EXHIBIT 99.5
UNITED STATES OF AMERICA
BEFORE
THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
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)
Written Agreement by and between )
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CIB MARINE BANCSHARES, INC. ) Docket No. 04-012-WA/XX-XX
Pewaukee, Wisconsin )
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and )
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FEDERAL RESERVE BANK )
OF CHICAGO )
Chicago, Illinois )
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WHEREAS, in recognition of their common goal to restore the financial
soundness of CIB Marine Bancshares, Inc., Pewaukee, Wisconsin ("CIB Marine"), a
registered bank holding company that owns and controls, directly or indirectly,
six subsidiary banks* (the "Subsidiary Banks") and various nonbank subsidiaries,
CIB Marine and the Federal Reserve Bank of Chicago (the "Reserve Bank") have
mutually agreed to enter into this Written Agreement (the "Agreement");
WHEREAS, CIB Marine oversees the activities and operations of the
Subsidiary Banks on a consolidated basis and provides various services to the
Subsidiary Banks, including but not limited to, credit administration, loan
review, finance/treasury management, audit, compliance, accounting, and
operations management;
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* CIB Bank, Hillside, Illinois; Central Illinois Bank, Champaign, Illinois;
Marine Bank, Wauwatosa, Wisconsin; CIB Bank, Indianapolis, Indiana; Citrus Bank,
N.A., Vero Beach, Florida; and Marine Bank, Scottsdale, Arizona.
WHEREAS, as a result of the identification of deficiencies by the Reserve
Bank and other federal and state bank regulators, CIB Marine is taking steps to
enhance and improve the centralized functions and services it provides to the
Subsidiary Banks; and
WHEREAS, on May 27, 2004, the board of directors of CIB Marine, at a
duly constituted meeting, adopted a resolution authorizing and directing Xxxxxxx
Xxxxxxxx, President and Chief Executive Officer, to enter into this Agreement on
behalf of CIB Marine and consenting to compliance with each and every provision
of this Agreement by CIB Marine 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, CIB Marine and the Reserve Bank hereby agree as follows:
BOARD OVERSIGHT
1. Within 60 days of this Agreement, the board of directors shall submit to
the Reserve Bank an acceptable written plan that describes the specific actions
that the board of directors proposes to take in order to strengthen the board of
directors' oversight of the consolidated organization and the bank holding
company's management information systems. The plan shall, at a minimum, address,
consider, and include actions to improve and strengthen:
(a) The systems and controls needed by the board of directors to
supervise management's adherence to approved policies, procedures, and
guidelines in all areas and the monitoring of exceptions to approved policies
and guidelines;
(b) systems and controls to address noncompliance with approved
policies, procedures, and guidelines;
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(c) policies and procedures to ensure the timely implementation of
corrective actions by management and the board of directors in response to audit
and regulatory findings;
(d) the timeliness and accuracy of the reports provided to the board
of directors in its oversight of the operations and management of the
consolidated organization, including but not limited to, information sufficient
to assess management's compliance with approved policies and procedures on loan
administration, loan review, concentrations of credit, lending limitations,
allowance for loan and lease losses, and conflicts of interest; and
(e) the adoption of written charters for all board of directors'
committees.
MANAGEMENT SUCCESSION PLAN
2. Within 90 days of this Agreement, CIB Marine shall submit to the Reserve
Bank a written plan providing for orderly management succession. The plan shall,
at a minimum, identify the individual(s) at CIB Marine who are considered to
have the potential for advancement or promotion, the area(s) in which such
individual(s) may assume new duties or responsibilities or the position(s) to
which they may be promoted, and the training to be provided such individual(s)
to ensure adequate successor management.
LOAN POLICIES AND PROCEDURES
3. Within 60 days of this Agreement, CIB Marine shall submit to the Reserve
Bank an acceptable written plan to strengthen and improve enterprise-wide
compliance with written loan policies and procedures relating to underwriting,
loan approval, loan review, loan modification, and workout processes. The plan
shall, at a minimum, address, consider, and include:
(a) Uniform adherence to written loan policies and procedures;
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(b) enhanced policies, procedures and controls concerning loan
participations;
(c) compliance with established concentrations of credit limits by
borrower and industry group and systems to manage the risk associated with asset
concentrations;
(d) appropriate segregation and independence of the loan review
function; and
(e) separation of the loan workout function from the lending function
and procedures for the assignment of loans to the workout group.
