UNITED STATES OF AMERICA BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C.
UNITED
STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
|
Written
Agreement by and between
FRONTIER FINANCIAL CORPORATION
Everett, Washington
and
FEDERAL RESERVE BANK OF
SAN FRANCISCO
San Xxxxxxxx, California
|
|
Docket
No. 09-073-WA/XX-XX
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WHEREAS,
Frontier Financial Corporation, Everett, Washington (“FFC”), a registered bank
holding company, owns and controls Frontier Bank, Everett, Washington (the
“Bank”), a state chartered nonmember bank, and various nonbank
subsidiaries;
WHEREAS, it
is the common goal of FFC and the Federal Reserve Bank of San Francisco (the
“Reserve Bank”) to maintain the financial soundness of FFC so that FFC may serve
as a source of strength to the Bank;
WHEREAS, FFC
and the Reserve Bank have mutually agreed to enter into this Written Agreement
(the “Agreement”); and
WHEREAS, on
June 24, 2009, the board of directors of FFC, at a duly constituted meeting,
adopted a resolution authorizing and directing Xxxxxxx X. Xxxxx to enter into
this Agreement on behalf of FFC and consenting to compliance with each and every
provision of this Agreement by FFC and its institution-affiliated parties, as
defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as
amended (the “FDI Act”) (12 U.S.C. §§ 1813(U) AND 1818(B)(3).
NOW, THEREFORE, FFC and the Reserve
Bank agree as follows:
Dividends
and Distributions
1.
(a) FFC shall
not declare or pay any dividends without the prior written approval of the
Reserve Bank and the Director of the Division of Banking Supervision and
Regulation (the “Director”) of the Board of Governors of the Federal Reserve
system (the “Board of Governors”).
(b) FFC
shall not directly or indirectly take dividends or any other form of payment
representing a reduction in capital from the Bank without the prior written
approval of the Reserve Bank.
(c) FFC
and its nonbank subsidiaries shall not make any distributions of interest,
principal, or other sums on subordinated debentures or trust preferred
securities without the prior written approval of the Reserve Bank and the
Director.
(d) All
requests for prior approval shall be received by the Reserve Bank at least 30
days prior to the proposed dividend declaration date, proposed distribution on
subordinated debentures, and required notice of deferral on trust preferred
securities. All requests shall contain, at minimum, current and
projected information on FFC’s capital, earnings, and cash flow; the Bank’s
capital, asset quality, earnings, and allowance for loan and lease losses; and
identification of the sources of funds for the proposed payment or
distribution. For requests to declare or pay dividends, FFC must also
demonstrate that the requested declaration or payment of dividends is consistent
with the Board of Governors’ Policy Statement on the Payment of Cash Dividends
by State Member Banks and Bank Holding Companies, dated November 14, 1985
(Federal Reserve Regulatory Service, 4-877 at page 4-323).
Debt
and Stock Redemption
2.
(a) FFC, and
any nonbank subsidiary, shall not, directly or indirectly, incur, increase, or
guarantee any debt without the prior written approval of the Reserve
Bank. All requests for prior written approval shall contain, but not
be limited to, a statement regarding the purpose of the debt, the terms of the
debt, and the planned source(s) for debt repayment, and an analysis of the cash
flow resources available to meet such debt repayment.
(b) FFC
shall not, directly or indirectly, purchase or redeem any shares of its stock
without the prior written approval of the Reserve Bank.
Capital
Plan
3. Within
60 days of this Agreement, FFC shall submit to the Reserve Bank an acceptable
written plan to maintain sufficient capital at FFC, on a consolidated basis, and
at the Bank, as a separate legal entity on a stand-alone basis. The
plan shall, at a minimum, address, consider, and include:
(a) The
consolidate organization’s and the Bank’s current and future capital
requirements, including compliance with the Capital Adequacy Guidelines for Bank
Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A
and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, app. A and
D) and the applicable capital adequacy guidelines for the Bank issued by the
Bank’s federal regulator;
(b) the
adequacy of the Bank’s capital, taking into account the volume of classified
credits, concentrations of credit, allowance for loan and lease losses, current
and projected asset growth, and projected retained earnings;
(c) the
source and timing of additional funds necessary to fulfill the consolidated
organization’s and the Bank’s future capital requirements;
(d) supervisory
requests for additional capital at the Bank or the requirements of any
supervisory action imposed on the Bank by its federal regulator;
and
(e) the
requirements of section 225.4(a) of Regulation Y of the Board of Governors (12
C.F.R. § 225.4(a) that FFC serve as a source of strength to the
Bank
4. FFC
shall notify the Reserve Bank, in writing, no more than 30 days after the end of
any quarter in which any of FFC’s or the Bank’s capital ratios (total
risk-based, Tier 1 risk-based, or leverage) fall below the plan’s minimum
ratios. Together with the notification, FFC shall submit an acceptable written
plan that details the steps that FFC and the Bank will take to increase FFC’s or
the Bank’s capital ratios to or above the plan’s minimums.
