ex10-19.htm


    EXHIBIT
10.19

    


    UNITED
STATES OF AMERICA

    DEPARTMENT
OF THE TREASURY

    COMPTROLLER
OF THE CURRENCY

    


    
      
        
          
            	
                    In
      the Matter of:

                    Bay
      National Bank

                    Lutherville,
      MD

                  	
                    )

                    )

                    )

                  	 
      


          

        

      

    

    


    CONSENT
ORDER

    


    The
Comptroller of the Currency of the United States of America (“Comptroller”),
through his National Bank Examiner, has supervisory authority over Bay National
Bank, Lutherville, MD (“Bank”).

     

    The Bank,
by and through its duly elected and acting Board of Directors (“Board”), has
executed a “Stipulation and Consent to the Issuance of a Consent Order,” dated
February 6, 2009, that is accepted by the Comptroller.  By this
Stipulation and Consent, which is incorporated by reference, the Bank has
consented to the issuance of this Consent Order (“Order”) by the
Comptroller.

     

    Pursuant
to the authority vested in it by the Federal Deposit Insurance Act, as amended,
12 U.S.C. § 1818, the Comptroller hereby orders that:

    
 

    
      ARTICLE
V
                             

    

    COMPLIANCE
COMMITTEE

     

    (1) Within
thirty (30) days of the date of this Order, the Board shall appoint a Compliance
Committee of at least five (5) directors, of which no more than one (1) shall be
an employee or controlling shareholder of the Bank or any of its affiliates (as
the term “affiliate” is defined in 12 U.S.C. § 371c(b)(1)), or a
family member of any such person.  Upon appointment, the names of the
members of the Compliance Committee and, in the event of a change of the
membership, the name of any new member shall be submitted in writing to the
Assistant Deputy Comptroller.  The Compliance Committee shall be
responsible for monitoring and coordinating the Bank's adherence to the
provisions of this Order.

     

    (2) The
Compliance Committee shall meet at least monthly.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (3) Within
thirty (30) days of the date of this Order and every thirty (30) days
thereafter, the Compliance Committee shall submit a written progress report to
the Board setting forth in detail:

     

    
      	
              (a)  

            	
              a
      description of the action needed to achieve full compliance with each
      Article of this Order;

               

            


    

    
      	
              (b)  

            	
              actions
      taken to comply with each Article of this Order; and

               

            


    

    
      	
              (c)  

            	
              the
      results and status of those actions.

               

            


    

    (4) The Board
shall forward a copy of the Compliance Committee's report, with any additional
comments by the Board, to the Assistant Deputy Comptroller within ten (10) days
of receiving such report.

     

    (5) All
reports or plans which the Bank or Board has agreed to submit to the Assistant
Deputy Comptroller pursuant to this Order shall be forwarded, by overnight mail,
to the following:

     

    
      
        
          
            
              
                
                  
                    
                      	 	
                              MaryAnn
      H. Kennedy

                            
	 	
                              Assistant
      Deputy Comptroller

                            
	 	
                              Washington
      DC Satellite Office

                            
	 	
                              250
      E Street SW

                            
	 	
                              Mail
      Stop DCFO

                            
	 	
                              Washington,
      D.C.,
20219

                            


                    

                  

                

              

            

          

        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    ARTICLE
VI

     

    STRATEGIC
PLAN

     

    (1)           Within
thirty (30) days of the date of this Order, the Board shall provide the
Assistant Deputy Comptroller, for review and prior written determination of no
supervisory objection, with a written analysis on the Board’s decision whether
to sell, merge or liquidate the Bank or remain an independent national
bank.  The Board must consider and document in this written analysis
various scenarios, including, but not limited to:

     

    (a)           resolution
of problem assets (including related costs);

     

    (b)           viable
sources of liquidity (including related costs);

     

    
      	
               
      

            	
              (c)

            	
              achievement
      and maintenance of capital requirements as defined in Article III –
      Capital Plan and Higher Minimums detailed below; and

               

            


    

    
      	
               
      

            	
              (d)

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

               

            


    

     

    (2)           Should
the Board decide to sell, merge or liquidate the Bank, the written analysis
required under Paragraph (1) of this Article must also include timeframes and
procedures for achieving the sale, merger or liquidation of the Bank, and the
means by which the Board shall value and market the Bank.

