Common use of CREDIT UNDERWRITING Clause in Contracts

CREDIT UNDERWRITING. (1) Within sixty (60) days of the date of this Agreement, the Board shall ensure proper collateral documentation is maintained on all loans and correct each collateral exception listed in the most recent Report of Examination, in any subsequent Report of Examination, in any internal or external loan review, or in any listings of loans lacking such information provided to management in writing by the OCC. (2) Effective immediately, the Bank may grant, extend, renew, alter or restructure any loan or other extension of credit only after: (a) identifying the expected source of repayment in writing; (b) structuring the repayment terms to coincide with the expected source of repayment; (c) obtaining and analyzing current and satisfactory credit information, including cash flow analysis, where loans are to be repaid from operations; (d) documenting, with adequate supporting material, the value of collateral and properly perfecting the Bank's lien on the collateral where applicable; and (e) if a commercial loan, (i) underwriting is based on financial analysis of the borrower and the primary source of repayment with exceptions reported based on borrower financial analysis and the primary source of repayment, and (2) global cash flow performed to include guarantor and related entities. Failure to obtain the information in subparagraph (c) of this paragraph shall require a majority of the full Board, or a delegated committee thereof, to certify in writing the specific reasons why obtaining and analyzing the information in subparagraph (c) of this paragraph would be detrimental to the best interests of the Bank. A copy of the Board certification shall be maintained in the credit file of the affected borrower(s). (3) Within sixty (60) days of the date of this Agreement, the Board shall develop an appropriate written exception reporting process (“Exception Reporting Process”). At minimum, the Exception Reporting Process must include: (a) aggregated underwriting policy exceptions by key areas (debt-to-income, credit scores, and loan-to-value, as well as other criteria as appropriate) as identified in the Board approved Loan Policy for each loan type; (b) limits for exceptions by key exception type as well as overall exceptions based on dollar volume as a percent of capital for each portfolio; (c) exception reporting must include the actual debt-to-income, credit score, and loan-to-value, as well as any other criteria, of each loan rather than just stating that it is outside policy limits; (d) the supervisory loan to value limits set forth in the Appendix to 12 C.F.R. § 160.101, Interagency Guidelines for Real Estate Lending Practices; and (e) quarterly reporting to the Board. (4) Upon completion of the Exception Reporting Process developed pursuant to paragraph (3) of this Article, a copy shall be promptly submitted to the Assistant Deputy Comptroller for a prior written determination of no supervisory objection. At the next Board meeting following receipt of the Assistant Deputy Comptroller’s written determination of no supervisory objection to the Exception Reporting Process, the Board shall adopt and the Bank, subject to Board review and ongoing monitoring, shall implement and thereafter ensure adherence to the Exception Reporting Process. (5) Within ninety (90) days of the date of this Agreement, the Board shall ensure that management has reviewed all 2015 and 2016 loan originations, identified all supervisory loan-to- value exceptions during that time, and reported all those supervisory loan-to-value exceptions to the Board. (6) Within ninety (90) days of the date of this Agreement, the Board shall develop, implement, and thereafter ensure adherence to collateral valuation procedures for equipment lending, including the use and documentation of independent valuation sources. (7) Within ninety (90) days of the date of this Agreement, the Board shall ensure that management develops, implements, and thereafter ensures adherence to stress testing procedures for individual adjustable rate mortgages to ensure borrowers have the ability to repay in the event that the rate adjustments increase the required payments. (8) Within ninety (90) days of the date of this Agreement, the Board shall ensure that all employees responsible for completing commercial financial analysis are properly trained.

