AGREEMENT BY AND BETWEEN Sun National Bank Vineland, New Jersey and The Comptroller of the Currency
EXHIBIT
10
AGREEMENT
BY AND BETWEEN
Sun
National Bank
Vineland,
New Jersey
and
The
Comptroller of the Currency
Sun National Bank, Vineland, New Jersey
(“Bank”) and the Comptroller of the Currency of the United States of America
(“Comptroller” or “OCC” ) wish to protect the interests of the
depositors, other customers, and shareholders of the Bank, and, toward that end,
wish the Bank to operate safely and soundly and in accordance with all
applicable laws, rules and
regulations.
The Comptroller has found unsafe and
unsound banking practices, including inadequate credit risk management and loan
review practices in the commercial lending area.
In consideration of the above premises,
it is agreed, between the Bank, by and through its duly elected and acting Board
of Directors (“Board”), and the Comptroller, through his
authorized representative, that the Bank shall operate at all times in
compliance with the articles of this Agreement.
ARTICLE
I
JURISDICTION
(1) This
Agreement shall be construed to be a “written agreement entered into with the
agency” within the meaning of 12 U.S.C. § 1818(b)(1).
(2) This
Agreement shall be construed to be a “written agreement between such depository
institution and such agency” within the meaning of 12 U.S.C.
§ 1818(e)(1) and 12 U.S.C.
§ 1818(i)(2).
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(3) This
Agreement shall be construed to be a “formal written agreement” within the
meaning of 12 C.F.R. § 5.51(c)(6)(ii). See 12 U.S.C.
§ 1831i.
(4) This
Agreement shall be construed to be a “written agreement” within the meaning of
12 U.S.C. § 1818(u)(1)(A).
(5) This
Agreement shall cause the Bank not to be designated as an “eligible bank” for
purposes of 12 C.F.R. § 5.3(g), unless otherwise informed in writing
by the Comptroller.
(6) All
reports or plans which the Bank or Board has agreed to submit to the Assistant
Deputy Comptroller pursuant to this Agreement shall be forwarded to
the:
The
Office of the Comptroller of the Currency
Eastern
Pennsylvania Field Xxxxxx
0000
Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx,
Xxxxxxxxxxxx 00000
ARTICLE
II
COMPLIANCE
COMMITTEE
(1) Within
five (5) days of the Effective Date of this Agreement, the Board shall appoint a
Compliance Committee of at least five (5) directors, of which no more than (1)
shall be
an employee of the Bank or any of its affiliates, or a family member of any such
person, and no more than one (1) shall be a controlling shareholder of the Bank
or any of its affiliates,
or a family member of any such person. The term “affiliate” is
defined as in 12 U.S.C. § 371c(b)(1). 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
Agreement.
(2) The
Compliance Committee shall meet at least monthly.
(3) Within
ten (10) days of the quarter ending June 30, 2010 and within ten (10) days of
the end of each calendar quarter thereafter, the Compliance Committee shall
submit a written
progress report to the Board setting forth in detail:
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(a) a description of the
action needed to achieve full compliance with each Article of this
Agreement;
(b) actions taken to comply
with each Article of this Agreement; and
(c) the results and status
of those actions.
(4) The
Board shall forward a copy of the Compliance Committee’s first report, with any
additional comments by the Board, to the Assistant Deputy Comptroller within
twenty
(20) days of the quarter ending June 30, 2010, and shall forward all subsequent
Compliance Committee reports, with any additional comments by the Board, to the
Assistant Deputy
Controller within twenty (20) days of each calendar quarter end
thereafter.
ARTICLE
III
CAPITAL
PLAN
(1) Within
sixty (60) days of the Effective Date of this Agreement, the Board shall submit
to the Assistant Deputy Comptroller for review and supervisory non-objection a
written
capital plan, covering at least a three year period. Upon receiving
the Assistant Deputy Comptroller’s supervisory non-objection to the capital
plan, the Board shall, at its next
board meeting, adopt the capital plan, and thereafter ensure the Bank’s
implementation of and adherence to the capital plan. The capital plan
shall include:
(a) specific
plans for the maintenance of adequate capital to support the Bank’s risk profile
and the Bank’s strategic plans;
(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
and
overall financial condition;
(c) projections
of the sources and timing of additional capital to meet the Bank's future needs,
as set forth in the strategic plan;
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(d) identification
of the primary source(s) from which the Bank will maintain an appropriate
capital structure to meet its needs;
(e) contingency
plans that identify alternative methods to strengthen capital should the primary
source(s) under (d) above not be available; and
(f) a
dividend policy that permits the declaration of a dividend only:
when the
Bank is in compliance with its approved capital plan and would remain in
compliance with its approved capital plan following the payment of any dividend;
when the Bank is
in compliance with 12 U.S.C. §§ 56 and 60; and with
the prior written supervisory non-objection of the
Assistant Deputy Comptroller.
