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For immediate release February7, 1997 The Federal Reserve Board today announced the execution of a Written Agreement between OmniBanc Corporation, River Rouge, Michigan, and the Federal Reserve Bank of Chicago. The Federal Reserve Board also announced the execution of a Written Agreement by and between the OmniBank, a subsidiary of OmniBanc Corporation, the Federal Reserve Bank of Chicago, and the Michigan Financial Institution Bureau. Copies of the Written Agreements are attached. Attachments BEFORE THE BOARD UNITED STATES OF AMERICA OF GOVERNORS OF THE FEDERAL WASHINGTON, D. C. MICHIGAN Written Agreement FINANCIAL LANSING. INSTITUTIONS MICHIGAN RESERVE SYSTEM BUREAU by and among: OMNIBANK River Rouge, Michigan and THE FEDERAL RESERVE DOCKET NO. 96-039-WAIRB-SM BANK OF CHICAGO Chicago, Illinois MICHIGAN FINANCIAL INSTITUTIONS BUREAU Lansing, Michigan WHEREAS, in recognition of their common goal to restore and maintain the financial soundness of the OmniBank, River Rouge, Michigan (the “Bank”), a state chartered bank which is a member of the Federal Reserve System, a subsidiary of OmniBanc Corporation, Detroit, Michigan (the “Holding Company”), a registered bank holding company, the Bank, the Federal Reserve Bank of Chicago (the “Reserve Bank”), and the Michigan Financial Institutions into this Written Agreement WHEREAS, Regarding Delegation Bureau (the ‘Bureau”) have mutually agreed to enter (the “Agreement”); this Agreement of Authority is being executed in accordance with the Rules of the Board of Governors of the Federal Reserve System (the “Board Reserve Bank has received Supervision of Governors”), and Regulation Governors to enter b 1 I’h’*b% on :A to compliance as amended on any issue admission proceedings, and the General adopted enter parties, as defined before the Bank, the Reserve of Banking of the Board of into this Agreement on behalf provision 1813 the taking of the Bank and by the Bank and Deposit Insurance (u)). of any testimony or adjudication this Agreement constituting by the Board of Governors, of settling and directing of this Agreement 3(u) of the Federal and without made or implied for the purpose Counsel authorizing in section of fact or law herein, and solely of the Division a resolution (12 U.S.C. THEREFORE, and the 5 with each and every of any allegation or the Bureau, of the Director (a) (15), with the Bank; and meeting, (the “FDI Act”) NOW, 12 FR 265.11 p*+r’y ~~~~&/to its institution-affiliated finding (the “Director”) at a duly constituted consented Act, the prior approval into this Agreement WHEREAS, the Bank, specifically this matter Bank, and the Bureau hereby of or an the Reserve without agree Bank, further as follows: DIVIDENDS 1. preferred stock The Bank shall not declare without the prior written approval Director. -2- or pay any dividends of the Reserve on common Bank, the Bureau or and the CAPITAL 2. Within 60 days of this Agreement, Reserve Bank and the Bureau an acceptable maintain an adequate capital position. written plan to achieve, and, thereafter, The plan shall, at a minimum, address and consider: (a) the Bank’s current and future capital requirements, Capital Adequacy the Bank shall submit to the including compliance with the Guidelines of the Board of Governors for State Member Banks: Risk Based measures and Tier 1 Leverage Measure (12 C.F.R. Part 208, App. A and B) and the Bureau’s capital guidelines as set forth in Bank Bulletin No. 25: (b) the volume of the Bank’s adversely classified and problem assets; (c) the growth in the Bank’s assets as it relates to the Bank’s capital ratios; (d) the Bank’s anticipated taking into consideration the loan loss reserve requirements levels of retained earnings, set forth in this Agreement; and (e) the need for an immediate capital infusion and the source(s) and timing of such capital infusion and any future capital infusions necessary to meet the Bank’s capital needs. FUNDS MANAGEMENT 3. Within 60 days of this Agreement, Reserve Bank and the Bureau an acceptable thereafter, maintain adequate liquidity. (a) or unanticipated the Bank shall submit to the liquidity plan designed to improve and, The plan shall, at a minimum, provide for: An adequate volume of liquid assets to provide for anticipated funding needs as well as a contingency plan to meet those unanticipated funding needs; fb) a reduction in the degree of reliance on brokered deposits; -3- (c) liabilities, including public funds, withdrawal federal brokered uses and sources the establishment funds deposits liquidity securities, position expected loan and deposit ff) the establishment future the Bank’s such of section $100,000, limits considering to support the any mix and maturity of the 5. manner Company’s engage current such institution-affiliated Deposit brokered parties, current the Bank’s deposit fluctuations, except 1831 f). any waiver Insurance and in compliance The Bank shall notify of the restrictions Corporation of any requests (the “FDIC”) and for such a waiver. TRANSACTIONS or indirectly, transaction institution-affiliated without deposits (12 U.S.C. disposition in any financial or former the Bank’s into account transactions, The Bank shall not, directly (a) to monitor taking if the Bank requests Bank of the FDIC’s and position. 