Exhibit 99.1
AGREEMENT BY AND BETWEEN
The First National Bank of Ipswich, Ipswich, Massachusetts
and
The Comptroller of the Currency
The First National Bank of Ipswich, Ipswich, MA ("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.
In consideration of the above premise, the Comptroller, through his
authorized representative, and the Bank, by and through its duly elected and
acting Board of Directors ("Board"), do hereby agree that the Bank shall at all
times operate 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. ss. 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. ss.
1818(e)(1) and 12 U.S.C. ss. 1818(i)(2).
(3) This Agreement shall be construed to be a "formal written agreement"
within the meaning of 12 C.F.R. ss. 5.51(c)(6)(ii). See 12 U.S.C. ss. 1831i.
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(4) This Agreement shall be construed to be a "written agreement" within
the meaning of 12 U.S.C. ss. 1818(u)(1)(A).
(5) This Agreement shall cause the Bank not to be designated as an
"eligible bank" for purposes of 12 C.F.R. ss. 5.3(g), unless otherwise informed
in writing by the Comptroller.
(6) 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:
Assistant Deputy Comptroller
New England Field ▇▇▇▇▇▇
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ARTICLE II
COMPLIANCE COMMITTEE
(1) Within ten (10) 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 one (1) shall be an employee of the Bank or any of its affiliates (as the
term "affiliate" is defined in 12 U.S.C. ss. 371c(b)(1)). Directors ▇▇▇▇ St.
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇ St. ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. are precluded from being
members of the Compliance Committee. 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.
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(2) The Compliance Committee shall meet at least monthly.
(3) Within thirty (30) days of the date of this Agreement and monthly
thereafter, the Compliance Committee shall submit a written progress report to
the Board setting forth in detail:
(a) a description of the action needed to achieve full compliance
with each Article of this Agreement;
(b) actions taken to comply with each Article of this Agreement; and
(c) the results and status of those actions.
(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
CAPITAL PLAN AND HIGHER MINIMUMS
(1) The Bank shall achieve by December 31, 2006 and thereafter maintain
the following capital levels (as defined in 12 C.F.R. Part 3):
(a) Tier 1 Capital at least equal to ten percent (10%) of
risk-weighted assets;
(b) Total Risk-Based Capital at least equal to eleven percent (11%)
of risk-weighted assets;
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(c) Tier 1 Capital at least equal to eight percent (8%) of adjusted
total assets.
(2) Within ninety (90) days, the Board shall develop, implement, and
thereafter ensure Bank adherence to a three-year capital program. The program
shall include:
(a) specific plans for the maintenance of adequate capital that may
in no event be less than the requirements of paragraph (1);
(b) projections for adherence to capital requirements based upon a
detailed analysis of the Bank's assets, liabilities, earnings, and
off-balance sheet activities;
(c) projections of the primary sources and amount and timing of
additional capital to meet the Bank's current and future needs;
(d) the primary source(s) from which the Bank will strengthen its
capital structure to meet the Bank's needs;
(e) contingency plans that identify alternative methods should the
primary source(s) under (d) above not be available. The contingency
plans must also include an option to sell, merge or liquidate the
bank with corresponding triggers, timeframes and a detailed process;
and
(f) a dividend policy that permits the declaration of a dividend
only:
(i) when the Bank is in compliance with its approved capital
program;
(ii) when the Bank is in compliance with 12 U.S.C. ▇▇.▇▇. 56
and 60; and
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(iii) with the prior written determination of no supervisory
objection by the Assistant Deputy Comptroller. Upon receiving
a determination of no supervisory objection from the Assistant
Deputy Comptroller, the Bank shall implement and adhere to the
dividend policy.
(g) a dividend policy that prohibits the declaration of dividend
payments to directors and senior officers of the Bank, and their
related interests, except for the purpose of Holding Company trust
preferred, so long as this Agreement is in force.
