Table of
Contents
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL
FORM REGISTRATION OF SECURITIES
Pursuant
to Section 12(b) or (g) of The Securities Exchange Act of 1934
State
Bank Financial Corporation
(Exact name of registrant as specified in its charter)
|
Georgia
|
|
27-1744232
|
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
|
|
415 East Paces Ferry Road, NE, Suite 200,
Atlanta, Georgia
|
|
30305
|
|
(Address of principal executive offices)
|
|
(Zip Code)
|
478-722-6200
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange
Act:
|
Title
of each class
|
|
Name
of each exchange on which
|
|
to
be so registered
|
|
each
class is to be registered
|
|
None.
|
|
Not Applicable.
|
Securities registered under Section 12(g) of the Exchange
Act:
Common
Stock, $0.01 par value per share
(Title of class)
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or
a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer
o
|
Accelerate
filer
o
|
|
Non-accelerated
filer
x
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
o
|
Table
of Contents
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements contained in this registration statement on Form 10
that are not statements of historical fact may constitute forward-looking
statements. These forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations, can generally be identified by the use of
the words “may,” “would,” “could,” “will,” “expect,” “anticipate,” “believe,” “intend,”
“plan” and “estimate,” as well as similar expressions. These forward-looking statements include
statements related to our projected growth, anticipated future financial
performance, and management’s long-term performance goals, as well as
statements relating to the anticipated effects on results of operations and
financial condition from expected developments or events, or business and
growth strategies, including anticipated internal growth and plans to establish
or acquire banks or the assets of failed banks.
These forward-looking statements involve significant risks and
uncertainties that could cause our actual results to differ materially from
those anticipated in such statements.
Potential risks and uncertainties include those described under “Risk
Factors” and the following:
·
general economic conditions (both generally
and in our markets) may be less favorable than expected, which could result in,
among other things, a continued deterioration in credit quality, a further
reduction in demand for credit and a further decline in real estate values;
·
the general decline in the real estate and
lending markets, particularly in our market areas, may continue to negatively
affect our financial results;
·
our ability to raise additional capital may
be impaired if current levels of market disruption and volatility continue or
worsen;
·
we may be unable to collect reimbursements on
losses that we incur on our assets covered under loss share agreements with the
FDIC as we anticipate;
·
costs or difficulties related to the
integration of the banks we acquired from the FDIC as receiver may be greater
than expected;
·
restrictions or conditions imposed by our
regulators on our operations may make it more difficult for us to achieve our
goals;
·
legislative or regulatory changes, including
changes in accounting standards and compliance requirements, may adversely
affect us;
·
competitive pressures among depository and
other financial institutions may increase significantly;
·
changes in the interest rate environment may
reduce margins or the volumes or values of the loans we make or have acquired;
·
other financial institutions have greater
financial resources and may be able to develop or acquire products that enable
them to compete more successfully than we can;
·
our ability to attract and retain key
personnel can be affected by the increased competition for experienced
employees in the banking industry;
·
adverse changes may occur in the bond and
equity markets;
·
war or terrorist activities may cause further
deterioration in the economy or cause instability in credit markets;
·
economic, governmental or other factors may
prevent the projected population, residential and commercial growth in the
markets in which we operate; and
·
we will or may continue to face the risk
factors discussed from time to time in the periodic reports we file with the
SEC.
You should not place undue
reliance on the forward-looking statements, which speak only as of the date of
this registration statement. All
subsequent written and oral forward-looking statements attributable to us or
any person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
See Item 1A, Risk Factors, for a description of some of the important
factors that may affect actual outcomes.
1
Table of
Contents
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Voluntary Filing
We
are voluntarily filing this registration statement on Form 10 to become a
reporting company under the Securities Exchange Act of 1934 (the “Exchange Act”). Following the effective date of this
registration statement, we will be obligated to file various reports required
by the Exchange Act, including current reports on Form 8-K, quarterly
reports on Form 10-Q and annual reports on Form 10-K.
Item 1. Business
General
Overview
State
Bank Financial Corporation (the “Company”) is a bank holding company
incorporated under the laws of the State of Georgia in January 2010 to
serve as the holding company for State Bank and Trust Company (the “Bank”). The Bank is a Georgia state-chartered bank
that opened in October 2005 in Pinehurst, Georgia. The Company was organized at the direction of
the board of directors of the Bank for the purpose of acquiring all of the
capital stock of the Bank. On July 23,
2010, the Company became the bank holding company of the Bank under a plan of
reorganization and share exchange that was approved by the boards of directors
of the Company and the Bank and adopted by the shareholders of the Bank at its
annual meeting held on March 11, 2010.