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Bank
intends to promote or develop, together with strategies to achieve those
objectives and, at a minimum, include:

     

    
      	
               
      

            	
              (a)

            	
              a
      mission statement that forms the framework for the establishment of
      strategic goals and objectives;

               

            


    

    (b)           an
assessment of the Bank's present and future operating environment;

     

    
      	
               
      

            	
              (c)

            	
              the
      development of strategic goals and objectives to be accomplished over the
      short and long term;

               

            


    

    
      	
               
      

            	
              (d)

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

               

            


    

    
      	
               
      

            	
              (e)

            	
              an
      evaluation of the Bank's internal operations, staffing requirements, board
      and management information systems and policies and procedures for their
      adequacy and contribution to the accomplishment of the goals and
      objectives developed under (1)(c) of this Article;

               

            


    

    
      	
               
      

            	
              (f)

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

               

            


    

    
      	
               
      

            	
              (g)

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

               

            


    

    
      	
               
      

            	
              (h)

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

               

            


    

    
      	
               
      

            	
              (i)

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

               

            


    

    
      	
               
      

            	
              (j)

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

               

            


    

    
       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

    

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

                 

              
	
                 
      

              	
                (l)

              	
                systems
      to monitor the Bank’s progress in meeting the plan’s goals and objectives;
      and

                 

              


      

    

    
      	
               
      

            	
              (m)

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

               

            


    

    (4)           Prior
to adoption of the strategic plan by the Board, a copy shall be forwarded to the
Assistant Deputy Comptroller for review and determination of supervisory
non-objection. Such determination will be made within thirty (30) days of
receipt of the strategic plan. Immediately upon receiving a determination of
supervisory non-objection, the strategic plan shall be implemented.

     

    (5)           The
Bank must give the Assistant Deputy Comptroller at least sixty (60) days advance
written notice of its intent to deviate significantly from the strategic
plan.  The Board shall obtain the OCC’s written determination of no
supervisory objection before the Bank deviates significantly from the strategic
plan.

     

    (6)           For
purposes of this Article, changes that may constitute a significant deviation
from the strategic plan include, but are not limited to, any significant
deviations from marketing strategies, marketing partners, acquisition channels;
underwriting practices and standards, account management strategies and test
programs; collection strategies, partners or operations; fee structure, pricing,
or fee application methods; accounting processes and practices; funding
strategy; or any other changes in personnel, operations or external factors that
may have a material impact on the Bank's operations or financial
performance.

     

    (7)           Prior
to making any changes that significantly deviate from the Bank's strategic plan,
the Board shall perform an evaluation of the adequacy of the Bank's
organizational structure, staffing, 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    management
information systems, internal controls and written policies and procedures to
identify, measure, monitor, and control the risks associated with the new
product or service. The evaluation shall include an assessment of the impact of
such change on the Bank's condition, including a profitability
analysis.  For the purpose of this Order, a significant deviation
shall have the same meaning as that phrase is further described in Appendix G
(Significant Deviations After Opening) of the “Charters” booklet of the Comptroller’s Licensing Manual
(January 2005).

     

    (8)           The
Board shall ensure that the Bank has processes, personnel, and control systems
to ensure implementation of and adherence to the plan developed pursuant to this
Article.

     

    (9)           If
the OCC determines, in its sole judgment, that the Bank has failed to submit an
acceptable strategic plan as required by Paragraph (3) of this Article or has
failed to implement or adhere to the Bank’s specific, measurable, and verifiable
objectives included in the strategic plan, for which the OCC has taken no
supervisory objection pursuant to Paragraph (4) of this Article, will be deemed
an unsafe and unsound banking practice and a violation of this
Order.

    


    ARTICLE
VII

     

    CAPITAL PLAN AND HIGHER
MINIMUMS

     

    (1) The Bank
shall achieve by April 30, 2009, and thereafter maintain the following capital
levels (as defined in 12 C.F.R. Part 3):

     

    
      	
              (a)  

            	
              Total
      risk based capital equal to twelve (12.0%) percent of risk-weighted
      assets;

               

            


    

    
      	
              (b)  

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

               

            


    

    
      	
              (c)  

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

               

            


    

    (2) The
requirement in this Order to meet and maintain a specific capital level means
that the Bank may not be deemed to be “well capitalized” for purposes of
12 U.S.C. § 1831o and 12 C.F.R. Part 6 pursuant to 12 C.F.R.
§ 6.4(b)(1)(iv).