(3) Upon completion, the Bank's capital program shall be submitted to the
Assistant Deputy Comptroller for prior determination of no supervisory
objection. Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the capital
program. The Board shall review and update the Bank's capital program on an
annual basis, or more frequently if necessary. Copies of the reviews and updates
shall be submitted to the Assistant Deputy Comptroller.
ARTICLE IV
BOARD TO ENSURE COMPETENT MANAGEMENT
(1) Within ninety (90) days, the Board shall ensure that the Bank has
competent management in place on a full-time basis in its Chief Executive
Officer/President; Senior Loan Officer; and Chief Financial Officer positions to
carry out the Board's policies, ensure compliance with this Agreement,
applicable laws, rules and regulations, and manage the day-to-day operations of
the Bank in a safe and sound manner.
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(2) Within one hundred and twenty (120) days, the Board shall review the
capabilities of the Bank's management to perform present and anticipated duties
and the Board will determine whether management changes will be made, including
the need for additions to or deletions from current management.
(3) The Board shall elect one (1) or more Board members with financial
expertise within one hundred and twenty (120) days. If the Board is unable to
identify such director candidates within this time frame, the Board shall
document its efforts to locate such candidates and notify the Assistant Deputy
Comptroller in writing. Thereafter, the Board shall provide monthly reports to
the Assistant Deputy Comptroller summarizing its continuing efforts to locate
such candidates.
(4) For incumbent officers in the positions mentioned in Paragraph 1 of
this Article, the Board shall within one hundred and twenty (120) days assess
each of these officers' experience, other qualifications and performance
compared to the position's description, duties and responsibilities.
(5) If the Board determines that an officer will continue in his/her
position but that the officer's depth of skills needs improvement, the Board
will within one hundred and twenty (120) days develop and implement a written
program, with specific time frames, to improve the officer's supervision and
management of the Bank. At a minimum the written program shall include:
(a) an education program designed to ensure that the officer has
skills and abilities necessary to supervise effectively;
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(b) a program to improve the effectiveness of the officer;
(c) objectives by which the officer's effectiveness will be
measured; and
(d) a performance appraisal program for evaluating performance
according to the position's description and responsibilities and for
measuring performance against the Bank's goals and objectives.
(6) If a position mentioned in Paragraph 1 of this Article is vacant now
or in the future, including if the Board realigns an existing officer's
responsibilities and a position mentioned in Paragraph 1 of this Article becomes
vacant, the Board shall within ninety (90) days of such vacancy appoint a
capable person to the vacant position who shall be vested with sufficient
executive authority to ensure the Bank's compliance with this Agreement and the
safe and sound operation of functions within the scope of that position's
responsibility.
(7) Prior to the appointment of any individual to an executive officer
position, the Board shall submit to the Assistant Deputy Comptroller the
following information:
(a) the information sought in the "Changes in Directors and Senior
Executive Officers" and "Background Investigations" booklets of the
Comptroller's Licensing Manual, together with a legible fingerprint
card for the proposed individual;
(b) a written statement of the Board's reasons for selecting the
proposed officer; and
(c) a written description of the proposed officer's duties and
responsibilities.
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(8) The Assistant Deputy Comptroller shall have the power to disapprove
the appointment of the proposed new officer. However, the lack of disapproval of
such individual shall not constitute an approval or endorsement of the proposed
officer.
(9) The requirement to submit information and the prior disapproval
provisions of this Article are based on the authority of 12 U.S.C. ss.
1818(b)(6)(E) and do not require the Comptroller to complete his review and act
on any such information or authority within ninety (90) days.
