Full text of Press Releases of the Board of Governors of the Federal Reserve System : Written Agreement with Southern Security Bank : Attachment 1

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UNITED STATES OF AIMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL

RESERVE

SYSTEM
WASHINGTON, D. C.
A\ND
STATE OF FLORIDA
DEPARTMENT

OF BANKING AND FINANCE

DIVISION OF BANKING
TALLAHASSEE,

FLORIDA

)
Written Agreement

by and among

1
>

SOUTHERN SECURITY
Hollywood, Florida
FEDERAL RESERVE
Atlanta, Georgia

BANK

)
)
)

BANK OF ATLANTA

financial soundness

Docket No. 98-02 1-WA/RB-SM

)

STATE COMPTROLLER
AND BANKING
COMMISSIONER
OF THE STATE
OF FLORIDA
Tallahassee, Florida

WHEREAS.

)

in recognition

I
)
)
>

of their common goal to restore and maintain the

of the Southern Security Bank. Hollywood,

Florida (the ‘-Bank”). a

State chartered bank that is a member of the Federal Reserve System. the Bank, the
Federal Reserve Bank of Atlanta (the “Reserve Bank”) and the State Comptroller
Banking Commissioner

of the State of Florida (the Comptroller’)

and

have mutually agreed

to enter into this Written Agreement
Agreement.

which supersedes

the Written

dated March 17. 1993;

U’HERE:!S.
Regarding Delegation

this Agreement

is being executed in accordance

vvith the Rules

of Authority of the Board of Governors of the Federal Reser1.e

System (the “Board of Governors”),
Resene

(the “.Qreement”),

specifically

12 C.F.R. 265.1 l( a)( 15). and the

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

WHEREAS.
duly constituted

on &&be

xv,

meeting adopted a resolution

C. Modder to enter into this Agreement
compliance

with the Bank; and

1998. the board of directors of the Bank. at a
authorizing

and directing Chairman Philip

on behalf of the Bank and consented to

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. 18 13(u)) (the “FDI Act”). with
each and every provision of this Agreement.

NOW, THEREFORE,

before the taking of any testimony

or adjudication

finding on any issue of fact or law herein. and without this Agreement
admission of any allegation
Comptroller,

made or implied by the Board of Governors

the Bank, the Reserve Bank. and the Comptroller

constituting
or the

agree as follows:

of or

Management

Review

(3) Within 30 d ays of this Agreement.

an outside consultant,
independent

the Bank’s board of directors shall engage

acceptable to the Resene

Bank and the Comptroller.

review of the functions and performance

of the executive officers of the

Bank and prepare a written report of findings and recommendations
of directors.

The review shall focus on an assessment

executive officer and the ability
assigned duties.
a management

ofeach

to conduct an

to the Bank’s board

of the duties performed by each

officer to perform competently

his or her

The primary purpose of this review shall be to aid in the development
structure that is suitable to the Bank’s needs and is adequately

qualified and trained personnel.

At a minimum.

the qualifications

staffed by

of management

shall

be assessed for its ability to (1) restore and maintain all aspects of the Bank to a safe and
sound condition. and (2) comply with the requirements

of this Agreement

(b) Within 30 days of the Bank’s receipt of the consultant’s
findings and recommendations
written management

required by paragraph

hereof, the Bank shall submit a

plan to the Reserve Bank and the Comptroller

actions that the board of directors
management

1(a)

describing specific

proposes to take in order to strengthen

and to improve the board of directors’ supervision

The management

written report of

plan shall fully address the consultant’s

and include written detailed descriptions

over the Bank’s ofticers.

findings and recommendations

of the responsibilities

of each executive officer

of the Bank. including reporting lines of authority and the responsibilities
subordinates.

A copy of the consultant’s

Reserve Bank and the Comptroller.

Bank

written report shall also be forwarded to the

7
-.

vement
(a)

Fees

The Bank shall not declare or pay any dividends without the prior written

approval of the Reserve Bank. the Comptroller.

and the Director.

(b) The Bank shall not pay to its parent bank holding company.
Security Corporation.
management

accompanied

description

Florida, any fee or fees that represent service or

fees of any nature without the prior written approval of the Resen;e Bank

and the Comptroller.