29 of the FDI Act 29 from the Federal the Reserve strategies; needs security liquidity INSIDER Holding over of liquid assets of a system liquidity loan repayments, Bank and the Bureau or, in any other with for the volume, pricing The Bank shall not accept by section shall notify standards (e) affecting with the provisions imposed funds, and the ability appropriate and to project 4. the Reserve funds, volatile of deposits on volatile loans and deposits; loan demands, other factors and other certificates reliance liabilities; td) Bank’s purchased, of the volatile of volatile of limits on the Bank’s with parties prior board of director -4- enter into, participate, any of the Bank’s or any related approval or the interests and prior written of notification to the Reserve Bank and the Bureau. (i) a “financial transaction” For the purposes of this paragraph, is defined as an extension of credit (as defined in section 215.3 of Regulation 0 of the Board of Governors (12 C.F.R. 215.3)); the exception a payment of money (with of current salaries and director fees or other compensation); the transfer, sale or purchase of any asset; a contract or payment for services; and the direct or indirect payment of any obligation of the Holding Company’s institution-affiliated section 215.2 or the Bank’s current or former parties: and (ii) “related interest” is defined as set forth in of Regulation 0 of the Board of Governors (12 C.F.R. 215.2). All written notifications tb) hereof shall be accompanied by documentation made pursuant to paragraph 5(a) adequate to allow the Reserve Bank and the Bureau to analyze fully the loan or other transaction. 6. Within 90 days of this Agreement, Reserve Bank and the Bureau a comprehensive the Bank shall submit to the ethics policy that shall apply to all directors, officers and employees of the Bank and shall, at a minimum, address the responsibilities for conduct and the avoidance of conflicts of interest. extensions Specific emphasis should be placed on of credit to directors and their related interests (as defined in section 215.2 the Board of Governors’s non-preferential treatment Regulation 0). of In addition, the policy shall require the ethical and of all transactions between the Bank and its directors and officers as well as between the Bank and any current or prospective Holding Company. -5- investors in the BOARD OF DIRECTORS AND MANAGEMENT With the assistance 7. of an independent Reserve Bank and the Bureau, the board of directors plan to improve submit the board of directors’ the plan, the board, at a minimum, management include and the major operations an assessment over the management with written findings of any weaknesses shall take into consideration majority of the board is comprised directors the board of directors information are clearly long-term over senior strategy shall as a member of the board, along or addition directors, to identify such weaknesses, of directors, while and the addition and ensuring that a of advisory to strengthen the expertise provided provide to sufficient actions individuals processes, required including committees and the responsibilities to improve consideration goals for the Bank and implementation in relation and the Bank’s key risk areas; of all board of directors’s of qualified reports to ensure these of the committees in writing; and budgeting performance and compliance to ensure that such reports and control a review are comprised identified of the financial and its committees td) planning of the Bank, which to the board of directors, a review (cl committees In of the board; tb) accurate a written of the Bank and supervision and a plan to eliminate of outside or the hiring of consultants and advice contribution the replacement to the 90 days of this Agreement. for improving and activities of each director’s acceptable shall consider: The board’s strategy (a) actual supervision consultant of the Bank shall develop the plan to the Reserve Bank and the Bureau within formulating SUPERVISION of both short-term of a system to the board of directors’ -6- the board of directors’s for monitoring goals; and strategic and the Bank’s a review of the board of directors’ procedures for monitoring (e) the Bank’s compliance with all laws, regulations, and Bank internal policies and procedures, including, but not limited to, the sale of the Bank’s other real estate as well as all business conducted with outside service providers, including mortgage companies; and, at a minimum, the review should consider enhancing the Bank’s audit and audit committee functions to provide assurance to the board that the Bank is in compliance with all applicable laws and regulations. 