ARTICLE V
STRATEGIC PLAN
(1) Within ninety (90) days, the Board shall adopt, implement, and
thereafter ensure Bank adherence to a written strategic plan for the Bank
covering at least a three-year period. The strategic plan shall establish
objectives for the Bank's overall risk profile, earnings performance, balance
sheet mix, off-balance sheet activities, liability structure, capital adequacy,
reduction in the level of interest rate risk, product line development and
market segments that the Bank intends to promote or develop, together with
strategies to achieve those objectives and, at a minimum, include:
(a) an action plan to improve bank earnings and accomplish
identified strategic goals and objectives, including individual
responsibilities, accountability and specific time frames;
(b) an assessment of the Bank's present and future operating
environment;
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(c) the development of strategic goals and objectives to be
accomplished over the short and long term;
(d) an identification of the Bank's present and future product lines
(assets and liabilities) that will be utilized to accomplish the
strategic goals and objectives established in paragraph (1)(c) of
this Article;
(e) an evaluation of the Bank's internal operations, staffing
requirements, board and management information systems and policies
and procedures for their adequacy and contribution to the
accomplishment of the goals and objectives developed under (1)(c) of
this Article;
(f) a management employment and succession program to promote the
retention and continuity of capable management;
(g) product line development and market segments that the Bank
intends to promote or develop;
(h) a mission statement that forms the framework for the
establishment of strategic goals and objectives;
(i) a financial forecast to include projections for major balance
sheet and income statement accounts and desired financial ratios
over the period covered by the strategic plan;
(j) control systems to mitigate risks associated with any proposed
changes in the Bank's operating environment;
(k) specific plans to establish responsibilities and accountability
for the strategic planning process, or proposed changes in the
Bank's operating environment;
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(l) systems to monitor the Bank's progress in meeting the plan's
goals and objectives; and
(m) contingency plans that identify alternative methods should
established strategic objectives not be achieved as described in (a)
through (1) above. The contingency plans must also include an option
to sell, merge or liquidate the bank with corresponding triggers,
timeframes and a detailed process.
(2) Upon adoption, a copy of the plan shall be forwarded to the Assistant
Deputy Comptroller for review and prior written determination of no supervisory
objection. Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the
strategic plan.
ARTICLE VI
INTEREST RATE RISK MANAGEMENT PLAN
(1) Within ninety (90) days, the Board shall adopt, implement, and
thereafter ensure Bank adherence to a written Interest Rate Risk Management
Plan. In formulating this plan, the Board shall refer to the "Interest Rate
Risk" booklet of the Comptroller's Handbook. The plan shall provide for a
coordinated interest rate risk strategy and, at a minimum, address:
(a) identification of strategies to manage long-term interest rate
risk on both sides of the balance sheet;
(b) written contingency plans based on interest rate risk scenarios
that trigger specific actions;
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(c) guidance of the Bank's strategic direction and tolerance for
interest rate risk;
(d) prudent limits on the nature and aggregated level of interest
rate risk that can be taken in terms of Net Interest Income at risk
as well as Net Income at risk; and
(e) periodic review of the Bank's adherence to the policy.
(2) This plan should be coordinated with the budget and three-year capital
plan.
(3) Upon adoption, a copy of the written policy shall be forwarded to the
Assistant Deputy Comptroller for review.
ARTICLE VII
LIQUIDITY
(1) Within ninety (90) days the Board shall reduce reliance on borrowings
as a source of liquidity to a level that is commensurate with deposit growth and
asset shrinkage. Actions to reduce borrowings may include, but are not limited
to:
(a) selling assets and/or allowing assets to run off;
(b) recovering charged-off assets;
(c) increasing deposits; and
(d) injecting additional equity capital.
(2) The Board shall review the Bank's liquidity on a monthly basis. Such
reviews shall consider:
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(a) a maturity schedule of certificates of deposit, including large
uninsured deposits;
(b) the volatility of demand deposits including escrow deposits;
(c) the type of loan commitments and standby letters of credit; and
(d) an analysis of the continuing availability and volatility of
present funding sources.
(3) The Board shall ensure that asset growth is not funded with borrowings
without the prior determination of no supervisory objection by the Assistant
Deputy Comptroller.
