form103otscease.htm


     

    
 

    UNITED STATES OF AMERICA

    Before
the

    OFFICE
OF THRIFT SUPERVISION

     

    
      	 
      


    

    
      	
              

            


    

     

     

    
       

      ORDER TO CEASE AND
DESIST

       

      WHEREAS,
WaterStone Financial Inc., Wauwatosa, Wisconsin, OTS Docket No. H4398 (Mid-Tier
Holding Company), by and through its Board of Directors (Board) has executed a
Stipulation and Consent to the Issuance of an Order to Cease and Desist
(Stipulation); and

      WHEREAS,
the Mid-Tier Holding Company, by executing the Stipulation, has consented and
agreed to the issuance of this Order to Cease and Desist (Order) by the Office
of Thrift Supervision (OTS) pursuant to 12 U.S.C. § 1818(b); and

      WHEREAS,
pursuant to delegated authority, the OTS Regional Director for the Central
Region (Regional Director), is authorized to issue consent Orders to Cease and
Desist where a savings and loan holding company has consented to the issuance of
an order.

       

      NOW,
THEREFORE, IT IS ORDERED that:

       

      Cease and
Desist.

       

      1.The
Mid-Tier Holding Company shall cease and desist from engaging in unsafe
or


      
        
          
            
              	
                      WaterStone
      Financial Inc.

                      Order
      to Cease and Desist

                      Page 1 of
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      unsound
practices that resulted in it operating with insufficient earnings and an
inadequate level of capital for its risk profile.

      Capital
Plan.

       

      
        	
                2.

              	
                (a)

              	
                No
      later than December 31, 2009, the Board shall develop and submit to the
      Regional
      Director for review and comment, a written two-year capital enhancement
      plan (Capital Plan), which shall take into consideration the requirements
      contained within this Order, and the comments contained within the OTS
      Report of Examination dated August 10, 2009 (ROE) of the enterprise
      consisting of the Mid-Tier Holding Company and its parent company,
      Lamplighter Financial, MHC, Wauwatosa, Wisconsin, OTS Docket No. H439. At
      a minimum, the Capital Plan shall
  include:

              


      

      
      

      
        	
                (i)  

              	
                the
      establishment of capital targets that are commensurate with the Mid-Tier
      Holding Company's consolidated risk profile;

                 

                 

              


      

      
        	
                (ii)  

              	
                specific
      strategies, such as stock issuances or merger plans, and timelines for
      increasing and maintaining consolidated capital 

                 

                 

                of
      the Mid-Tier
      Holding Company to Board established targets;

                 

                 

              


      

      
        	
                (iii)  

              	
                detailed
      plans to meet and maintain at the Mid-Tier Holding Company's wholly-owned
      savings association subsidiary, 

                 

                 

                WaterStone
      Bank, SSB, Wauwatosa, Wisconsin: (A) Tier 1 Capital Ratio equal to or
      greater than eight and one-half 

                 

                 

                percent
      (8.5%); and (B) Total Risk-Based Capital Ratio equal to or greater than
      twelve percent (12%); and

                 

                 

              


      

      
        	
                (iv)  

              	
                detailed
      quarterly pro forma consolidated and unconsolidated Mid-Tier Holding
      Company balance sheets and income statements

                 

                 

                for
      a rolling two-year period beginning with the quarter ending December 31,
      2009: and

                 

                 

              


      


      
        
          
            
              	
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      Financial Inc.

                      Order
      to Cease and Desist

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             (v)            detailed
descriptions of all relevant assumptions and projections and supporting
documentation for the 

              assumptions and
projections.

      (b) Within
thirty (30) days after receiving any written comments from the Regional
Director, the Board shall revise and adopt the Capital Plan 

      based on
such comments.  The
Mid-Tier Holding Company shall implement and adhere to the Capital Plan. A copy
of the Capital Plan shall 

      be
provided to the Regional Director within five (5) days
after the Board approval.

       

       

      (c) Once the
Capital Plan is implemented, the Mid-Tier Holding Company shall operate within
the parameters of its Capital Plan. Any proposed 

       

       

      material
deviations from or
changes to the Capital Plan shall be submitted for the prior, written
non-objection of the Regional Director. Requests

       

       

      for any
material deviations or changes must be
submitted at least sixty (60) days before a proposed change is
implemented.