8. Within 90 days of this Agreement, (a) the Bank’s board of directors shall conduct a review of the functions and performance executive functions. of the Bank’s senior officers as well as the officers responsible for the Bank’s loan and loan review The written findings of the review shall be forwarded to the Reserve Bank and the Bureau upon completion along with the board’s conclusions and any recommendations for management changesthat focus on an assessment may be proposed as a result of the review. of the duties performed by each senior executive and the ability of that individual to competently staffed and loan officer perform his or her assigned duties. primary purpose of this review shall be to aid in the development structure that is adequately The review shall The of a management by qualified and trained personnel and suitable to the Bank’s needs. fb) During the term of this Agreement or as otherwise required by law, the Bank shall comply with the provisions of section 32 of the FDI Act (I 2 U.S.C. 183 1 i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. Part 225, Subpart H), with respect to the appointment promotion of any senior executive of any new directors or the hiring or officers. -7- VIOLATIONS (b) The Bank shall not engage, directly or indirectly, in any violation of applicable laws or regulations, including Regulation 0 and Regulation H of the Board of Governors, and sections 196, 241, and 239 of the Michigan State Banking Code. fc) The Bank shall immediately initiate a compliance program to ensure compliance with all applicable laws and regulations, including, but not limited to, Regulation 0 and Regulation H of the Board of Governors, and sections 196, 241, and 239 of the Michigan State Banking Code and this Agreement, including ensuring that the Bank has an adequate compliance program and a qualified compliance officer responsible for coordinating and monitoring the Bank’s compliance with all banking laws and regulations. Pursuant to this program, the board of directors and senior management familiarize themselves of the Bank shall with the provisions of Regulation 0 of the Board of Governors. BANK SECRECY ACT 10. (a) The Bank shall not, directly or indirectly, engage in any violation of the Currency and Foreign Transaction and the accompanying Reporting Act (31 U.S.C. 531 1 & sgg.1 regulations issued thereunder -8- by the United States Department of the Treasury (31 C.F.R. 103.11 & ge&tcollectively referred to as the Bank Secrecy Act (the “BSA”)). For the purposes of this Agreement, (b) the term “violate” shall include any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling or aiding or abetting a violation. To ensure that the Bank does not violate any of the provisions (C) of the BSA, the Bank shall, among other things: Comply with the recordkeeping (i) requirements for currency transactions (ii) the recordkeeping $10,000 over $10,000 (31 C.F.R. 103.28); (31 C.F.R. 103.22); comply with the identification and reporting requirements and reporting requirements for currency transaction related to reports over and (iii) pursuant to 31 C.F.R. 103.22, ensure that currency transactions contain specific identifying information reports, required and that such reports do not contain such identifiers as “Established Customer” or “Customer Known to Bank.” 11. Within SO days of this Agreement, Reserve Bank and the Bureau an acceptable the Bank shall submit to the written internal compliance plan designed to ensure that the Bank complies with the provisions of paragraph 10 hereof. At a minimum, the plan shall: (a) transactions over $10,000 Provide the means by which to detect and monitor currency occurring at the Bank: -9- I provide fb) identifying information occurring at the Sank: is contained currency transactions occurring reports to ensure of currency by which that the required transactions to detect over and monitor $10,000 all other at the Bank: is being conducted with all applicable by which the means provide Id) transaction within provide Cc) the means a reasonable for illegitimate laws and regulations means to identify purposes relative whether and that there to such currency any currency is full compliance transactions; s provide (e) being followed and that exemption the means limits the currency transaction reporting transactions that the exemption requirements regular exceed are complied with: basis; and, all required to ensure for customers requirements limits occur, relative procedures of the Bank that are being complied the transactions information that exemption the currency of exempted are exempted with: from in the event transaction customers to exempted are that reporting are reviewed customers on a is appropriately recorded; provide ff) the Bank and each representatives, customer procedures lending contact related that all personnel of its branches, personnel, including, private in all aspects to the BSA and update are provided fg) Bank responsible officers, and document with and personal the training current