Unless
the context indicates otherwise, all references to “we,” “us” and “our” refer
to State Bank Financial Corporation and our wholly-owned subsidiary, State Bank
and Trust Company, except that if the discussions relate to a period before July 23,
2010, these terms refer solely to State Bank and Trust Company. All references to the “Bank” refer to State
Bank and Trust Company.
Under
the plan of reorganization and share exchange, the holding company
reorganization was effected through a contribution of all of the outstanding
shares of the Bank’s common stock to the Company in a one-for-one exchange for
shares of the Company’s common stock.
Upon consummation of the reorganization, the Bank became the
wholly-owned subsidiary of the Company and all of the former shareholders of
the Bank became shareholders of the Company.
Before the reorganization, the Company did not engage in any operations
other than organizational activities. As
a result, the consolidated financial statements included in Item 15 of
this registration statement reflect the holding company reorganization. The only significant activities of the
Company are the ownership and supervision of the Bank.
We
offer a variety of community banking services to individuals and businesses
within our middle Georgia and metropolitan Atlanta markets. Our product line includes loans to small and
medium-sized businesses, residential and commercial construction and
development loans, commercial real estate loans, farmland and agricultural
production loans, residential mortgage loans, home equity loans, consumer loans
and a variety of commercial and consumer demand, savings and time deposit
products. We also offer online banking
and bill payment services, online cash management, safe deposit box rentals,
debit card and ATM card services and the availability of a network of ATMs for
our customers.
As
of June 30, 2010, our total assets were approximately $2.6 billion, our
total loans receivable were approximately $1.1 billion, our total deposits were
approximately $2.2 billion and our total shareholders’ equity was approximately
$335.0 million. We are headquartered at
415 East Paces Ferry Road, Suite 200, Atlanta, Georgia 30305. The Bank’s executive office is located at
4219 Forsyth Road, Macon, Georgia 31210.
Recent
Developments
July 2009 Offering and Acquisitions
On
July 24, 2009, the Bank’s new management team led by Joseph W. Evans, J.
Daniel Speight and Kim M. Childers took control of the Bank to be able to use
the Bank’s charter to acquire failed banks from the FDIC. Simultaneously with the change in control
transaction, we raised approximately $292.1 million in gross proceeds (before
expenses) from investors in a private placement of our common stock, including
investments from our new executive management team. The purchase price for the shares in the
offering was $10.00 per share. The
investors in the offering,
2
Table of
Contents
either
directly or through affiliated funds, included hedge funds, mutual funds, an
insurance company and individuals. These
new investors now own approximately 92% of our outstanding common stock.
Also
on July 24, 2009, the Bank assumed all of the deposits and acquired
certain assets and liabilities of the six bank subsidiaries of Security Bank
Corporation, Macon, Georgia, from the FDIC, as receiver, under the terms of a
purchase and assumption agreement between the Bank and the FDIC dated July 24,
2009 (the “Security Bank Agreement”).
The
six banks involved in the transaction were:
·
Security Bank of Bibb County in Macon,
Georgia;
·
Security Bank of Houston County in Perry and
Warner Robins, Georgia;
·
Security Bank of Jones County in Gray,
Georgia;
·
Security Bank of North Metro in Woodstock,
Georgia;
·
Security Bank of North Fulton in Alpharetta,
Georgia; and
·
Security Bank of Gwinnett County in Suwanee,
Georgia.
The
six acquired banks (the “Security Banks”) had a total of 20 branches that
reopened as branches of our Bank on July 25, 2009.
Terms of the Security Bank Agreement.
Under the terms of the Security Bank agreement, we assumed $2.2 billion
of liabilities, including $1.2 billion of retail deposits and $817.4 million of
wholesale deposits with no deposit premium paid. The liabilities assumed also included $159.5
million of Federal Home Loan Bank advances and $23.5 million of other
liabilities. We acquired approximately
$2.0 billion of the assets of the Security Banks, including $1.5 billion in
loans, net of unearned income, and $115.2 million of other real estate with a
discount of $57.6 million of fair value adjustments. The assets acquired also included $878.1
million of cash and cash equivalents, securities, Federal Home Loan Bank stock
and other assets, including the effect of the $316.5 million negative bid
described in the following paragraph.
In
connection with the acquisition, we conducted due diligence on the Security
Banks’ loan portfolios and created financial models of the portfolios to
determine expected losses, the costs of administering the portfolios and expected
carrying costs and expenses. Based on
this due diligence, we submitted a negative bid to the FDIC to purchase the
assets of the Security Banks at a discount of $316.5 million in exchange for
the Bank assuming substantially all of the Security Banks’ deposits and certain
other liabilities. We did not pay any
deposit premium or other consideration.
