FEDERAL RESERVE BANK OF ATLANTA
Xxxxxx X. Xxxxxx, III
Assistant Vice President
April 13, 1995
The Board of Directors
Southern Security Bank Corporation, Inc.
Post Office Box 520
Boca Raton, Florida 33429-0520
Re: Written Agreement dated April 13, 1995
Dear Board Members:
This will acknowledge receipt of two signed copies of the Written Agreement
and the cross-referenced side letter. The Federal Reserve Bank executed this
document on April 13, 1995. The corporation's record copy of the Agreement is
enclosed. Also attached is our executed draft of the accompanying side letter
clarifying our mutual understanding of certain monthly operating expenses.
The Agreement's April 13, 1995 "as of date" established the start date upon
which various reporting deadlines will be based. To clarify when the Reserve
Bank expects receipt of individual provision responses, the following grid
recaps the established deadlines dates:
- Paragraph 2 - Capital Adequacy: the 90-day deadline is July 12, 1995;
- Paragraph 8 - Tax Policies/Procedures: the 90-day deadline is July 12, 1995;
Management may of course submit responses before these dates if you wish.
The quarterly reports required by paragraph 11, detailing compliance with all
Agreement requirements, will commence with the second quarter of 1995; this
first report is due no later than July 30, 1995. Compliance is expected to
commence immediately for those provisions without a response due date.
We appreciate your cooperation and look forward to reviewing your initial
submissions. If you have any questions regarding this action, please contact me
or Examiner Xxxxxx Xxxxxxxx at 404/589-7220.
Very truly yours,
Xxxxxx X. Xxxxxx, III
Enclosures
cc: Xxxxxx Xxxxxxx, BOG
State of Florida
000 Xxxxxxxx Xxxxxx, X.X. Atlanta, Georgia 30303-2713 404/585-7206
UNITED STATES OF AMERICA
BEFORE THE BOARD GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
-------------------------------------
Written Agreement By and Among
SOUTHERN SECURITY BANK CORPORATION, INC.
Deerfield Beach, Florida
XXXXXX X. XXXXXX
XXXXX XXXXXX
Institution-Affiliated Parties of DOCKET NOS. 95-004-WA/XX-XX
Southern Security Bank Corporation, Inc. 95-004-WA/RB-I1
Deerfield Beach, Florida 95-004-WA/RB-12
and
FEDERAL RESERVE BANK OF ATLANTA
Atlanta, Georgia
----------------------------------------
WHEREAS, in order to maintain the financial soundness of Southern Security
Bank Corporation, Deerfield Beach, Florida ("Southern Security"), a registered
bank holding company, the Federal Reserve Bank of Atlanta (the "Reserve Bank"),
Southern Security, and Xxxxxx X. Xxxxxx ("Modder"), chairman of the board and a
director, and Xxxxx Xxxxxx ("Xxxxxx"), president and a director,
institution-affiliated parties of Southern Security, have mutually agreed to
enter into this Written Agreement (the "Agreement");
WHEREAS, as of the date of this Agreement, Southern Security owns and
controls the Southern Security Bank, Hollywood, Florida (the "Bank");
WHEREAS, this Agreement is being executed in accordance with the Rules
Regarding Delegation of Authority of the Board of Directors of the Federal
Reserve System (the "Board of Governors"), specifically 12 C.F.R. 265-11(a)(15),
and the Reserve Bank has received the prior approval of the Director of the
Division of Banking Supervision and Regulation (the "Director") and the General
Counsel of the Board of Governors to enter into this Agreement with Southern
Security, Modder, and Xxxxxx; and
WHEREAS, on March 23, 1995, the board of directors of Southern Security, at
a duly constituted meeting, adopted a resolution authorizing and directing
Xxxxxx X. Xxxxxx to enter into this Agreement on behalf of Southern Security and
consented to compliance with each and every provision of this Agreement by
Southern Security 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)); and
WHEREAS, on April 5, 1995, Xxxxxx and Xxxxxx, in their individual
capacities, consented to compliance with paragraphs 4(c), 5, and 14 through 18
of this Agreement;
NOW, THEREFORE, before the taking of any testimony or adjudication of or
finding on any issue of fact or law herein, and without this Agreement
constituting an admission of any allegation made or implied by the Board of
Governors, and for the purpose of settling this matter without further
proceedings, the Reserve Bank and Southern Security hereby agree as follows:
1. Dividends. Southern Security shall not declare or pay dividends without the
prior written approval of the Reserve Bank and the Director. Requests for
permission to pay a dividend shall be in writing and received 30 days prior to
the proposed declaration date. Such requests shall, at a minimum, contain
sufficient documentation to demonstrate that the proposed dividend is in
compliance with the Board of Governors' dividend policy and is otherwise
consistent with the Board of Governors' Capital Adequacy Guidelines (12 C.F.R.
Part 225, App. A and D).
2. Capital Adequacy. Within 90 days of this Agreement, Southern Security shall
submit to the Reserve Bank an acceptable written plan to improve and,
thereafter, maintain an adequate capital position at the Bank. The plan shall,
at a minimum, address and consider:
a. The current and future capital requirements of the Bank, including
the maintenance of adequate risk-based capital ratios and tier 1 leverage ratio
in accordance with the Capital Adequacy Guidelines of the Board of Governors (12
C.F.R. Part 208, App. A and B);
b. the Bank's continued compliance with the capital requirements contained
within paragraphs 2(a) and 2(b) of the Written Agreement dated March 17, 1992,
among the Reserve Bank, the State Comptroller and Banking Commissioner of the
State of Florida, and the Bank;
c. the volume of the Bank's adversely classified assets and the potential
for additional asset quality problems at the Bank;
d. requests by the Bank's federal or state regulators for an increase in
the Bank's capita;
e. the anticipated level of earnings of the Bank, with particular attention
to the Bank maintaining an adequate loan loss reserve;
f. the source and timing of additional funds that may be necessary to
achieve compliance with the capital plan developed and submitted pursuant to the
provisions of this paragraph; and
g. Southern Security's responsibility to act as a source of strength to the
Bank, and, in connection therewith, to use its assets to provide whatever
capital support to the Bank as may be required by the Reserve Bank in a manner
consistent with the Board of Governors'; Policy Statement on the responsibility
of bank holding companies to act as a source of strength to their bank
subsidiaries, dated April 24, 1987.
3. Debt Restrictions.
a. Southern Security shall not, directly or indirectly, increase its
borrowings or incur any additional debt, including debt to stockholders, without
the prior written approval of the Reserve Bank.
b. Southern Security shall not, directly or indirectly, make any debt
service payments to any institution-affiliated party, or related interest
thereof, without the prior written approval of the Reserve Bank.