RISK MANAGEMENT
4. Within 90 days of this Agreement, CIB Marine shall submit to the Reserve
Bank an acceptable written plan designed to establish enhanced risk management
processes for the consolidated organization. The plan shall, at a minimum,
address, consider, and include:
(a) Policies and procedures designed to (i) identify, assess, manage,
and monitor risk exposures of the consolidated organization, including but not
limited to, the areas of credit, operational, liquidity, legal and reputational
risks, and to set risk tolerance levels for the consolidated organization, and
(ii) strengthen and improve the consolidated credit risk management program,
including underwriting, loan grading, loan policy exceptions, and collections;
(b) management information systems and reporting procedures designed
to ensure that appropriate management personnel and committees receive timely
and accurate reports necessary to effectively manage risks and correct
weaknesses and deficiencies;
(c) improvements to the oversight of risk management processes by the
board of directors, including but not limited to, timely response to identified
deficiencies and risks; and
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(d) internal controls designed to effectively manage risks and observe
acceptable risk parameters, including but not limited to, enhancements to the
internal auditing of the lending function's adherence to loan policy standards.
REGULATORY REPORTS
5. CIB Marine shall take all actions as are necessary to ensure that each
regulatory report, including Form Y-9C, accurately reflects CIB Marine's
condition on the date for which it is filed, and that all records indicating how
the report was prepared are maintained for subsequent supervisory review.
COMPLIANCE
6. (a) Within 90 days of this Agreement, CIB Marine shall submit to the
Reserve Bank an acceptable written plan, consistent with safe and sound banking
considerations, to address the violations of laws, rules, or regulations listed
in the report of the inspection completed March 12, 2004, by the Reserve Bank.
(b) Within 10 days of this Agreement, CIB Marine shall implement
procedures to ensure future compliance with all applicable laws, rules, and
regulations.
CONFLICTS OF INTEREST
7. Within 90 days of this Agreement, CIB Marine shall submit to the Reserve
Bank an acceptable written plan to enhance the organization's code of ethics and
conflicts of interest policy and enterprise-wide adherence to the code of ethics
and conflicts of interest policy. The plan shall provide, at a minimum, for:
(a) An enhanced code of ethics that applies to all directors,
officers, and employees within the consolidated organization and addresses the
responsibilities for conduct
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and the avoidance of conflicts of interest, in particular in the administration
of loans to insiders, shareholders, and their affiliates and any other
transactions from which any insider may derive personal benefit; and
(b) internal controls that monitor compliance with the code of ethics
and conflicts of interest policy and report any noncompliance or exceptions to
approved policy.
CAPITAL PLAN
8. (a) Within 90 days of this Agreement, CIB Marine shall submit to the
Reserve Bank an acceptable written plan to restore and maintain a sufficient
capital position for the consolidated organization. The plan shall, at a
minimum, address, consider, and include:
(i) The current and future capital requirements of each of the
Subsidiary Banks, nonbank subsidiaries, and the consolidated organization,
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);
(ii) the asset quality, condition, and risk profile of each
Subsidiary Bank;
(iii) the Subsidiary Banks' anticipated level of retained
earnings and anticipated dividends of both the Subsidiary Banks and CIB Marine;
(iv) actions to be taken and the source and timing of additional
funds to fulfill the consolidated organization's future capital requirements and
to maintain the adequacy of the consolidated organization's Allowance for Loan
and Lease Losses (the "ALLL") and each of the Subsidiary Banks' ALLLs; and
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(v) projected or anticipated growth of the consolidated
organization.
(b) CIB Marine shall monitor and review the sufficiency of the
consolidated organization's capital position on a quarterly basis and shall
reflect such reviews in the minutes of the meetings of the board of directors.
EARNINGS AND CASH FLOW
9. Within 90 days of this Agreement, CIB Marine shall submit to the Reserve
Bank a written business plan that includes the goals and strategies for
improving consolidated earnings for calendar years 2004 and 2005. The written
plan shall, at a minimum, address, consider, and include:
(a) Identification of the major areas and means by which the board of
directors will seek to improve CIB Marine's operating performance;
(b) financial performance objectives, including plans for asset
growth, earnings, liquidity, and capital supported by quarterly and annual pro
forma financial statements and assumptions; and
(c) a budget review process that ensures, at a minimum:
(i) Timely reporting of discrepancies between budget and
performance;
(ii) documentation of variances from budget; and
(iii) timely and appropriate revisions to budget.
10. (a) Within 90 days of this Agreement, CIB Marine shall submit to the
Reserve Bank an acceptable written plan for 2004 to service its outstanding debt
and other obligations,
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including trust preferred securities, without incurring additional debt. The
plan shall, at a minimum, address, consider, and include:
(i) Appropriate earnings, growth, capital, and cash flow
projections;
(ii) alternative sources of funds; and
(iii) actions to be taken by CIB Marine to comply with the terms
of all outstanding debt and other obligations.
