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EXHIBIT 99.1
UNITED STATES OF AMERICA
Before the
OFFICE OF THRIFT SUPERVISION
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In the Matter of: OTS Order No.:
Life Financial Corporation, Date:
OTS Docket No. H-2834
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STIPULATION AND CONSENT TO ISSUANCE OF
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ORDER TO CEASE AND DESIST
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WHEREAS, the Office of Thrift Supervision (OTS), based upon information
derived from the exercise of its regulatory responsibilities, is of the opinion
that grounds exist to initiate an administrative cease and desist proceeding
against Life Financial Corporation (Life Financial), OTS Docket No. H-2834,
pursuant to Section 8 of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. (S)
1818(b)(1)./1/
WHEREAS, Life Financial desires to cooperate with the OTS and to avoid the
time and expense of such administrative proceeding and, therefore, hereby
stipulates and agrees to the following terms:
1. Jurisdiction.
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a) Life Financial owns one hundred percent (100%) of the outstanding common
stock of Life Bank, F.S.B., Riverside, California, (the Institution), an
insured savings association, and is a savings and loan holding company as
that term is defined at 12 U.S.C. (S) 1467a(a)(1)(D).
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/1/ All references to the United States Code (USC) are as amended.
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b) Pursuant to 12 U.S.C. (S) 1818(b)(9), the "appropriate Federal banking
agency" may initiate cease-and-desist proceedings against a savings and
loan holding company in the same manner and to the same extent as savings
associations for regulatory violations and unsafe or unsound acts or
practices.
c) Pursuant to 12 U.S.C. (S) 1813(q), the Director of the OTS is the
"appropriate Federal banking agency" with authority to initiate cease-and-
desist proceedings against savings and loan holding companies. Accordingly,
Life Financial is subject to the jurisdiction of the OTS to initiate and
maintain such administrative proceedings pursuant to 12 U.S.C. (S) 1818(b).
2. OTS Findings of Fact.
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The OTS finds that Life Financial has engaged in activities and practices that
are unsafe and unsound, and caused the Institution to engage in activities and
practices that are unsafe and unsound, and in violation of regulations and
regulatory guidance, as follows:
a) The December 31, 1999 sale to the Institution of $5.2 million in residual
assets to the Institution, the June 23, 1999 sale of $25.5 million in
residual assets to the Institution, and the October 15, 1999 sale of $40.1
million in loans to the Institution, each exceeded ten percent of capital
and surplus of the Institution, in violation of 12 C.F.R. 563.41 (S)
(a)(1)(i). As a result of these transactions, Life Financial owed the
Institution $1.3 million as of June 23, 1999 and $2.2 million as of October
15, 1999 (repaid on July 30, 1999 and November 26, 1999, respectively),
which constituted unsecured advances by the Institution in violation of 12
C.F.R. (S) 563.41(c).
b) In addition, the December 31, 1999 sale of $5.2 million in residual assets
to the
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Institution was not supported by empirical data that showed this
transaction was on terms and under circumstances that were substantially
the same, or at least as favorable to the Institution as those prevailing
at the time for comparable transactions with or involving nonaffiliated
companies, in violation of 12 C.F.R. (S) 563.42. Likewise, Life Financial
and the Institution failed to provide sufficient support to ensure that
bonds and mortgage servicing rights the Institution sold to Life Financial
on June 23, 1999 and October 15, 1999 met the qualitative requirements of
12 C.F.R. (S) 563.42. Life Financial and the Institution failed to
demonstrate that these transactions were on terms and under circumstances
that were substantially the same, or at least as favorable to the
Institution as those prevailing at the time for comparable transactions
with or involving nonaffiliated companies.
c) Life Financial had outstanding accounts payable to the Institution of $1.6
million and $98,000 for December 31, 1999 and March 31, 2000, respectively,
which constitute unsecured advances by the Institution in violation of 12
C.F.R. (S) 563.41(c).
d) Further, the June 23, 1999 and October 15, 1999 sales of $25.5 million and
$40.1 million, respectively, in assets to the Institution, each exceeded
twenty percent of the Institution's capital and surplus in violation of 12
C.F.R. (S) 563.41(a)(1)(ii).
e) During the fourth quarter of 1998, 1999, and the first quarter of 2000, the
Institution paid Life Financial approximately $4.3 million in fees for work
performed by Life Capital Markets (LCM) division. Life Financial and the
Institution failed to demonstrate that these transactions were on terms and
under circumstances that were substantially the same, or at least as
favorable to the Institution as those prevailing at the time for
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comparable transactions with or involving nonaffiliated companies, in
violation of 12 C.F.R. (S) 563.42.
f) The Transactions With Affiliates Log maintained by Life Financial failed to
properly identify all transactions with affiliates, and ensure compliance
with applicable regulations by the Institution. The Transactions With
Affiliates Log erroneously stated that several transactions between Life
Financial and the Institution were not subject to the applicable
regulations, and the Log was unclear with respect to outgoing and income
cash flows.
g) The Tax Sharing Agreement between Life Financial and the Institution fails
to comply with applicable regulatory guidance in that it does not ensure
that the tax payment by the Institution does not exceed the lesser of the
Institution's tax liability or the combined tax liability of the
consolidated entities to the taxing authorities.
3. Consent.
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Without admitting or denying the findings contained herein, except as to
the jurisdiction of the OTS over Life Financial, which is admitted, Life
Financial hereby consents to the issuance by the OTS of the accompanying Order
to Cease and Desist ("Order"). Life Financial further agrees to comply with all
terms of the Order upon its issuance and stipulates that the Order complies with
all requirements of law.
4. Finality.
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The Order is issued pursuant to 12 U.S.C. (S) 1818(b). Upon its issuance by
the Regional Director for the West Region, or his designee, it shall be a final
order, effective and fully enforceable by the OTS under 12 U.S.C. (S) 1818(i).
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5. Waivers.
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a) Life Financial hereby waives any and all rights to a written Notice of
Charges and administrative hearing provided by 12 U.S.C. (S) 1818(b), and
further waives any right to seek judicial review of the Order, including
any such right provided by 12 U.S.C. (S) 1818(h), or otherwise challenge
the validity of the Order.
b) Life Financial acknowledges and agrees that the consent to the entry of the
Order is for the purpose of resolving this OTS enforcement matter only,
arising out of the findings described herein, and does not resolve, affect,
or preclude any other civil or criminal proceeding that may be or has been
brought by the OTS or any other governmental entity.
c) Life Financial hereby waives any and all claims against the OTS, including
its employees and agents, and any other governmental entity for the award
of fees, costs or expenses related to this OTS enforcement matter and for
the Order, whether arising under common law, the Equal Access to Justice
Act (5 U.S.C. (S) 504), or 28 U.S.C. (S) 2412.
6. Signature of Directors.
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Each director signing this Stipulation, without admitting or denying the
findings contained herein, except as to the jurisdiction of the OTS over Life
Financial, which is admitted, attests that he or she voted in favor of a
resolution authorizing the execution of the Stipulation.
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WHEREFORE, Life Financial, by a majority of its directors, executes this
Stipulation and Consent to the Entry of an Order to Cease and Desist, intending
to be legally bound thereby.
LIFE FINANCIAL CORPORATION
By a Majority of its Directors:
Robert K. Riley 9/25/2000
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Director Date
Milton E. Johnson 9/25/2000
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Director Date
Ronald G. Skipper 9/25/2000
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Director Date
John D. Goddard 9/25/2000
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Director Date
Edgar C. Keller 9/25/2000
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Director Date
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