Exhibit
10.1


 


FEDERAL DEPOSIT INSURANCE
CORPORATION


WASHINGTON, D.C.


 


CALIFORNIA DEPARTMENT OF
FINANCIAL INSTITUTIONS


SAN FRANCISCO, CALIFORNIA


 


	
   

  	
   

  	
  )

  	
   

  	
   

  
	
  In
  the Matter of

  	
   

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
  )

  	
   

  	
  CONSENT ORDER

  
	
  BUTTE
  COMMUNITY BANK

  	
   

  	
  )

  	
   

  	
   

  
	
  CHICO,
  CALIFORNIA

  	
   

  	
  )

  	
   

  	
  FDIC-10-097b

  
	
   

  	
   

  	
  )

  	
   

  	
   

  
	
  (INSURED
  STATE NONMEMBER BANK)

  	
   

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
  )

  	
   

  	
   

  



 


The Federal Deposit Insurance Corporation (“FDIC”) is the appropriate
Federal banking agency for Butte Community Bank, Chico, California (“Bank”)
under Section 3(q) of the Federal Deposit Insurance Act (“FDI Act”),
12 U.S.C. § 1813(q)(3).  The California
Department of Financial Institutions (“CDFI”) is the appropriate State banking
agency for the Bank under Division 1 of the California Financial Code.


 


The Bank, by and through its duly elected and acting Board of Directors
(“Board”), has executed a Stipulation to the Issuance of a Consent Order (“Stipulation”),
dated May 11 2010, that is accepted by the FDIC and the CDFI.  With the Stipulation, the Bank has consented,
without admitting or denying any charges of unsafe or unsound banking practices
relating to management, asset quality, loans, liquidity, and brokered deposits,
to the issuance of this Consent Order (“Order”) by the FDIC and the CDFI
pursuant to Section 8(b)(1) of the FDI Act, and Section 1913.


 

















 


Having determined that the requirements for issuance of an order under Section 8(b) of
the FDI Act, 12 U.S.C. § 1818(b), and Section 1913 have been satisfied,
the FDIC and the CDFI hereby order that:


 


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.  Management shall include the following:  (i) a chief executive officer with
proven ability in managing a bank of comparable size and risk profile; (ii) a
chief financial officer with proven ability in all aspects of financial
management; and (iii) a senior lending officer with significant lending,
collection, and loan supervision experience and experience in upgrading a low
quality loan portfolio.  Each member of
management shall be provided appropriate written authority from the 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 Commissioner of the California Department of Financial Institutions (“Commissioner”)
in writing when it proposes to add or replace any individual on the Board, or
employ any individual to serve as a senior executive officer, or change the
responsibilities of any existing senior executive officer to 


 


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include
the responsibilities of another senior executive officer position.  The term “senior executive officer” shall
have the same meaning ascribed to it in Part 303 of the FDIC’s Rules and
Regulations, 12 C.F.R. § 303.101.  The
notification shall include a completed Interagency Biographical and Financial
Report and Interagency Change in Director or Senior Executive Officer and must
be received at least 30 days before the addition, employment or change of
responsibilities is intended to become effective.  The Regional Director and the Commissioner
shall have the power under the authority of this Order to disapprove the
addition, employment or change of responsibilities of any proposed officer or
director.


 


(d)                                 The requirement to submit information and the prior disapproval
provisions of this paragraph are based upon the authority of 12 U.S.C. § 1818(b) and
do not require the Regional Director and the Commissioner to complete their
review and act on any such information or authority within 30 days, or any
other timeframe.  The Bank shall not add,
employ or change the responsibilities of any proposed director or senior
executive officer until such time as the Regional Director and the Commissioner
have completed their review.


 


2.                                       Within 180 days from the effective date of this Order, the Board shall
obtain an independent study of the management and personnel structure of the
Bank to determine whether the Bank is staffed by qualified individuals
commensurate with its size and risk profile to ensure the safe and profitable
operation of the Bank.  Such study shall
include, at a minimum, a review of the duties, responsibilities,
qualifications, and remuneration of the Bank’s officers, an evaluation of
management resources, and recommendations regarding management and staffing in
the context of the Bank’s strategic plan. 
A copy of the study shall be submitted to the Regional Director and the
Commissioner.  The Board shall adopt a
plan to implement the recommendations of the study.  The plan policy and its implementation shall
be satisfactory to 


 


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the
Regional Director and the Commissioner as determined at subsequent examinations
and/or visitations.