     

    (3) Within
sixty (60) days, the Board shall develop, implement, and thereafter ensure Bank
adherence to a three year capital program.  The program shall
include:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              (a)  

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

               

            


    

    
      	
              (b)  

            	
              projections
      for growth and capital requirements based upon a detailed analysis of the
      Bank's assets, liabilities, earnings, fixed assets, and off-balance sheet
      activities;

               

            


    

    
      	
              (c)  

            	
              projections
      of the sources and timing of additional capital to meet the Bank's current
      and future needs;

               

            


    

    
      	
              (d)  

            	
              the
      primary source(s) from which the Bank will strengthen its capital
      structure to meet the Bank's needs;

               

            


    

    
      	
              (e)  

            	
              contingency
      plans that identify alternative methods should the primary source(s) under
      (d) above not be available; and

               

            


    

    
      	
              (f)  

            	
              a
      dividend policy that permits the declaration of a dividend
      only:

               

            


    

    
      	
              (i)  

            	
              when
      the Bank is in compliance with its approved capital program;

               

            


    

    
      	
              (ii)  

            	
              when
      the Bank is in compliance with 12 U.S.C. §§ 56 and 60;
      and

               

            


    

    
      	
              (iii)  

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

               

            


    

    
      	
              (iv)  

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

               

            


    

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

     

    (5) The Board
shall ensure that the Bank has processes, personnel, and control systems to
ensure implementation of and adherence to the program developed pursuant to this
Article.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

    


    ARTICLE
VIII

     

    LIQUIDITY

     

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

     

    
      	
              (a)  

            	
              selling
      assets;

               

            


    

    
      	
              (b)  

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

               

            


    

    
      	
              (c)  

            	
              injecting
      additional equity capital.

               

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (2) The Board shall review the Bank's
liquidity on a monthly basis.  Such reviews shall
consider:

     

    
      	
              (a)  

            	
              maturity
      schedule of certificates of deposit, including large uninsured
      deposits;

               

            


    

    
      	
              (b)  

            	
              the
      volatility of demand deposits including escrow deposits;

               

            


    

    
      	
              (c)  

            	
              the
      amount and type of loan commitments and standby letters of
      credit;

               

            


    

    
      	
              (d)  

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

               

            


    

    
      	
              (e)  

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

               

            


    

    
      	
              (f)  

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

               

            


    

    
      	
              (g)  

            	
              geographic
      disbursement of and risk from brokered deposits.

               

            


    

    (3) The Board shall take appropriate action
to ensure adequate sources of liquidity in relation to the Bank's
needs.  Monthly reports shall set forth liquidity requirements and
sources and establish a contingency plan.  Copies of these reports
shall be forwarded to the Assistant Deputy Comptroller in the Bank’s monthly
report to the Assistant Deputy Comptroller.

     

    (4) Within thirty (30) days, the Board
shall revise their Contingency Funding Plan to include at least the
following:

     

    
      	
              (a)  

            	
              clear
      identification, quantification, availability and rank of all sources of
      funding by preference;

               

            


    

    
      	
              (b)  

            	
              modification
      of the liability structure or increasing liabilities;

               

            


    

    
      	
              (c)  

            	
              use
      of other alternative for controlling balance sheet changes;

               

            


    

    
      	
              (d)  

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

               

            


    

    
       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

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

    

    


    ARTICLE
IX

     

    BOARD
TO ENSURE COMPETENT MANAGEMENT

    (1) Within
sixty (60) days, the Board shall ensure that the Bank has competent management
in place on a full-time basis in its Credit Risk and Asset Liability Risk
Management functions, including the Chief Credit Officer and Chief Financial
Officer, to carry out the Board’s policies, ensure compliance with this Order,
applicable laws, rules and regulations, and manage the day-to-day operations of
the Bank in a safe and sound manner.

