Attached files
Exhibit 10.1
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
AND
STATE OF WISCONSIN
DEPARTMENT OF FINANCIAL INSTITUTIONS FOR THE STATE OF WISCONSIN MADISON,
WISCONSIN
In the Matter of CONSENT ORDER
MID-WISCONSIN BANK
MEDFORD, WISCONSIN FDIC-10-807b
(STATE CHARTERED)
(INSURED NONMEMBER BANK)
Mid-Wisconsin Bank, Medford, Wisconsin ("Bank"), having been advised of
its right to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound
banking practices and violations of law, rule, or regulation alleged to have
been committed by the Bank, and of its right to a hearing on the charges under
section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. {section}
1818(b), and under section 220.04(9) of the Wisconsin Statutes, Wis. Stat.
{section} 220.04(9), regarding hearings before the Department of Financial
Institutions for the State of Wisconsin ("WDFI"), and having waived those
rights, by and through its duly elected and acting Board of Directors ("Board")
entered into a STIPULATION TO THE ISSUANCE OF A CONSENT ORDER ("STIPULATION")
with representatives of the Federal Deposit Insurance Corporation ("FDIC") and
WDFI, dated November 9, 2010, whereby, solely for the purpose of this proceeding
and without admitting or denying any charges of unsafe or unsound banking
practices and without admitting or denying any violations of law, rule, or
regulation, the Bank consented to the issuance of a CONSENT ORDER ("ORDER") by
the FDIC and WDFI.
The FDIC and WDFI considered the matter and determined to accept the
STIPULATION.
Having also determined that the requirements for issuance of an order
under 12 U.S.C. {section} 1818(b) and section 220.04(9) of the Wisconsin
Statutes, Wis. Stat. {section} 220.04(9), have been satisfied, the FDIC and WDFI
HEREBY ORDER, that the Bank, its institution-affiliated parties, as that term is
defined in section 3(u) of the Act, 12 U.S.C. {section} 1813(u), and its
successors and assigns take affirmative action as follows:
MANAGEMENT
1. (a) During the life of this ORDER, the Bank shall have and retain
qualified management. Management shall be provided the necessary written
authority to implement the provisions of this ORDER. The qualifications of
management shall be assessed on its ability to:
(i) comply with the requirements of this ORDER;
(ii) operate the Bank in a safe and sound manner;
(iii) comply with applicable laws, rules, and regulations;
and
(iv) restore all aspects of the Bank to a safe and sound
condition, including capital adequacy, asset quality,
management effectiveness, earnings, liquidity, and
sensitivity to interest rate risk.
(b) During the life of this ORDER, prior to the addition of any
individual to the board of directors or the employment of any individual as a
senior executive officer, the Bank shall request and obtain WDFI's written
approval For purposes of this ORDER, "senior executive officer" is defined as
in section 32 of the Act, 12 U.S.C. {section} 1831i, and section 303.101(b) of
the FDIC Rules and Regulations, 12 C.F.R. {section} 303.101(b).
MANAGEMENT PLAN
2. (a) Within 90 days from the effective date of this ORDER, the Bank
shall retain an independent third party acceptable to the Regional Director of
the FDIC, Chicago Region ("Regional Director") and the Administrator of WDFI,
Division of Banking, ("Administrator"), who will develop a written analysis and
assessment of the Bank's management needs ("Management Study") for the purpose
of providing qualified management for the Bank.
(b) The Bank shall provide the Regional Director and the
Administrator with a copy of the proposed engagement letter or contract with the
independent third party for review.
(c) The Management Study shall be developed within 120 days from
the effective date of this ORDER. The Management Study shall include, at a
minimum:
(i) identification of both the type and number of senior
officer positions needed to properly manage and
supervise the affairs of the Bank;
(ii) identification and establishment of such Bank
committees as are needed to provide guidance and
oversight to active management;
(iii) evaluation of all senior Bank officers to determine
whether these individuals possess the ability,
experience and other qualifications required to perform
present and anticipated duties, including adherence to
the Bank's established policies and practices, and
restoration and maintenance of the Bank in a safe and
sound condition;
(iv) evaluation of all senior Bank officers' compensation,
including salaries, director fees, and other benefits;
and
(v) a plan to recruit and hire any additional or
replacement personnel with the requisite ability,
experience and other qualifications to fill those
senior officer positions identified by this paragraph
of this ORDER.