Compliance
with Laws and Regulations
5.
(a) In
appointing any new director or senior executive officer, or changing the
responsibilities of any senior executive officer so that the officer would
assume a different senior executive officer position, FFC shall comply with the
notice provisions of section 32 of the FDI Act (12 U.S.C. § 183li) and Subpart H
of Regulation Y of the Board of Governors
(12
C.F.R. §§ 225.71 et
seq.).
(b) FFC
shall comply with the restrictions on indemnification and severance payments of
section 18(k) of the FDI Act (12 U.S.C. § 1828(k) and Part 359 of the Federal
Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).
Progress
Reports
6. Within
30 days after the end of each calendar quarter following the date of this
Agreement, the board of directors shall submit to the Reserve Bank written
progress reports detailing the form and manner of all actions taken to secure
compliance with the provisions of this Agreement and the results thereof, and a
parent company only balance sheet, income statement, and as applicable, report
of changes in stockholders’ equity.
Approval
and Implementation of Plan
7.
(a) FFC shall
submit a written capital plan that is acceptable to the Reserve Bank within the
applicable time period set forth in paragraph 3 of this Agreement.
(b) With
10 days of approval by the Reserve Bank, FFC shall adopt the approved capital
plan. Upon adoption, FFC shall promptly implement the approved plan,
and thereafter fully comply with it.
(c) During
the term of this Agreement, the approved capital plan shall not be amended or
rescinded without the prior written approval of the Reserve Bank.
Communications
8. All
communications regarding this Agreement shall be sent to:
(a) Xx.
Xxxxx Xxxxx
Vice President
Banking Supervision &
Regulation
Federal Reserve Bank of San
Francisco
000 Xxxxxx Xxxxxx, Mail Stop
000
Xxx Xxxxxxxxx, Xxxxxxxxxx
00000
(b) Xx.
Xxxxxxx X. Xxxxx
Chairman of the Board and Chief
Executive Officer
Frontier Financial
Corporation
000 Xxxxxxxxx Xxxxxxx Xxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Miscellaneous
9. Notwithstanding
any provision of this Agreement, the Reserve Bank may, in its sole discretion,
grant written extensions of time to FFC to comply with any provision of this
Agreement.
10. The
provisions of this Agreement shall be binding upon FFC and its
institution-affiliated parties, in their capacities as such, and their
successors and assigns.
11. Each
provision of this Agreement shall remain effective and enforceable until stayed.
Modified, terminated, or suspended in writing by the Reserve Bank.
12. The
provisions of this Agreement shall not bar, estop, or otherwise prevent the
Board of Governors, the Reserve Bank, or any other federal or state agency from
taking any other action affecting FFC, the Bank, any nonbank subsidiary of FFC,
or any of their current or former institution-affiliated parties and their
successors and assigns.
13. Pursuant
to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable
by the Board of Governors under section 8 of the FDI Act (12 U.S.C. §
1818).
IN WITNESS WHEREOF, the parties have
caused this Agreement to be executed as of the 2nd day of
July, 2009.
| FRONTIER FINANCIAL CORPORATION | FEDERAL RESERVE BANK | |
| OF SAN FRANCISCO | ||
| By: /s/ Xxxxxxx X. Xxxxx | By: /s/ Xxxxx X. Xxxxx | |
| Xxxxxxx X. Xxxxx | Xxxxx X. Xxxxx | |
| Chairman & CEO | Vice President |