officers and internal provided personnel customer and competent at service and all other policies on a regular and basis to ensure and up to date information: and monitoring -lO- to, tellers, banking of regulatory a qualified for the daily coordination to all appropriate but not limited the most designate training individual(s) of compliance and within the with the BSA. ASSET QUALITY AND RESERVES +. Unless otherwise approved in writing by the Reserve Bank and the Bureau, the Bank shall, within 30 days after the receipt of any Reserve Bank or Bureau report of examination, charge-off 100 percent of all assets classified “Loss” in any such report. Within 30 days of this Agreement, fb) thereafter, the Bank shall achieve and, continue to maintain, through charges to current operating income, an adequate valuation reserva for loan losses. of the volume of weighted loan loss experience, The adequacy of the reserve shall be determined classified loans, the current level of nonperforming evaluation in light loans, prior of the potential for loan losses in the Bank’s portfolio, CI if7 r$ current economic conditions, concentrations of credit, and other criticisms contained in the Reserve Bank’s and the Bureau's Joint jl A Report of Examination@d the requirements of the Interagency Policy Statement on the dated AuglIat 5, 1996 (the "Report of Examination"), Allowance for Loan and Lease Losses, dated December 21, 1993. be maintained needed. indicating the methodology A written record shall used in determining the amount of the reserve The Bank shall strive to incorporate a loan review rating system as described in paragraph 16(a) hereof for determining the adequacy of the reserve. The interim methodology shall be submitted to the Reserve Bank and the Bureau within 30 days of this Agreement. Thereafter, the Bank shall conduct a monthly assessment reserve and have the assessment available for examiner review. submit each quarter end assessment of its loan loss The Bank shall also to the Reserve Bank and the Bureau within 30 days of the end of each quarter. -ll- I 13. Within 120 days of this Agreement, Reserve Bank and the Bureau acceptable written plans designed to improve the Bank’s position on each loan in excess of $25,000 that was past due as to principal or interest in excess of 90 days as of the date of this Agreement $50,000, the Bank shall submit to the and on each asset in excess of including other real estate, that was adversely classified, listed as special mention by examiners in the Report of Examination or identified on the Bank’s watch list. The plans shall detail the efforts to improve such loans either through amortization, repayment, liquidation, additional collateral or other means, as may be appropriate. plans shall be amended periodically as warranted in excess of $50.000 that are subsequently mention at future examinations The and shall also cover loans or other assets adversely classified or listed for special or visitations, loans in excess of $25,000 that become past due as to principal or interest for more than 90 days, or loans which are otherwise added to the Bank’s watch list. The amended plans shall be submitted to the Reserve Bank and the Bureau within 30 days of the end of each calendar quarter. CONCENTRATIONS 14. OF CREDIT Within 120 days of this Agreement, Reserve Bank and the Bureau an acceptable written plan to reduce concentrations in the Bank’s loan portfolio, including those concentrations Examination. the Bank shall submit to the of credit noted in the Report of The plan shall include, at a minimum, the following: (a) the methods used to identify concentrations of direct and indirect credits to a specific industry or line of business that represent 25 percent or more of the Bank’s tier 1 capital; fb) a description of specific procedures that will be initiated to provide a greater degree of diversification within the Bank’s loan portfolio in order to avoid undue risks: and fc) the submission of monthly - IZ- concentration reports to the Bank’s board of directors, which shall be available for examiner review. LOAN ADMINISTRATION 15. (a) Within 60 days of this Agreement, Reserve Bank acceptable the Bank shall submit to the amended written loan policies and procedures to address all aspects of the Bank’s current or planned future lending activities, including, but not limited to, any lending program targeted to specialty markets or borrowers. At a minimum, these policies and procedures shall include, but not be limited to, (iI underwriting standards for all loans: (ii) guidelines for credit analysis to be performed on all loans, including requirements for complete credit and cash flow analysis, to permit full assessment financial capacity and the documentation requirements of such analysis; (iii) guidelines on the collateral for all loans; and (iv) guidelines for formal loan review and approval limits for bank officers and the Bank’s loan committee, extensions of the borrower’s of credit authorized tb) by lending