(d) Within 30 days after receipt of the Management Study the Bank
shall formulate a plan to implement the recommendations of the Management Study.
(e) A copy of the plan required by this paragraph shall be
submitted to the Regional Director and the Administrator.
CAPITAL
3. (a) During the life of this ORDER, the Bank shall have and
maintain its level of Tier 1 capital as a percentage of its total assets
("capital ratio") at a minimum of 8.5 percent and its level of qualifying total
capital as a percentage of risk-weighted assets ("total risk based capital
ratio") at a minimum of 12 percent. For purposes of this ORDER, Tier 1 capital,
qualifying total capital, total assets, and risk-weighted assets shall be
calculated in accordance with Part 325 of the FDIC Rules and Regulations ("Part
325"), 12 C.F.R. Part 325.
(b) If, while this ORDER is in effect, the Bank increases capital
by the sale of new securities, the board of directors of the Bank shall adopt
and implement a plan for the sale of such additional securities, including the
voting of any shares owned or proxies held by or controlled by them in favor of
said plan. Should the implementation of the plan involve public distribution of
Bank securities, including a distribution limited only to the Bank's existing
shareholders, the Bank shall prepare detailed offering materials fully
describing the securities being offered, including an accurate description of
the financial condition of the Bank and the circumstances giving rise to the
offering, and other material disclosures necessary to comply with Federal
securities laws. Prior to the implementation of the plan and, in any event, not
less than 20 days prior to the dissemination of such materials, the materials
used in the sale of the securities shall be submitted to the FDIC Registration
and Disclosure Section, 550 17th Street, N.W., Washington, D.C. 20429 and to
WDFI, 345 W. Washington Avenue, 4[th] Floor, P.O. Box 7876, Madison, Wisconsin
53707-7876 for their review. Any changes requested to be made in the materials
by the FDIC or WDFI shall be made prior to their dissemination.
(c) In complying with the provisions of this paragraph, the Bank
shall provide to any subscriber and/or purchaser of Bank securities written
notice of any planned or existing development or other changes which are
materially different from the information reflected in any offering materials
used in connection with the sale of Bank securities. The written notice
required by this paragraph shall be furnished within 10 calendar days of the
date any material development or change was planned or occurred, whichever is
earlier, and shall be furnished to every purchaser and/or subscriber of the
Bank's original offering materials.
PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS
4. (a) As of the effective date of this ORDER, the Bank shall not
extend, directly or indirectly, any additional credit to, or for the benefit of,
any borrower who is already obligated in any manner to the Bank on any
extensions of credit (including any portion thereof) that has been charged off
the books of the Bank or classified "Loss" in the Joint Report, so long as such
credit remains uncollected.
(b) As of the effective date of this ORDER, the Bank shall not
extend, directly or indirectly, any additional credit to, or for the benefit of,
any borrower whose loan or other credit has been classified "Substandard",
"Doubtful", or is listed for Special Mention in the Joint Report, and is
uncollected unless the Bank's board of directors has adopted, prior to such
extension of credit, a detailed written statement giving the reasons why such
extension of credit is in the best interest of the Bank. A copy of the
statement shall be signed by each Director, and incorporated in the minutes of
the applicable board of directors' meeting. A copy of the statement shall be
placed in the appropriate loan file.
