AGREEMENT
BY AND BETWEEN
Patriot
National Bank
Stamford,
Connecticut
and
The
Comptroller of the Currency
Patriot National Bank, Stamford, Connecticut ("Bank") and the
Comptroller of the Currency of the United States of America
("Comptroller") wish to protect the interests of the depositors,
other customers, and shareholders of the Bank, and, toward that
end, wish the Bank to operate safely and soundly and in accordance
with all applicable laws, rules and regulations.
The Comptroller, through his National Bank Examiner, has examined
the Bank and his findings are contained in the Report of
Examination (“ROE”) for the examination that commenced
on August 18, 2008.
In consideration of the above premises, it is agreed between the
Bank, by and through its duly elected and acting Board of Directors
(“Board”), and the Comptroller, through his authorized
representative, that the Bank shall operate at all times in
compliance with the articles of this Agreement.
Article I
JURISDICTION
(1) This
Agreement shall be construed to be a “written agreement
entered into with the agency” within the meaning of 12 U.S.C.
§ 1818(b)(1).
(2) This
Agreement shall be construed to be a “written agreement
between such depository institution and such agency” within
the meaning of 12 U.S.C. § 1818(e)(1) and 12 U.S.C. §
1818(i)(2).
(3) This
Agreement shall be construed to be a “formal written
agreement” within the meaning of 12 C.F.R. §
5.51(c)(6)(ii). See 12 U.S.C. §
1831i.
(4) This
Agreement shall be construed to be a “written
agreement” within the meaning of 12 U.S.C. §
1818(u)(1)(A).
(5) All
reports or plans which the Bank or Board has agreed to submit to
the Assistant Deputy Comptroller pursuant to this Agreement shall
be forwarded to:
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Melissa
F. Scofield
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Assistant
Deputy Comptroller
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343
Thornall Street, Suite 610
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Edison,
New Jersey 08837
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Article II
COMPLIANCE COMMITTEE
(1) Within
sixty (60) days of the date of this Agreement, the Board shall
appoint a Compliance Committee of at least three (3) directors, of
which no more than (1) shall be an employee or controlling
shareholder of the Bank or any of its affiliates (as the term
“affiliate” is defined in 12 U.S.C. § 371c(b)(1)),
or a family member of any such person. Upon appointment,
the names of the members of the Compliance Committee and, in the
event of a change of the membership, the name of any new member
shall be submitted in writing to the Assistant Deputy
Comptroller. The Compliance Committee shall be
responsible for monitoring and coordinating the Bank's adherence to
the provisions of this Agreement.
(2) The
Compliance Committee shall meet at least monthly.
(3) Within
thirty (30) days of the date of the formation of the Compliance
Committee, and quarterly thereafter, the Compliance Committee shall
submit a written progress report to the Board setting forth in
detail:
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(a)
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a description of the action needed to achieve full compliance with
each Article of this Agreement;
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(b)
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actions taken to comply with each Article of this Agreement;
and
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(c)
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the results and status of those actions.
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(4) The
Board shall forward a copy of the Compliance Committee's report,
with any additional comments by the Board, to the Assistant Deputy
Comptroller within ten (10) days of receiving such
report.
Article III
BOARD AND MANAGEMENT SUPERVISION
(1) Within
one hundred twenty (120) days, the Board shall ensure competent
management and strengthen supervision presently being provided to
the Bank by assessing the Board of Director's effectiveness, the
Bank’s management structure, and staffing requirements in
light of the Bank’s present condition. At a
minimum, the Board and management shall assess:
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(a)
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For the Board:
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(i)
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The Board’s strengths and weaknesses, including an analysis
of the necessary qualifications and skills for individual members
to serve as effective directors and properly supervise the
Bank’s affairs:
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(ii)
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The Board committees, especially the Audit Committee, to ensure
members are knowledgeable of what is required to establish an
effective audit program and capable of implementing this
program;
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(iii)
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Individual members' qualifications and skills compared to necessary
qualifications and skills to properly supervise the Bank's
affairs;
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(iv)
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Whether the Board members are receiving adequate information on the
operation of the Bank to enable them to fulfill their fiduciary
responsibilities and other responsibilities under law;
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(v)
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Recommendations to correct or eliminate any other deficiencies in
the supervision or organizational structure of the Bank.
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(b)
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For management:
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(i)
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Present and future management and staffing requirements of each
area of the Bank, with particular emphasis given to the commercial
real estate lending, credit administration, risk management,
compliance (particularly the Bank Secrecy Act (BSA) area), audit
and financial areas;
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(ii)
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Current lines of authority, reporting responsibilities, and
delegation of duties for all officers, including identification of
any overlapping duties or responsibilities;
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(iii)
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Each senior officer's qualifications and abilities, at a minimum
for senior vice president and above, and a determination of whether
each of these individuals possesses the experience and other
qualifications required to perform present and anticipated duties
of his/her officer position;
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(iv)
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Each objective by which management's effectiveness will be
measured;
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(v)
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Whether management or staffing changes should be made, including
the need for additions to or deletions from the current management
team, and develop recommendations for making the necessary changes;
and
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(vi)
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Weaknesses in the skills and abilities of the Bank's staff and
management team and develop a training program to address such
weaknesses.
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(2) Within
one hundred twenty (120) days, the Board shall ensure that the Bank
has developed a management succession program to promote the
retention and continuity of capable management;
(3) Within
one hundred twenty (120) days, the Board shall ensure that
management has completed a Bank-wide risk assessment that discusses
and reviews all risks relevant to the Bank (e.g., credit, interest
rate, liquidity, transaction, compliance, strategic and reputation)
and including new products and services being
considered. The risk assessment should describe for each
risk the current risk position, the likely direction of risk over
the nest twelve months, and the controls in place to mitigate
risks. Finding from the risk assessment should be
submitted to and reviewed by the Board.