4. Insider Transactions.
a. Except as otherwise provided in the executive employment agreements with
Xxxxxx and Xxxxxx, dated June 11, 1992, Southern Security shall not, directly or
indirectly, increase the salaries of, or pay any bonuses or fees to, or make any
other type of form of payments, including, but not limited to, the reimbursement
of expenses or the payment of indebtedness, to or on behalf of any
institution\-affiliated party, or related interest thereof, of Southern Security
or the Bank without the prior written approval of the Reserve Bank.
b. Southern Security shall not, directly or indirectly, enter into,
participate or, in any other manner, engage in any financial transaction with
any institution-affiliated party or principal shareholder, or related interest
thereof, of Southern Security or the Bank without the prior written approval of
the Reserve Bank.
c. Except as otherwise provided by paragraph 4.a hereof, Modder and Xxxxxx
shall not, directly or indirectly, in any manner engage in, enter into or
participate in any financial transaction with Southern Security without the
prior written approval of the Reserve Bank.
d. Any request for prior approval pursuant to this paragraph shall be
accompanied by documentation adequate to provide the Reserve Bank with the
details of each proposed payment or transaction, including a full description of
the proposal, the purpose(s) for the payment or transaction, the amounts
involved, the benefits to be derived by Southern Security or the Bank and such
other matters that may be pertinent to the proposed payment or transaction to
assist the Reserve Bank in its review of each proposal.
e. For the purposes of this Agreement, the terms:
(1) "Related interest" shall be defined as set forth in section
215.2(m) of Regulation O of the Board of Governors (12 C.F.R. 215.2(m));
(2) "financial transaction" shall include, but is not limited to: (A)
an extension of credit (as defined in section 215.3 of Regulation O of the Board
of Governors (12 C.F.R. 215(3)), (B) the transfer, sale or purchase of any
asset, (C) a contract or payment for services, (D) the payment of any Southern
Security debt to any shareholder or institution affiliated party of Southern
Security, the Bank, or any related interest thereof, or (B) the direct or
indirect payment by Southern Security of any obligation of any
institution-affiliated party or principal shareholder, or related interest
thereof, of southern Security or the Bank; and
(3) "principal shareholder" shall include any individual or company
(other than Southern Security) that directly or indirectly, or acting through
or in consent with one or more persons, owns, controls or has the power to vote
more than 10 percent of any class of voting securities or Southern Security of
the Bank.
5. Employment Contracts.
a. Southern Security and Modder and Xxxxxx shall each not amend or modify
any current employment contract or agreement and shall not enter into any new
employment or consulting contract or agreement without providing at least 30
days advance written notice to the Reserve Bank.
b. The advance written notice required by this paragraph shall include
documentation adequate to provide the Reserve Bank with the details of each
proposed amended or new contract or agreement, including a full description of
the proposed contract or agreement, the name and qualifications of the person
providing the proposed services, the amounts involved, the benefits to be
derived by Southern Security, and such other matters that may be pertinent to
the proposal and assist the Reserve Bank in its review of each proposed amended
or new contract or agreement.
c. The Reserve Bank shall have the right to disapprove any proposed amended
or new employment or consulting contract or agreement. If the Reserve Bank
disapproves any proposed amendment or new employment or consulting contract or
agreement, Southern Security, Modder and Xxxxxx, as the case may be, shall not
proceed with such proposal.
6. Required Approval of New Directors and Executive Officers.
During the term of this Agreement, or as otherwise required by law, southern
Security shall comply with the provisions of Section 32 of the FDI Act (U.S.C.
1831i) with respect to the appointment of any new directors or the hiring or
promotion of any senior executive officer.
7. Restriction on Intercorporate Transactions.
a. Southern Security shall not, directly or indirectly, enter into,
participate, or in any other manner engage in any transaction with the Bank
without the prior written approval of the Reserve Bank.
b. Any request for prior approval pursuant to this paragraph shall be
accompanied by documentation adequate to provide the Reserve Bank with the
details of each proposed transaction, including a full description of the
proposed transaction, the purpose(s) for the transaction, the amounts involved,
the benefits to be derived by Southern Security and the Bank, the proposed
transaction's compliance with all applicable laws and regulations, including
sections 23A and 23B of the Federal Reserve Act (12 U.S.C. 371c and 371c-1) and
such other matters that may be pertinent to the proposal and assist the Reserve
Bank in its review of each proposal.
c. For the purposes of this paragraph, the term "transaction" shall
include, but not be limited to the transfer, sale or purchase of any asset, the
direct or indirect payment of any expense or obligation of Southern Security,
the payment of a management or service fee or any nature, or any extension of
credit, including overdrafts.
8. Tax Policies and Procedures.
a. Within 90 days of this Agreement, Southern Security shall submit to the
Reserve Bank an acceptable proposed written tax allocation agreement between
Southern Security and the Bank and shall take such other actions as are
necessary to execute the tax allocation agreement with the Bank within 120 days
of this Agreement. The tax agreement shall address, at a minimum:
(1) The timing and method of estimating quarterly tax payments;
(2) the disposition of any deferred tax liability;
(3) the computation and payment of any tax benefits;
(4) the allocation of the surtax exemption;
(5) any refund due the Bank on a separate entity basis, regardless of
the availability of a consolidated refund; and
(6) the Policy Statement on Intercorporate Tax Transactions issued by
the Board of Governors, dated September 25, 1978.
b. In no event shall the tax agreement required under this paragraph call
for the Bank to incur a greater liability because of its affiliation with
Southern Security than it would as a separate taxable entity.
c. Southern Security shall remit to the Bank, immediately upon receipt by
Southern Security; (1) any state or federal income tax refund, or similar refund
received by Southern Security that becomes due, owing or otherwise reimbursable
to the Bank; and (2) the reimbursement of any tax overpayment that is allocable
to the Bank, subject to the concurrence of the Reserve Bank.
d. Southern Security shall not use monies received from the Bank pursuant
to the written tax allocation agreement between Southern Security and the Bank,
for purposes other than the remittance of same to the Internal Revenue Service
and the State of Florida in accordance with such tax agreement, and shall, in
all other respects, fully comply with such tax agreement.
9. Sale of Equity Securities.
a. Southern Security shall provide the Reserve Bank with at least 30 days
advance written notice of the proposed sale or offering of any equity
securities.
b. The advance written notice required by this paragraph shall include all
prospectus, offering or private placement materials, as well as a full
description of the proposed uses of the funds raised by the securities' sale, an
opinion letter from an independent securities counsel stating that the materials
contain adequate disclosures and comply with the registration, reporting, and
anti-fraud provisions of the federal and state securities laws, and such other
matters that may be pertinent to assist the Reserve Bank in its review of the
proposed sale or offering.
10. Policy and Plan Approval. The plans and tax agreement required by paragraphs
2 and 8 hereof shall be submitted to the Reserve Bank for review and approval.
An acceptable plan and tax agreement shall be submitted to the Reserve Bank
within the required time periods. Southern Security shall submit the plan and
tax agreement to the Reserve Bank no later than 30 days prior to the expiration
of the applicable time periods. The Reserve Bank may comment on the plan and tax
agreement within 10 days of receipt. Southern Security shall provide the Reserve
Bank with revised plan and tax agreement as may be required, within 5 days of
receipt of written comments, if any. Within 10 days of receipt of the revised
plan and tax agreement, the Reserve Bank shall communicate in writing its
approval or disapproval. Southern Security shall adopt the approved plan within
10 days of approval by the Reserve Bank and the tax agreement as provided in
paragraph 8 hereof, and then shall fully comply with them. During the term of
this Agreement, the approved plan and tax agreement shall not be amended or
rescinded without the prior written approval of the Reserve Bank.
11. Quarterly Compliance Reports. Within 45 days after the end of each calendar
quarter (March 31, June 30, September 30, and December 31) following the date of
this Agreement, Southern Security 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.
12. All communications regarding this Agreement shall be sent to:
(a) Xx. Xxxxxx X. Xxxxxx, III
Assistant Vice President
Federal Reserve Bank of Atlanta
000 Xxxxxxxx Xxxxxx, X.X.
Atlanta, Xxxxxx 30303
(b) Xx. Xxxxxx X. Xxxxxx
Chairman
Southern Security Bank Corporation
Post Office Box 520
Boca Raton, Florida 33429-0520
(c) Mr. Xxxxx Xxxxxx
President
Southern Security Bank Corporation
Post Office Box 520
Boca Raton, Florida 33429-0520
13. The provisions of this Agreement shall be binding upon Southern Security all
of its institution-affiliated parties, in their capacities as such, as their
successors and assigns, and Xxxxxx and Xxxxxx in their individual capacities.
