AMQ-Long Beach-supervisory agreement

8/7/2019 AMQ-Long Beach-supervisory agreement

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SUPERVISORY AGREENEEThis Supervisory A reement (nAgreenentn) is entered into and madeeffective this2 day of October, 1992, (LEffecrive Daten), byand between Long Beach Bank, F.S.B., Orange, Califcrnia, foritself and any wholly or partly-owned subsidiary (*Long Beachwor the *Institutionn) and the Office of Thrift Supervision("OTSn).WHEREAS, the OTS is 0%the opinion that the Institution has notcomplied with certain statutes and regulations to which theInstitution is subject, as more fully discussed in the OTS'sReport of Examination of the Institution dated April 6, 1992:WHEREAS, the OTS is of the view that such non-compliance providessufficient grounds for the initiation of formal enforcementproceedings against the Institution by the OTS;WHEREAS, the OTS is willing to forbear at this time from theinitiation of formal enforcement proceedings against the.Institution for its failure to comply with certain statutes andregulations to which it is subject, provided the Institutionenters into this Agreement;WHEREAS, by entering into this Agreement, neither theInstitution, nor any subsidiary admits or denies that it hasviolated any qtatute or regulation or has been operating in anunsafe and unsound manner; andWHEREAS, the Institution, in the interest of regulatorycompliance and cooperation, is willing to enter into and abide bythe terms of this Agreement to avoid the initiation of formalenforcement proceedings against it by the OTS.NOW, THEREFORE, in consideration for the above stated forbearanceby the OTS from the initiation of formal enforcement proceedings,it is agreed between the parties as follows:1. problem AssetaThe Institution, acting through its Board of Directors fnBoardw),shall use its best efforts to reduce, on an ongoing basis, thelevel of its classified assets, as a percentage of tangiblecapital plus general valuation allowances, with an ultimate goalof reducing its level of classified assets to no more than 50percent of tangible capital plus general valuation allowances.. -Within 60 da s he_ EfXective Date, the Institution shalldevelop w r i t k o&the resolution of all of its currentproblem assets. Thereafter, within 30 days after any assetbecomes a problem assetis the Institution shall adopt a writtenplan for e~ ~~i j~ ,B, g- @+3 J~j ps et.Such plans shallBF~su i;KE CO


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immediately implemented. For the purpose of this Agreement, a"problem asseti1shall mean any asset (including unfundedcommitments) involving a commitment or an amount due theInstitution in excess of $300,000 that:has been adversely classified or criticized by the OTSas a result of its most recent examination of theInstitution, or is adversely classified or criticized byeither the FDIC or the OTS as a result of any subsequentexamination of the Institution;has been accorded a sub-investment quality rating and/orhas been designated a work-out or watch-list asset, orsome equivalent designation, as the result of aninternal asset review and rating procedure performed bythe Institution or by another party on behalf of theInstitution;is past due in excess of 90 days and/or has been placedin either a non-accrual or non-earning status by theInstitution; and/orhas been partially charged-off.

Each such plan shall include, at a minimum, an assessment of thestatus of each problem asset, the action proposed to eliminatethe cause or causes of such asset being a problem asset, and thetime frame for the resolution of any amount determined to be duethe Institution.

The Board shall establish and maintain appropriate generalvaluation allowances ("GVAsW) based upon its review ofinformation provided by management, outside auditors and as maybe required from time to time by the OTS and/or the FDIC. TheInstitution shall evaluate, and the Board shall review andapprove, the Institutionts level of GVAs on a quarterly basis, ormore frequently if deemed necessary for the prudent operation ofthe Institution.

Within 30 days from the Effective Date, the Board shall file withthe ARD, copies of the Board approved plan implementing theInstitution's strategy for achieving compliance with the servicecorporation investment limitations set forth in Section 545.74 ofthe OTS's regulations (12 C.F.R. Section 545.74). The SubsidiaryPlan shall, at a minimum, detail the Institutions plans fordecreasing it investment in service corporations to a level notto exceed two percent ( 2 % ) of total assets, as required bySection 545.74(d) of the OTS's regulation, by no later than June30, 1993.