       

       

      (d) The
Mid-Tier Holding Company shall notify the Regional Director regarding any
material event adversely affecting or that may adversely 

       

       

      affect
the capital or capital
projections of the Mid-Tier Holding Company within five (5) days after such
event.

       

       

      (e) Within
sixty (60) days of the close of each quarter, beginning with the quarter ending
December 31, 2009, the Mid-Tier Holding Company 

       

       

      shall
submit to the Board and
the Regional Director a written report that compares projected operating results
contained within the Capital 

       

       

      Plan to
actual results (Capital Plan Variance
Report). The Board's review of the Capital Plan Variance Report and assessment
of the Mid-Tier 

       

       

      Holding
Company's compliance with the Capital Plan shall be
fully documented in the appropriate Board meeting minutes.

       


      
        
          
            
              	
                      WaterStone
      Financial Inc.

                      Order
      to Cease and Desist

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      Dividends and other Capital
Distributions.

       

      3. Effective
immediately, the Mid-Tier Holding Company shall not declare, make, or pay any
cash dividends or other capital distributions or purchase, 

       

       

      repurchase
or redeem or commit to purchase, repurchase, or redeem any Mid-Tier Holding
Company equity stock without the prior written non-objection 

       

       

      of the
Regional Director. The Mid-Tier Holding Company shall submit its written request
for non-objection to the Regional Director at least forty-five (45)


       

       

      days
prior to the anticipated date of the proposed dividend, capital distribution, or
stock transaction. The written request for such notice of non-objection


       

       

      shall:
(a) contain current and pro forma projections regarding the Mid-Tier Holding
Company's capital and earnings; and (b) address compliance with the


       

       

      Capital
Plan required by Paragraph 2 of this Order.

       

       

      Debt
Restrictions.

       

      4. Effective
immediately, the Mid-Tier Holding Company shall not, directly or indirectly,
incur, issue, renew, or rollover any debt or commit to do so, increase


       

       

      any
current lines of credit, or guarantee the debt of any entity, without prior
written notice to and written non-objection from the Regional Director. The


       

       

      Mid-Tier
Holding Company's written request for approval shall be submitted to the
Regional Director at least thirty (30) days prior to incurring, issuing,


       

       

      renewing,
rolling
over any debt, increasing any current lines of credit, or guaranteeing the debt
of any entity. The Mid-Tier Holding Company's written 

       

       

      requests
for Regional Director
non-objection to engage in such debt transactions, at a minimum, shall: (a)
describe the purpose of the proposed 

       

       

      debt; (b)
set forth and analyze the terms of the
proposed debt and covenants; (c) analyze the Mid-Tier Holding Company's current
cash flow 

       

       

      resources
available to satisfy such debt repayment; and (d) set forth the
anticipated source(s) of repayment of the proposed debt. For purposes


       

       

      of this
Paragraph of the Order, the term "debt" includes, but is not limited to,
loans,

       


      
        
          
            
              	
                      WaterStone
      Financial Inc.

                      Order
      to Cease and Desist

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      bonds,
cumulative preferred stock, hybrid capital instruments such as subordinated debt
or trust preferred securities, and guarantees of debt. For 

      purposes
of this Paragraph
of the Order, the term "debt" does not include liabilities incurred in the
ordinary course of business to acquire goods 

      and
services and that are normally recorded
as accounts payable under generally accepted accounting principles.

      Directorate and Management
Changes.

       

      5. Effective
immediately, the Mid-Tier Holding Company shall comply with the prior
notification requirements for changes in directors and Senior 

       

       

      Executive
Officers' set forth in 12 CFR
Part 563, Subpart H.

       

       

      Severance and
Indemnification Payments.

       

      6. Effective
immediately, the Mid-Tier Holding Company shall not make any golden parachute
payment2 or
any prohibited indemnification 

       

       

      payment3
unless, with respect to each such
payment, the Mid-Tier Holding Company has complied with the requirements of 12
CFR 

       

       

      Part 359
and, as to indemnification payments, 12 C.F.R. §§ 545.121 and 575.11(f).


       

       

      Employment
Contracts and Compensation Arrangements.