(4) The Board shall take appropriate action to ensure adequate sources of
liquidity in relation to the Bank's needs. Monthly reports shall set forth
liquidity requirements and sources and establish a contingency plan. Copies of
these reports shall be forwarded to the Assistant Deputy Comptroller.
ARTICLE VIII
ADMINISTRATIVE APPEALS AND EXTENSIONS OF TIME
(1) If the Bank determines that an exception to any provision of this
Agreement is in the best interests of the Bank, or requires an extension of any
timeframe within this Agreement, the Board shall submit a written request to the
Assistant Deputy Comptroller asking for relief.
(2) Any written requests submitted pursuant to this Article shall include
a statement setting forth in detail the special circumstances that prevent the
Bank from complying with any provision that requires the Assistant Deputy
Comptroller to exempt the Bank from any provision or that requires an extension
of any timeframe within this Agreement. All such requests shall be accompanied
by relevant supporting documentation.
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(3) The Assistant Deputy Comptroller's decision regarding this request is
final and not subject to further review.
ARTICLE IX
CLOSING
(1) Although the Board has by this Agreement consented to submit certain
proposed actions and programs for the review or prior written determination of
no supervisory objection of the Assistant Deputy Comptroller, the Board has the
ultimate responsibility for proper and sound management of the Bank.
(2) It is expressly and clearly understood that if, at any time, the
Comptroller deems it appropriate in fulfilling the responsibilities placed upon
him by the several laws of the United States of America to undertake any action
affecting the Bank, nothing in this Agreement shall in any way inhibit, estop,
bar, or otherwise prevent him from so doing.
(3) Any time requirements specified in this Agreement shall begin to run
from the effective date of this Agreement. Such time requirements may be
extended in writing by the Assistant Deputy Comptroller for good cause upon
written application by the Board.
(4) This Agreement shall be effective upon execution by the parties
hereto, and its provisions shall continue in full force and effect until such
time as they shall be amended by written mutual consent of the parties to this
Agreement or excepted, waived, or terminated in writing by the Comptroller.
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(5) In each instance in this Agreement in which the Board is required to
ensure adherence to, and undertake to perform certain obligations of the Bank,
it is intended to mean that the Board shall:
(a) authorize and adopt such actions on behalf of the Bank as may be
necessary for the Bank to perform its obligations and undertakings
under the terms of this Agreement;
(b) require the timely reporting by Bank management of such actions
directed by the Board to be taken under the terms of this Agreement;
(c) follow-up on any non-compliance with such actions in a timely
and appropriate manner; and,
(d) require corrective action be taken in a timely manner of any
non-compliance with such actions.
(6) This Agreement is intended to be, and shall be construed to be, a
supervisory "written agreement entered into with the agency" as contemplated by
12 U.S.C. ss. 1818(b)(1), and expressly does not form, and may not be construed
to form, a contract binding on the Comptroller or the United States.
Notwithstanding the absence of mutuality of obligation, or of consideration, or
of a contract, the Comptroller may enforce any of the commitments or obligations
herein undertaken by the Bank under his supervisory powers, including 12 U.S.C.
ss. 1818(b)(1), and not as a matter of contract law. The Bank expressly
acknowledges that neither the Bank nor the Comptroller has any intention to
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enter into a contract. The Bank also expressly acknowledges that no officer or
employee of the Office of the Comptroller of the Currency has statutory or other
authority to bind the United States, the U.S. Treasury Department, the
Comptroller, or any other federal bank regulatory agency or entity, or any
officer or employee of any of those entities to a contract affecting the
Comptroller's exercise of his supervisory responsibilities. The terms of this
Agreement, including this paragraph, are not subject to amendment or
modification by any extraneous expression, prior agreements or prior
arrangements between the parties, whether oral or written.
IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller, has
hereunto set her hand on behalf of the Comptroller.
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Assistant Deputy Comptroller
New England Field Officer
IN TESTIMONY WHEREOF, the undersigned, as the duly elected and acting
Board of Directors of the Bank, have hereunto set their hands on behalf of the
Bank.
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