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4 Internal Audit mnctipnWithin 30 days of the Effective Date, the Institution shall filewith the ARD, copies of the Board approved Internal Audit Plan("Audit Plann) which addresses the internal audit needs of theInstitution. The Audit Plan shall, at a minimum:

detail each area to be reviewed during the current auditcycle in an Audit Schedule approved by the Board. TheAudit Schedule shall include an evaluation of theInternal Asset Review System and cover all high-riskareas including asset/liability management, real estateowned, and mortgage loans secured by nonresidential realestate;contain an analysis of the Institution's internal auditresources to determine whether the Audit Plan's goalscan be achieved by the current internal audit staff orwhether the department needs to be expanded toadequately perform the audit function;require that all responses to Audit Reports include atimely written response and a written plan to correctall deficiencies noted in the Audit Report;require that the minutes of the Audit Committee meetingsare comprehensive and include acknowledgement of receiptof Audit Reports, a discussion of Audit Report findings,and ratification of recommendations; andprovide for at least monthly reports by the AuditCommittee to the Board. All Audit Committee findings,conclusions and recommendations shall be fullydocumented in the minutes of the Board meetings.

5 . Svstems and Control8Within 30 days of the Effective Date, the Institution shall filewith the ARD, Board approved written plans detailing thecorrective action currently undertaken by the Institution inresponse to the EDP Report of Examination dated April 6, 1992,relative to the Institution's operating policies, data security,internal control, and disaster recovery.6 - 5FR Rewortinqwithin 30 days of the Effective Date, the rnstitution shall filewith the ARD copies of the Board approved plans detailing themeasures to be followed by the fnstitution to ensure that allThrift Financial Reports ( V F R * ) submitted to-the OTS areprepared in accordance with OTS guidelines, complete and accurate


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as of the date of submission, contain no material omissions, andare filed with the OTS on a timely basis.

On a quarterly basis, the Institution shall LOCOM the held forsale portfolios (Long Beach internal codes 200 and 201). Anyfallout loan, or any loan over 120 days old, shall be removedfrom the 200 portfolio and placed in the fallout portfolio (LongBeach code 201) for LOCOHing purposes.

Immediately upon the execution of this Agreement, the Board shallcommence a search for a qualified manager for the MortgageBanking Operation (%BOW). The Board shall use its best effortsto locate a qualified candidate within 60 days after theEffective Date. The proposed manager shall be subject to theformal Notice Requirements of Tnrift Bulletin 4 5 . Within 60 daysof the Effective Date, the Institution shall file with the ARD, aBoard approved management succession plan for the HBO manager.9. B-Immediately upon the execution of this Agreement, the Board shallcommence a search for a qualified candidate to serve on theBoard, with the objective of increasing the total number ofdirectors to seven. Each proposed director shall be subject tothe formal Notice Requirements of Thrift Bulletin 45. Suchcandidates shall possess relevant financial or businessexperience, education, competence, and integrity, so as toprovide adequate oversight regarding the Institution's operation,proposed business activities, and other policy decisions. No newdirectors shall have any familial relationship with any existingdirector, officer, employee or principal shareholder.10. Business and Strateaic PlansWithin 120 days of the Effective Date, and annually thereafter,the Institution shall submit for the review and approval of theARD, a Board approved, comprehensive Business Plan for calendaryear 1993, which details the Institution's operating strategiesand financial projections for the following~12months. The Planshall include, at a minimum: (1) a discussion of theInstitutionfs short term goals and objectives; (2) pro-fomafinancial statements which reflect the proposed operatingstrategy of the Institution; and (3) any proposed asset growth orreduction.Within 120 days of the Effective Date, the Institution shallsubmit for the review by the ARD, a Board approved StrategicPlan, which details the Institution's strategic plans for thenext 3 - 5 years. The Strategic Plan shall include, at a