Comptroller

Hollywood,

Southern

Any request for prior approval pursuant to this paragraph shall be

by documentation

adequate to provide the Reserve Bank and the

with the details of each fee proposed to be paid by the Bank and a
of the benefits proposed to be derived by the payment of the fee. the type of

services to be rendered, and the identity of the person or persons who will supply the
services or advice covered by the fee.

3. Capital

Adequacy

(a) Within 60 days of this Agreement,
and the Comptroller

an acceptable written plan to achieve and maintain sufficient capital.

The plan shall, at a minimum,
capita1 requirements.
Board of Governors
Bank’s assets;

the Bank shall submit to the Reserve Bank

address and consider:

including compliance

(1) the Bank’s current and future

with the Capita1 Adequacy Guidelines

of the

(12 C.F.R. Part 208. App. A and B); (2) any planned growth in the

(3) the Bank’s level of concentrations

Bank’s adversely classified assets;

of credit;

(5) the Bank’s anticipated

(4) the volume of the
level of retained earnings;

and (6) the source and timing

of additional

funds to fulfill the future capital needs

of the

Bank.

(b) Notwithstanding
the date of this Agreement

the provisions of paragraph 3(a) hereof. the Bank shall. from
through December 3 1. 1998. maintain its tier 1 leverage ratio

at a level of no less than 6.25 percent.
Agreement,

At all times thereafter during the term of this

the Bank shall maintain its tier 1 leverage ratio at a lev,el of no less than

7 percent.

Compliance

with Applicable

Laws and Regulations

(a) The Bank shall immediately

take all necessary steps to eliminate or correct all

violations of State and Federal law. rule, and regulation cited in the State of Florida
Examination

Report. dated April 4, 1998 (the “Report of Examination”).

(b) The Bank shall immediately
order to ensure compliance
regulations

initiate an affirmative

with the provisions

and this Agreement.

promulgated

of this Agreement.

thereunder,

program in

of all applicable laws, rules. and

Pursuant thereto, the management

familiarize itself with the applicable provisions
regulations

compliance

of the Bank shall

of the Federal Reserve Act and the

the laws of the State of Florida. and the provisions

Brokered Deposits
I‘he Bank shall not accept brokered deposits except in compliance

with the

provisions of section 29 of the FDI Act ( 12 U. S. C. 183 1e). The Bank shall notify the
Reseme Bank and the Comptroller

if the Bank requests any waiver of the restrictions

imposed by section 29 from the Federal Deposit Insurance Corporation
shall notify the Reserve Bank and Comptroller

(the “FDIC”). and

of the FDIC’s disposition

of any request

for such a waiver.

6. Asset/Liability

Management

(a) Within 60 days of this Agreement,
and the Comptroller

the Bank shall submit to the Resen;e Bank

an acceptable revised written asset/liability

designed to improve management

management

of the Bank’s liquidity and sensitivity to market risk.

(b) The revised policy regarding liquidity shall. at a minimum.
following:

(1) a minimum

liabilities;

(3) an appropriate

level of temporary

assets;

level of core deposits;

relative to deposits and capital; (5) parameters

address the

(2) a maximum

level of volatile

(4) an appropriate

level of loans

for off-balance

and amount of large deposits; (7) the Bank’s borrowing

sheet risk; (6) the number

availability;

and (8) appropriate

standards for volume, mix and maturity of the Bank’s loans, investments.

policy

and deposits.

to market risk shall, at a minimum.

for interest rate risk: (1) appropriate

guidelines

for

(2) an adequate system to model and control the vulnerability

net interest income to changes in interest rates; and (3) appropriate

parameters governing

the economic risk to the Bank’s capital due to changes in interest rates.

(d) The Asset/Liability
responsible

Committee

(the “ALCO”) of the Bank shall be

for providing the necessary reports to the board of directors on a monthly

basis so that the board of directors can make informed decisions regarding the Bank’s
management

of market risk.

(e) The ALCO shall, at all times. be comprised
The ALCO shall be responsible
policies and procedures.
Bank’s management

for monitoring

of at least two outside directors.

compliance

and shall review, on a monthly basis, all decisions made by the

with regard to such policies and procedures,

attention to whether each decision was made in accordance
and procedures.

with the Bank’s asset/liability

Any exceptions

with the established

to the policies and procedures

the ALCO as to the reason for the exception,

paying particular
policies

shall be documented

and the continuance

of any exception must

be approved by a majority of both the ALCO and the Bank’s board of directors.