personnel. A majority of the Bank’s Loan Committee comprised of outside directors. any extension and procedures for ratifying or approving Prior approval by the Loan Committee of credit made by the Bank that, in the aggregate, shall, at all times, be shall be required for will exceed $50,000 any borrower, including any related interest(s) of the borrower (unless the extension ,crie&1E&at~c$EEnt&~Ysrall credit is fully secured by residential real estate, marketable securities or cas sch prior Loan Committee $250,000). approval is required if, in the aggregate, The Loan Committee meet the Bank’s underwriting such extensions to &lylJ-J of case exceed shall ensure that, prior to its approval, all loan requests and documentation standards. The Loan Committee have the responsibility for monitoring compliance with the Bank’s loan policies and - 13- shall tlmz,, 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 the lending operations. of the Loan Committee, of $25,000 the Committee At each meeting shall review the current status of all loans in excess that are past due as to principal or interest for 90 days or more as of the date of the Committee meeting, or that are adversely classified or listed for special mention by Bureau or Reserve Bank examiners in the Bank’s latest report of examination The Loan Committee accordance shall specifically address whether the extension or visitation. of credit was made in with the Bank’s written loan policies and procedures, and whether the collection actions undertaken by Bank management to reduce such loans are consistent with the Bank’s collection procedures, which shall be clearly set forth in the Bank’s written loan policies and procedures. of its meetings, The Loan Committee shall maintain accurate written minutes which shall be available for examiner review. fc) For purposes of this Agreement, the term “outside director” shall be defined as a director who is not fi) an employee or officer of the Bank or a direct or indirect owner of 5% or more of any class of the outstanding Company or indebted, shares of the Holding directly or indirectly, or has a related interest that is indebted, directly or indirectly, to an amount exceeding 5% of the Bank’s tier 1 capital, or (ii) is not related by blood or marriage to any person described in paragraph 15(c)(i) hereof. 16. evaluation (a) Within 120 days of this Agreement, the Bank shall conduct an of its loan review program and procedures and submit to the Reserve Bank and the Bureau an acceptable~ revised program and acceptable identify and categorize procedures designed to properly problem credits and provide work out strategies for minimizing the risk exposure from these identified problem credits. - 14. These procedures shall, at a minimum, include the following: the designation of the individual(s) responsible for determining loan grades: (iii) the timing of the assignment requirements Allowance (i) a description of the risk grades to be assigned to each loan; (ii) of loan grades; (iv) the types of loans that will be graded: (v) the outlined in Attachment Policy Statement on the of Loans and Lease Losses, issued December 21, 1993, addressing the minimum requirements (attached I of the Interagency relating to “Loan Review Systems” and “Credit Grading Systems” hereto); (vi) procedures to confirm the accuracy of all risk grades assigned by the Bank’s loan officers; (vii) procedures requiring that all loans adversely classified by examiners at future examinations and visitations be incorporated into the Bank’s loan review program; (viii) procedures requiring that all watch list loans be analyzed at least semi-annually to ensure that the action plans to improve these credits are effective being followed; requirement (ix) the development of an adequate loan review report: and (x) the that the board of directors be responsible for the Bank’s loan review program. (b) independent and are consultant, recognized expertise Bank in identifying 17. Within 90 days of this Agreement, the Bank shall retain an acceptable to the Reserve Bank and the Bureau, who possesses in analyzing problem loan portfolios, for the purpose of assisting the and categorizing problem credits as required by paragraph 16(a) hereof. (a) Within 90 days of the 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 exception in the Report of Examination. (b) Within 120 days of this Agreement, the Reserve Bank and the Bureau: the Bank shall submit to fi) a written report detailing the actions taken pursuant - 15- to paragraph 17(a) all extensions not limited hereof: of credit to, those and (ii) acceptable comply policies written with the Bank’s and procedures the Reserve be limited Bank and the Bureau to, the following: board of directors of the operating projected by paragraph review analysis will seek to improve 12(b) hereof; process of budgeted incorporating plan, which actual operating Lb) A written to the Reserve including and maintain income and collateral. the Bank shall submit shall