UNITED STATES OF AMERICA BEFORE
THE
BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM
WASHINGTON, D.C.
STATE OF GEORGIA
DEPARTMENT OF BANKING AND
FINANCE ATLANTA, GEORGIA
Written
Agreement by and among
FEDERAL RESERVE
BANK OF ATLANTA
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Docket Nos.
09-084-WA/RB-HC
09-084-WA/RB-SM
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WHEREAS, in recognition of their
common goal to maintain the financial soundness of PAB Bankshares,
Inc., Valdosta, Georgia ("Bankshares"), a registered bank holding
company, and its subsidiary bank, The Park Avenue Bank, Valdosta,
Georgia (the "Bank"), a state chartered bank that is a member of
the Federal Reserve System, Bankshares, the Bank, the Federal
Reserve Bank of Atlanta (the "Reserve Bank"), and the Banking
Commissioner of the State of Georgia (the "Commissioner") have
mutually agreed to enter into this Written Agreement (the
"Agreement"); and
WHEREAS, on July 9, 2009,
Bankshares's and the Bank's boards of directors, at duly
constituted meetings, adopted resolutions authorizing and directing
Donald J. Torbert, Jr., president and chief executive officer to
consent to this Agreement on behalf of Bankshares and the Bank and
consenting to compliance with each and every applicable provision
of this Agreement by Bankshares, the Bank, and their
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. §§ 1813(u) and 1818(b)(3)).
NOW, THEREFORE, Bankshares, the
Bank, the Reserve Bank, and the Commissioner agree as
follows:
Credit Risk Management
1. Within 60 days of this Agreement,
the Bank shall submit to the Reserve Bank and the Commissioner an
acceptable written plan to strengthen credit risk management
practices. The plan shall, at a minimum, address, consider, and
include:
(a) Procedures to periodically
review and revise risk exposure limits to address changes in market
conditions;
(b) strategies to minimize credit
losses;
(c) procedures to identify, limit,
and manage concentrations of credit that are consistent with the
Interagency Guidance on Concentrations in Commercial Real Estate
Lending, Sound Risk Management Practices, dated December 12, 2006
(SR 07-1), including but not limited to: establishment of
concentration of credit risk tolerances or limits by types of loan
products, geographic locations, and other common risk
characteristics or sensitivities; enhanced stress testing; and
enhanced periodic reporting to management and the board of
directors; and
(d) measures to address the criticisms regarding
credit risk management noted in the report of the examination of
the Bank that was conducted jointly by the Reserve Bank and
Commissioner that commenced on January 26, 2009 (the "Report of
Examination").
Lending and Credit Administration
2. Within 60 days of this Agreement,
the Bank shall submit to the Reserve Bank and the Commissioner an
acceptable written lending and credit administration program that
shall, at a minimum, address, consider, and include:
(a) Underwriting standards that
require documented analyses of any borrower's and guarantor's
repayment sources, global cash flow, and overall debt service
ability;
(b) procedures for the periodic
analyses of any current borrower's and guarantor's repayment
sources, global cash flow, and overall debt service
ability;
(c) an enhanced internal loan review
process that includes, but is not limited to, increased frequency
of loan reviews;
(d) the appropriate use of interest
reserves;
(e) limitations on the
capitalization of interest; and
(f) improved documentation of loan
modifications.
Asset Improvement
3.
(a) The Bank shall not, directly or indirectly, extend or renew any
credit to or for the benefit of any borrower, including any related
interest of the borrower, who is obligated to the Bank in any
manner on any extension of credit or portion thereof that has been
charged off by the Bank or classified, in whole or in part, "loss"
in the Report of Examination or in any subsequent report of
examination, as long as such credit remains uncollected.
(b) The Bank shall not, directly or
indirectly, extend or renew any credit to or for the benefit of any
borrower, including any related interest of the borrower, whose
extension of credit has been classified "doubtful" or "substandard"
in the Report of Examination or in any subsequent report of
examination, without the prior approval of the Bank's board of
directors. The board of directors shall document in writing the
reasons for the extension of credit or renewal, specifically
certifying that: (i) the extension of credit is necessary to
protect the Bank's interest in the ultimate collection of the
credit already granted or (ii) the extension of credit is in full
compliance with the Bank's written loan policy, is adequately
secured, and a thorough credit analysis has been performed
indicating that the extension or renewal is reasonable and
justified, all necessary loan documentation has been properly and
accurately prepared and filed, the extension of credit will not
impair the Bank's interest in obtaining repayment of the already
outstanding credit, and the board of directors reasonably believes
that the extension of credit or renewal will be repaid according to
its terms. The written certification shall be made a part of the
minutes of the board of directors meetings, and a copy of the
signed certification, together with the credit analysis and related
information that was used in the determination, shall be retained
by the Bank in the borrower's credit file for subsequent
supervisory review. For purposes of this Agreement, the term
"related interest" is defined as set forth in section 215.2(n) of
Regulation O of the Board of Governors of the Federal Reserve
System (the "Board of Governors") (12 C.F.R. §
215.2(n)).
4.
(a) Within 60 days of this Agreement, the Bank shall submit to the
Reserve Bank and the Commissioner an acceptable written plan
designed to improve the Bank's position through repayment,
amortization, liquidation, additional collateral, or other means on
each loan or other asset in excess of $500,000, including OREO,
that: (i) is past due as to principal or
interest more than 90 days as of the date of
this Agreement; (ii) is on the Bank's problem loan list; or (iii)
was adversely classified in the Report of Examination. In
developing the plan for each loan, the Bank shall, at a minimum,
review, analyze, and document the financial position of the
borrower, including source of repayment, repayment ability, and
alternative repayment sources, as well as the value and
accessibility of any pledged or assigned collateral, and any
possible actions to improve the Bank's collateral
position.
(b) Within 30 days of the date that
any additional loan or other asset in excess of $500,000, including
OREO: (i) becomes past due as to principal or interest for more
than 90 days; (ii) is on the Bank's problem loan list; or (iii) is
adversely classified in any subsequent report of examination of the
Bank, the Bank shall submit to the Reserve Bank and the
Commissioner an acceptable written plan to improve the Bank's
position on such loan or asset.
(c) Within 30 days after the end of
each calendar quarter thereafter, the Bank shall submit a written
progress report to the Reserve Bank and the Commissioner to update
each asset improvement plan, which shall include, at a minimum, the
carrying value of the loan or other asset and changes in the nature
and value of supporting collateral, along with a copy of the Bank's
current problem loan list, extension report, and past
due/non-accrual report. The board of directors shall review the
progress reports before submission to the Reserve Bank and shall
document the review in the minutes of the board of directors'
meetings.
Allowance for Loan and Lease
Losses
5. (a)
Within 10 days of this Agreement, the Bank shall eliminate from its
books, by charge-off or collection, all assets or portions of
assets classified "loss" in the Report of Examination that have not
been previously collected in full or charged off. Thereafter the
Bank shall, within 30 days from the receipt of any federal or state
report of examination, charge
off all assets
classified "loss" unless otherwise approved in writing by the
Reserve Bank and the Commissioner.
(b) The Bank shall maintain a sound
process for determining, docu