7. Funds Management
(a) Within 60 days of this Agreement,
and the Comptroller

an acceptable

provide for the maintenance
shall, at a minimum,

the Bank shall submit to the Reserve Bank

written funds management

of an adequate liquidity position.

address and consider:

plan and procedures

The plan and procedures

( 1) Identitication
txperience

of potential sources of liquidity if the Bank Lvere to

an erosion of its deposit base;

(3) establishment
withdrawals.

of contingency

which shall, at a minimum,

(B) establishing

include:

plans for meeting large, unexpected
(.4) the sale of assets. and

lines of credit with other financial institutions

to advance funds on short

notice; and

(3) a monthly review by the Bank’s board of directors to determine how
best to allocate the Bank’s available funding sources among various asset categories after
reviewing:

(A) the Bank’s liquidity position; (B) outstanding

commitments

and letters of credit; and (C) the Bank’s rate-sensitivity

such as loan

position and net

interest margin.

(b) The funds management
investment,

plan shall be coordinated

with the Bank’s loan.

operating, and strategic plan and budget policies.

Concentrations
Within 60 days of this Agreement,

the Comptroller
concentrations
consider:

the Bank shall submit to the Reserve Bank and

an acceptable written policy and procedures
of credit. The policy and procedures

to monitor and control

shall, at a minimum,

address and

(a) methods used to identify assets or groups of assets or contingent

claims

with common risk elements that, in the aggregate, represent 25 percent or more of the

Bank’s tier 1 capital; (b) the establishment

by the board of directors of acceptable

on concentrations

procedures

of credit; (c) monitoring

and (d) written monthly reporting of concentration
copies of vvhich shall be retained for subsequent

to control concentrations

limits
of credit:

levels to the Bank’s board of directors.
supervisory

review.

Policy Revisions
Within 90 days of this Agreement.

the Comptroller

the Bank shall submit to the Reserve Bank and

acceptable revised written policies for the following areas:

(a)

Loan Policy:

revisions to the loan policy shall include, but not be

limited to: (1) the annual review of the loan policy by the board of directors;
establishment

of the duties, responsibilities,

Discount Committee;
inspections

(3) a requirement

and procedures

(2) the

for the Bank’s Loan and

that real estate appraisals and bank management

be updated annually, and that appraisals be at “fair value” estimates;

and

(4) the board of directors’ annual adoption of a list of approved real estate appraisal firms.

(b)

BSASuspicious

Activity Repot-t/Know Your Customer:

these policies shall include, but not be limited to: (1) maintenance
Transaction
procedures

Report (Form 4789) and preparation

instructions;

revisions to

of a sample Currency

(2) establishment

for the detection and review of off-line and multiple transactions;

(3) maintenance

of a sample Suspicious

(4) maintenance

of a written record of the training received by Bank personnel,

the frequency

Activity Report and preparation

of training and the names of personnel trained.

instructions:

and

including

revisions to the vvire transfer policy shall include, but

not be limited to: ( 1) the specification
various vvire transfer functions;

of the positions responsible

(2) required written agreements

the customer for requests received by facsimile;

are used for the processing

back” procedures

are performed

and the instances

of wire transactions;

and documented

transfer requests are received from customers;

the

between the Bank and

(3) a record of the institutions

which incoming and outgoing wire transfers are processed
institutions

for performing

when these

a requirement

(1)

through

that “call-

when telephone and/or facsimile wire

and (5) a contingency

plan in the event of

a disaster or emergency.

10. Loan Committee
(a) A majority of the Bank’s Loan Committee

shall, at all times. be comprised

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 or acquired by the

Bank (1) that in the aggregate will exceed $100,000 to any borrower, including related
cti&dccLcQR
y of the Bank. incl

interest(s) of such

any related interest(s) of such borrower; or (3) for any loan acquisitions
25 percent or more of the Bank’s tier 1 capital.
Committee

shall be made in accordance

Florida Statutes.
compliance

The Loan Committee

aggregating

All loan approvals by the Loan

with the requirements

of section 658.48 of the

shall have the responsibility

with the Bank’s written loan policies and procedures

for monitoring

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 functions and operations.

