a revised written profit
plan and realistic comprehensive budget for all categories of income and expense for the remainder
of 2008. The plan and budget required by this paragraph 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) Within 30 days from the receipt of all such written comments from the Regional Director
and the Division, and after revising the plan and budget as necessary, the Bank shall adopt the
plan and budget, which adoption shall be




 









 







recorded in the minutes of a board of directors’ meeting.
Thereafter, the Bank shall implement the plan and budget.




          (c) Within 30 days from the end of each calendar quarter following completion of the profit
plan and budget required by this paragraph, the Bank’s board of directors 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 of directors’ meeting at which such
evaluation is undertaken.




          (d) The Bank shall develop a written profit plan and budget for each subsequent calendar year
for which this ORDER is in effect and submit each year’s proposed profit plan and budget to the
Regional Director and the Division for review and comment not less than 30 days before the end of
the year. Within 30 days of receipt of all such written comments from the Regional Director and the Division, and after
adoption of any recommended changes, the board of directors shall approve the plan and budget,
which approval shall be recorded in the minutes of a board of directors’ meeting. Thereafter, the
Bank shall implement and follow the plan and budget.




CORRECTION OF VIOLATIONS 




     14. (a) Within 60 days from the effective date of this ORDER, the Bank shall eliminate and/or
correct all violations of laws, rules, and regulations listed in the Joint Report.



 









 





          (b) Within 60 days from the effective date of this ORDER, the Bank shall implement procedures
to ensure future compliance with all applicable laws, rules, and regulations.




CAPITAL 




     15. (a) Within 30 days from the last day of each calendar quarter following the effective date
of this ORDER, the Bank shall determine from its Report of Condition and Income its level of Tier 1
capital as a percentage of its total assets (“Tier 1 capital ratio”) and its total risk-based
capital ratio for that calendar quarter. If the Tier 1 capital ratio is less than 8 percent or its
total risk based capital ratio is less than 12 percent, the Bank shall, within 60 days of the date
of the required determination, increase its capital ratio to not less than 8 percent, and/or its
total risk-based capital to not
less than 12 percent, calculated as of the end of that preceding quarterly period. For purposes of
this ORDER, Tier 1 capital and total assets, as well as the total risk-based capital ratio, shall
be calculated in accordance with Part 325 of the FDIC Rules and Regulations (“Part 325”), 12 C.F.R.
Part 325.



          (b) Any such increase in Tier 1 capital or total risk-based capital may be accomplished by the
following:





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





 









 






	 	(ii)
	 	The elimination of all or part of the assets
classified “Loss” in the Joint Report, without loss or liability to the
Bank; or

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

	 
	 	(iv)
	 	The direct contribution of cash by the directors
and/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.






          (c) If all or part of the increase in capital required by this paragraph is to be accomplished
by the sale of new securities, the board of directors of the Bank shall adopt and implement a plan for the sale of
such additional securities, including the voting of any shares owned or proxies held by or
controlled by them in favor of said plan. Should the implementation of the plan involve public
distribution of Bank securities, including a distribution limited only to the Bank’s existing
shareholders, the Bank shall prepare detailed 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




 









 







other material disclosures necessary to comply with
Federal securities laws. Prior to the implementation of the plan and, in any event, not less than
20 days prior to the dissemination of such materials, the materials used in the sale of the
securities shall be submitted to the FDIC Registration and Disclosure Section, 550 17th
Street, N.W., Washington, D.C. 20429 and to the Ohio Department of Commerce, Division of Financial
Institutions, 77 South High Street, 21st Floor, Columbus, Ohio 43215-6120, for their
review. Any changes requested in writing to be made in the materials by the FDIC or the Division
shall be made prior to their dissemination.




          (d) In complying with the provisions of this paragraph, the Bank shall provide to any
subscriber and/or purchaser of Bank securities 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 calendar days of the date any material
development or change was planned or occurred, whichever is earlier, and shall be furnished to
every purchaser and/or subscriber of the Bank’s original offering materials.




          (e) The capital ratio analysis required by this paragraph shall not negate the responsibility
of the Bank and




 









 







its board of directors for maintaining throughout the year an adequate level of
capital protection for the kind, quality and degree of market depreciation of assets held by the
Bank.




DIVIDEND RESTRICTION




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



ASSET/LIABILITY MANAGEMENT




     17. (a) Within 90 days from the effective date of this ORDER, the Bank shall develop and
submit to the Regional Director and the Division, for review and comment, a written plan addressing
liquidity, the relationship of the Bank’s volatile liabilities to the Bank’s temporary investments,
and overall asset/liability management. The plan shall include, at a minimum, provisions:




	 	(i)
	 	Establishing a desirable range for the Bank’s ratio
of total loans to total assets, and requiring the Bank’s loan to asset
ratio shall be monitored on a monthly basis and maintained at a level
consistent with prudent banking practices;

	 
	 	(ii)
	 	Establishing a desirable range for the Bank’s ratio
of on-hand liquidity to total deposits;





 









 






	 	(iii)
	 	Establishing a desirable range for its net
non-core funding ratio as computed in the Uniform Bank Performance
Report;

	 
	 	(iv)
	 	Identifying the source and use of borrowed and/or
volatile funds;