 


3.                                       (a)                                  Within 90 days from the effective date of this Order, the Bank shall
increase and thereafter maintain its Tier 1 capital in such an amount to ensure
that the Bank’s leverage ratio equals or exceeds 10 percent and shall maintain
such level.


 


(b)                                 Within 90 days from the effective date of this Order, the Bank shall
increase and thereafter maintain its total risk-based capital ratio in such an
amount as to equal or exceed 13 percent and shall maintain such level.


 


(c)                                  Within 60 days from the effective date of this Order, the Bank shall
develop and adopt a plan to meet and maintain the capital requirements of this
Order and to comply with the FDIC’s Statement of Policy on Risk-Based Capital
contained in Appendix A to Part 325 of the FDIC’s Rules and
Regulations, 12 C.F.R. Part 325, Appendix A.  Such plan and its implementation shall be in
a form and manner acceptable to the Regional Director and the Commissioner as
determined at subsequent examinations and/or visitations.


 


(d)                                 The level of capital to be maintained during the life of this Order 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
Commissioner as determined at subsequent examinations and/or visitations.  Any increase in Tier 1 capital necessary to
meet the requirements of this paragraph 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 this Order is
accomplished by the sale of new securities, the Board shall 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 


 


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distribution
of the Bank’s securities (including a distribution limited only to the Bank’s
existing shareholders), 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 all
applicable State and 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 plan and any
materials used in the sale of the securities shall be submitted to the FDIC,
Registration, Disclosure and Securities Unit, 550 17th St. N.W., Washington, D.C. 20429, for review,
and to the Commissioner to obtain any and all necessary securities permits or
other approvals.  Any changes requested
by the FDIC or the Commissioner shall be made prior to dissemination.  If the increase in capital is provided by the
sale of noncumulative perpetual preferred stock, 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 Commissioner for prior approval.


 


(f)                                    Subject to obtaining all required prior authorizations, permits or other
approvals from the Commissioner, the Bank shall promptly revise or supplement
the offering materials it is using in connection with the offer and sale of its
securities to fully and fairly disclose every material change or development
regarding the Bank and its operation, including every planned change that would
be material, that occurs during the offering of the securities.  The Bank shall provide the revised offering
materials or supplement, along with a notice that the subscriber may rescind
its subscription, to each subscriber that has submitted a subscription for the
Bank’s securities before receiving the revised offering materials or supplement
for at least ten (10) days before accepting the subscriber’s subscription.


 


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(g)                                 In complying with the provisions of this paragraph, 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 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.


 


(h)                                 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), 325.2(y), and Appendix A.


 


4.                                       The Bank shall not pay cash dividends or make any other payments to its
shareholders without the prior written consent of the Regional Director and the
Commissioner.


 


5.                                       (a)                                  Within 10 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 Joint FDIC and CDFI Report of Examination dated January 11, 2010 (“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 180 days from the effective date of this Order, the Bank shall
have reduced the assets classified “Substandard” and “Doubtful” in the ROE,
that have not previously been charged off to not more than 75 percent of the
Bank’s Tier 1 capital and ALLL.


 


(c)                                  The requirements of this paragraph are not to be construed as standards
for future operations and, in addition to the foregoing, the Bank shall
eventually reduce the total of all adversely classified assets.  Reduction of these assets through proceeds of
other loans made 


 


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by the
Bank is not considered collection for the purpose of this paragraph.  As used in this paragraph 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 and the
CDFI.