14. The provisions of this Agreement shall remain effective and enforceable
until stayed, modified, terminated or suspended, in writing, by the Reserve
Bank.
15. Notwithstanding any provision of this Agreement to the contrary, the Reserve
Bank may, in its sole discretion, grant written extensions of time to the
Southern Security, Modder, and Xxxxxx to comply with any provision of this
Agreement.
16. 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 taken any other action affecting Southern Security, the Bank or
any of its current or former instituion-affiliated parties thereof including,
but not limited to Modder and Xxxxxx, and their successors or assigns.
17. This Agreement is a "written agreement" for the purposes of 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 13th day of April, 1995.
SOUTHERN SECURITY BANK CORPORATION FEDERAL RESERVE BANK OF ATLANTA
By: s/Xxxxxx X. Xxxxxx By: s/ Xxxxxx X. Xxxxxx, III
---------------------- --------------------------
Xxxxxx X. Xxxxxx, III
Title: Chairman & CEO Assistant Vice President
With respect to paragraphs 4(c), 5, and 14 through 18 hereof, in their
individual capacities.
s/ Xxxxxx X. Xxxxxx s/ Xxxxx Xxxxxx
----------------------------- --------------------------------
Xxxxxx X. Xxxxxx Xxxxx Xxxxxx
The undersigned directors of Southern Security each acknowledges having
read the foregoing Agreement and approves of the consent thereto by Southern
Security.
s/Xxxxxxx Xxxxxx s/Xxxxxx X. Xxxxxx
----------------------------- ---------------------------------
Xxxxxxx Xxxxxx Xxxxxx X. Modder
s/Xxxxxx Xxxxxxxx, M.D. s/Xxxxx Xxxxxx
----------------------------- ---------------------------------
Xxxxxx Xxxxxxxx, M.D. Xxxxx Xxxxxx
s/Xxxxx Xxxxxx s/Xxxxxx Xxxxxx
----------------------------- ---------------------------------
Xxxxx Xxxxxx Xxxxxx Xxxxxx
UNITED STATES OF AMERICA
BEFORE THE BOARD GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
-------------------------------------
Written Agreement By and Among
FLORIDA FIRST INTERNATIONAL BANK
Hollywood, Florida
FEDERAL RESERVE BANK OF ATLANTA
Atlanta, Georgia DOCKET NO. 92-022-WA/XX-XX
and
STATE COMPTROLLER AND BANKING
COMMISSIONER OF THE STATE OF FLORIDA
Tallahassee, Florida
----------------------------------------
WHEREAS, in recognition of their common goal to restore and maintain the
financial soundness of the Florida First International Bank, Hollywood, Florida
(the "Bank"), a State chartered bank which is a member of the Federal Reserve
System, the Bank, the Federal Reserve Bank of Atlanta (the "Reserve Bank") and
the State Comptroller and Banking Commissioner of the State of Florida (the
"Comptroller") have mutually agreed to enter into this Written Agreement (the
"Agreement"), which replaces the prior Written Agreement, effective January 9,
1989;
WHEREAS, this Agreement is being executed in accordance with the Rules
Regarding Delegation of Authority of the Board of Governors of the Federal
Reserve System (the "Board of Governors"), specifically 12 CFR 265.11(a)(15),
and the Reserve Bank has received the prior approval of the Director of the
Division of Banking Supervision and Regulation (the "Director") and the General
Counsel of the Board of Governors to enter into this Agreement with the Bank;
and
WHEREAS, on February 27, 1992, the board of directors of the Bank, at a
duly constituted meeting adopted a resolution authorizing and directing
President, Xxxxxx Xxxxxx to enter into this Agreement on behalf of the Bank and
consented to compliance by the Bank and its institution-affiliated parties, as
defined by Section 3(u) of the Federal Deposit Insurance Act, as amended (12
U.S.C. 1813(u)) (the "FDI Act"), with each and every provision of this
Agreement.
NOW, THEREFORE, before the taking of any testimony or adjudication of or
finding on any issue of fact or law herein, and without this Agreement
constituting an admission of any allegation made or implied by the Board of
Governors or the Comptroller, the Bank, the Reserve Bank, and the Comptroller
agree as follows:
1. The Bank shall not declare or pay any dividends without the prior
written approval of the Reserve Bank, the Comptroller, and the Director.
2. (a) Within 60 days of this Agreement, the Bank shall submit to the
Reserve Bank and the Comptroller a written plan to maintain an adequate capital
position. The plan shall, at a minimum, address and consider (1) the Bank's
current and future capital requirements, including the maintenance of an
adequate risk-based capital ratio and tier 1 leverage ratio in conformity with
the Capital Adequacy Guidelines of the Board of Governors (12 C.F.R. Part 208,
App. A and B), (2) the volume of the Bank's adversely classified assets, (3) the
Bank's anticipated level of retained earnings, and (4) the source and timing of
additional funds to fulfill the future capital and the loan loss reserve
requirements set forth in this Agreement.
(b) Notwithstanding the provisions of paragraph 2(a) hereof, in the
event that the Bank's tier 1 leverage ratio falls below 6.25 percent, the Bank,
shall within 5 days of such event, notify the Reserve Bank and the Comptroller
about the capital deficiency and shall submit a written statement detailing the
steps that will be taken by the Bank to increase the Bank's tier 1 leverage
ratio above 6.25 percent within 90 days of such event.
3. (a) The board of directors shall take all actions as are necessary to
ensure the Bank's substantial compliance with its established written
asset/liability management policies and procedures.
(b) The Asset/Liability Committee (the "ALCO") of the bank shall, at
all times, be comprised of at least two outside directors. The ALCO shall have
the responsibility for monitoring compliance with the Bank's asset/liability
policies and procedures, and shall review, on a monthly basis, all decision made
by the Bank's management with regard to such policies and procedures, paying
particular attention to whether each decision was made in accordance with the
policies and procedures. Any exceptions to the policies and procedures shall be
documented by the ALCO as to the reason for the excepting and the continuity of
the exception with the Bank's overall goals and strategies and shall be approved
by the majority of the ALCO members.
4. (a) A majority of the Bank's Loan Committee shall, at all times, be
comprised of outside directors, who are not executive officers of the Bank. The
prior approval of the Loan Committee shall be required for any extension of
credit made by the Bank(1) that in the aggregate will exceed $100,000 to any
borrower, including any related interest(s) of the borrower or (2) to any
institution-affiliated party of the Bank, including any related interest(s) of
such borrower. The Bank's Loan Committee shall have the responsibility for
monitoring compliance with the Bank's written loan policies and procedures and
shall review, on a monthly basis, all loans made by the Bank and the activities
of all personnel of the Bank involved in its lending operations. At each meeting
of the Loan Committee, the Committee shall review the current status of all
loans in excess of $50,000 that are in default as to principal or interest for
30 days or more as of the date of the board meeting, that are adversely
classified or listed for special mention by State or Federal examiners in the
Bank's latest report of examination or that are to an institution-affiliated
party of the Bank. The Committee shall specifically address whether the
extension of credit was made in accordance with the Bank's written loan policies
and procedures and whether the collection actions undertaken by Bank management
to reduce the volume of past due loans were in full compliance with the Bank's
collection procedures as set forth in its written loan policies and procedures.
The Loan Committee shall maintain accurate written minutes of its meetings,
which shall be available for subsequent supervisory review.