(2) The
Board shall review and update the Bank's capital plan on an annual basis, or
more frequently if necessary. Copies of each update shall be submitted to the
Assistant
Deputy Comptroller.
(3) 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.
ARTICLE
IV
CRITICIZED
ASSETS
(1) Within
sixty (60) days of the Effective Date of this Agreement the Board shall adopt
and the Bank (subject to Board review and ongoing monitoring) shall implement
and thereafter ensure adherence to a written program designed to protect the
Bank’s interest in those assets criticized in the most recent Report of
Examination (“XXX”), in any subsequent XXX, 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.” The program shall include the development of Criticized
Asset Reports (“CARs”) identifying all credit relationships and other assets
totaling in aggregate one million five hundred thousand dollars ($1,500,000) or
more, criticized as “doubtful,” “substandard,” or “special
mention.” The
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CARs must
be updated and submitted to the Board and the Assistant Deputy Comptroller
quarterly. Each CAR shall cover an entire credit relationship and
include, at a minimum, analysis
and documentation of the following:
(a) the
origination date and any renewal or extension dates, amount, purpose of the
loan, the originating and current loan officer(s), and a brief explanation of
why the relationship
is a problem asset;
(b) the
expected primary and secondary sources of repayment, and an analysis of the
adequacy of the repayment source;
(c) the
appraised value of supporting collateral and the position of the Bank’s lien on
such collateral, where applicable, as well as other necessary documentation to
support the
current collateral valuation;
(d) an
analysis of current and complete credit information, including cash flow
analysis where loans are to be repaid from operations, and analysis of any
guarantor on whom
the Bank
intends to rely as part of the workout strategy;
(e) results
of any FAS 114 impairment analysis;
(f) significant
developments, including a discussion of changes since the prior CAR, if any and
any charge offs, including date and amount; and
(g) the
proposed action to eliminate the basis of criticism and the time frame for its
accomplishment, including an appropriate exit strategy.
(2) The
Board shall assess periodically, and no less than quarterly, the adequacy of
work-out staff, in terms of both numbers and expertise, to ensure staffing
levels are appropriate
to address the Bank’s level of criticized assets.
(3) The
Bank may not extend credit, directly or indirectly, including renewals,
extensions, or capitalization of accrued interest to a borrower whose loans or
other extensions
of credit are criticized in any XXX, in any internal or external loan review, or
in any list provided to
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management
by the National Bank Examiners during any examination, unless and until each of
the following conditions is met:
(a) the
Board, or a designated committee thereof, finds that the extension of additional
credit is necessary to promote the best interests of the Bank and that prior to
renewing, extending
or capitalizing any additional credit, a majority of the full Board (or
designated committee) approves the credit extension and records, in writing why
such extension is necessary
to promote the best interests of the Bank; A copy of the findings and approval
of the Board or designated committee shall be maintained in the credit file of
the affected
borrower;
(b) the
Bank performs a written credit and collateral analysis as required by paragraph
(1) (c) and (d) of this Article and, if necessary, the proposed action referred
to in paragraph
(1)(g) of this Article is revised, as appropriate; and
(c) the
Board’s formal plan to collect or strengthen the criticized asset will not be
compromised by the extension of additional credit.
(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
his Article.
ARTICLE
V
LOAN
REVIEW
(1) Within
sixty (60) days of the Effective Date of this Agreement, the Board shall review
and revise the Bank’s loan review program to ensure the Bank maintains an
effective,
risk based, independent and on-going process to review the Bank’s loan and lease
portfolios for the timely identification and categorization of problem
credits. The program shall
provide for appropriate scope and coverage of the loan and lease portfolio and
sufficient staffing in light of the Bank’s size and risk profile, and include a
written policy that conforms
to OCC Bulletin
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2006-47
and a loan and lease rating system consistent with the guidelines set forth in
“Rating Credit Risk” and “Allowance for Loan and Lease Losses” booklets of the
Comptroller’s
Handbook. The
program shall provide for a written report to be filed with the Board promptly
after each review and no less than quarterly. Such reports shall
include, at a minimum:
(a) conclusions
regarding the overall quality of the loan and lease portfolio(s)
reviewed;
(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) loans meeting the
criteria for nonaccrual status;
(f)
the identity of the loan officer who originated each loan reported in
accordance
with subparagraphs (b) through (e);
(g)
the identification and status of credit-related violations of law, rule, or
regulation;
(h)
concentrations of credit;
(i)
loans and leases to executive officers, directors, principal shareholders of the
Bank and their related interests; and
(j)
loans and leases in nonconformance with the Bank’s lending and leasing policies,
and exceptions to the Bank’s lending and leasing policies.