       

      7. Effective
immediately, the Mid-Tier Holding Company shall not enter into, renew,
extend or
revise any contractual arrangement related to 

      compensation
or benefits with any director or Senior Executive Officer of the Mid-Tier
Holding Company, unless it first provides the Regional 

      Director
with not less than thirty (30) days prior written notice of the proposed
transaction. The notice to the Regional Director shall include 

      a copy of
the proposed employment contract or compensation arrangement, or a detailed,
written description
of the

      ____________________________________

      1
The term "Senior Executive Officer" is defined at 12 C.F.R. §
563.555.

      2 The
term "golden parachute payment" is defined at 12 C.F.R. § 359.1(f).

      3 The
term "prohibited indemnification payment" is defined at 12 C.F.R. §
359.1(1).


      
        
          
            
              	
                      WaterStone
      Financial Inc.

                      Order
      to Cease and Desist

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      compensation
arrangement to be offered to such officer or director, including all benefits
and perquisites. The Board shall ensure that any contract, 

      agreement
or arrangement submitted to OTS fully complies with the requirements of 12
C.F.R. Part 359, 12 C.F.R. §§ 563.39 and 563.161(b), 575.11(g), 

      and 12
C.F.R. Part 570-Appendix A.

       

      Affiliate
Transactions.

       

      8. Effective
immediately, the Mid-Tier Holding Company shall not engage in transactions with
any subsidiary or affiliate without the prior written 

       

       

      non-objection
of the Regional
Director, except: (a) exempt transactions under 12 C.F.R. Part 223; and (b)
intercompany cost-sharing transactions 

       

       

      identified
in executed written agreements between
the parties. The Mid-Tier Holding Company shall provide thirty (30) days advance
written 

       

       

      notice to
the Regional Director of any proposed affiliate transaction and shall
include a full description of the transaction. 

       

       

      Effective
Date, Incorporation of Stipulation.

       

       

      9. This
Order is effective on the Effective Date as shown on the first page. The
Stipulation is made a part hereof and is incorporated 

       

       

      herein by
this reference.

       

       

      Duration.

       

      10. This
Order shall remain in effect until terminated, modified or suspended, by written
notice of such action by the OTS, acting by 

       

       

      and
through its authorized
representatives. 

       

       

      Time
Calculations.

       

       

      11. Calculation
of time limitations for compliance with the terms of this Order run from the
Effective Date and shall be calendar based, 

       

       

      unless
otherwise noted.

       

      12. The
Regional Director, or an OTS authorized representative, may extend any of the
deadlines
set forth in the provisions of this Order 

      upon
written request by the
Mid-Tier Holding Company
that includes reasons in support for any such extension. Any OTS extension


      shall be
made in writing.

       

      
        
          
            WaterStone
Financial Inc.

            Order to
Cease and Desist

            Page 6 of
8

          

        

        
          
          

          
          

        

        
          
          

        

      

      Submissions and
Notices.

       

      13. All
submissions, including progress reports, to OTS that are required by or
contemplated by this Order shall be submitted within the specified
timeframes.

       

       

      14. Except as
otherwise provided herein, all submissions, requests, communications, consents
or other documents relating to this Order shall be in writing 

       

       

      and
sent by
first class U.S mail (or by reputable overnight carrier, electronic facsimile
transmission or hand delivery by messenger) addressed as follows:

       

                   (a)  To
the OTS:

       

          Regional
Director

          Office of
Thrift Supervision

          One South
Wacker Drive, Suite 2000 

          Chicago,
Illinois 60606

          Facsimile:
(312) 917-5001

       

                   (b)  To
the Mid-Tier Holding Company:

       

          Chairman of
the Board

          WaterStone
Financial Inc. 

          11200 West
Plank Court

          Wauwatosa,
Wisconsin 53226 

          Facsimile:
(414) 918-0910


      
        
          
            
              	
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      Financial Inc.

                      Order
      to Cease and Desist

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      No Violations
Authorized.

       

       

      15.           Nothing
in this Order or the Stipulation shall be construed as allowing the Mid-Tier
Holding
Company, its Board, officers or employees to violate 

       

       

      any law,
rule, or regulation.

       

       

      IT
IS SO ORDERED.

       

              
OFFICE OF THRIFT SUPERVISION

       

      
        	
                 
      

              	
                By:  
      __________________________________

              


      

       

      
        	
                 
      

              	
                         Daniel
      T. McKee

              

                                                                                                                  
Regional Director, Central Region

       

               
Date: See Effective Date on page 1


      
        
          
            
              	
                      WaterStone
      Financial Inc.

                      Order
      to Cease and Desist

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