(b) For each year after 2004, CIB Marine shall by January 30 of such year
submit to the Reserve Bank a parent-only cash flow analysis for such year.
DEBT SERVICE, DIVIDENDS, AND REDEMPTIONS
11. (a) CIB Marine 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 of the Board of Governors (the "Director").
(b) CIB Marine shall not make any distribution of interest or
dividends on its trust preferred securities without the prior written approval
of the Reserve Bank and the Director.
(c) CIB Marine shall not, directly or indirectly, purchase or redeem
any shares of its stock or other securities without the prior written approval
of the Reserve Bank.
(d) All requests for prior approval shall be received by the Reserve
Bank at least 30 days prior to the proposed dividend declaration date,
distribution date, or redemption date and shall contain, but not be limited to,
current and projected information on earnings, cash flow, capital levels and
asset quality of CIB Marine.
12. CIB Marine shall not, directly or indirectly, increase its borrowings
or incur any debt, including debt to stockholders, without the prior written
approval of the Reserve Bank.
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APPOINTMENT OF NEW OFFICERS AND DIRECTORS; XXXXXXXXX AND INDEMNIFICATION
PAYMENTS
13. During the term of this Agreement, or as otherwise required by law, CIB
Marine shall comply with the provisions of section 32 of the FDI Act (12 U.S.C.
1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. Part
225, Subpart H) with respect to the appointment of any new directors or the
hiring or promotion of any senior executive officers as defined in Regulation O
of the Board of Governors (12 C.F.R. Part 215).
14. CIB Marine 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).
COMPLIANCE COMMITTEE
15. (a) Within 15 days of this Agreement, the board of directors of CIB
Marine shall establish a committee to monitor CIB Marine's compliance with the
provisions of this Agreement (the "Compliance Committee"). The Compliance
Committee shall be comprised of three or more outside directors who are not
officers or employees of CIB Marine or any of the Subsidiary Banks and who do
not directly or indirectly own more than ten percent of the outstanding shares
of CIB Marine or any of the Subsidiary Banks. At a minimum, the Compliance
Committee shall keep detailed minutes of each meeting and shall report its
findings to CIB Marine's board of directors on a monthly basis.
(b) Within 30 days after the end of each calendar quarter (June 30,
September 30, December 31, and March 31,) following the date of this Agreement,
CIB Marine shall furnish to the Reserve Bank written progress reports detailing
the form and manner of all actions taken to secure compliance with this
Agreement and the results thereof. Progress reports
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may be discontinued when the corrections required by this Agreement have been
accomplished and the Reserve Bank has, in writing, released CIB Marine from
making further reports.
MISCELLANEOUS
16. The plans required by paragraphs 1, 3, 4, 6(a), 7, 8(a), and 10(a) of
this Agreement shall be submitted to the Reserve Bank for review and approval.
Acceptable plans shall be submitted to the Reserve Bank within the time periods
set forth in this Agreement. CIB Marine shall adopt the approved plans within 10
days of approval by the Reserve Bank and then shall fully implement and comply
with them. During the term of this Agreement, the approved plans shall not be
amended or rescinded without prior written approval of the Reserve Bank.
17. All communications regarding this Agreement shall be sent to:
(a) Xxxxxxx X. Xxxxxx
Vice President
Federal Reserve Bank of Chicago
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000
(b) Xxxxxxx Xxxxxxxx
President and Chief Executive Officer
CIB Marine Bancshares, Inc.
N27 W24025 Xxxx Court
Pewaukee, WI 53072
TERM AND EFFECT OF AGREEMENT
18. The provisions of this Agreement shall be binding upon CIB Marine and
its institution-affiliated parties, in their capacities as such, and their
successors and assigns.
19. Each provision of this Agreement shall remain effective and enforceable
until stayed, modified, terminated or suspended by the Reserve Bank.
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20. Notwithstanding any provision of this Agreement to the contrary, the
Reserve Bank may, in its sole discretion, grant written extensions of time to
CIB Marine to comply with any provision of this Agreement.
21. The provisions of this Agreement shall not bar, estop or otherwise
prevent the Board of Governors, the Reserve Bank or any federal or state agency
or department from taking any other action affecting CIB Marine or any of its
current or former institution-affiliated parties.
22. This Agreement is a "written agreement" for the purposes of, and is
enforceable by the Board of Governors as an order issued under, section 8 of the
FDI Act (12 U.S.C. 1818).
IN WITNESS HEREOF, the parties have caused this Agreement to be executed as
of the 29th day of May, 2004.
CIB Marine Bancshares, Inc. Federal Reserve Bank of Chicago
By: /s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx Xxxxxxxx Xxxxxxx X. Xxxxxx
President and Vice President
Chief Executive Officer
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