     

    (2) Within
ninety (90) days, the Board shall review the capabilities of the Bank’s
management to perform present and anticipated duties and the Board will
determine whether management changes will be made, including the need for
additions to or deletions from current management.

     

    (3) For
incumbent officers in the positions mentioned in Paragraph (1) of this Article,
the Board shall within ninety (90) days assess each of these officers’
experience, other qualifications and performance compared to the position’s
description, duties and responsibilities.

     

    (4) If the
Board determines that an officer will continue in his/her position but that the
officer’s depth of skills needs improvement, the Board will within one hundred
and twenty (120) days develop and implement a written program, with specific
time frames, to improve the officer’s supervision and management of the
Bank.  At a minimum the written program shall include:

     

    
      	
              (a)  

            	
              an
      education program designed to ensure that the officer has skills and
      abilities necessary to supervise effectively;

               

            


    

    
      	
              (b)  

            	
              a
      program to improve the effectiveness of the officer;

               

            


    

    
      	
              (c)  

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

               

            


    

    
       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (d)  a
performance appraisal program for evaluating performance according to the
position’s description and responsibilities and for measuring performance
against the Bank’s goals and objectives.

       

    

    (5)           Upon
completion, a copy of the written program required under Paragraph (4) of this
Article shall be submitted to the Assistant Deputy Comptroller.

     

    (6)           If
a position mentioned in Paragraph (1) of this Article is vacant now or in the
future, including  if the Board realigns an existing officer’s
responsibilities and a position mentioned in Paragraph (1) of this Article
becomes vacant, the Board shall within ninety (90) days of such vacancy appoint
a capable person to the vacant position who shall be vested with sufficient
executive authority to ensure the Bank’s compliance with this Order and the safe
and sound operation of functions within the scope of that position’s
responsibility.

     

    (7)           Prior
to the appointment of any individual to an executive officer position, the Board
shall submit to the Assistant Deputy Comptroller the following
information:

     

    
      	
               
      

            	
              (a)

            	
              the
      information sought in the “Changes in Directors and Senior Executive
      Officers” and “Background Investigations” booklets of the Comptroller’s
      Licensing Manual, together with a legible fingerprint card for the
      proposed individual

               

            


    

    
      	
               
      

            	
              (b)

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

               

            


    

    (c)           a
written description of the proposed officer's duties and
responsibilities.

     

    (8)           The
Assistant Deputy Comptroller shall have the power to disapprove the appointment
of the proposed new officer.  However, the lack of disapproval of such
individual shall not constitute an approval or endorsement of the proposed
officer.

     

    (9)           The
requirement to submit information and the prior disapproval provisions of this
Article are based on the authority of 12 U.S.C. § 1818(b)(6)(E) and do
not require the Comptroller to complete his/her review and act on any such
information or authority within ninety (90) days.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    ARTICLE
X

     

    CRITICIZED
ASSETS

     

    (1) The Bank
shall take immediate and continuing action to protect its interest in those
assets criticized in the ROE, in any subsequent Report of Examination, by
internal or external loan review, or in any list provided to management by the
National Bank Examiners during any examination.

     

    (2) Within
ninety (90) days, the Board shall adopt, implement, and thereafter ensure Bank
adherence to a written program designed to eliminate the basis of criticism of
assets criticized in the ROE, in any subsequent Report of Examination, or by any
internal or external loan review, or in any list provided to management by the
National Bank Examiners during any examination as "doubtful," "substandard," or
"special mention."  This program shall include, at a
minimum:

     

    
      	
              (a)  

            	
              an
      identification of the expected sources of repayment;

               

            


    

    
      	
              (b)  

            	
              the
      appraised value of supporting collateral and the position of the Bank's
      lien on such collateral where applicable;

               

            


    

    
      	
              (c)  

            	
              an
      analysis of current and satisfactory credit information, including cash
      flow analysis where loans are to be repaid from operations;
      and

               

            


    

    
      	
              (d)  

            	
              the
      proposed action to eliminate the basis of criticism and the time frame for
      its accomplishment (“problem loan action plan”).

               

            


    

    (3) Upon
adoption, a copy of the program for all criticized assets equal to or exceeding
one hundred and fifty thousand dollars ($150,000) shall be forwarded to the
Assistant Deputy Comptroller.