include, adequate and comprehensive by which support, for 1997: statements major cost structure loan loss reserves income the (ii) a description overhead budget to but not necessarily performance; the Bank’s the use of pro forma versus but PLAN the Bank’s (iii) a realistic that including, of the major areas in and means components, to establish to ensure loan documentation that form the basis for, and adequately and expense necessary shall be submitted a business designed and procedures, 12.0 days of this Agreement, Ii) identification assumptions income and provisions budget Within (a) loan policies regarding BUSINESS 18. procedures as required and (iv) a in the and expenses. business plan for each calendar year following 33 at least4Bdays prior to the Bank and the Bureau 1997 IIlSl~? 4 beginning of that calendar year. ‘33 Cc) The business quarterly review by the board of directors shall be submitted plans required and any modification to the Reserve by this paragraph to those Bank and the Bureau review. - 16- shall be reviewed plans as a result within of the 10 days of the 9 REVIEW AND APPROVAL The plans, programs, policies, and procedures required by 19. paragraphs 2, 3, 11, 13, 14, 15(a), 16(a), and 17(b) hereof shall be submitted to the Reserve Bank and the Bureau for review and approval. Acceptable plans, programs, policies, and procedures shall be submitted to the Reserve Bank and the Bureau within the required time periods. The Bank shall adopt the approved plans, programs, policies, and procedures within 10 days of approval by the Reserve Bank and the Bureau and then shall fully comply with them. During the term of this Agreement, the approved plans, programs, policies, and procedures shall not be amended or rescinded without the prior written approval of the Reserve Bank and the Bureau. PROGRESS REPORTS 20. June 30, Within 30 days after the end of each calendar quarter ( March 31, September 30 and December 31) following the date of this Agreement, the Bank shall furnish to the Reserve Bank and the Bureau written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement thereof, including updated reports on all asset improvement and a quarterly assessment plans required by paragraph 13 of the loan loss reserve required by paragraph 12(b) hereof. Such reports may be discontinued been accomplished and the results when the corrections required by this Agreement have and the Reserve Bank and the Bureau have, in writing, released the Bank from making further reports. - 17- GENERAL PROVISIONS 21. 22. its institution-affiliated All communications regarding this Agreement (a) Ms. Gay Whiting Assistant Vice President Federal Reserve Bank of Chicago 2.30 South La Salle Street Chicago, Illinois 60604 fb) Mr. Joseph E. Petterson Assistant Director Bank and Trust Division Financial Institutions Bureau P.O. Box 30224 Lansing, Michigan 48909 (c) Mr. Herbert Ford President and CEO OmniBank 10474 West Jefferson Avenue River Rouge, Michigan 48218-l The provisions of this Agreement shall be sent to: 396 shall be binding upon the Bank and parties, in their capacities assuch, and their successors and assigns. 23. enforceable (a) Each provision of this Agreement until stayed, modified, terminated, (b) Notwithstanding shall remain effective or suspended by the Reserve Bank and the any provision of this Agreement to the contrary, the Reserve Bank and the Bureau may, in their discretion, grant written extensions and of time to the Bank to comply with any provision of this Agreement. - 18- 24. The provisions of this Agreement shall not bar, estop or otherwise prevent the Board of Governors, the Reserve Rank, the Bureau, or any other federal or state agency or department Company, from taking any other action affecting or any of their current or former institution-affiliated 25. This Agreement is a ‘written the Sank, the Holding parties. agreement’ for the purposes of section 8 of the FDI Act (12 U.S.C. 1818). -‘. ,’ th$;y,, W NESS HEREOF. the parties have caused this Agreement La ,199@% to be executed as of eD lLA7 I-’ OMNIBANK River Rouge, Mict#& FEDERAL RESERVE BANK OF CHICAGO By: MICHIGAN FINANCIAL lNSTD-UTlONS BUREAU LansingnMichigan r By: Deputy Commissioner Office of Regulation - 19- * The undersigned directors of the Bank each acknowledges having read the foregoing flm_en(anjr]o&&nsentth . . .