 


6.                                       (a)                                  Within 30 days from the effective date of this Order, the Board shall
develop or revise, adopt and implement a comprehensive policy for determining
the adequacy of the ALLL.  For the
purpose of this determination, the adequacy of the reserve shall be determined
after the charge-off of all loans or other items classified “Loss.”  The policy shall provide for a review of the
allowance at least once each calendar quarter. 
Said review shall be completed in order that the findings of the Board
with respect to the ALLL are properly reported in the quarterly Reports of
Condition and Income.  The review shall
focus on the results of the Bank’s internal loan review, loan loss experience,
trends of delinquent and non-accrual loans, an estimate of potential loss
exposure of significant credits, concentrations of credit, and present and
prospective economic conditions.  A
deficiency in the allowance shall be remedied in the calendar quarter it is
discovered, prior to submitting the Report of Condition, by a charge to current
operating earnings.  The minutes of the
Board meeting at which such review is undertaken shall indicate the results of
the review.  Upon completion of the
review, the Bank shall increase and maintain its ALLL consistent with the ALLL
policy established.  Such policy and its
implementation shall be satisfactory to the Regional Director and the
Commissioner as determined at subsequent examinations and/or visitations.


 


7.                                       (a)                                  Beginning with 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 has a loan 


 


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or
other extension of credit from the Bank that has been charged off or
classified, in whole or in part, “Loss” and is uncollected.  This paragraph 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, 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 classified, in whole or part, “Doubtful” or Substandard” without the
prior approval of a majority of the Board or loan committee of the Bank.  The Board and loan committee shall not
approve any extension of credit or additional credit to such borrowers without
first collecting in cash all past due interest.


 


8.                                       Within 90 days from the effective date of this Order, the Bank shall
develop or revise, adopt, and implement a written plan, approved by its Board
and acceptable to the Regional Director and the Commissioner for systematically
reducing the amount of loans or other extensions of credit advanced, directly
or indirectly, to or for the benefit of, any borrowers in the “Construction and
Land Development” Concentration.  Such
plan shall be in conformance with Appendix A of Part 365 of the FDIC’s Rules and
Regulations, 12 C.F.R. Part 365, Appendix A; and Financial Institution
Letter (FIL)-104-2006, Commercial Real Estate Lending Joint Guidance, dated December 12,
2006.


 


9.                                       (a)                                  Within 90 days from the effective date of this Order, the Bank shall
develop or revise, adopt, and implement written lending and collection policies
to provide effective guidance and control over the Bank’s lending
function.  Such policies and their
implementation shall be satisfactory to the Regional Director and the
Commissioner as determined at subsequent examinations and/or visitations.


 


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


 


(i)                                     provisions, consistent with the FDIC’s instructions for the preparation
of Reports of Condition and Income, under which the accrual of interest income
is discontinued and previously accrued interest is reversed on delinquent
loans;


 


(ii)                                  provisions which require realistic repayment terms, and current credit
information adequate to support the outstanding indebtedness of the
borrower.  Such documentation shall
include current financial information, profit and loss statements or copies of
tax returns and cash flow projections;


 


(iii)                               provisions which incorporate limitations on the amount that can be loaned
in relation to established collateral values;


 


(iv)                              provisions that specify the circumstances and conditions under which real
estate appraisals must be conducted by an independent third party;


 


(v)                                 provisions that establish standards for unsecured credit;


 


(vi)                              provisions that require an accurate internal grading system;


 


(vii)                           the Board shall adopt procedures whereby officer compliance with the
revised loan policy is monitored and responsibility for exceptions thereto
assigned.  The procedures adopted shall be
reflected in minutes of a Board meeting at which all members are present and
the vote of each is noted.


 


10.                                 Within 90 days from the effective date of this Order, the Bank shall
develop or revise, adopt, and implement a written liquidity and funds management
policy that adequately addresses liquidity needs and appropriately reduces its
reliance on non-core funding sources. 
Such policy and its implementation shall be satisfactory to the Regional
Director and the Commissioner as determined at subsequent examinations and/or
visitations.


 


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11.                                 (a)                                  Within 30 days from the effective date of this Order, the Bank shall
develop or revise, adopt, and implement a written plan addressing retention of
profits, reducing overhead expenses, and setting forth a comprehensive budget
covering the period 6/30/2010 to 12/31/2010. 
The plan required by this Paragraph shall contain formal goals,
strategies and benchmarks which are consistent with sound banking practices to
improve the Bank’s net interest margin, increase interest income, reduce
discretionary expenses, and improve and sustain earnings of the Bank.  It shall also contain a thorough description
of the operating assumptions that form the basis for, and adequately support,
each major component of the plan.  Such
plan and its implementation shall be satisfactory to the Regional Director and
the Commissioner as determined at subsequent examinations and/or visitations.