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minimum: (1) a discussion of the Institution's long term goalsand objectives: (2) pro-forma financial statements which reflectthe proposed long term operating strategy of the Institution; and(3) any proposed asset growth or reduction for the period coveredby the Plan. Prior to undertaking any operating strategy oractivity which materially deviates from those set forth in theStrategic Plan required under this paragraph, the Institutionshall submit for the review by the ARD, an amended StrategicPlan.11. Ermlovment ContractgEmployment contracts between the Institution and its seniorexecutive officers and directors are subject to the requirementsof OTS Regulatory Bulletin 27, and must receive the priorapproval of the ARD.12. Corrective ActionWithin 60 days of the Effective Date, the Institution shallsubmit a detailed action plan, including time frames, designed tocorrect all deficiencies cited in the OTS Report of Examinationdated April 6, 1992, to the extent that a specific plan for thecorrection of such deficiency is not otherwise expressly requiredherein. This detailed action plan shall include a description ofthe additional procedures, internal controls and follow-upmechanisms developed by the Institution to prevent a reoccurrenceof similar issues.13. Submission of Plans to OTgAny plans required to be prepared under this Agreement shall besubmitted to the OTS, for its review, and where indicated, itsnonobjection or approval. Material amendments to plans whichrequire the ARD's approval or nonobjection under this Agreement,must also receive the ARD's prior approval or nonobjection, asappropriate. At such time as the OTS indicates its writtenapproval or nonobjection to any plan submitted, such plan shallbe incorporated into and included as part of this Agreement.Plans which require the ARD8s review, but not his writtenapproval or nonobjection, such as the Strategic Plan and theCorrective Action Plan, shall also be incorporated into andincluded as part of this Agreement. The ARD shall have 30 daysin which to object to all or any part of the plans submittedpursuant to this Agreement. After such time, and if no ARDobjection is issued, such plan shall be deemed approved orotherwise acceptable to the ARD. The Board shall promote theimmediate implementation of plan submitted to the OTS byexpressly authorizing management to execute the provision of anyplan submitted upon the OTSfs approval or nonobjection.If the ARD objects, in whole or in part to any policy, plan, oract required under the terms of this Agreement, the Institution


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shall revise and resubmit the policy or plan within 15 days afterreceiving written notice of objection. The failure to submit arevised policy or plan acceptable to the ARD within 15 days afterreceiving notice of objection shall be considered to be aviolation of this Agreement, unless the ARD has provided theInstitution with prior written approval to extend theresubmission time frame.A resolution evidencing the Board's review, consideration andapproval of plans required by this Agreement shall accompany anyand all submission to the ARD.

No later than the last day of each month following a quarterduring the period which this Agreement is in effect, the Boardshall review a written report by management as to theInstitution's compliance with the Business Plan and StrategicPlan required under paragraph 10 of this Agreement.No later than the last day of each month during the period whichthis Agreement is in effect, the Board shall review a writtenreport by management as to the compliance with all of theobligations under this Agreement, except the Business Plan andStrategic Plan, during the preceding month.With respect to the compliance reviews required under thisparagraph 14, the Board shall deliver to the ARD, within ten (10)days after such review, a copy of a board resolution dulycertified by the Institution's corporate secretary, which either(a) states that to the Board's knowledge, and based upon theBoard's prudent review of the compliance reports provided bymanagement, the Institution (including the Board), was incompliance in all material respects with each and everyobligation under this Agreement at all times during the precedingcalendar month, or with respect to the Business Plan and theStrategic Plan during the preceding calendar quarter, or (bfindicates any instance of noncompliance with any of suchobligations and specifies the measures taken to cure suchnoncompliance,15. Riahts and WaivereThis Agreement has been duly authorized, executed, delivered, andconstitutes, in accordance with its terms, a valid and bindingagreement between the Institution and the oTS. It is understoodand agreed that this Agreement is a "written agreementn betweenthe depository institution and the OTS, as that term is used inSection 8 of the Federal Deposit Insurance Act ("FDIAtt)(12U.S.C. Section 1818). No amendment or modification of thisAgreement shall be valid or binding unless executed in writing byboth the 0% and the Institution.