- / /I -&w-j William Holmes yknneth N. Hylton Mukhles Karmo-’ : / j - 20 - i UNITED BEFORE Written THE BOARD Agreement OMNIBANC Detroit, STATES OF AMERICA OF GOVERNORS OF THE FEDERAL WASHINGTON, D.C. RESERVE SYSTEM by and between: CORPORATION DOCKET Michigan NO. 96-039-WA/R&HC and THE FEDERAL RESERVE BANK OF CHICAGO Chicago, Illinois WHEREAS, Corporation, company, Detroit, Michigan and its subsidiary ‘Bank”). the Federal Company have Regarding mutually Delegation (the “Board Bank has received and Regulation (the into this Agreement (the “Holding state Reserve WHEREAS, System in order to maintain member to enter this Agreement of Authority soundness of OmniBanc a registered bank holding bank, the OmniBank, (the “Reserve into this Written is being executed the prior approval specifically of the Director and the General the Holding 12 C.F.R. Company; Bank”) (the of the Federal 265.1 Michigan (the and the Holding in accordance ‘Agreement”): with the Rules Reserve 1 (a)(1 5). and the Reserve of the Division Counsel and River Rouge, Agreement of the Board of Governors of Governors”), with Company”), Bank of Chicago agreed “Director”) the financial of Banking Supervision of the Board of Governors to enter WHEREAS, on Jti% F,“‘?t Holding Company, at a duly constituted directing the board of directors of the meeting, adopted a resolution authorizing 4 ta enter into this Agreement ~Jl!&&JDtt* Company and consented and on behalf of the Holding to compliance with each and every provision of this Agreement by the Holding Company 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. 1813hr)and 1818(b)(3)). NOW, THEREFORE, before the taking of any testimony finding on any issue of fact or law herein, and without this Agreement admission of any allegation or adjudication constituting of or an made or implied by the Board of Governors or the Reserve Bank, and solely for the purpose of settling this matter without further proceedings, the Holding Company and the Reserve Bank hereby agree as follows: DIVIDENDS 1. the prior written The Holding Company shall not declare or pay any dividends without approval of the Reserve Bank and the Director. DEBT SERVICE 2. (a) The Holding Company shall not, directly or indirectly, increase its borrowings or incur any debt, including renewals of existing debt, debt to stockholders, and subordinated debt, without the prior written approval of the Reserve Bank. (b) All requests for prior written approval required by paragraph 2(a) hereof shall contain, but not be limited to: -2 fi) a statement regarding the I purpose of the debt: (ii) the terms of the debt; and (iii) the’ planned source(s) for debt repayment and an analysis of the cash flow resources required to meet such debt repayment. ;-.& &&-* 3. +@+-@S Within 30 days w, 3mL”‘trt: cps the Holding Company shall submit to the Reserve Bank an acceptable written plan to service its outstanding incurring any additional debt. ++&I srrot7cl’~.~* debt without The plan shall, at a minimum, specifically address and consider: (a) fb) (cl The Holding Company’s cash flow projections: the Bank’s anticipated earnings, asset growth, capital, and dividend projections; and alternative sources of funds to be used to make all necessary debt reductions: STOCK REDEMPTION 4. The Holding Company shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank. RESPONSIBILITIES 5. OF DIRECTORS Within 90 days of this Agreement, the board of directors of the Holding Company shall: (a) comprehensiveness, Conduct and complete a review of the quality, uniformity, and timeliness of the information provided to the board of directors, for the purpose of carrying out its responsibilities, including, reviewing and assessing the risks attendant into any new business arrangements: and but not limited to, to new business arrangements prior to entering i prepare and submit a written report to the Reserve Bank that W details the findings of this review and the actions taken to correct any deficiencies noted during the review. SUPPORT OF BANK’S CAPITAL POSITION 6. The Holding Company shall take all necessary actions, not limited to, downstreaming in accordance Agreement including, but available funds, to support the capital position of the Bank, with the Bank’s capital plan required by paragraphs 2 and 19 of the Written among the Reserve Bank, the Michigan Financial Institutions Bureau and the Bank, dated i PAYMENTS AND EXPENSES (a) 7. Unless it~d~;~~~~~p~~~“~~~~~,aries Bank, the Holding Company shall not or bonuses unless the payments are: (i) preapproved by the Holding Company’s board of directors: (ii) related to services actually rendered to or on behalf of the Holding Company or the Bank: (iii) related to services necessary to perform the requisite operations of the Holding Company, such as filing required regulatory reports; (iv) justified based on the financial condition of the Holding Company: fv) rendered on-site at the Holding Company or the Bank: and (vi) consistent size, condition, with payments made by financial institutions of comparable and geographic location. fb) The Holding Company shall not make any salan/ or bonus payment unless the Holding Company submits in writing to the Reserve Bank a list of individuals who receive salary or bonus payments, the amounts of those payments, and justification Such justification shall, at a minimum, address the financial for the payments. condition of the Holding Company and shall include, but not be limited to, an adequate and complete description of the services rendered to or on behalf of ‘the Holding Company or the Bank, and an explanation 8. The Holding Company shall not, directly or indirectly, (a) any payments