	 
	 	(v)
	 	Establishing appropriate lines of credit at
correspondent banks, which can include the Federal Reserve Bank of
Cleveland and the Federal Home Loan Bank of Cincinnati, that would allow
the Bank to borrow funds to meet depositor demands if the Bank’s other
provisions for liquidity proved to be inadequate;

	 
	 	(vi)
	 	Requiring the retention of securities and/or other
identified categories of investments that can be liquidated within one
day in amounts sufficient (as a percentage of the Bank’s total assets) to
ensure the maintenance of the Bank’s liquidity posture at a level
consistent with short- and long-term liquidity objectives;

	 
	 	(vii)
	 	Establishing a minimum liquidity ratio and
defining how the ratio is to be calculated;





 









 






	 	(viii)
	 	Establishing contingency plans by identifying alternative courses of
action designed to meet the Bank’s liquidity needs;

	 
	 	(ix)
	 	Addressing the proper use of borrowings
(i.e., seasonal credit needs, match funding, etc.), addressing
concentration of funding sources, pricing and collateral requirements
with specific allowable funding channels identified (i.e.,
brokered deposits, internet deposits, Fed funds purchased and other
correspondent borrowings); and

	 
	 	(x)
	 	Requiring revision and approval of investment and
funds management policies by
the Bank’s board of directors at least annually.






          (b) Within 30 days from the receipt of all such written comments from the Regional Director
and the Division, and after revising the plan as necessary, the board of directors shall adopt the
plan, which adoption shall be recorded in the minutes of a board of directors’ meeting.
Thereafter, the Bank shall implement the plan.




INFORMATION TECHNOLOGY




     18. Within 120 days from the effective date of this ORDER, the Bank shall correct the
information technology deficiencies



 









 




that are listed in the Joint Report. Additionally, the Bank
shall establish policies to prevent the recurrence of any deficiencies noted.




AUDIT AND INTERNAL ROUTINES




     19. Within 90 days from the effective date of this ORDER, the Bank shall correct all
deficiencies identified in the Joint Report pertaining to mortgage banking hedging and oversight;
the audit function; security against external crimes; and non-deposit investment products.
Additionally, the Bank shall establish policies to prevent the recurrence of any deficiencies
noted.



COMPLIANCE COMMITTEE




     20. (a) Within 10 days from the date of this Order, the Bank’s board of directors shall
establish a Compliance Committee to monitor the Bank’s compliance with the provisions of this
Order, and the Bank’s written policies and procedures. The Compliance Committee shall be comprised
of outside directors who are not executive officers or principal shareholders of the Bank, as those
terms are defined in Section 215.2(e)&(m) of Regulation O, 12 C.F.R. §§ 215.(e)&(m). At a minimum,
the Compliance Committee shall meet no less often than monthly, shall keep detailed minutes of each
meeting, and shall report its findings to the Bank’s board of directors monthly.



 









 





          (b) The Compliance Committee shall ensure that the policies, plans, and procedures required by
this ORDER to be submitted to the Division and the Regional Director for review and approval are
submitted within the required time periods, and that the approved plans, policies, and procedures
are not amended or rescinded without the prior approval of the Division and the Regional Director.




DISCLOSURE TO SHAREHOLDERS




     21. Following the effective date of this ORDER, the Bank shall send to its shareholder a copy
or description of this ORDER: (1) in conjunction with the Bank’s next shareholder communication;
and (2) in conjunction with its notice or proxy statement preceding the Bank’s next shareholder
meeting. The description shall fully describe this ORDER in all material respects. The description and any
accompanying communication, notice or statement shall be sent to the FDIC Registration and
Disclosure Section 550 17th Street, N.W., Washington, D.C. 20429 and to the Ohio
Department of Commerce, Division of Financial Institutions, 77 South High Street, 21st
Floor, Columbus, Ohio 43215-6120, for review at least 20 days prior to dissemination to
shareholders. Any changes requested to be made by the FDIC or the Division shall be made prior to
dissemination of the description, communication, notice or statement.



 









 





PROGRESS REPORTS




     22. Within 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 of directors, detailing the actions taken to secure
compliance with the ORDER and the results thereof. Such reports may be discontinued when the
corrections required by this ORDER have been accomplished and the Regional Director and the
Division have, in writing, released the Bank from making further reports.



CLOSING PARAGRAPHS




     The effective date of this ORDER shall be 10 calendar days after 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.



     Pursuant to delegated authority.



 









 





     Dated:                                         ,                     .



	 	 	 	 	 	 	 
	FEDERAL DEPOSIT INSURANCE
CORPORATION,

Division of Supervision and 


Consumer Compliance


	 
	 	 
	STATE OF OHIO

Division of Financial 


Institutions

By:	 
	 
	By:
	 
	 	 
	 	 
	 
	 
	 
	 	 
	 	 
	 
	 

Sylvia H. Plunkett

Regional Director 

Chicago Regional Office

	 
	 
	 
	 

John B. Reardon

Superintendent of

Financial Institutions
	 
	 
	 
	 
	 	 
	 	 
	 
	 

	 
	 	 
	 

Kevin R. Allard

Acting Deputy 
Superintendent for

Savings and Loan

Associations and

Savings Banks