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Any rights, powers, and remedies given to the OTS by thisAgreement shall be in addition to all rights, powers, waivers andremedies given to its by any applicable statue or rule of law.The OTS does not relinquish any of its rights to take anysupervisory or other action whatsoever with respect to theInstitution as a result of this Agreement. The Institutionacknowledges that it has not received any oral or writtenrepresentations to the contrary by the OTS or any of its agentsor employees.

All technical words or terms used in this Agreement, for whichmeanings are not specified or otherwise provided by theprovisions of this Agreement, shall, insofar as applicable, havemeanings as defined in Chapter V of Title 12 of the Code OfFederal Recrulation, the Home Ownerst Loan Act ("HOLAU), the FDIAor OTS Memoranda. Any such technical words or terms used in thisAgreement, and undefined in said Code of Federal Resulatiot&BOLA, FDIA, or OTS Memoranda shall have meanings that are inaccordance with the best custom and usage in the thrift industry.17. Successor Reaulations and GuidanceReference in this Agreement to provisions of statutes,regulations, and OTS Memoranda shall be deemed to includereferences to all amendments to such provisions as have been madeas of the Effective Date, and references to successorprovision(s) as they become applicable.

a) In the event that any provision of this Agreement shallbe declared invalid, illegal or unenforceable, thevalidity, legality and enforceability of the remainingprovisions shall not in any way be affected or impairedthereby.

b) Nothing in this Agreement shall be construed aspermitting the Institution to violate any law, rule,regulation, or policy, statement to which it is subject.C) The terms and provisions of this Agreement shall bebinding upon, and enure to the benefit of, the partieshereto and their successors in interest.d) This Agreement shall remain in effect until terminated

or modified, in whole or in part, by the OTS. Allrequests for termination or modification of thisAgreement shall be submitted in writing to the ARD. TheARD may grant a written request for termination ormodification of this Agreement if, in the ARDts opinion,the Institution has satisfactory complied with the


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applicable terms of this Agreement for an appropriateperiod of time, or that a particular provision is notlonger required for the safe and sound operation of theInstitution.e) The ARD has the full and unfettered discretion to extendthe time frames in all applicable provisions of thisAgreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to beexecuted by their duly elected directors, in the case of theInstitution, and by their designated agent, in the case of theOTS. A certified copy of the resolution of the Board ofDirectors of the Institution authorizing the execution of thisAgreement is attached hereto and made part hereof.Approved:OFFICE OF THR I f T SUPERVISION

By:t Regional Director

LONG B CH BANK, F.S .B ..A - n ABy: (rbir'ectorB p / J /DirectorBY :. i : i -Director ,,By: DirectorBy: Director

Date

Date

Date


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applicable terms of this Agreement for an appropriateperiod of time, or that a particular provision is notlonger required for the safe and sound operation of theInstitution.e) The ARD has the full and unfettered discretion to extendthe time frames in all applicable provisions of thisAgreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to beexecuted by their duly elected directors, in the aase of theInstitution, and by their designated agent, in the case of theOTS. A certified copy o f the resolution of the Board ofDirectors of the rnstitution authorizing the execution of thisAgreement is attached hereto and made part hereof.Apprcved:OFFICE OF THRIFT SUPERVISION

By: Timothy J. LaneActing Assistant Regional DirectorBANK, F . S . B .

f J , IBy: J / I 8 -Director

Date ,

/ & h / 9J -Date '

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AMQ-Long Beach-supervisory agreement