to consultants, arrangement between Holding Company’s of why the services are necessary. make unless the payments are: 0) pursuant to a written the consultant and the Holding Company; (ii) preapproved by the board of directors: (iii) related to services actually rendered to or on behalf of the Holding Company or the Bank: (iv) related to services necessary to perform the requisite operations of the Holding Company, such as filing required regulatory (VI justified based on the financial condition of the Holding Company; payments made by financial institutions of comparable size, condition, location; and (vii) not duplicative reports; (vi) consistent with and geographic of services rendered to the Holding Company or the Bank by their officers, directors, or employees, or any other consultant, advisor, or provider of services. fb) consultant consultants The Holding Company shall not make any payment to any unless the Holding Company submits in writing to the Reserve Bank a list of who receive payments, the payments. Such justification the amounts of those payments, and justification for shall, at a minimum, address the financial condition of the Holding Company and shall include, but not be limited to, an adequate and complete description of the services rendered to or on behalf of the Holding Company or the Bank, and an explanation of why the services are necessary. I 9. (a) Except as otherwise agreed to in writing by the Reserve Bank, the Holding Company shall not, directly or the Reserve Bank, make during any $500 to any individual or entity, except for a salary or bonus payment or payment consultant consistent with paragraphs 7 and 8 hereof; or (ii) any cash expenditures to a that aggregate in excess of $500 to any individual or entity, except for payments consistent with paragraphs 7 and 8 hereof. fb) The Holding Company shall provide the Reserve Bank with at least 15 days advance written notice when requesting prior written approval under paragraph 9(a) hereof, and shall include with such advance written notice documentation i sufficient to demonstrate the appropriateness of any such expenditure. VIOLATIONS 10. (a) in any lending activity, The Holding Company shall not engage, directly or indirectly, including, but not limited to, extending or renewing extensions credit or purchasing loan participations, of without the prior written approval of the Reserve Bank. fb) The Holding Company shall not engage, directly or indirectly, in any violation or in any activity resulting in a violation of Regulation Y of the Board of Governors (12 C.F.R. Part 225). REVIEW AND APPROVAL 11. The plan required by paragraph 3 hereof shall be submitted Reserve Bank for review and approval. An acceptable to the plan shall be submitted to the .’ I Reserve Bank within the required time period. The Holding Company shall adopt the approved plan within 10 days of approval by the Reserve Bank and then shall fully comply with it. During the term of this Agreement, the approved plan shall not be amended or rescinded without the prior written approval of the Reserve Bank. PROGRESS REPORTS 12. June 30, September Within 30 days after the end of each calendar quarter (March 31, 30 and December 31) following the date of this Agreement, the Holding Company shall furnish to the Reserve Bank written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement results thereof. Agreement Such reports may be discontinued and the when the corrections required by this have been accomplished and the Reserve Bank has, in writing, released the Holding Company from making further reports. GENERAL PROVISIONS 13. All communications (a) fb) g 14. regarding this Agreement shall be sent to: Ms. Gay Whiting Assistant Vice President Federal Reserve Bank of Chicago 230 South LaSalle Street Chicago, Illinois 60604 Mr. WilEam T. Johnson President OmniBanc Corporation ,511 Woodward Avenue Detroit, Michigan 48216 The provisions of this Agreement Company and its institution-affiliated shall be binding upon the Holding parties, in their capacities successors and assigns. -7- as such, and their 15. enforceable The provisions of this Agreement (a) until stayed, modified, terminated, or suspended, shall remain effective and in writing, by the Reserve Bank. Notwithstanding fb) any provision of this Agreement to the contrary, the Reserve Bank may, in its sole discretion, grant written extensions of time to the Holding Company 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 taking any other action affecting the Holding Company, the Bank, or any i of their current or former institution-affiliated 17. This Agreement the FDI Act (12 U.S.C. parties and their successors or assigns. is a “written agreement” for purposes of section 8 of 1818). EREOF the parties have cau e his greement to be executed of the ‘N~~~&$@&f OMNIBANC CORPORATION Detroit, Michigan FEDERAL RESERVE BANK OF CHICAGO -8. as I The undersigned directors of the Holding Company acknowledge William T. Johnson -9. that each has read the