(2) The
Board shall evaluate the loan and lease review report(s) and shall ensure that
immediate, adequate, and continuing remedial action, as appropriate, is taken
upon all
findings noted in the report(s), and documentation of the action taken by the
Bank to collect or strengthen assets identified as problem credits, shall be
preserved in the Bank.
(3) The
Board shall forward copies of the policy and program required by this Article to
the Assistant Deputy Comptroller for review.
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(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
his Article.
ARTICLE
VI
ALLOWANCE FOR LOAN AND LEASE
LOSSES
(1) The
Board shall require, and within thirty (30) days of the Effective Date of this
Agreement, the Bank shall implement and thereafter adhere to a program for the
maintenance
of an adequate Allowance for Loan and Lease Losses (“ALLL”). The
program shall be consistent with the comments on maintaining a proper ALLL found
in the Interagency
Policy Statement on the ALLL contained in OCC Bulletin 2006-47 (December 13,
2006) and with the “Allowance for Loan and Lease Losses,” booklet A-ALLL of the
Comptroller’s Handbook, and
shall incorporate, at a minimum, the following:
(a) results
of the Bank’s loan review;
(b) criteria
for determining which loans will be reviewed under Financial Accounting Standard
(“FAS”) 114, how impairment will be determined, and procedures to ensure that
the
analysis of loans complies with FAS 114 requirements;
(c) criteria
for determining FAS 5 loan pools and an analysis of those loan
pools;
(d) loan loss
experience;
(e) trends of delinquent and
nonaccrual loans;
(f) concentrations of credit
in the Bank; and
(g) present and projected
economic and market conditions.
(2)
The Board shall ensure that the Bank, in implementing the program required under
paragraph (1), does the following:
(a) reviews
and revises the rationale and methodology for developing historical loss rates,
ensuring the rationale is appropriately supported and consistently
applied;
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(b) stratifies
loan types to more accurately assess risk;
(c) develops
and provides additional support for qualitative factors used in the ALLL
analysis and ensures that the directional movement of the allocation for each
factor is clearly
supported;
(d) documents
updated evaluations and appraisals for impaired loans;
(e) utilizes
more robust tools, such as migration analysis and stress testing, to assess
historical losses and better project future losses;
(f)
incorporates requirements for periodic independent validation of the Bank’s ALLL
methodology, and revises the methodology when appropriate.
(3) The
program shall provide for a review of the ALLL by the Board at least once each
calendar quarter. Any deficiency in the ALLL 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 ALLL.
(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.
ARTICLE
VII
CREDIT
ADMINISTRATION
(1) Within
thirty (30) days of the Effective Date of this Agreement, the Board shall revise
the Bank’s credit administration program and thereafter ensure the Bank’s
implementation
of and adherence to the revised program, which shall, at a minimum, provide
for:
(a) procedures
to ensure updated appraisals and collateral valuations are obtained when
necessary to support the Bank’s collateral position;
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(b) criteria
used to determine valuation standards, including who a valuation must be
performed by; and
(c) a
process to fully analyze guarantor support, including a detailed analysis of the
guarantor’s global financial condition, which considers the value, sufficiency
and liquidity
of a guarantor’s net assets, actual and contingent liabilities, and
cash flow, including inflows and both required and discretionary cash outflows
from all activities;
(2) Upon
completion, a copy of the program shall be forwarded to the Assistant Deputy
Comptroller.
(3) The
Board shall ensure that the Bank has the processes, personnel, and control
systems to ensure implementation of and adherence to the program developed
pursuant
to this Article.
ARTICLE
VIII
PROFIT
PLAN
(1) Within
sixty (60) days of the Effective Date of this Agreement, the Board shall develop
and submit to the Assistant Deputy Comptroller for review and supervisory
non-objection
a written plan to improve and sustain the earnings of the Bank. Upon
receiving the Assistant Deputy Comptroller’s written supervisory non-objection
to the plan the
board shall promptly adopt and thereafter ensure the Bank’s implementation of
and adherence to the plan. The plan shall describe the means by which
the Bank will improve
and sustain earnings to support its operations and risk profile and shall, at a
minimum, include:
(a) an
analysis of the profitability of the Bank’s business lines, market segments,
lending strategies, funding costs and fee structures;
(b) the
identification of areas in which earnings performance may be
improved;
(c) specific
actions the Bank will take to improve earnings performance, including, for
example, potential strategies to eliminate unprofitable business lines, market
segments or
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products
and specific strategies to reduce overhead and operating expenses without
compromising the safe and sound operation of the Bank;
(d) the
assignment of accountability and establishment of specific timeframes to achieve
the plan’s objectives; and
(e) a
review process to monitor the Bank’s progress in meeting the plan’s
objectives.