     

    (4) The Board
shall ensure that the Bank has processes, personnel, and control systems to
ensure implementation of and adherence to the program developed pursuant to this
Article.

     

    (5) The
Board, or a designated committee, shall conduct a review, on at least a monthly
basis, to determine:

     

    
      	
              (a)  

            	
              the
      status of each criticized asset or criticized portion thereof that equals
      or exceeds one hundred and fifty thousand dollars ($150,000);

               

            


    

    
      	
              (b)  

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

               

            


    

    
       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

       

    

    
      	(c)  	
              the
      status and effectiveness of the written program; and

               

            
	
              (d)  

            	
              the
      need to revise the program or take alternative action.

               

            


    

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

    


    ARTICLE
XI

     

    ALLOWANCE FOR LOAN AND LEASE
LOSSES

     

    (1)           By
March 1, 2009, the Board shall review the adequacy of the Bank’s Allowance for
Loan and Lease Losses (“ALLL”) and shall adopt, implement, and thereafter ensure
adherence to written policies and procedures for maintaining an adequate ALLL in
accordance with generally accepted accounting principles.  The ALLL
policies and procedures shall be consistent with the guidance set forth in the
Federal Financial Institutions Examination Council’s “Interagency Policy
Statement on the Allowance for Loan and Lease Losses” dated December 13, 2006
(OCC Bulletin 2006-47), and shall at a minimum include:

     

    
      	
              (a)  

            	
              procedures
      for determining whether a loan is impaired and measuring the amount of
      impairment, consistent with FASB Statement of Financial Accounting
      Standards No. 114, Accounting by Creditors for Impairment of a
      Loan;

               

            


    

    
      	
              (b)  

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

               

            


    

    
      	
              (c)  

            	
              procedures
      for validating the ALLL methodology;

               

            


    

    
      	
              (d)  

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

               

            


    

    
       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

       

    

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

               

            
	
              (f)  

            	
              results
      of the Bank's external loan review;

               

            


    

    
      	
              (g)  

            	
              an
      estimate of inherent loss exposure on each significant
credit;

               

            


    

    
      	
              (h)  

            	
              trends
      of delinquent, non-performing, and nonaccrual loans;

               

            


    

    
      	
              (i)  

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

               

            


    

    
      	
              (j)  

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

               

            


    

    (2)           The
program shall provide for a review of the Allowance by the Board at least once
each calendar quarter.  Any deficiency in the Allowance shall be
remedied in the quarter it is discovered, prior to the filing of the
Consolidated Reports of Condition and Income, by additional provisions from
earnings.  Written documentation shall be maintained indicating the
factors considered and conclusions reached by the Board in determining the
adequacy of the Allowance.

     

    (3)           A
copy of the Board's program shall be submitted to the Assistant Deputy
Comptroller for review and prior written determination of no supervisory
objection.  Upon receiving a determination of no supervisory objection
from the Assistant Deputy Comptroller, the Bank shall implement and adhere to
the program.

     

    (4)           The
Board shall ensure that the Bank has processes, personnel, and control systems
to ensure implementation of and adherence to the policies and procedures
developed pursuant to this Article.

    


    ARTICLE
XII

     

    LOAN PORTFOLIO
MANAGEMENT

     

    (1)           The
Board shall, within ninety (90) days, develop, implement, and thereafter ensure
Bank adherence to a written program to improve the Bank's loan portfolio
management.  The program shall include, but not be limited
to:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              (a)  

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

               

            


    

    
      	
              (b)  

            	
              procedures
      to ensure satisfactory and perfected collateral
documentation;

               

            


    

    
      	
              (c)  

            	
              procedures
      to ensure that extensions of credit are granted, by renewal or otherwise,
      to any borrower only after obtaining and analyzing current and
      satisfactory credit information;

               

            


    

    
      	
              (d)  

            	
              procedures
      to ensure conformance with loan approval requirements;

               

            


    

    
      	
              (e)  

            	
              a
      system to track and analyze exceptions;

               

            


    

    
      	
              (f)  

            	
              procedures
      to ensure conformance with Call Report instructions;

               

            


    

    
      	
              (g)  

            	
              procedures
      to ensure the accuracy of internal management information
      systems;

               

            


    

    
      	
              (h)  

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

               

            


    

    
      	
              (i)  

            	
              procedures
      to track and analyze concentrations of credit; including stress testing
      for the significant economic factors and general conditions that impact
      the credit quality of the Bank’s loan and lease portfolios.