(b) At least once every 30 days from the date of this Agreement, but
not less than 5 days before a board of directors' meeting, the Loan Committee
shall to the board of directors a written report regarding all actions it has
taken.
(c) For the purpose of this Agreement, the terms (1) "related
interest" shall be defined as set forth in Section 215.2(k) of Regulation O of
the Board of Governors (12 CFR 215.2(k)); (2) "extension of credit" shall be
defined as set forth in Section 215.3 of Regulation O of the Board of Governors
(12 CFR 215.3); and (3) "executive officer" shall be defined as set forth in
Section 215.2(d) of Regulation O of the Board of Governors (12 CFR 215.2(d)).
5. The Bank shall not, directly or indirectly, (a) extend any additional
credit to or for the benefit of any borrower, including any related interest of
the Borrower, who is obligated in any manner to the Bank on any extension of
credit or portion thereof that has been charged off by the Bank or classified
"Loss" or "Doubtful" in the Report of Examination of the Bank, dated October 31,
1991 (the "Report of Examination":) as long as such credit remains uncollected;
and (b) extend any additional credit to any borrower whose line of credit has
been classified "Substandard" in the Report of Examination without the prior
approval of the Bank's board of directors, who shall document the reasons for
the additional advances, specifically (1) that the additional extension of
credit is necessary to protect the Bank's interest in the ultimate collection of
the credit already granted, or (2) that the additional credit is in full
compliance with the Bank's written loan policy and is adequately secured, that a
through credit analysis has been performed indicating that the additional
extension of credit is reasonable and justified, that all necessary loan
documentation has been properly and accurately prepared and filed, that the
additional extension will not impair the Bank's interest in obtaining repayment
of the already outstanding credit, and that the board of directors reasonably
believes that the additional extension of credit will be repaid according to its
terms. The certification, together with the credit analysis and related
information that was used in the determination, shall be maintained by the Bank
for subsequent supervisory review.
6. Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank and the Comptroller a written plan designed to improve the Bank's position
on each loan in excess of $100,000 that was in default as to principal or
interest in excess of 90 days as of the date of this Agreement and each asset,
including other real estate, adversely classified by examiners in the Report of
Examination, through amortization, repayment, liquidation, additional collateral
or other means, whichever may be appropriate. The plan shall not be amended or
rescinded without the prior written approval of the Reserve Bank, except that
the plan shall be amended periodically to cover loans or others assets in excess
of $100,000 that are adversely classified or listed for special mention in
subsequent examinations of the Bank or, with respect to loans, in default as to
principal or interest in excess of 90 days as of the date of each subsequent
examination or visitation. Amended plans based on loans or other assets that are
classified or listed for special mention or overdue in subsequent examinations
or visitations shall be submitted to the Reserve Bank and the Comptroller with
the next progress report, described by paragraph 13 hereof, following each
subsequent examination or visitation.
7. (a) Within 45 days of this Agreement, the Bank shall take all necessary
steps to correct all exceptions to the Bank's loan files reflected in the loans
adversely classified and the loans listed for technical exceptions in the Report
of Examination, including obtaining accurate and current financial statements,
updating insurance coverage, and obtaining income/cashflow information.
(b) Within 60 days of this Agreement, the Bank shall submit to the
Reserve Bank and the Comptroller (1) a written report detailing the actions
taken pursuant to paragraph 7(a) hereof, and (2) written procedures designed to
ensure that all extensions of credit comply with the Bank's revised loan policy
concerning required loan documentation and collateral.
8. (a) Within 30 days of this Agreement, the Bank shall establish and
shall, thereafter, continue to maintain, through charges to current operating
income, an adequate valuation reserve for loan losses. The adequacy of this
reserve shall be determined in light of past loss experience, evaluation of the
potential for losses in the loan portfolio of the Bank (especially the potential
for unidentified losses in loans adversely classified) and examiners' other
criticisms. A written record shall be maintained indicating the methodology used
in determining the amount of the reserve needed (e.g., at a minimum, the
methodology should address the maintenance of a reserve equal to a sum of : 40
to 50 percent of loans classified "Doubtful", 10 to 20 percent of loans
classified "Substandard" and .5 to 1 percent of all other loans). This record
shall be submitted to the Reserve Bank and the comptroller for review within 60
days of this Agreement.
(b) Notwithstanding the provisions of paragraph 8(a) hereof, the
Bank's valuation reserve for loan losses shall, within 10 days of this Agreement
and, thereafter, at all times subsequent to date of this Agreement, equal, at a
minimum, 1.78 percent of the Bank's total loans, excluding Federal funds sold.
(c) For the purpose of this paragraph, the Bank's total loans shall
not include any loans or portions of loans that have been adversely classified
as "Loss" by examiners in any report of examination or visitation (which loans
shall be charged off upon the Bank's receipt of any report of examination or
visitation) or otherwise charged off the books of the Bank, and the amount of
total loans shall be the amount listed on line 11 of Schedule RC-C of the
Consolidated Report of Condition of the Bank as reported for each quarter after
the date of this Agreement.
(d) The requirement of this paragraph shall not be construed as a
standard for future operations of the Bank after the termination of this
Agreement. It is the intention of these requirements to provide for an
appropriate reduction in adversely classified assets and to maintain adequate
loan loss reserves during the term of this Agreement.
9. Within 45 days of this Agreement, the Bank shall develop and submit to
the Reserve Bank and the Comptroller written loan review procedures. The loan
review procedures shall be designed to identify and categorize problem credits
and to assess the overall quality of the Bank's loan portfolio. These procedures
shall, at a minimum, include the following:
(a) A description of the risk grades to be assigned to each loan;
(b) the designation of the individual(s) who will be responsible for
determining loan grades;
(c) a description of when loans will be graded; and,
(d) a mechanism for reporting periodically to the Bank's board of directors
the status of the loan reviews and the action(s) taken by management to improve
the Bank's position on each loan adversely graded.
10. Within 45 days of this Agreement, the Bank shall amend its present
written loan policies and procedures and shall submit such amended policies and
procedures to the Reserve Bank and the Comptroller. The amended loan policies
and procedures shall include, but not be limited to, the following:
(a) The establishment of procedures for performing credit evaluations,
including, at a minimum, (1) reviewing current (less than 12 months old)
balance sheet and income information, (2) determining business trends by
obtaining statements for the previous two years for existing businesses, (3)
reviewing the applicant's liquidity, cash flow and leverage position, (4)
determining the applicant's current status and payment record on outstanding
debts, (5) obtaining credit bureau reports, (6) verifying contingent
liabilities, and (7) obtaining all other necessary documentation regarding the
applicant, guarantor, and/or collateral;
(b) guidelines for determining when audited financial statements of loan
customers will be required in lieu of applicant prepared statements or
compilations;
(c) guidelines for loans secured by real estate and/or income producing
properties, including appraisal requirements and requirements for minimum debt
service coverage ratios and minimum dollar amounts on which an outside appraisal
will be required;
(d) procedures designed to ensure that extensions of credit are generally
made to borrowers within the Bank's defined trade area;
(e) procedures for establishing repayment plans at the inception on all
extensions of credit;
(f) guidelines for placing loans on nonaccrual status in conformity with
call report instructions; and,
(g) procedures for exceptions to the loan policy, including required
documentation by the account officer and approval by the board of directors.