 


(b)                                 Following the end of each calendar quarter, the Board shall evaluate the
Bank’s actual performance in relation to the plan and shall 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.


 


12.                                 Within 180 days from the effective date of this Order, the Bank shall
develop or revise, adopt, and implement a written three-year strategic
plan.  Such plan shall be submitted to
the Regional Director and the Commissioner and shall include specific goals for
the dollar volume of total loans, total investment securities, and total
deposits as of year-end 12/31/2010, 12/31/2011, and 12/31/2012.  For each time frame, the plan will also
specify:


 


(a)                                  the anticipated average maturity and average yield on loans and
securities;


 


(b)                                 the average maturity and average cost of deposits;


 


(c)                                  the level of earning assets as a percentage of total assets; and


 


(d)                                 the ratio of net interest income to average earning assets.


 


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Such plan and its implementation shall be
satisfactory to the Regional Director and the Commissioner as determined at
subsequent examinations and/or visitations.


 


13.                                 During the life of this Order, the Bank shall not establish any new
branches or other offices of the Bank without the prior written consent of the
Regional Director and the Commissioner.


 


14.                                 During the life of this Order, the Bank shall notify the Regional
Director and Commissioner no less than one business day before making any
public announcement or notification regarding changes in the Bank’s financial
condition, executive management or Board.


 


15.                                 (a)                                  During the life of this Order, the Bank shall comply with the provisions
of section 337.6 of the FDIC’s Rules and Regulations, 12 C.F.R. § 337.6.


 


(b)                                 Within 60 days from the effective date of this Order the
Bank shall submit to the Regional Director and
the Commissioner a written plan for eliminating its reliance on brokered
deposits.  The plan shall contain details
as to the current composition of brokered deposits by maturity and explain the
means by which such deposits will be reduced. 
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).  Such
plan and its implementation shall be satisfactory to the Regional Director and
the Commissioner as determined at subsequent examinations and/or visitations.


 


16.                                 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 Commissioner 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
Reports of Condition and Income.  Such
reports may be 


 


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discontinued
when the corrections required by this Order have been accomplished and the
Regional Director and the Commissioner have released the Bank in writing from
making further reports.


 


17.                                 Following the effective date of this Order, the Bank shall provide a copy
of the Order or otherwise furnish a description of the Order to its shareholder(s) in
conjunction with:


 


(a)                                  the Bank’s next shareholder communication; and


 


(b)                                 the notice or proxy statement preceding the Bank’s next shareholder
meeting.


 


The 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, Division of Supervision and Consumer Protection, Accounting and
Securities Disclosure Section, 550 17th Street, N.W., Washington, D.C. 20429, at least
20 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.


 


The provisions of this Order
shall not bar, estop, or otherwise prevent the FDIC, the CDFI, or any other
federal or state agency or department from taking any other action against the
Bank or any of the Bank’s current or former institution-affiliated parties, as
that term is defined in Section 3(u) of the FDI Act, 12 U.S.C. §
1813(u).


 


This Order will become
effective upon its issuance by the FDIC and the CDFI.


 


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 CDFI.


 


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Violation of any provisions
of this Order, will be deemed to be conducting business in an unsafe or unsound
manner, and will subject the Bank to further regulatory enforcement action.


 


Issued pursuant to delegated
authority


 


Dated at San Francisco,
California, this 18th day of May, 2010.


 


 


	
  /s/
  J. George Doerr

  	
   

  	
  /s/
  Craig A. Carlson

  
	
  J.
  George Doerr

  	
   

  	
  Craig
  A. Carlson

  
	
  Deputy
  Regional Director

  	
   

  	
  Senior
  Deputy Commissioner

  
	
  Risk
  Management

  	
   

  	
  and
  Chief Examiner

  
	
  Division
  of Supervision and Consumer Protection

  	
   

  	
  California
  Department of Financial

  
	
  San
  Francisco Region

  	
   

  	
  Institutions

  
	
  Federal
  Deposit Insurance Corporation

  	
   

  	
   

  



 


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