SUPERVISORY AGREEMENT
This Supervisory Agreement (Agreement) is made and is effective this 22
nd day of September, 2000 (the Effective Date), by and between
First Federal Savings Bank
(the Association), a stock-chartered association, having its main office located in
Bryan Texas, and the Office of Thrift Supervision (OTS), an office within the United States Department of the Treasury, having its principal executive offices located at 1700 G Street, N.W., Washington, D.C. 20552, acting through its Midwest
Regional Director or his/her designee (Regional Director).
WHEREAS, the OTS is the primary federal regulator of the Association; and
WHEREAS, based on the Report of Examination dated June 1, 2000 (ROE), the OTS is of
the opinion that the Association has engaged in acts and practices that: (i) have resulted in violations
of certain of the laws or regulations to which the Association is subject, and/or (ii) are considered
to be unsafe and unsound; and
WHEREAS, the OTS is of the opinion that grounds exist for the initiation of administrative
proceedings against the Association; and
WHEREAS, the OTS is of the view that it is appropriate to take measures intended to ensure
that the Association will: (i) comply with all applicable laws and regulations, and (ii) engage in safe
and sound practices; and
WHEREAS, the Association, acting through its Board of Directors (the Board) without
admitting or denying any violations of laws or regulations and/or unsafe and unsound practices
wishes to cooperate with the OTS and to evidence the intent to: (i) comply with all applicable laws
and regulations, and (ii) engage in safe and sound practices.
NOW THEREFORE, in consideration of the above premises, the mutual undertakings set
forth herein, the parties hereto agree as follows:
COMPLIANCE WITH LAWS, REGULATIONS & SAFE AND SOUND PRACTICES
1. Compliance with Regulations
The Association shall take all necessary and appropriate actions to achieve compliance with
the following:
| | A. | Section 560.160 of the OTS Regulations, 12 CFR § 560.160 (regarding asset
classification);
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| | B. | Section 562.1 of the OTS Regulations, 12 CFR § 562.1 (regarding regulatory
reporting requirements);
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| | | 1. | Section 562.2 of the OTS Regulations, 12 CFR § 562.2 (regarding
regulatory reporting standards); |
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| | | 2. | Section 563.161 of the OTS Regulations, 12 CFR § 563.161
(regarding management and financial policies and compensation);
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| | | 3. | Section 563.41 of the OTS Regulations, 12 CFR § 563.41 (regarding
loans and other transactions with affiliates and subsidiaries);
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| | | 4. | Section 563.170 of the OTS Regulations, 12 CFR § 563.170
(regarding establishment and maintenance of records);
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| | | 5. | Section 563.180 of the OTS Regulations, 12 CFR § 563.180
(regarding suspicious activity reports) |
CORRECTIVE PROVISIONS
2. President and Chief Executive Officer
| | A. | Within 30 days prior to the termination of the employment contract of the interim
president and chief executive officer (CEO), which ends on November 22, 2000, the
Association and its Board of Directors shall notify OTS that the Board of Directors
has made provisions to retain or employ a capable and qualified president and chief
executive officer (CEO).
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| | B. | Prior to the employment of a qualified president and CEO or the appointment of new
directors, the Association and its Board shall submit a notice in accordance with the
requirements of Paragraph 7 herein. |
3. Management
| | A. | By September 30, 2000, the Association and its Board of Directors shall establish a
workable Board committee structure that provides for all committees to meet on a
reasonable and regular schedule
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| | B. | The Association and its Board of Directors shall not make any severance payment to
former president and CEO Stan Stephens except: (i) as provided in Paragraph 7
herein, and (ii) after receipt of a written notice of non-objection from the Regional
Director.
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4. Business Plan
| | A. | By September 30, 2000, the Association shall develop a one-year Business Plan,
which must be submitted to the Regional Director for non-objection. The Business
Plan shall address, at a minimum, the corrective actions detailed in the OTS June 1,
2000 ROE, and shall include;
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| | | 1) | a target date, but not later than March 31, 2001, for reaching "well
capitalized" status in conformance with Section 565.4 of the OTS
Regulations, 12 CFR § 565.4;
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| | | 2) | a contingent capital plan describing the Board's strategy to increase capital
to avoid undercapitalization;
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| | | 3) | strategies for reducing noninterest expenses, especially general and
administrative expenses;
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| | | 4) | development of profitable lines of business; and
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| | | 5) | strategies for enhancing the viability of the North Bryan branch.
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| | B. | The Association and its Board of Directors shall establish procedures to (i) monitor
the Association's actual results against the projections in the Plan, (ii) provide for
appropriate adjustments to the Business Plan, and (iii) submit any revised Business
Plan to the Regional Director for non-objection. The Association and its Board of
Directors shall update the Business Plan on an annual basis and submit such revised
Business Plan to the Regional Director for non-objection. |
5. Disposition of Assets
| | A. | By August 31, 2000, the Association and its Board of Directors shall ensure that: (i)
the subprime lending program is discontinued, (ii) repossessed assets are disposed
of in accordance with the Association's policies, (iii) losses are timely recognized,
and (iv) allowance for loan and lease losses are adequate.