The negative bid represents an amount that we believed would be adequate
to absorb our share of the probable losses and expenses relating to the
Security Banks’ loan portfolios, expected carrying costs for the non-performing
assets and the costs to manage those portfolios. Our judgment as to the adequacy of our
negative bid is based on a number of assumptions about future events that we
believe to be reasonable but which may or may not prove to be accurate. The terms of the agreement provide for the
FDIC to indemnify us against claims with respect to liabilities and assets of
the Security Banks that we did not assume and with respect to certain other
claims made after the acquisition based on, among other things:
·
rights of shareholders of the Security Banks
or shareholders of any subsidiary or affiliate of the Security Banks;
·
rights of creditors of the Security Banks;
·
rights of any present or former director,
officer, employee or agent of the Security Banks or of any subsidiary or
affiliate of the Security Banks; and
·
any action or inaction of the Security Banks,
its directors, employees or agents, or any subsidiary or affiliate of the
Security Banks before the acquisition.
Loss Share Arrangements.
In connection
with the acquisition of the Security Banks, we entered into 12 loss share
agreements with the FDIC (two for each Security Bank) that collectively cover
approximately $1.6 billion of the acquired assets, including 100% of the
acquired loans and other real estate.
The first type of loss share agreement covers single-family residential
mortgage loans (the “Single Family Loss Agreement”) and the second type of loss
share agreement covers construction, commercial real estate and commercial and
industrial loans, other real estate owned and other commercial assets (the “Commercial
Loss Agreement”). In this registration
statement, we refer to all of the loans and other real estate covered under the
loss share agreements as “covered assets.”
These loss share agreements with the FDIC afford the Bank significant
protection against future losses on the acquired loans and other real estate
owned.
3
Table of
Contents
Under
the terms of the loss share agreements for the Security Banks, the FDIC’s
obligation to reimburse us for losses with respect to covered assets begins
with the first dollar of loss incurred.
The FDIC agreed to assume 80% of losses and share 80% of loss recoveries
on the first $563.0 million of losses on the acquired loans and other real
estate owned, and assume 95% of losses and share 95% of loss recoveries on losses
exceeding $563.0 million. The loss share
agreements cover losses on single-family residential mortgage loans for 10
years and all other losses for five years (eight years for recoveries on
non-residential loans). In addition to
the $712.9 million of fair value discounts on loans and other real estate
owned, the Bank recorded a $403.6 million indemnification asset from the FDIC
as part of the loss share agreements.
The Bank has received $162.0 million in cash from the FDIC under the
loss share agreements for the Security Banks as of June 30, 2010.
December 2009 Acquisitions
The Buckhead Community Bank
On
December 4, 2009, the Bank assumed substantially all of the deposits and
acquired certain assets and liabilities of The Buckhead Community Bank, Atlanta,
Georgia, under the terms of a purchase and assumption agreement between the
Bank and the FDIC dated December 4, 2009, similar to the Security Bank
Agreement. The Buckhead Community Bank
and its six branches operated under the following names: The Sandy Springs Community Bank, The Midtown
Community Bank, The Alpharetta Community Bank, The Cobb Community Bank, The
Forsyth Community Bank and The Hall Community Bank. Each of these branches reopened as branches
of our Bank.
Under
the purchase and assumption agreement for The Buckhead Community Bank, we
assumed $810.0 million of liabilities, including $690.7 million of retail
deposits and $99.6 million of wholesale deposits with no deposit premium
paid. The liabilities assumed also
included $16.5 million of Federal Home Loan Bank advances and other borrowings
and $3.2 million of other liabilities.
We acquired approximately $880.5 million of the assets of The Buckhead
Community Bank, including $635.4 million in loans, net of unearned income, with
a discount of $291.8 million of fair value adjustments and $62.1 million of
other real estate with a discount of $27.4 million of fair value
adjustments. The assets acquired also
included $211.8 million of cash and cash equivalents, securities, Federal Home
Loan Bank and Federal Reserve Bank stock and other assets, including the effect
of the $100.3 million negative bid described in the following paragraph.
In
connection with the acquisition, we conducted due diligence on the The Buckhead
Community Bank’s loan portfolio and
created financial models of the portfolio to determine expected losses, the
costs of administering the portfolio and expected carrying costs and
expenses. Based on this due diligence,
we submitted a negative bid to the FDIC to purchase the assets of The Buckhead
Community Bank at a discount of $100.3 million in exchange for the Bank
assuming substantially all of The Buckhead Community Bank’s deposits and
certain other liabilities. We did not
pay any deposit premium or other consideration.