(2) 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.
ARTICLE
IX
BROKERED
DEPOSITS
(1) The
Bank shall not accept, renew, rollover or acquire any “brokered deposit” (as
that term is defined by 12 C.F.R. § 337.6(a)(2)) if the acceptance,
renewal, rollover or acquisition
of such deposit would result in the Bank’s aggregate level of brokered deposits
exceeding 3.5% of the Bank’s total liabilities, unless the Bank has obtained
from the Assistant
Deputy Comptroller a prior written determination of no supervisory
objection.
(2) The
limitation in paragraph (1) shall include the acquisition of brokered deposits
through any transfer, purchase, or sale of assets.
(3) If
the Bank seeks to exceed the limitation set forth in paragraph (1), the
Board
shall submit to the Assistant Deputy Comptroller a written request that
includes, at a
minimum, the following information:
(a) the
dollar volume, maturities, and cost of the brokered deposits to be
acquired;
(b)
the
proposed use of the brokered deposits, i.e., short-term liquidity or
restructuring of liabilities to reduce cost;
(c) alternative
funding sources available to the Bank; and
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(d) the
reasons why the Bank believes that the acceptance of the brokered deposits does
not constitute an unsafe or unsound practice in its particular
circumstances.
(4) The
Assistant Deputy Comptroller may require the submission of such additional
information as necessary to make an informed decision. Upon
consideration of the Board’s
request, the OCC will determine, in its sole discretion, whether to provide a
written determination of no supervisory objection or deny the Board’s
request. Any written determination
of no supervisory objection may contain such conditions as the OCC shall deem
appropriate.
ARTICLE
X
CLOSING
(1) This
Agreement shall be effective immediately upon its execution by all parties
(“Effective Date”) and shall remain in full force and effect until the
Comptroller, in his sole
discretion, through his authorized representative elects to terminate the
Agreement.
(2) Although
the Board has agreed to submit certain programs and reports to the
Assistant Deputy Comptroller for review and prior written determination of
no
supervisory
objection, the Board has the ultimate responsibility for proper and
sound management
of the Bank.
(3) It
is expressly and clearly understood that if, at any time, the Comptroller deems
it appropriate in fulfilling the responsibilities placed upon him by the several
laws of the
United States of America to undertake any action affecting the Bank, nothing in
this Agreement shall in any way inhibit, estop, bar, or otherwise prevent the
Comptroller from so doing.
(4) Any
time limitations imposed by this Agreement shall begin to run from the Effective
Date of this Agreement, unless otherwise provided. Such time
requirements may be
extended in writing by the Comptroller or his duly authorized representative for
good cause upon written application by the Board.
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(5) The
provisions of this Agreement shall be effective upon execution by the parties
hereto and its provisions shall continue in full force and effect unless or
until such provisions
are amended in writing by mutual consent of the parties to the Agreement or
excepted, waived, or terminated in writing by the Comptroller or his duly
authorized representative.
(6) In
each instance in this Agreement in which the Board is required to act, the Board
shall be obligated to take such measures within the scope of their authority
necessary
to accomplish such act, and, to the extent that such measures involve directions
to management of the Bank, the Board shall be obligated to ensure that
management of the
Bank follows such directions.
(7) This
Agreement is intended, and shall be construed to be a supervisory “written
agreement entered into with the agency” as contemplated by 12 U.S.C. §
1818(b)(1), and
expressly does not form, and may not be construed to form, a contract binding on
the Comptroller or the United States of America. Notwithstanding the
absence of mutuality
of obligation, or of consideration, or of a contract, the Comptroller may
enforce any of the commitments or obligations, undertaken by the Bank herein,
pursuant to his
supervisory powers, including pursuant to 12 U.S.C. § 1818(b)(1), and not as a
matter of contract law. The Bank expressly acknowledges that neither
the Bank nor the Comptroller
has any intention to enter into a contract. The Bank also expressly
acknowledges that no officer or employee of the Office of the Comptroller of the
Currency
has statutory or other
authority to bind the United States of America, the U.S. Treasury Department,
the Comptroller, or any other federal bank regulatory agency or entity, or
any
officer or employee of any of
those entities to a contract affecting the Comptroller’s exercise of his
supervisory responsibilities. The terms of this Agreement, including
this
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paragraph,
are not subject to amendment
or modification by any extraneous expression, prior agreements or arrangements,
or negotiations between the parties, whether oral or written.
IN TESTIMONY WHEREOF, the
undersigned, authorized by the Comptroller, has hereunto set his hand on behalf
of the Comptroller.
[SIGNATURES
OMITTED]
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