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| | B. | The Association and its Board of Directors shall establish procedures for timely
processing of insurance claims on repossessed vehicles.
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| | C. | The Association and its Board of Directors shall conduct a quarterly review of its
loan loss reserves for all Second Chance loans. |
6. Transactions With Affiliates
| | A. | The Association or its subsidiaries shall not, either directly or indirectly, engage in
any transaction with an affiliate, except as specifically provided in 12 CFR § 563.41
and 12 CFR § 563.42.
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| | B. | By August 31, 2000, the Association and its Board of Directors shall establish an
adequate system of records for all transactions between the Association and its
holding company.
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7. Changes in Directors or Executive Officers; Terms of Employment and Golden
Parachute Payments.
| | A. | As required by 12 USC § 1831i, and Subpart H of the OTS Regulations, Notice of
Changes of Director or Senior Executive Officer, 12 CFR § 563.550 et seq., the
Association shall provide at least 30 days' prior written notice of any changes to its
directorate or executive officer staff to the OTS before the employment becomes
effective.
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| | B. | Pursuant to OTS Regulatory Bulletin No. 27a, the Association shall not enter into,
renew, extend or revise any contractual arrangement related to compensation or
benefits with any director, senior executive officer of the Association, or any
subsidiary thereof, unless its first (i) provides a minimum of 30 days' advance notice
of the proposed transaction, and (ii) receives a written notice of non objection from
the Regional Director.
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| | C. | The Association shall not make any golden parachute payment, as that term is
defined in Section 18(k) of the FDIA, 12 USC § 1828(k), and as it may be further
defined in regulations adopted by the Federal Deposit Insurance Corporation (FDIC)
under that authority, unless it first (i) provides a minimum of 30 days' advance notice
of the proposed payment, and (ii) receives a written notice of non objection from the
Regional Director with regard thereto. |
MISCELLANEOUS
8. Director Responsibility
Notwithstanding the requirements of this Agreement that the Board submit various matters
to the Regional Director for the purpose of receiving his approval, non-objection or notice of
acceptability, such regulatory oversight does not derogate or supplant each individual member's
continuing fiduciary duty. The Board shall have the ultimate responsibility for overseeing the safe
and sound operation of the Association at all times, including compliance with the determinations
of the Regional Director as required by this Agreement.
9. Compliance with Agreement
| | A. | The Board and officers of the Association shall take immediate action to cause the
Association to comply with the terms of this Agreement and shall take all actions
necessary or appropriate thereafter to cause the Association to continue to carry out
the provisions of this Agreement.
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| | B. | The Board, on a monthly basis, shall adopt a board resolution (the Compliance
Resolutions) formally resolving that, following a diligent inquiry of relevant
information (including reports of management), to the best of its knowledge and
belief, during the immediately preceding calendar month, the Association has
complied with each provision of this Agreement currently in effect, except as |
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| | | otherwise stated. The Compliance Resolution shall: (i) specify in detail how, if at all,
full compliance was found not to exist, and (ii) identify all notices of exemption or
non objection issued by the Regional Director that were outstanding as of the date of
its adoption.
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| | C. | The minutes of the meeting of the Board shall set forth the following information
with respect to the adoption of each Compliance Resolution: (i) the identity of each
director voting in favor or its adoption, and (ii) the identity of each director voting
in opposition to its adoption or abstaining from voting thereon, setting forth each
such director's reasoning for opposing or abstaining.
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| | D. | No later than the 25th Calendar Day of the month following the end of a calendar
quarter, beginning with the end of the first calendar quarter following the Effective
Date, the Association shall provide to the Regional Director a certified true copy of
the Compliance Resolution[s] adopted at the Board Meeting of each month in such
calendar quarter. The Board, by virtue of the Association's submission of a certified
true copy of each such Compliance Resolution to the Regional Director, shall be
deemed to have certified to the accuracy of the statements set forth in each
Compliance Resolution, except as provided below. In the event that one or more
Directors do not agree with the representations set forth in a Compliance Resolution,
such disagreement shall be noted in the minutes of the Association. |
10. Definitions
All technical words or terms used in this Agreement for which meanings are not specified
or otherwise provided by the provisions of this Agreement shall, insofar as applicable, have
meanings as defined in Chapter V of Title 12 of the
Code of Federal Regulations, HOLA, FDIA or
OTS Memoranda. Any such technical words or terms used in this Directive and undefined in said
Code of Federal Regulations, HOLA, FDIA, or OTS Memoranda shall have meanings that are in
accordance with the best custom and usage in the savings and loan industry.