               

            


    

    (2) Upon
completion, a copy of the program shall be forwarded to the Assistant Deputy
Comptroller.

     

    (3) Within
one hundred and twenty days (120) days, the Board shall develop, implement, and
thereafter ensure Bank adherence to systems which provide for effective
monitoring of:

     

    
      	
              (a)  

            	
              early
      problem loan identification to assure the timely identification and rating
      of loans and leases based on lending officer submissions;

               

            


    

    
       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

    

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

               

            
	
              (c)  

            	
              previously
      charged-off assets and their recovery potential;

               

            


    

    
      	
              (d)  

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

               

            


    

    
      	
              (e)  

            	
              adequacy
      of credit and collateral documentation; and

               

            


    

    
      	
              (f)  

            	
              concentrations
      of credit as described in the Report of
  Examination.

            


    

     

    (4) Management
will continue to provide the Board, on a monthly basis, with written reports
including, at a minimum, the following information:

     

    
      	
              (a)  

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

            
	 	 


    

    
      	
              (b)  

            	
              the
      identification and amount of delinquent loans and
  leases;

            
	 	 


    

    
      	
              (c)  

            	
              credit
      and collateral documentation exceptions;

            
	 	 


    

    
      	
              (d)  

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

            
	 	 


    

    
      	
              (e)  

            	
              the
      identity of the loan officer who originated each loan reported in
      accordance with subparagraphs (a) through (d) of this Article and
      Paragraph;

            
	 	 


    

    
      	
              (f)  

            	
              an
      analysis of concentrations of credit, significant economic factors, and
      general conditions and their impact on the credit quality of the Bank’s
      loan and lease portfolios;

            
	 	 


    

    
      	
              (g)  

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

            
	 	 


    

    
      	
              (h)  

            	
              the
      identification of loans and leases not in conformance with the Bank's
      lending and leasing policies, and exceptions to the Bank’s lending and
      leasing policies.

            
	 	 


    

    (5) The Board
shall ensure that the Bank has processes, personnel, and control systems to
ensure implementation of and adherence to the program and systems developed
pursuant to this Article.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    ARTICLE
XIII

     

    CONCENTRATIONS OF
CREDIT

     

    (1) Within
ninety (90) days, the Board shall adopt, implement, and thereafter ensure Bank
adherence to a written asset diversification program consistent with OCC
Bulletin 2006-46, Guidance on Concentrations in Commercial Real Estate Lending,
Sound Risk Management Practices.  The program shall include, but not
necessarily be limited to, the following:

     

    
      	
              (a)  

            	
              a
      review of the balance sheet to identify any concentrations of credit which
      must include a meaningful segmentation of concentrations considering
      appropriate risk characteristics such as:

               

            
	 	
              (i) 
      product
      or property type;

               

            
	 	
              (ii) geographic
      location; or

               

            
	 	
              (iii) industry.

               

            


    

    
    

    
    

    
    

    
      	
              (b)  

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

               

            


    

    
      	
              (c)  

            	
              policies
      and procedures to control and monitor concentrations of credit;
      and

               

            


    

    
      	
              (d)  

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

               

            


    

    (2) For
purposes of this Article, a concentration of credit is as defined in the “Loan
Portfolio Management” booklet of the Comptroller's
Handbook.

     

    (3) The Board
shall ensure that future concentrations of credit are subjected to the analysis
required by subparagraph (b) of Paragraph (1) of this Article and that the
analysis demonstrate that the concentration will not subject the Bank to undue
credit or interest rate risk.

     

    (4) The Board
shall forward a copy of any analysis performed on existing or potential
concentrations of credit to the Assistant Deputy Comptroller immediately
following the review.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (5) The Board
shall ensure that the Bank has processes, personnel, and control systems to
ensure implementation of and adherence to the program developed pursuant to this
Article.

