Written Agreement by and between ROYAL BANCSHARES OF PENNSYLVANIA, Docket No. 10-022-WA/RB-HC INC. Narberth, Pennsylvania and FEDERAL RESERVE BANK OF PHILADELPHIA Philadephia, Pennsylvania
Exhibit 10.1
UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
Written Agreement by and between |
||
ROYAL BANCSHARES OF PENNSYLVANIA,
|
Docket No. 10-022-WA/▇▇-▇▇ | |
INC. |
||
Narberth, Pennsylvania |
||
and |
||
FEDERAL RESERVE BANK OF |
||
PHILADELPHIA |
||
Philadephia, Pennsylvania |
WHEREAS, Royal Bancshares of Pennsylvania, Inc, Narberth, Pennsylvania
(“Bancshares”), a registered bank holding company, owns and controls Royal Bank America,
Narberth, Pennsylvania (“Royal Bank”), and Royal Asian Bank, Philadelphia, Pennsylvania,
both state nonmember banks (collectively, the “Banks”), and various nonbank subsidiaries;
WHEREAS, it is the common goal of Bancshares and the Federal Reserve Bank of
Philadelphia (the “Reserve Bank”) to maintain the financial soundness of Bancshares so that
Bancshares may serve as a source of strength to the Banks;
WHEREAS, Bancshares and the
Reserve Bank have mutually agreed to enter into this Written Agreement (the “Agreement”);
and
WHEREAS,
on March 17, 2010, the board of directors of Bancshares, at a duly
constituted meeting, adopted a resolution authorizing and directing
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ to
enter into this Agreement on behalf of Bancshares, and consenting to compliance with each
and every provision of this Agreement by Bancshares and its 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, Bancshares and the Reserve Bank agree as follows:
Source of Strength
1. The board of directors of Bancshares shall take appropriate steps to fully utilize
Bancshares’ financial and managerial resources, pursuant to Section 225.4 (a) of Regulation Y of
the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. §
225.4(a)), to serve as a source of strength to its subsidiary banks, including, but not limited to,
taking steps to ensure that Royal Bank complies with the cease and desist orders entered into with
the Federal Deposit Insurance Corporation (the “FDIC”) and the Commonwealth of Pennsylvania,
Department of Banking on July 15, 2009, and any other supervisory action taken by either of the
Banks’ federal or state regulators.
Board Oversight
2. Within 60 days of this Agreement, the board of directors shall submit to the Reserve
Bank a written plan to strengthen board oversight of the management and operations of the
consolidated organization. The plan shall, at a minimum, address, consider, and include:
(a)
The actions that the board of directors will take to improve the condition of the consolidated
organization and maintain effective control over, and supervision of, the consolidated
organization’s major operations and activities, including but not limited to, risk management,
accounting and financial controls and reporting, and regulatory reporting.
2
(b) the responsibility of the board of directors to monitor management’s
adherence to approved policies and procedures and to require management to document
exceptions thereto at each regularly and specially called board meeting;
(c) the establishment of measures to ensure management’s adherence to approved policies and
procedures; and
(d) a description of the information and reports that will be
regularly reviewed by the board of directors in its oversight of the operations and
management of the consolidated organization, [including information on the Banks’
adversely classified assets, allowance for loan and lease losses, capital,
liquidity, and earnings].
Dividends and Distributions
3. (a) Bancshares shall not declare or pay any dividends without the prior written
approval of the Reserve Bank and the Director of the Division of Banking Supervision and
Regulation (the “Director”) of the Board of Governors.
(b) Bancshares shall not directly or indirectly take dividends or any other form of payment
representing a reduction in capital from the Banks without the prior written approval of the
Reserve Bank.
(c) Bancshares and its nonbank subsidiaries shall not make any distributions
of interest, principal, or other sums on subordinated debentures or trust preferred
securities without the prior written approval of the Reserve Bank and the Director.
(d) All requests for prior approval shall be received by the Reserve Bank at
least 30 days prior to the proposed dividend declaration date, proposed
distribution on subordinated debentures, and required notice of deferral on trust
preferred securities. All requests shall contain, at a minimum, current and
projected information on Bancshares’ capital,
3
earnings, and cash flow; the Banks’ capital, asset quality, earnings, and allowance for loan and
lease losses; and identification of the sources of funds for the proposed payment or distribution.
For requests to declare or pay dividends, Bancshares must also demonstrate that the requested
declaration or payment of dividends is consistent with the Board of Governors’ Policy Statement on
the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14,
1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).
Debt and Stock Redemption
4. (a) Bancshares and its nonbank subsidiaries shall not, directly or indirectly,
incur, increase, or guarantee any debt without the prior written approval of the Reserve
Bank. All requests for prior written approval shall contain, but not be limited to, a
statement regarding the purpose of the debt, the terms of the debt, and the planned
source(s) for debt repayment, and an analysis
of the cash flow resources available to meet such debt repayment.