REDUCTION OF DELINQUENCIES AND CLASSIFIED ASSETS
5. (a) Within 60 days from the effective date of this ORDER, the Bank
shall adopt, implement, and adhere to, a written plan to reduce the Bank's risk
position in each asset in excess of $500,000 which is more than 90 days
delinquent or classified "Substandard" or "Doubtful" in the Joint Report. The
plan shall include, but not be limited to, provisions which:
(i) prohibit an extension of credit for the payment of
interest, unless the Board provides, in writing, a
detailed explanation of why the extension is in the
best interest of the Bank;
(ii) provide for review of the current financial condition
of each delinquent or classified borrower, including a
review of borrower cash flow and collateral value;
(iii) delineate areas of responsibility for loan officers;
(iv) establish dollar levels to which the Bank shall reduce
delinquencies and classified assets within 6 and 12
months from the effective date of this ORDER; and
(v) provide for the submission of monthly written progress
reports to the Bank's board of directors for review and
notation in minutes of the meetings of the board of
directors.
(b) As used in this paragraph, "reduce" means to: (1) collect; (2)
charge off; (3) sell; or (4) improve the quality of such assets so as to warrant
removal of any adverse classification by the FDIC and WDFI.
(c) A copy of the plan required by this paragraph shall be
submitted to the Regional Director and WDFI.
LIQUIDITY PLAN
6. Within 60 days of the effective date of this ORDER, the Bank shall
revise its written contingency funding plan ("Liquidity Plan"). The Liquidity
Plan shall identify sources of liquid assets to meet the Bank's contingency
funding needs over time horizons of one month, two months, and three months. At
a minimum, the Liquidity Plan shall be prepared in conformance with the
Liquidity Risk Management Guidance found at FIL-84-2008, as supplemented by FIL-
13-2010, and include provisions to address the issues as identified in the Joint
Report.
DIVIDEND RESTRICTION
7. As of the effective date of this ORDER, the Bank shall not declare
or pay any dividend without the prior written consent of the Regional Director
and WDFI.
ALLOWANCE FOR LOAN AND LEASE LOSSES
8. (a) After the effective date of this ORDER, and prior to the
submission of all Reports of Condition and Income required by the FDIC, the
board of directors of the Bank shall review the adequacy of the Bank's ALLL,
provide for an adequate ALLL, and accurately report the same. The minutes of the
board meeting at which such review is undertaken shall indicate the findings of
the review, the amount of increase in the ALLL recommended, if any, and the
basis for determination of the amount of ALLL provided. In making these
determinations, the board of directors shall consider the FFIEC Instructions for
the Reports of Condition and Income and any analysis of the Bank's ALLL provided
by the FDIC or Division.
(b) ALLL entries required by this paragraph shall be made prior to
any capital determinations required by this ORDER.
SPECIAL MENTION LOAN
IX. Within 60 days from the effective date of this ORDER,
the Bank shall correct all deficiencies in the loan listed for "Special Mention"
in the Joint Report.
PROFIT PLAN AND BUDGET
10. (a) Within 60 days from the effective date of this ORDER, the Bank
shall revise and adhere to its written profit plan and a realistic,
comprehensive budget for all categories of income and expense for calendar years
2011 and 2012. The plans required by this paragraph shall contain formal goals
and strategies, consistent with sound banking practices, to reduce discretionary
expenses and to improve the Bank's overall earnings, and shall contain a
description of the operating assumptions that form the basis for major projected
income and expense components.
(b) The written profit plan shall address, at a minimum:
(i) realistic and comprehensive budgets;
(ii) a budget review process to monitor the income and
expenses of the Bank to compare actual figures with
budgetary projections;
(iii) identification of major areas in, and means by which,
earnings will be improved; and
(iv) a description of the operating assumptions that form
the basis for and adequately support major projected
income and expense components.
(c) Within 30 days from the end of each calendar quarter following
completion of the profit plans and budgets required by this paragraph, the
Bank's board of directors shall evaluate the Bank's actual performance in
relation to the plan and budget, record the results of the evaluation, and note
any actions taken by the Bank in the minutes of the board of directors' meeting
at which such evaluation is undertaken.
(d) A written profit plan and budget shall be prepared for each
calendar year for which this ORDER is in effect.
(e) Copies of the plans and budgets required by this paragraph
shall be submitted to the Regional Director and WDFI.