11. (a) Within 60 days of this Agreement, the Bank shall submit to the
Reserve Bank and the Comptroller a written strategic plan concerning the Bank's
proposed business activities for 1992. This plan shall at a minimum provide for
or describe:
(1) The responsibilities of the Bank's board of directors towards the
definition, approval, implementation and monitoring of the strategic plan, and
the procedures designed to ensure that the board of directors fulfill such
responsibilities;
(2) management, lending, and operational objectives, given the
condition of the Bank as reflected in the Report of Examination;
(3) an identification of the major areas in and the means by which the
Bank will seek to improve its operational and earnings performance;
(4) the operating assumptions that form the basis for major projected
income and expense components and the sources and uses of cash flow;
(5) financial performance objectives, including plans for asset growth,
earnings, liquidity and capital supported by detailed quarterly and annual pro
forma financial statements, including projected budgets, cash flow statements,
balance sheets and income statements;
(6) the establishment of a quarterly review process to monitor the
actual income, expenses and net cash flow of the Bank in comparison to budgetary
projections; and,
quarterly and annual budgets and cash flow statements and quarter-end and
year-end balance sheet and income statements for the Bank.
(b) A strategic plan for each calendar year subsequent to 1992 shall be
submitted to the Reserve Bank and the Comptroller at least one month prior to
the beginning of that calendar year. The revised projected quarterly and annual
financial statements required by paragraph 11(1)(7) hereof shall be submitted to
the Reserve Bank and the Comptroller within 30 days of the end of each calendar
quarter.
12. The plans, policies, and procedures required by paragraphs 2(a), 6,
7(b)(2), 9, and 10 hereof shall be submitted to the Reserve Bank and the
Comptroller for review and approval. The Reserve Bank and the Comptroller may
comment on the plans, policies and procedures within 10 business days of
receipt. Acceptable plans, policies, and procedures shall be submitted to the
Reserve Bank and the Comptroller within the time periods set forth in this
Agreement. The Bank shall adopt all approved plans, policies and procedures
within 10 business days of approval by the Reserve Bank and the Comptroller and
then shall fully comply with them. During the term of this Agreement, the Bank
shall not amend or rescind the approved plans, policies, and procedures without
the prior written approval of the Reserve Bank and the Comptroller.
13. Within 30 days of the end of each calendar quarter (March 31, June
30, September 30, and December 31) following the date of this Agreement, the
Bank shall furnish to the Reserve Bank and the Comptroller written progress
reports detailing the form and manner of all actions taken to ensure compliance
with this Agreement and the results thereof, including updated reports on all
asset improvement plans required by paragraph 6 hereof. The board of directors
of the Bank shall certify in writing to the Reserve Bank and the Comptroller
that each director has reviewed each quarterly progress report required by this
paragraph. Such reports may be discontinued when corrections required by this
Agreement have been accomplished, and the Reserve Bank and the Comptroller have,
in writing, released the Bank from making further reports.
14. All communications regarding this Agreement shall be sent to:
(a) Xx. Xxxxxx X. Xxxxxxxxx
Vice President
Federal Reserve Bank of Atlanta
000 Xxxxxxxx Xx., X.X.
Atlanta, Georgia 30303-2713
(b) Xx. Xxxxxx X. Xxxxx
State Comptroller and Banking Commissioner
Office of the Comptroller
State of Florida
Tallahassee, Florida 32399-0350
(c) Xx. Xxxxxx X. Xxxxxx
President
Florida First International Bank
Post Office Box 6699
Hollywood, Florida 33081
15. Notwithstanding any provision of this Agreement to the contrary,
the Reserve Bank and the Comptroller may, in their sole discretion, grant
written extensions of time to the Bank to comply with any provision of this
Agreement.
16. The provisions of this Agreement shall be binding upon the Bank,
all of its institution-affiliated parties, in their capacities as such, and
their successors and assigns.
17. Each provision of this Agreement shall remain effective and
enforceable until stayed, modified, terminated or suspended by the Reserve Bank
and the Comptroller.
18. The provision of this Agreement shall not bar, estop or otherwise
prevent the Board of Governors or the Comptroller from taking any other action
affecting the Bank or any of its current or former institution-affiliated
parties and their successors and assigns.
19. This Agreement is a "written agreement" for the purposes of section
8 of the FDI Act (12 U.S.C. 1818).
20. As of the date of this Agreement, the Written Agreement by and
among the Bank, the Reserve Bank, and the Comptroller, dated January 9, 1969, is
terminated.
IN WITNESS WHEREOF, the parties have caused this Agreement to the
executed as of the 17th day of March, 1992.
Florida First International Bank Federal Reserve Bank
By s/ "X.X. Xxxxxx" By s/ "Xxxxxx X. Xxxxxx XXX"
President
State Comptroller and Banking
Commissioner of the State of
Florida
By s/"Xxxxxx Xxxxx"
The undersigned directors of the Bank each acknowledges reading the
foregoing Agreement and approves of the consent thereto by the Bank.
s/"Xxxxxx X. Xxxxxx" s/"Xxxxxx X. Xxxxxxxxx"
s/"Xxxxx X. Xxxxxxxxxxx" s/"Xxxxxx X. Xxxxxxxxx"
s/"Xxxxxx X. Xxxxxx"
SOUTHERN SECURITY BANK
ASSET/LIABILITY MANAGEMENT POLICY
REVIEWED: MAY 27, 1997
APPROVED: MAY 27, 1997
MODIFIED: JULY 22, 1997
SOUTHERN SECURITY BANK
ASSET/LIABILITY MANAGEMENT POLICY
I. STATEMENT OF POLICY....................................1
II. AUTHORITY FOR ASSET/LIABILITY MANAGEMENT COMMITTEE.....1
III. ASSET/LIABILITY MANAGEMENT COMMITTEE...................2
IV. ANNUAL PROFIT PLAN.....................................4
V. LIQUIDITY POLICY.......................................4
VI. PRIMARY FUNDING NEEDS AND SOURCES......................7
VII. OFF BALANCE SHEET POLICY...............................8
VIII. INTERBANK LIABILITIES (REGULATION F)...................9
ASSET/LIABILITY MANAGEMENT POLICY
Southern Security Bank is a full service banking institution organized and
operated to meet the financial needs of individuals and business throughout the
Broward County Area.
I. STATEMENT OF POLICY
X. Xxxxx/Liability Management is the coordination of all balance sheet
categories so as to maximize shareholder wealth. The actual practice
of Asset/Liability Management focuses on the narrower asset/liability
relationship between variable rate assets and variable rate
liabilities. The advent of deregulation caused financial institution
management to assess its ability to reinvest variable cost funds into
profitable investments to maintain stable profitability. Because
banking is an industry that is changing together with the fluctuating
nature of the local and national economies, this policy is subject to
change as needed. The asset/liability management objectives of
Southern Security Bank include the following.
1. Managing net interest margins.
2. managing profitability.
3. Controlling interest rate risk exposure (GAP analysis).
4. Insuring liquidity
5. Performing balance sheet planning (maintaining the ability to
meet loan demand and deposit withdrawals).
6. Perform tax planning. 7. Plan bank funding.
B. It shall be the policy of the Bank's management to achieve the above
objective in the functioning of its Asset/Liability Management Policy.
Quantitative goals shall be established to fit these objectives in
light of the operating environment and long-term planning goals.
X. Xxxxxxxx among the policies to govern Asset/Liability Management is
that of requiring full compliance with all state and federal laws.
II. AUTHORITY FOR ASSET/LIABILITY MANAGEMENT COMMITTEE
Asset/Liability management policies of the bank are under the purview
of the Board of Directors who shall delegate authority for their
formulation and administration to the Asset/Liability Management
Committee.
III. ASSET/LIABILITY MANAGEMENT COMMITTEE
A. An Asset/Liability Management Committee shall be appointed to:
1. monitoring stress conditions, financial markets and regulatory change
on a continuing basis.
