Contrary to popular belief

These guys do have a plan or plans, so it appears unlikely that there will be a shut down, or am I missing something. It is apparent that these plans for the OCC do not have to be filed anywhere nor shared with the shareholders. The bold print and underlining is mine and the paragraphs aren’t necessarily sequential as per the actual document.

Excerpts from the 10-k for the 2011 year under the notes to financial statements: Click on 13. Regulatory Matters. to see the intro, then click on “Notes to Financial Statement”.

On September 20, 2011, the Bank entered into a Stipulation and Consent to the Issuance of a Consent Order (the “Consent Order”) with the Office of the Comptroller of the Currency (the “OCC”).  The Consent Order replaced the above-noted formal written agreement entered into by the Bank with the OCC on March 15, 2010. Under the terms of the Consent Order, the subsidiary bank is required to, among other things: (i) adopt and adhere to a three-year written strategic plan that establishes objectives for the subsidiary bank’s overall risk profile, earnings performance, growth, balance sheet mix, off-balance sheet activities, liability structure, capital adequacy, reduction in non-performing assets and its product development; (ii) adopt and maintain a capital plan; (iii) by December 19, 2011, achieve and thereafter maintain a Tier 1 capital ratio of at least 8% and a total risk-based capital ratio of at least 12%; (iv) seek approval of the OCC prior to paying dividends on its capital stock; (v) develop a program to reduce the subsidiary bank’s credit risk; (vi) take certain actions related to credit and collateral exceptions; (vii) reaffirm the subsidiary bank’s liquidity risk management program; and (viii) appoint a compliance committee of the Board of Directors to help ensure the subsidiary bank’s compliance with the Consent Order.  The subsidiary bank is also required to submit certain regular reports with respect to the foregoing requirements.
On December 19, 2011, the subsidiary bank submitted to the OCC a three year strategic plan and capital plan designed to strengthen the Corporation and its subsidiary bank’s operations and capital position going forward.  The plans reflected the current challenges with respect to capital and difficulties in projecting the impact of economic weakness in the Corporation’s markets on its loan portfolio, as well as strategies to maintain the financial strength of the Corporation and its subsidiary bank.  A significant part of the plans was the initiative by the Corporation to evaluate the sale of branch locations of the subsidiary bank in order to generate profits to improve capital ratios of the subsidiary bank.  As of December 31, 2011, the corporation has not committed to a plan to sell any particular branches.

On March 29, 2012, the Subsidiary Bank’s Board of Directors received a Prompt Corrective Action (“PCA”) Notice under 12 U.S.C. 1831o and 12 C.F.R. Part 6 due to its amended Call Report filed with the OCC on March 22, 2012 reflecting capital ratios in the Significantly Undercapitalized PCA capital category.  This Notice places the Bank under certain mandatory PCA restrictions regarding the payment of capital distributions and management fees, as well as restrictions on asset growth, on certain expansion activities, including acquisitions, new branches, and new lines of business, and on payment of bonuses and compensation to senior executive officers.  These mandatory requirements also include a requirement that the Bank submit an acceptable Capital Restoration Plan (“CRP”) to the OCC no later than May 7, 2012, addressing the steps the Bank will take to become adequately capitalized, the levels of capital to be attained during each quarter of each year of the CRP, the types and level of activities in which the Bank will engage; and how management will comply with the restrictions against asset growth, and acquisition, branching and new lines of business. The subsidiary bank’s capital category is determined solely for the purpose of applying PCA and may not constitute an accurate representation of the subsidiary bank’s overall financial condition or prospects.

In December 2011, as part of the capital plan submitted to the OCC in response to the Consent Order, several capital enhancement alternatives were evaluated including a public offering of common shares, a shareholder rights offering, the sale of branch locations and other asset sales.  In 2012, the board and management continue to evaluate these potential alternatives with advisors, independent parties and the OCC, which under the consent order must provide prior approval before the execution of any capital enhancement transaction.
and this is the most reassuring
If the Corporation is unsuccessful in assessing and implementing other strategic and capital-raising options, and if a liquidity crisis would develop, the Corporation has various alternatives, which could include selling or closing additional branches, packaging and selling high-quality commercial loans, executing sale/leaseback agreements on its banking facilities and other options. If executed, these transactions would decrease the subsidiary bank’s assets and liabilities, improve capital ratios and reduce general, administrative and other expense. The Corporation is continuing to explore and evaluate all strategic and capital-raising options with its financial and legal advisors.

15 comments on “Contrary to popular belief

  1. If the bank’s plan is to sell more stock, thus diluting the existing shareholders – how does one decide if it’s better to sell out now at, say, $1+ per share? I guess if one feels that after dilution, the share price will be less than the current price, best to sell out now and, you’ll have the future opportunity to buy it back at a lower price (if you then want to do so). Comments?

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