At each meeting of the Loan

Committee.

the Committee

shall rev.iew the current status

of all

loans in excess of

S50.000 that are in default as to principal or interest for 30 days or more as of the date of
the Committee

meeting, that are adversely classified or listed for special mention by State

or Federal examiners
institution-affiliated

in the Bank’s latest report of examination
party of the Bank. The Committee

the extension of credit was made in accordance
procedures

shall specifically

address whether

with the Bank’s written loan policies and

and whether the collection actions undertaken

the volume of past due loans were in full compliance
procedures

or that are to an

by Bank management

to reduce

with the Bank’s collection

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.
five days before a board of directors’ meeting, the Loan Committee

but no less than

shall submit to the

board of directors a written report regarding all actions it has taken.

the terms (1) “related interest” shall be

defined as set forth in section 2 1.5.2(k) of Regulation

0 of the Board of Governors

(12 C.F.R. 215.2(k)); (2) “extension of credit” shall be defined as set forth in
section 2 15.3 of Regulation

0 of the Board of Governors

(12 C.F.R. 2 15.3); and

“executive officer” shall be defined as set forth in section 2 15.2(d) of Regulation 0 of the
Board of Governors

(12 C.F.R. 2 15.2(d)).

11. Loan Documentation
(3) Within 35 days of this Agreement.
correct all exceptions

the Bank shall take all necessary steps to

to the Bank’s loan files reflected in the loans adversely classified

and the loans listed for technical exceptions

in the Report of Examination.

not limited to. obtaining accurate and current financial statements.
coverage, and obtaining income/cash

paragraph

11 (a)

12. Allowance

the Bank shall submit to the Reserve

a written report detailing the actions taken pursuant to

hereof.

for Loan and Lease Losses

(a) Within 10 days of this Agreement,
charge-off or collection,
Examination

updating insurance

flow information.

(b) Within 60 days of this Agreement.
Bank and to the Comptroller

including, but

the Bank shall eliminate from its books. by

all assets or portions of assets classified “Loss” in the Report of

that have not been previously

collected in full or charged-off.

(b) The Bank shall continue to maintain, through charges to current operating
income, an adequate allowance

for loan and lease losses (the “ALLL”).

The adequacy of

the ALLL shall be determined

in light of the current level of nonperforming

current level of concentrations

of credit within the loan portfolio of the Bank, past loss

experience,

evaluation

loans, the

of the potential losses in the loan portfolio of the Bank. especially

the potential for unidentified

losses in loans adversely classified, current economic

conditions

and examiners’ criticisms or other comments

recent report of examination.
on the :Illowance

and the requirements

contained

in the Bank‘s most

of the Interagency

Policy Statement

for Loan and Lease Losses. dated December 2 1. 1993. A written

record shall be maintained

indicating the methodology

used

in determining

the amount of

the ALLL needed.

13. Loan Review
The board of directors shall take all actions necessary to ensure the Bank’s
compliance

with its established written loan review policy and procedures

amend such policy and procedures

and shall not

without the prior written approval of the Reserve

Bank and the Comptroller.

14. Strategic Plan and Budget
(a) Within 60 days of this Agreement,
and the Comptroller

itten strategic plan and budget concerning

provide for or describe:

directors towards the definition,

(1) the responsibilities

approval. implementation

plan and budget, and the procedures
such responsibilities;
condition

the Bank’s proposed

for 1999. This plan shall, at a

business activities
minimum.

the Bank shall submit to the Reserve Bank

of the Bank‘s board of
and monitoring

designed to ensure that the board of directors fultills

(2) management.

lending, and operational

of the Bank as reflected in the Report of Examination

(3) an earnings improvement

of the strategic

objectives.

given the

and subsequent

reports;

plan, with emphasis on the net interest margin and overhead

expenses; (4) the operating assumptions

that form the bases for major projected income

and expense components.
performance

and the sources and uses of new funds: (5) financial

objectiv>es. including plans for asset growth. earnings. liquidity. and capital

supported by detailed quarterly and annual pro forma financial statements,
projected budgets,

balance sheets and income statements;

including

(6) the establishment

of a

monthly review process to monitor the actual income. expenses and net cash flow of the
Bank in comparison

to budgetary projections;

(7) the quarterly revision of projected

financial statements,

including projected quarterly and annual budgets and quarter-end

and year-end balance sheet and income statements
to the Reserve Bank and the Comptroller
prior to the occurrence

for the Bank; and (8) the submission

of a revised strategic plan or budget 60 days

of planned material changes to the strategic plan or budget .