2. manage mix of rate sensitive sources and uses of funds over interest
rate cycle.
3. evolve key loan deposit investment and funds management strategies
consistent with profit planning and long-range goals and objectives.
B. The composition of this committee shall include the Chairman of the
Board, the President, the Chief Operating Officer and the Senior
Lending Officer. As the staff of Southern Security Bank increases in
size and additional officers are employed, the committee may decide to
include additional members, which may include directors. The Chairman
of the committee shall be the Chairman of the Board of the bank who
shall be responsible for carrying out the Asset/Liability management
subject to quarterly review by the Board of Directors or more often if
conditions dictate.
C. The Asset/Liability Management Committee shall meet at least monthly or
more frequently as conditions require, such as in times of increased
rate volatility and unexpected economic changes.
D. At its monthly meetings, committee members will review:
1. minutes of the previous meetings.
2. monthly Asset/Liability funds budget in relation to the actual
flow of funds as well as peer group comparisons. The committee
will also conduct a spread analysis and determine how well the
allocation of sources and uses of funds as well as related
strategies and programs are working to meet the bank's longer
range targets.
3. alternative scenarios developed through sensitivity or what if
analysis. These scenarios will incorporate such variables as
expected loan demand, investment opportunities, core deposit
growth within specific categories, regulatory changes,
monetary policy adjustments and the overall state of the
economy and, in addition, interest rates on particular sources
and uses of funds.
4. ratio of the amount of rate-sensitive assets to the amount of
rate-sensitive liabilities which are sensitive within defined
time frames, (i.e., 90, 180, 365 days). the sensitive assets
and rate-sensitive liabilities and the maturity distribution.
Furthermore, it will review rate-sensitivity reports as well
as mix/spread analysis to assess the effects of anticipated
interest rates and of the volume and mix of asset/liability
items on net interest margin.
5. current and prospective liquidity position both on the asset
and liability sides of the balance sheet and in relation to
rate sensitivity.
6. results of the implementation of funding strategies which are
designed to insure that the bank has adequate funds for loans,
investments, deposit coverage, debt repayment and the
expansion of service capability when they are necessary.
Prospective assessment of the availability of funds both for
shorter term and capital purposes at a price that will give a
reasonable and consistent return on investment in relation to
the risk involved. Weighted average maturity distribution on
money market certificates and $100,000 and larger certificates
of deposits.
7. balances maintained with correspondent banks and other
non-earning assets.
8. ratio of loan loss reserve to outstanding loans.
9. capital levels to determine whether they are sufficient
to support asset growth; to underwrite interest rate risk;
to match the expectations of rating agencies and the
marketplace, and to meet long- and short-term funding needs.
Periodic review of bank's dividend policy.
10. tax position.
11. recommendations on asset/liability allocations, current months
funds budget and action plan.
E. Discussion of information recommendations and actions taken by the
committee will be recorded and reported in the minutes of the meeting.
Copies of these minutes will be distributed to the committee members
and other key personnel. A copy of the minutes for each meeting will be
maintained on file in the office of the Chief Executive Officer.
F. This committee will be involved in all operations and functions of the
bank. It requires a management information system providing thorough
and useful information quickly available. Manual preparation of such
information is burdensome and time consuming.
G. The committee shall attempt to be proactive rather than reactive in
implementing and accomplishing balance sheet goals. the bank has the
opportunity to enter the financial markets without burden of old,
economically outdated operating programs. Such strategy shall include:
1. establishing loan pricing closely paralleling the bank's cost
of funds.
2. providing variable/renegotiable rate loan products which will
change based upon and appropriate index. It will be the
intention of the committee to have these variable rate
products reflect, as much as possible, changes in the bank's
own cost of funds.
3. utilizing secondary mortgage market capabilities through loan
origination and pass through arrangements to maintain
liquidity.
4. assessing the role of the investment portfolio in light of
deregulation of interest rates and tax reform.
5. maximizing investment yield subject to risk and maturity
considerations. In addition, certain hedging devices, i.e.,
interest rate swaps, options and loss programs may be used
from time to time to more effectively manage the portfolio.
6. developing an investment portfolio that is responsive to
fluctuating levels of interest rates by emphasizing shorter
maturities and money market instruments to better match
funding liabilities.
H. Asset/Liability Management affects all bank activities. The remaining
policy areas discovered herein interrelate with Asset/Liability
management.
IV. ANNUAL PROFIT PLAN
A. Long-range plans serve as the basis for profit plans and the
Asset/Liability Management Committee will review variances
from the budget segments of these plans so that timely
corrective action can be taken or adverse variance with regard
to interest rates, volume levels, and mix of assets and
liabilities.
B. The committee will also review performance measures quarterly.
Based on discernible changes and trends or patterns, it will
make alterations and strategies for loan policies, bond
portfolio structure and funds acquisitions in order to achieve
year-end goals.
C. On an operating level, management will have sufficient
authority to react to contingencies daily.
D. Sufficient flexibility will be built into the budgeting
process so that variance analysis input and rolling monthly
12-month forecasts can be factored on an ongoing basis.
E. The Board of Directors will review each calendar quarter
comparisons of actual versus planned results in the annual
profit plan. These reviews will focus on dollar as well as
percentage variances for the quarter being reviewed in the
year-to-date results.
V. LIQUIDITY POLICY
A. Liquidity represents the ability to accommodate the most efficient
decreases in deposits and/or the run-off of other liabilities as well
as fund increases in the loan portfolio, lines and letters of credit
and fulfill short-term credit needs. A bank has adequate liquidity
potential when it can obtain sufficient cash promptly at a reasonable
cost. Liquidity is essential to compensate for expected and unexpected
balance sheet fluctuations and to provide funds for growth. The price
of liquidity is a function of market conditions and the degree of
interest rate and credit risk. If liquidity needs are met through
holdings of high quality, short-term assets, the price is income
sacrificed by not holding longer term and/or lower quality assets. If
liquidity needs are not met through liquid asset holdings, the bank
may be forced to acquire additional liabilities under adverse market
conditions at excessively high rates. Determination of the adequacy of
the bank's liquidity position depends on the analysis of:
1. historical funding requirements.
2. current liquidity position.
3. anticipated future funding needs.
4. options for reducing funding needs or attracting
additional funds.
5. sources of funds.
B. To insure adequate liquidity or a safe pattern of cash flows in a
fluctuating rate environment, the Asset/Liability Management Committee
will consider the implementation of three strategies:
1. Extending the maturities of the bank's liabilities unless
interest rates are heading downward.
2. Diversifying the bank's sources of funds, including the
development of new funding sources.
3. matching the maturity of assets and liabilities, recognizing
that this strategy usually causes a higher cost of funding
assets than maturity mismatching.
C. In assessing liquidity, the committee will consider current position
and future outlook. It will especially monitor large liability
dependence, temporary investments to large liabilities, fixed rate
assets to core deposits and loans to deposits.
D. To provide funds to satisfy liquidity needs, the bank must do one or
more of the following:
1. Dispose of liquid assets.
2. Increase short-term borrowing or issue additional short-term
deposit liabilities.
3. Decrease holdings of non-liquid assets.
4. Increase liabilities of a term nature.
5. Increase capital funds.
E. The committee will guide the bank's funding operations according to the
following principles:
1. Compete for stable deposit money by building multi-service
customer relationships.
2. Lengthen the maturity of purchased liabilities unless longer
term rates so far exceed current or prospective short-term
rates as to make this option unfeasible.
3. Diversify sources of funds by maintaining an active presence
in as many money markets as possible for a small bank.