(4) Within
one hundred fifty (150) days, the Board shall develop, implement,
and thereafter ensure Bank adherence to a written plan, with
specific time frames, that will correct any deficiencies identified
as part of the reviews required.
(5) The
Board shall ensure that the Bank has satisfactory processes,
personnel, and control systems to ensure implementation of and
adherence to the plan developed pursuant to this
Article.
(6) Copies
of the Board's written plan shall be forwarded to the Assistant
Deputy Comptroller. The Assistant Deputy Comptroller
shall retain the right to determine the adequacy of the report and
its compliance with the terms of this Agreement. In the event the
written plan, or any portion thereof, is not implemented, the Board
shall immediately advise the Assistant Deputy Comptroller, in
writing, of specific reasons for deviating from the
plan.
Article IV
CREDIT RISK MANAGEMENT AND THE ALLOWANCE FOR LOAN AND
LEASE
LOSSES
(1) Within
ninety (90) days, the Board shall develop implement, and thereafter
ensure Bank adherence to a written program to improve credit risk
management process and address credit deficiencies noted in the
ROE. The program shall include but not be limited
to:
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(a)
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a revision and/or development of the Bank’s procedures to
ensure accuracy of risk ratings and proper and timely problem loan
identification to include non-accrual loans;
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(b)
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a revision and/or development of the Bank’s procedures to
ensure current financial data is obtained on borrowers and
guarantors;
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(c)
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a revisions and/or development of the Bank’s procedures to
ensure quality financial analysis and documentation for new and
renewed credits;
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(d)
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a revisions and/or development of the Bank’s procedures to
ensure ongoing guarantor analysis, to include a review of the
borrower’s or guarantor’s global cash flow analysis and
analysis of contingent liabilities;
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(e)
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a revisions and/or development of the Bank’s procedures to
ensure appraisal reviewers to review key appraisals and
appropriately document their findings;
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(f)
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a revisions and/or development of the Bank’s procedures to
ensure MIS is developed to track completion of annual reviews and
financial statement exceptions;
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(g)
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a revisions and/or development of the Bank’s procedures to
improve the ALLL process and methodology including the use of
external factors that could impact the ALLL. Such
procedures shall refer to the Comptroller of the Currency’s
Handbook for the Allowance for Loan and Lease Losses dated June
1996 and the Interagency Policy Statement on the Allowance for Loan
and Lease Losses dated December 13, 2006.
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(2) At
least quarterly, the Board shall prepare a written assessment of
the Bank’s credit risk, which shall evaluate the Bank’s
progress under the aforementioned program. The Board
shall submit a copy of this assessment to the Assistant Deputy
Comptroller.
(3) The
Bank shall submit a copy of the program to the Assistant Deputy
Comptroller. The Board shall ensure that the Bank has
processes, personnel, and control systems to ensure implementation
of and adherence to the program developed pursuant to this
Article.
Article V
CRITICIZED ASSETS
(1) The
Bank shall take prompt and continuing action to protect its
interest in those assets criticized the ROE, in any subsequent
Report of Examination, by internal or external loan review, or in
any list provided to management by the National Bank Examiners
during any examination.
(2) Within
sixty (60) days, the Board shall adopt, implement, and thereafter
ensure Bank adherence to a written program designed to eliminate
the basis of criticism of assets criticized in the ROE, in any
subsequent Report of Examination, or by any internal or external
loan review, or in any list provided to management by the National
Bank Examiners during any examination as "doubtful," "substandard,"
or "special mention." shall include, at a minimum:
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(a)
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an identification of the expected sources of repayment;
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(b)
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the appraised value of supporting collateral and the position of
the Bank’s lien on such collateral where
applicable;
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(c)
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an analysis of current and satisfactory credit information,
including cash flow analysis where loans are to be repaid from
operations; and
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(d)
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the proposed action to eliminate the basis of criticism and the
time frame for its accomplishments.
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(3) Upon
adoption, a copy of the program for all criticized assets equal to
or exceeding one million dollars ($1,000,000) shall be forwarded to
the Assistant Deputy Comptroller.
(4) The
Board shall ensure that the Bank has satisfactory processes,
personnel, and control systems to ensure implementation of and
adherence to the program developed pursuant to this
Article.
(5) The
Board, or a designated committee, shall conduct a review, on at
least a quarterly basis, to determine:
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(a)
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the status of each criticized asset or criticized portion thereof
that equals or exceeds one million dollars ($1,000,000);
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(b)
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management’s adherence to the program adopted pursuant to
this Article;
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(c)
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the status and effectiveness of the written program; and
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(d)
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the need to revise the program or take alternative
action.
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(6) A
copy of each review shall be forwarded to the Assistant Deputy
Comptroller on a quarterly basis (in a format similar to Appendix
A, attached hereto).
(7) The
Bank may extend credit, directly or indirectly, including renewals,
extensions, or capitalization of accrued interest, to a borrower
whose loans or other extensions of credit are criticized in the
ROE, in any subsequent Report of Examination, in any internal or
external loan review, or in any list provided to management by the
National Bank Examiners during any examination and whose aggregate
loans or other extensions exceed one million dollars ($1,000,000)
only if each of the following conditions are met:
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(a)
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the Board or designated committee finds that the extension of
additional credit is necessary to promote the best interests of the
Bank and that prior to renewing, extending, or capitalizing any
additional credit, a majority of the full Board (or designated
committee) approves the credit extension and records, in writing,
why such extension is necessary to promote the best interests of
the Bank; and
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(b)
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a comparison to the written program adopted pursuant to this
Article shows that the Board’s formal plan to collect or
strengthen the criticized asset will not be compromised.
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(8) A
copy of the ap