(b) A strategic plan and budget for each calendar year subsequent
be submitted to the Reserve Bank and the Comptroller

to 1999 shall

at least one month prior to the

beginning of that calendar year. The revised quarterly and annual financial statements
required by paragraph
Comptroller

14(a)(7) hereof shall be submitted

to the Reserve Bank and the

within 30 days of the end of each calendar quarter.

15. Call Reports
The Bank shall take such actions as are necessary to ensure that all Consolidated
Reports of Condition
Bank’s condition

and Income filed or published

by the Bank accurately reflect the

on the date(s) for which such reports are tiled or published,

reports are filed or published

that all such

in a timely manner, and that all records indicating

reports are prepared are adequately

maintained

for subsequent

supervisory

how such

review.

16. Approval of, and Compliance

with, Submissions

(a) The plans, policies, and procedures

required by paragraphs

3(a). 6(a). 7(a). 8, and

9 hereof shall be submitted to the Reserve Bank and to the Comptroller
approval.

The Reserve Bank and the Comptroller

and procedures.

Acceptable

may comment on the plans. policies.

plans, policies, and procedures

Reserve Bank and to the Comptroller

for review and

shall be submitted to the

within the time periods set forth in this Agreement.

The Bank shall adopt all approved plans, policies. and procedures
approval by the Reserve Bank and the Comptroller
them. During the term of this Agreement.
approved plans, policies, and procedures

within 10 days of

and then shall fully comply with

the Bank shall not amend or rescind the
without the prior written approval of the

Reserve Bank and the Comptroller.

(b) The Bank’s board of directors shall review all policies and procedures
annually. and review compliance

with all policies and procedures

quarterly.

17. Quarter-Iv Reports
Within 30 days of the end of each calendar quarter (September
March 3 1. and June 30) following the date of this Agreement,
the Reserve Bank and the Comptroller

the Bank shall furnish to

written progress reports detailing the form and

manner of all actions taken to ensure compliance
thereof.

30. December 3 I.

with this Agreement

and the results

The board of directors of the Bank shall certify in writing to the Reserve Bank

and to the Comptroller

that each director has reviewed each quarterly progress report

required by this paragraph.
by this Agreement

Such reports may be discontinued

have been accomplished.

Lvhen corrections

required

and the Reserve Bank and the Comptroller

have, in writing, released the Bank from making further reports.

18. Communications
All communications

regarding this agreement

shall be sent to:

Mr. Marion P. Rivers. III
Assistant Vice President
Federal Reseme Bank of Atlanta
104 Marietta Street, NW
Atlanta, Georgia 30303-2713

(b)

Mr. Robert F. Milligan
State Comptroller and Banking Commissioner
Office of the Comptroller - The Capitol
State of Florida
Tallahassee, Florida 32399-0350

Cc)

Mr. Philip C. Modder
Chairman
Southern Security Bank
3475 Sheridan Street
Hollywood, Florida 3302 1
/

Miscellaneous
19.

Notwithstanding

any provision of this Agreement

Bank and the Comptroller

may. in their sole discretion.

to the contrary, the Reserve
grant wtitten extensions

of time

to the Bank to comply with any provision of this Agreement.

20.

The provisions

institution-affiliated

of this Agreement

shall be binding upon the Bank and all of its

parties. in their capacities as such, and their successors

and assigns.

21.

Each provision of this Agreement

shall remain effective and enforceable

stayed. modified, terminated or suspended

22.

The provisions of this Agreement

Board of Governors or the Comptroller

until

by the Reserve Bank and the Comptroller.

shall not bar. estop, or otherwise prevent the
from taking any other action affecting the Bank

or any of its current or former institution-affiliated

parties and their successors and

assigns.

23.

This Agreement

is a “Written Agreement”

for the purposes of section 8 of the

FDI Act (12 U.S.C. 1818).

24.

As of the date of this Agreement,

the Written Agreement

the Reserve Bank, and the Comptroller.

by and among the Bank,

dated March 17, 1992, is terminated.

IN WITNESS WHEREOF, the parties have caused this Agreement
as of the

ljrbday

of Aher

to be executed

1998.

Federal Reserve Bank of Atlanta

Southern Security Bank

State Comptroller and Banking
Commissioner of the State of Florida

The undersigned
foregoing Agreement

directors of the Bank individually

acknowledge

and approve of the consent thereto by the Bank.

reading the