11. Successor Statutes, Regulations, Guidance, Amendments
Reference in this Agreement to provisions of statutes, regulations, and OTS Memoranda shall
be deemed to include references to all amendments to such provisions as have been made as of the
Effective Date and references to successor provisions as they become applicable.
12. Notices
Except as otherwise provided herein, any request, demand, authorization, direction, notice,
consent, waiver or other document provided or permitted by the Directive to be made upon, given
or furnished to, delivered to, or filed with the OTS or the Association shall be in writing and mailed,
first class or overnight courier, or means of electronic transmission, or physically delivered, and
addressed as follows:
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| OTS: |
Midwest Regional Office
122 W. John Carpenter Fwy
Suite 600
Irving, TX 75039
(972) 281-2000 - Main Number
(972) 281-2001 - Main Facsimile |
Association: |
First Federal Savings Bank
2900 Texas Avenue
Bryan, Texas 77802
(409) 779-2900 - Main Number
(409) 822-5654 - Main Facsimile
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13. Duration, Termination or Suspension of Agreement
| | A. | This Agreement shall: (i) become effective upon its execution by the OTS, through
its authorized representative whose signature appears below, and (ii) remain in effect
until terminated, modified or suspended in writing by the OTS, acting through its
Director or the Regional Director (including any authorized designee thereof).
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| | B. | The Regional Director in his or her sole discretion, may, by written notice, suspend
any or all provisions of this Agreement. |
14. Time Limits
Time limitations for compliance with the terms of this Agreement run from the Effective
Date, unless otherwise noted.
15. Effect of Headings
The Section headings herein are for convenience only and shall not affect the construction
hereof.
16. Separability Clause
In case any provision in this Agreement is ruled to be invalid, illegal or unenforceable by the
decision of any Court of competent jurisdiction, the validity, legality and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired thereby, unless the
Regional Director in his/her sole discretion determines otherwise.
17. No Violations of Law, Rule, Regulation or Policy Statement Authorized; OTS Not
Restricted.
Nothing in this Agreement shall be construed as: (i) allowing the Association to violate any
law, rule, regulation, or policy statement to which it is subject, or (ii) restricting the OTS from taking
such action(s) that are appropriate in fulfilling the responsibilities placed upon it by law, including,
without limitation, any type of supervisory, enforcement or resolution action that the OTS determines
to be appropriate.
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18. Successors in Interest/Benefit
The terms and provisions of this Agreement shall be binding upon, and inure to the benefit
of, the parties hereto and their successors in interest. Nothing in this Agreement, express or implied,
shall give to any person or entity, other than the parties hereto, the Federal Deposit Insurance
Corporation and their successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
19. Signature of Directors
Each Director signing this Agreement attests, by such act, that she or he, as the case may be,
voted in favor of the resolution, in the form attached to this Agreement, authorizing the execution
of this Agreement by the Association.
20. Integration Clause; Impact on Other Enforcement Documents
This Agreement represents the final written agreement of the parties with respect to the
subject matter hereof and constitutes the sole agreement of the parties as of the Effective Date, with
respect to such subject matter.
21. Enforceability of Agreement
The Association represents and warrants that this Agreement has been duly authorized,
executed, and delivered, and constitutes, in accordance with its terms, a valid and binding obligation
of the Association. The Association acknowledges that this Agreement is a written agreement
entered into with the OTS within the meaning of Section 8 of the FDIA, 12 USC § 1818.
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IN WITNESS WHEREOF, the OTS, acting by and through the Regional Director and the
Association, in accordance with a duly adopted resolution of its Board (copy attached hereto), hereby
execute this Agreement as of the Effective Date.
| OFFICE OF THRIFT SUPERVISION | |
FIRST FEDERAL SAVINGS BANK
BRYAN, TEXAS
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| By: |
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By: |
/s/Frederick R. Casteel
Frederick R. Casteel
Regional Director |
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/s/David D. Rinehart
David D. Rinehart, Interim President |
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/s/Gary A. Snoe
Gary A. Snoe, Chairman of the Board
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DIRECTORS OF THE ASSOCIATION
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/s/Richard L. Peacock
Richard L. Peacock, Director |
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/s/George Koenig, Director
George Koenig
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/s/Ernest A. Wentrcek
Ernest A. Wentrcek, Director |
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/s/Charles Neelley
Charles Neelley, Director
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/s/Helen Chavarria
Helen Chavarria, Director |
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/s/Robert H. Conaway
Robert H. Conaway, Director
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/s/Ken L. Hayes
Ken L. Hayes, Director |
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/s/Joseph Krolczyk
Joseph Krolczyk, Director
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/s/J. Roland Ruffino
J. Roland Ruffino, Director |
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