STRATEGIC PLAN
11. (a) Within 90 days from the effective date of this ORDER, the Bank
shall revise its comprehensive strategic plan. The plan required by this
paragraph shall contain an assessment of the Bank's current financial condition
and market area, and a description of the operating assumptions that form the
basis for major projected income and expense components. The written strategic
plan shall address, at a minimum:
(i) strategies for pricing policies and asset/liability
management; and
(ii) financial goals, including pro forma statements for
asset growth, capital adequacy, and earnings.
(b) Within 30 days from the end of each calendar quarter following
the adoption and implementation of the Strategic Plan described in (a) above,
the Bank's board of directors shall evaluate the Bank's actual performance in
relation to the strategic plan required by this paragraph and record the results
of the evaluation, and any actions taken by the Bank, in the minutes of the
board of directors' meeting at which such evaluation is undertaken.
(c) The strategic plan required by this ORDER shall be revised 30
days prior to the end of each calendar year during which this ORDER is in
effect. Thereafter the Bank shall approve the revised plan, which approval shall
be recorded in the minutes of a board of directors' meeting, and the Bank shall
implement and adhere to the revised plan.
(d) Copies of the plan and revisions thereto required by this
paragraph shall be submitted to the Regional Director and WDFI.
CORRECTION OF VIOLATIONS
12. Within 30 days from the effective date of this ORDER, the Bank shall
eliminate and/or correct all violations of law, rule, or regulation listed in
the Joint Report.
RESTRICTION ON GROWTH
13. During the life of this ORDER, the Bank shall not increase its total
assets by more than 5 percent during any consecutive three-month period without
providing, at least 30 days prior to its implementation, a growth plan to the
Regional Director and WDFI. Such growth plan, at a minimum, shall include the
funding source to support the projected growth, as well as the anticipated use
of funds. This growth plan shall not be implemented without the prior written
consent of the Regional Director and Administrator. In no event shall the Bank
increase its total assets by more than 10 percent annually. For the purpose of
this paragraph, "total assets" shall be defined as in the Federal Financial
Institutions Examination Council's Instructions for the Consolidated Reports of
Condition and Income.
INTEREST RATE RISK
14. (a) Within 60 days of the effective date of this ORDER the Bank
shall revise its procedures for managing the Bank's sensitivity to interest rate
risk. The procedures shall comply with the Joint Agency Statement of Policy on
Interest Rate Risk (June 26, 1996), and the Joint Supervisory Statement on
Investment Securities and End-user Derivative Activities (April 23, 1998).
(b) A copy of the policy revisions and procedures required by this
paragraph shall be submitted to the Regional Director and WDFI.
NOTIFICATION TO SHAREHOLDER
15. Following the effective date of this ORDER, the Bank shall send to
its shareholder a copy of this ORDER: (1) in conjunction with the Bank's next
shareholder communication; or (2) in conjunction with its notice or proxy
statement preceding the Bank's next shareholder meeting.
MONITORING
16. Within 30 days from the effective date of this ORDER, the Bank's
board of directors shall have in place a program that will provide for
monitoring of the Bank's compliance with this ORDER.
PROGRESS REPORTS
17. Within 30 days from the end of each calendar quarter following the
effective date of this ORDER, the Bank shall furnish to the Regional Director
and WDFI written progress reports signed by each member of the Bank's board of
directors, detailing the actions taken to secure compliance with the ORDER and
the results thereof.
This ORDER shall be effective on the date of issuance.
The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.
The provisions of this ORDER shall remain effective and enforceable except
to the extent that, and until such time as, any provision has been modified,
terminated, suspended, or set aside by the FDIC and WDFI.
Pursuant to delegated authority.
Dated: November 9, 2010.
__________________________ __________________________
M. Anthony Lowe Michael J. Mach
Regional Director Administrator, Division of
Chicago Regional Office Banking
Federal Deposit Insurance Department of Financial
Corporation Institutions
State of Wisconsi