CREDIT UNDERWRITING. (1) Within sixty (60) days of the effective date of this Agreement, the Board shall revise, implement, and thereafter ensure Bank adherence to the Bank’s loan policies and procedures concerning loan modifications, extensions, renewals, and Troubled Debt Restructurings (“TDRs”), consistent with the Loan Portfolio Management booklet of the Comptroller’s Handbook, OCC Bulletin 2009-32 – Commercial Real Estate (CRE) Loans: Guidance on Prudent CRE Loan Workouts (Oct. 30, 2009), and OCC Bulletin 2012-10 – Troubled Debt Restructurings (Apr. 5, 2012), to ensure appropriate credit underwriting practices. At a minimum, the Bank’s revised loan policies and procedures shall address: (a) proper loan structuring of unsecured debt; (b) recognition of nonaccrual loans, consistent with U.S. Generally Accepted Accounting Principles (“GAAP”) and the instructions for the preparation of Consolidated Reports of Condition and Income (“Call Report”); (c) the use of loan extensions and renewals; and (d) any other deficiencies in the Bank’s lending procedures noted in the Report of Examination (“XXX”) dated April 8, 2013 (the “most recent XXX”). (2) Effective immediately, the Bank may grant, extend, renew, alter, or restructure any loan or other extension of credit only after: (a) documenting the specific reason or purpose for the extension of credit; (b) identifying the expected source of repayment in writing; (c) structuring the repayment terms to coincide with the expected source of repayment; (d) obtaining current and satisfactory credit information and performing and documenting a detailed financial analysis of such information, including a cash flow analysis of all expected repayment sources and an appropriate analysis of the guarantors’ current financial position where repayment is dependent in whole or in part on the support of a guarantor; (e) determining and documenting whether the loan conforms to the Bank’s Loan Policy, and if it does not conform, providing identification of the exception and ample justification to support waiving the policy exception; (f) making and documenting the determinations made regarding the customer’s ability to repay the credit on the proposed repayment terms; (g) providing an accurate risk assessment grade; and (h) documenting, with adequate supporting material, the value of collateral and properly perfecting the Bank’s lien on it where applicable. (3) The Board shall take the necessary steps to ensure that proper collateral documentation is maintained on all loans and correct each loans. Within thirty (30) days of notification, the Board shall ensure that the Bank obtains any missing collateral exception listed documentation described in the most recent Report of ExaminationXXX, in any subsequent Report of ExaminationXXX, in any internal or external loan review, or in any listings of loans lacking such information provided to management in writing by the OCCOCC examiners during any examination. (2) Effective immediately, the Bank may grant, extend, renew, alter or restructure any loan or other extension of credit only after: (a) identifying the expected source of repayment in writing; (b) structuring the repayment terms to coincide with the expected source of repayment; (c) obtaining and analyzing current and satisfactory credit information, including cash flow analysis, where loans are to be repaid from operations; (d) documenting, with adequate supporting material, the value of collateral and properly perfecting the Bank's lien on the collateral where applicable; and (e) if a commercial loan, (i) underwriting is based on financial analysis of the borrower and the primary source of repayment with exceptions reported based on borrower financial analysis and the primary source of repayment, and (2) global cash flow performed to include guarantor and related entities. Failure to obtain the information in subparagraph (c) of this paragraph shall require a majority of the full Board, or a delegated committee thereof, to certify in writing the specific reasons why obtaining and analyzing the information in subparagraph (c) of this paragraph would be detrimental to the best interests of the Bank. A copy of the Board certification shall be maintained in the credit file of the affected borrower(s). (34) Within sixty (60) days of the effective date of this Agreement, the Board shall develop an appropriate written exception reporting process take the necessary steps to ensure the Bank obtains appraisals and evaluations in compliance with 12 C.F.R. Part 34, OCC Bulletin 2005-6 – Frequently Asked Questions on the Appraisal Regulations and the Interagency Statement on Independent Appraisal and Evaluation Functions (“Exception Reporting Process”Mar. 22, 2005). At minimum, the Exception Reporting Process must include: OCC Bulletin 2010-42 –Interagency Appraisal and Evaluation Guidelines (a) aggregated underwriting policy exceptions by key areas (debt-to-incomeDec. 10, credit scores2010), and loan-to-value, as well as other criteria as appropriate) as identified in the Board approved Loan Policy for each loan type; (b) limits for exceptions by key exception type as well as overall exceptions based on dollar volume as a percent Uniform Standards of capital for each portfolio; (c) exception reporting must include the actual debt-to-income, credit score, and loan-to-value, as well as any other criteria, of each loan rather than just stating that it is outside policy limits; (d) the supervisory loan to value limits set forth in the Appendix to 12 C.F.R. § 160.101, Interagency Guidelines for Real Estate Lending Practices; and (e) quarterly reporting to the BoardProfessional Appraisal Practice. (4) Upon completion of the Exception Reporting Process developed pursuant to paragraph (3) of this Article, a copy shall be promptly submitted to the Assistant Deputy Comptroller for a prior written determination of no supervisory objection. At the next Board meeting following receipt of the Assistant Deputy Comptroller’s written determination of no supervisory objection to the Exception Reporting Process, the Board shall adopt and the Bank, subject to Board review and ongoing monitoring, shall implement and thereafter ensure adherence to the Exception Reporting Process. (5) Within ninety (90) days of the date of this Agreement, the Board shall ensure that management has reviewed all 2015 and 2016 loan originations, identified all supervisory loan-to- value exceptions during that time, and reported all those supervisory loan-to-value exceptions to the Board. (6) Within ninety (90) days of the date of this Agreement, the Board shall develop, implement, and thereafter ensure adherence to collateral valuation procedures for equipment lending, including the use and documentation of independent valuation sources. (7) Within ninety (90) days of the date of this Agreement, the Board shall ensure that management develops, implements, and thereafter ensures adherence to stress testing procedures for individual adjustable rate mortgages to ensure borrowers have the ability to repay in the event that the rate adjustments increase the required payments. (8) Within ninety (90) days of the date of this Agreement, the Board shall ensure that all employees responsible for completing commercial financial analysis are properly trained.