    


    ARTICLE
XIV

    INDEPENDENT
LOAN REVIEW

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

     

    
      	
              (a)  

            	
              the
      overall quality of the loan and lease portfolios;

               

            


    

    
      	
              (b)  

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

               

            


    

    
      	
              (c)  

            	
              the
      identification and amount of delinquent loans and leases;

               

            


    

    
      	
              (d)  

            	
              credit
      and collateral documentation exceptions;

               

            


    

    
      	
              (e)  

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

               

            


    

    
      	
              (f)  

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

               

            


    

    
      	
              (g)  

            	
              concentrations
      of credit;

               

            


    

    
      	
              (h)  

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

               

            


    

    
      	
              (i)  

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

               

            


    

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     basis.  The
program shall require a quarterly report to the Board.  At a minimum
the program shall provide for an independent reviewer’s assessment of the
Bank’s:

     

    
      	
              (j)  

            	
              monitoring
      systems for early problem loan identification to assure the timely
      identification and rating of loans and leases based on lending officer
      submissions;

               

            


    

    
      	
              (k)  

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

               

            


    

    
      	
              (l)  

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

               

            


    

    
      	
              (m)  

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

               

            


    

    
      	
              (n)  

            	
              system
      for monitoring the adequacy of credit and collateral
      documentation.

               

            


    

    (3)           A
written description of the program called for in this Article shall be forwarded
to the Assistant Deputy Comptroller upon implementation.

     

    (4)           The
Board shall ensure that the Bank has processes, personnel, and control systems
to ensure implementation of and adherence to the program developed pursuant to
this Article.

     

    (5)           The
Board shall evaluate the internal loan and lease review report(s) and shall
ensure that immediate, adequate, and continuing remedial action, if appropriate,
is taken upon all findings noted in the report(s).

     

    (6)           A
copy of the reports submitted to the Board, as well as documentation of the
action taken by the Bank to collect or strengthen assets identified as problem
credits, shall be preserved in the Bank.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
XV

     

    CLOSING

     

    (1) Although
the Board is by this Order required to submit certain proposed actions and
programs for the review or prior written determination of no supervisory
objection of the Assistant Deputy Comptroller, the Board has the ultimate
responsibility for proper and sound management of the Bank.

     

    (2) It is
expressly and clearly understood that if, at any time, the Comptroller deems it
appropriate in fulfilling the responsibilities placed upon it by the several
laws of the United States of America to undertake any action affecting the Bank,
nothing in this Order shall in any way inhibit, estop, bar or otherwise prevent
the Comptroller from so doing.

     

    (3) Any time
limitations imposed by this Order shall begin to run from the effective date of
this Order.  Such time limitations may be extended in writing by the
Assistant Deputy Comptroller for good cause upon written application by the
Board.

     

    (4) The
provisions of this Order are effective upon issuance of this Order by the
Comptroller, through his authorized representative whose hand appears below, and
shall remain effective and enforceable, except to the extent that, and until
such time as, any provisions of this Order shall have been amended, suspended,
waived, or terminated in writing by the Comptroller.

     

    (5) In each
instance in this Order in which the Board is required to ensure adherence to,
and undertake to perform certain obligations of the Bank, it is intended to mean
that the Board shall:

     

    (a) authorize
and adopt such actions on behalf of the Bank as may be necessary for the Bank to
perform its obligations
and undertakings under the terms of this Order;

     

    (b) require
the timely reporting by Bank management of such actions directed by the Board to
be taken under the terms
of this Order;

     

    (c) follow-up
on any non-compliance with such actions in a timely and appropriate manner;
and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d) require
corrective action be taken in a timely manner of any non-compliance with such
actions.

     

    (6) This
Order is intended to be, and shall be construed to be, a final order issued
pursuant to 12 U.S.C. § 1818(b), and expressly does not form, and may not
be construed to form, a contract binding on the Comptroller or the United
States.

     

    (7) The terms
of this Order, including this paragraph, are not subject to amendment or
modification by any extraneous expression, prior agreements or prior
arrangements between the parties, whether oral or written.

    


    IT IS SO
ORDERED, this          
 day of              
,         
.

    


    


    


    
      
        	
                                                                                                             
      

                MaryAnn
      H. Kennedy

                Assistant
      Deputy Comptroller

                Washington
      DC Satellite Office