4. Promote buyer/seller relations and market reputations so that
investor confidence will enable the bank to raise funds it
needs when it needs them at reasonable rates.
5. Plan and arrange for contingency funding through a variety of
sources before adverse market conditions cause difficulty.
6. Conduct frequent profitability analysis of deposit accounts
relationship and compare funds cost with those of alternative
sources.
F. Liquidity targets and guidelines. It should be understood that targets
are just that and if not met, an acceptable explanation will follow.
Guidelines should not be violated unless prior approval is obtained. As
follows.
1. A net loan to deposit ratio of 80% maximum. (Guideline, refer to
loan policy)
2. Net Loans & Leases (& Capital) of not greater than
8.0%. (Target, refer to loan policy)
3. Net loans to total assets of not more than 75%. (Target, refer to
loan policy).
4. Commercial loans to total loans not to exceed 60%.
(Target, refer to loan policy).
5. Consumer Loans to total loans not to exceed 50%. (Target, refer to
loan policy).
6. Real Estate Loans to total loans not to exceed 60%. (Target, refer
to loan policy).
7. Temporary Investments to average total assets of 10% - 20%.
(Guideline)
Temporary investments are interest bearing balances due from
depository institutions, federal funds sold and securities
purchased under agreements to resell, trading-account assets,
and debt securities with remaining maturities or earliest
repricing opportunity of one year or less.
8. Certificates of deposits, borrowing and public funds should account
for less than 50% of total assets. (Target)
9. Borrowing to total capital should be less than 200%. (Guideline)
10. The rate sensitive asset to rate sensitive liability ration from 0
to 90 days should be maintained between .80 to 1.20. (Target).
11. The rate sensitive asset to rate sensitive liability ration from
91 - 365 days should be maintained between .80 to 1.20. (Target).
12. Zero to 90 day GAP to total assets shall not exceed -10% to +10%.
(Target) 13. 91 - 365 day GAP to total assets shall not exceed
-10% to +10%. (Target) 14. Zero to 190 day rate sensitive loans to
total loans, 50% to 70%. (Guideline) 15. Net Liquidity to Net
Liability, more than 20%. (Target) Net Liquidity is cash,
due from banks, fed funds sold, interest-bearing deposits
maturing in 30 days or less, and market value of all
unencumbered, rated, investment-grade securities. Net
Liability is total deposits less due from banks.
16. Short term liquidity divided by total assets should be greater than
20%. (Target)
17. Riskless Assets to Total Assets 10% to 25%. (Guideline) Riskless
Assets are cash & due from, U.S. treasuries and government agency
securities less pledge amount, FDIC insured certificates of
deposits, cash and federal funds sold.
18. In determining the spread rate (rate differential) between marginal
liability cost and marginal yield, reserve requirements, taxes and
deposit insurance must be considered incremental costs for cost of
funds calculations. The resulting net spread should not be less
than 3%. (Target)
19. Gross Off Balance sheet items to total assets should not be greater
than 10%. (Target)
20. Volatile Liability Dependence Ratio should be less than a Plus 10%
and preferable a negative ratio. (Target)
G. A small bank runs an extreme risk of illiquidity quickly due to the
risk of loans transferred from other institutions inherently exceeding
the transfer of deposits. Therefore, it is imperative that the
established policy be adhered to as it relates to prudent maximum loan
limits rather than the legal maximum limits which relate to the amount
of capital not liquidity. A loan policy has been adopted and is
referenced hereto.
H. Similarly, long-range investment strategies based on the investment
Policy incorporated herein must have regard for liquidity needs.
Liquidity is sought while at the same time minimizing the cost of those
funds. It must be expected to experience cyclical deposit fluctuations
particularly in the Florida economy and to a lesser degree, loan demand
fluctuations. The Asset/Liability Management Committee will endeavor to
make
educated predictions for funding requirements and investments which can
be purchased with these requirements in mind.
I. There should be established unsecured (preferably) or secured lines of
credit with correspondent banks. Preferably at least two lines should
be established. Diversification reduces dependency on any single
supplier. The bank should not exceed its capacity to borrow in any one
area or market. The committee shall determine an appropriate level of
borrowing that the bank may have. Initially it shall be the
responsibility of the committee to arrange for lines of credit at other
financial institutions. These lines of credit shall include fed funds,
repo's and the Federal Reserve discount window.
VI. PRIMARY FUNDING NEEDS AND SOURCES
Primary funding needs and sources are measured by our need and ability to raise
cash at a reasonable cost or minimum loss. Our bank must be capable of meeting
all customer obligations at all times. Specifically, we must meet cash
withdrawal requirements, fund lines and letters of credit, and fulfill
short-term credit needs. Practically, we will achieve sufficient liquidity by
the following procedures:
1. Pursuit of core deposits.
2. We should have part of our investment portfolio maturing
within one year. As these investments mature, they will be
used to meet the bank's cash needs or they will be reinvested
to maintain a desired liquidity position.
3. We will attempt to define volatile deposits existing in our
money market savings account (i.e., accounts over $100,000).
This balance in the account will be classified as volatile
money and we will keep at least an amount equal to this in our
Fed funds sold account to offset volatile deposits. This money
in Fed funds would then become a temporary source of liquidity
if needed.
4. We may apply for a second line of credit from the
Federal Reserve or a correspondent to be used if needed.
5. Should we experience temporary high loan demand, we will
attempt to meet it by selling loans to correspondent
xxxxx.
6. In terms of illiquidity, we could explore the possibility of
raising money by buying money from such sources as the CD
market.
7. For liquidity purposes we are classifying our investment
portfolio into liquidity and income designations. Government
agency, and other short-term investments maturing within two
years, and municipal securities maturing within one year, will
be designated as "liquid" investments, while investments with
maturities greater than the above criterion will be considered
"income" investments.
8. We will attempt to forecast loan and deposit expectations
through the use of historical trends and future economic
expectations. These projections will enable us to plan for
seasonal liquidity needs rather than react hastily to
liquidity pressure.
9. Should the bank become illiquid in spite of these steps, we
will curtail lending. The first step is to cease making real
estate mortgage loans; the second is to cease making
commercial loans; the third step will be to slow consumer
loans; and the
fourth step is to refuse loans to new customers. Only as a
last resort will we refuse short-term working capital loans to
existing commercial customers or short-term loans to
individual customers.
VII. OFF BALANCE SHEET POLICY
The Off Balance Sheet items (contingent liabilities) of the bank will consist
primarily of unused portions of committed lines of credit where the bank has a
legal obligation to fund these unused portions when called upon. Said legal
obligation arises from the acceptance of a commitment fee from the borrower
whether or not the loan has actually closed.
Additionally, while the bank is not at this time seeking to engage in the
issuance of standby or trade letters of credit, we recognize the possibility of
being called upon to do so by existing customers. Any letter of credit activity
will be subject to the same policy, procedures, credit and collateral
requirements that any loan request is subject to and once paid for, will become
an Off Balance Sheet Item until it is called upon or expires.
Because of liquidity considerations and their generally lower profit potential,
total exposure in letters of credit will be reviewed monthly by the Director's
Loan Committee.
Because of liquidity considerations, all unused portions of lines of credit will
be reviewed by the Director's Loan Committee monthly, said total to be compared
to the bank's average excess liquidity for the prior thirty-day period.
Loans of credit in excess of officer's authority will be subject to lending
authorities set forth in the bank's Loan Policy.
VIII. INTERBANK LIABILITIES REGULATION(S)
Credit Exposure that may exist between the Bank and its correspondent banking
relationship with outside correspondents, as that term is defined in Federal
Reserve Regulation F, shall at all times be monitored and controlled as required
by that regulation.