(b) Bancshares shall not, directly or indirectly, purchase or redeem any shares
of its stock without the prior written approval of the Reserve Bank.
Capital Plan
5. Within 60 days of this Agreement, Bancshares shall submit to the Reserve Bank an
acceptable written plan to maintain sufficient capital at Bancshares on a consolidated
basis. The plan shall, at a minimum, address, consider, and include: (a) The consolidated
organization’s and the Banks’ current and future capital requirements, including compliance
with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and
Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12
C.F.R. Part 225, App. A and D) and the applicable capital adequacy guidelines for the Banks
issued by the Banks’ federal regulator;
4
(b) the adequacy of the Banks’ capital, taking into account the volume of classified
credits, concentrations of credit, allowance for loan and lease losses, current and projected asset
growth, and projected retained earnings;
(c) the source and timing of additional funds necessary to fulfill the consolidated
organization’s and the Banks’ future capital requirements;
(d) supervisory requests for additional capital at the Banks or the requirements of any supervisory
action imposed on the Banks by their federal or state regulators; and
(e) the requirements of section 225.4(a) of Regulation Y of the Board of Governors that Bancshares
serve as a source of strength to the Banks.
6. Bancshares shall notify the Reserve Bank, in writing, no more than 30 days after
the end of any quarter in which any of Bancshares’ capital ratios fall below the approved
plan’s minimum ratios. Together with the notification, Bancshares shall submit an
acceptable written plan that details the steps that Bancshares will take to increase
Bancshares’ capital ratios to or above the approved plan’s minimums.
Cash Flow Projections
7. Within 60 days of this Agreement, Bancshares shall submit to the Reserve Bank a
written statement of its planned sources and uses of cash for debt service, operating expenses, and
other purposes (“Cash Flow Projection”) for 2010. Bancshares shall submit to the Reserve Bank a
Cash Flow Projection for each calendar year subsequent to 2010 at least one month prior to the
beginning of that calendar year.
Compliance with Laws and Regulations
8. (a) In appointing any new director or senior executive officer, or changing the
responsibilities of any senior executive officer so that the officer would assume a different
senior
5
executive officer position, Bancshares shall comply with the notice provisions of section 32 of the
FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§
225.71 et seq.).
(b) Bancshares shall comply with the restrictions on indemnification and severance payments of
section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the FDIC’s regulations (12
C.F.R. Part 359).
Progress Reports
9. Within 30 days after the end of each calendar quarter following the date of this
Agreement, the board of directors shall submit to the Reserve Bank written progress reports
detailing the form and manner of all actions taken to secure compliance with the provisions
of this Agreement and the results thereof, and a parent company only balance sheet, income
statement, and, as applicable, report of changes in stockholders’ equity.
Approval and Implementation of Plan
10. (a) Bancshares shall submit a written capital plan that is acceptable to the Reserve Bank
within the applicable time period set forth in paragraph 5 of this Agreement.
(b) Within 10 days of approval by the Reserve Bank, Bancshares shall adopt the
approved capital plan. Upon adoption, Bancshares shall promptly implement the
approved plan and thereafter fully comply with it.
(c) During the term of this Agreement, the approved capital plan shall not be
amended or rescinded without the prior written approval of the Reserve Bank.
6
Communications
11. All communications regarding this Agreement shall be sent to:
| (a) | ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ Assistant Vice President Supervision, Regulation and Credit Federal Reserve Bank of Philadelphia ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ |
| (b) | ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ President and Chief Operating Officer Royal Bancshares of Pennsylvania, Inc. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ |
12. Notwithstanding any provision of this Agreement, the Reserve Bank
may, in its sole discretion, grant written extensions of time to Bancshares to comply
with any provision of this Agreement.
13. The provisions of this Agreement shall be binding upon Bancshares and its
institution-affiliated parties, in their capacities as such, and their successors and
assigns.
14. Each provision of this Agreement shall remain effective and enforceable until
stayed, modified, terminated, or suspended in writing by the Reserve Bank.
15. The provisions of this Agreement shall not bar, estop, or otherwise prevent the
Board of Governors, the Reserve Bank, or any other federal or state agency from taking any
other action affecting Bancshares, the Banks, any nonbank subsidiary of Bancshares, or any
of their current or former institution-affiliated parties and their successors and assigns.
16. Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is
enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).
7
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the 17th
day of March, 2010.
ROYAL
|
BANCSHARES OF PENNSYLVANIA, INC. | FEDERA | L RESERVE BANK OF PHILADELPHIA | |||||||
By:
|
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | By: | ||||||||
| ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | |||||||||
| President and Chief Operating Officer | Assistant Vice President |
8