A. No less frequently than quarterly, the Bank's Chief Operating Officer,
or in its absence the Senior Loan Officer, or such designated
"Responsible Officer" as specified and directed by the Board of
Directors, shall review the call reports, annual reports, and such
other publicly available information as the Responsible Officer shall
deem appropriate concerning each correspondent to which this Bank has
a "significant exposure". For purposes herein, "significant exposure"
shall be deemed to exist whenever the exposure of this Bank to a
correspondent is more than $100,000 on a monthly average basis.
Exposure shall be measured by using the actual amount owed to the Bank
on all exposure types. This is to include the sale of federal funds
(exclusive of agent status).
B. The Responsible Officer shall conduct such reviews more frequently than
quarterly if prudent to do so, based upon the size and type of the
Bank's exposure and the financial condition of such correspondent. In
assessing the financial condition of each
correspondent, the Responsible Officer shall consider at a minimum the
following financial characteristics of the correspondent's:
1. Capital level;
2. Level of non-accruals and past due loans and leases;
3. Level of
earnings;
4. Factors affecting the correspondent financial condition.
In such assessments, the Responsible Officer may also take into account the
rating of the correspondent by a bank rating agency whose general assessment and
selection criteria have been reviewed and approved by the Board of Directors. At
present, this board has reviewed and approved the criteria of the following bank
rating agency:
Xxxxx Financial Reports, Inc.
P.O. Drawer 145510
Coral Gables, Florida 35114
This board recognizes the need to establish a current list of acceptable
correspondents. The list of institutions initially identified is neither all
inclusive or deemed an approval of a nonqualifying institution as required by
this policy:
Independent Bankers Bank - Orlando Florida
Compass Bank - Birmingham, Alabama
First Union National Bank, Charlotte, North Carolina
Chase Manhattan Bank - New York, New York
Fleet Bank - Providence, Rhode Island
C. The Responsible Officer shall determine whether the correspondent
qualified as at least "adequately capitalized" as defined in
Regulation F. At present that standard requires the correspondent to
have at a minimum:
1. - Total Risk Based Capital Ratio of 8.0%
- Tier 1 Risk Based Capital Ratio of 4.0%; and - Leverage
Ratio of 4.0%.
2. If the numerical values as defined above in Section
4.20[C](1,2,3) are not equal to or exceed those minimum
requirements as defined by Regulation "F" for an "Adequately
Capitalized" correspondent, those minimum requirements
stipulated in Regulation "F" shall be the applicable
qualifications. The Responsible Officer shall:
a. begin applying the amended standards immediately; and
b. bring such changes to the attention of the
Asset/Liability Committee immediately, and to the
Board of Directors at its next regular meeting after
the Responsible Officer becomes aware of the changes,
so that it may revise this policy.
3. Additionally, the bank should limit exposure to correspondent
banks in the form of noninterest and interest bearing FDIC
insured accounts and federal funds
exclusive of agent status). The limit for these balances on
inter-day and intra-day transactions are 10% of total assets.
The maturity of such exposure should be daily but may
occasionally extend to seven days (except for FDIC insured
time deposits which should not exceed one year). The
correspondent should also meet the following quantitative
measures: a. Nonperforming Assets/Assets equal to or less than
1.25% b. Repossessed Assets/Total Assets equal to less than
1.25% c. Return on Assets equal to or more than .75%.
D. The Bank shall neither establish nor (to the extent possible) continue
a significant exposure to a correspondent in which the form or maturity
of the exposure and the financial condition of the correspondent create
a significant risk that the payments expected by the Bank will not be
made in full or on time.
1. If a correspondent relationship which initially complied with
Bank policy later becomes non-complying because of
deterioration of the financial condition of the correspondent,
market changes or any other reason, the Responsible Officer
shall terminate and close out the relationship, or reduce it
to an insignificant level as rapidly as possible, consistent
with prudent banking standards.
2. The Responsible Officer shall report all such situations,
the remedial action taken and the results of that action
immediately to the Executive Committee of the Board of
Directors, and to the Board of Directors at its next
schedule meeting.
E. The Bank's internal financial limit for its exposure to any
institutional correspondent shall be established and recorded on the
"Bank's Interbank Liability (Regulation F) Control Records". (See
Appendix for Control Record format.)
1. The Board of Directors shall review these limits from time to
time upon recommendations of management or upon its own
motion, and revise those limits up or down either as a global
change applicable to all correspondent relationships, or for
any or each specific correspondent(s) as it deems appropriate.
2. Bank management shall use only the most current revision of
each form in determining what are the internal limits of the
Bank for exposures to correspondents. Each officer
responsible for a corespondent relationship of the Bank
shall structure that relationship so as to preclude the
possibility of the relationship growing to a size in excess
of the applicable internal limit unless such growth is merely
an occasional anomaly, resulting from unusual market
disturbances, market movements favorable to the Bank,
increases in activity, operational problems, or other unusual
circumstances.
F. Procedure to determine the Bank's internal financial limit for its
exposure to any institutional correspondent.
1. At least quarterly, determine the size of the exposure in each
present or proposed correspondent relationship of the Bank.
2. If the exposure is not "significant" as defined herein, go to
Step 3. If the exposure is "significant" as defined, go to
Step 4.
3. Monitor the size of the exposure retroactively on a monthly
basis, or more frequently if appropriate. If the exposure
becomes significant, to Step 4.
4. Review each correspondent's latest call report, annual report,
rating by any bank rating service approved in the Policy, or
any other available financial and other information about the
correspondent to determine whether it has at lest the capital
as defined in item C of this section.
5. If the correspondent does not meet all of those three
requirements, determine how best to reduce the Bank's exposure
to that correspondent below the level defined as "significant"
in the Policy. Alternatively, determine how to eliminate that
exposure completely. Weigh the risks and costs of each
alternative against the risks and costs of continuing the
relationship at its present level or some level higher than
the lowest figure which constitutes a "significant" exposure
under the Policy until its normal liquidation if it is one
which will liquidate normally at a fixed time in the future.
Document these processes and report them to the Executive
Committee of the Board of Directors.
6. If the correspondent does not meet all three of those
requirements, compare the size of the Bank's exposure to
that correspondent with the limits stated in the Bank's
interbank liability control record established by the
Policy.
7. If the exposure is less than the applicable limit on the
control record, note that the fact in the working papers and
repeat the above steps at the next regular monitoring.
8. If the exposure is greater than the applicable limit in the
Bank's control record, the Responsible Officer shall reduce
the exposure at or below the level limit amount, unless the
excess is merely an occasional one, resulting from unusual
market disturbances, market movements favorable to the Bank,
increases in activity, operation problems, or other unusual
circumstances. Document these activities.
G. Compliance officer's Procedure to determine the Bank's compliance with
its internal financial limit for exposure to institutional
correspondent(s).
1. At least annually, obtain all records regarding the monitoring
of interbank exposure pursuant to the Bank's policy since the
immediately previous review by the Compliance Officer.
2. If the number of correspondent relationships the Bank has is
not large, review all of them. If it is large, select a
representative sample for review, and review them.
3. Note whether correct determinations of the size and compliance
or lack thereof with the Bank's policy were made by the
Responsible Officer.
4. Note whether all corrective actions required by the Bank's
policy and procedure were taken and reported to the Bank's
Executive Committee and/or the Board of Directors.
5. Advise the Bank's auditor of the results of this examination.
H. To override internal limits as to Interbank Liabilities will require
documenting the processes and the situation. Authority is vested with
the Chief executive Officer to override the limitations herein
established.