The negative bid represents an amount that we believe will be adequate
to absorb the probable losses and expenses relating to The Buckhead Community
Bank’s loan portfolio, expected carrying costs for the non-performing assets
and the costs to manage that portfolio.
Our judgment as to the adequacy of our negative bid is based on a number
of assumptions about future events that we believe to be reasonable but which
may or may not prove to be accurate.
The
Bank entered into two loss share agreements with the FDIC on approximately
$697.5 million of The Buckhead Community Bank’s assets, including 100% of the
acquired loans and other real estate, similar to the loss share agreements
described above for the Security Banks.
The FDIC agreed to assume 80% of losses and share 80% of loss recoveries
on the first $254.0 million of losses on the acquired loans and other real
estate owned, and assume 95% of losses and share 95% of loss recoveries on
losses exceeding $254.0 million. In
addition to the $319.2 million of fair value discounts on loans and other real
estate owned, the Bank recorded a $213.8 million indemnification asset from the
FDIC as part of the loss share agreements.
The Bank has received $26.7 million in cash from the FDIC under the loss
share agreements for The Buckhead Community Bank as of June 30, 2010.
First Security National Bank
On
December 4, 2009, the Bank also assumed substantially all of the deposits
and acquired certain assets and liabilities of First Security National Bank,
Norcross, Georgia under the terms of a purchase and assumption agreement
between the Bank and the FDIC dated December 4, 2009, similar to the
agreements described above. The four
branches of
4
Table of
Contents
First
Security National Bank reopened as branches of our Bank. Under the purchase and assumption agreement,
we assumed $118.9 million of liabilities, including $113.2 million of retail
deposits and $4.5 million of wholesale deposits with no deposit premium
paid. The liabilities assumed also
included $1.2 million of other liabilities.
We acquired approximately $113.0 million of the assets of First Security
National Bank, including $50.7 million in loans, net of unearned income, with a
discount of $17.4 million of fair value adjustments and $29.4 million of other
real estate with a discount of $12.0 million of fair value adjustments. The assets acquired also included $49.5
million of cash and cash equivalents, securities, and other assets, including
the effect of the $10.7 million negative bid described in the following
paragraph.
In
connection with the acquisition, we conducted due diligence on the First
Security National Bank’s loan portfolio
and created financial models of the portfolio to determine expected losses, the
costs of administering the portfolio and expected carrying costs and
expenses. Based on this due diligence,
we submitted a negative bid to the FDIC to purchase the assets of First
Security National Bank at a discount of $10.7 million in exchange for the Bank
assuming substantially all of First Security National Bank’s deposits and
certain other liabilities. We did not
pay any deposit premium or other consideration.
The negative bid represents an amount that we believe will be adequate
to absorb the probable losses and expenses relating to First Security National
Bank’s loan portfolio, expected carrying costs for the non-performing assets
and the costs to manage that portfolio.
Our judgment as to the adequacy of our negative bid is based on a number
of assumptions about future events that we believe to be reasonable but which
may or may not prove to be accurate.
The
Bank entered into two loss share agreements on approximately $80.1 million of
First Security National Bank’s assets, including 100% of the acquired loans and
other real estate, similar to the loss share agreements described above for the
Security Banks. The FDIC agreed to
assume 80% of losses and share 80% of loss recoveries on the first $27.0
million of losses on the acquired loans and other real estate owned, and assume
95% of losses and share 95% of loss recoveries on losses exceeding $27.0
million. In addition to the $29.4
million of fair value discounts on loans and other real estate owned, the Bank
recorded a $19.8 million indemnification asset from the FDIC as part of the
loss share agreements. The Bank has
received $5.1 million in cash from the FDIC under the loss share agreements for
First Security National Bank as of June 30, 2010.
NorthWest Bank and Trust
On
July 30, 2010, the Bank entered into a purchase and assumption agreement
with a loss share arrangement with the FDIC, as receiver of NorthWest Bank and
Trust, Acworth, Georgia, to assume $133.3 million in liabilities and acquire
approximately $154.6 million in assets of NorthWest Bank and Trust, a former
full-service community bank headquartered in Acworth, Georgia. The Bank now operates one former NorthWest
Bank and Trust branch in Marietta, Georgia.
Under the purchase and assumption agreement, we assumed $132.6 million
of retail deposits with no deposit premium paid. The liabilities assumed also included
$700,000 of other liabilities. We
acquired approximately $154.6 million of the assets of NorthWest Bank and
Trust, including $97.8 million in loans, net of unearned income, with a
discount of $41.0 million of fair market value adjustments and $5.0 million of
other real estate with a discount of $2.5 million of fair value adjustments. The assets acquired also included $30.5
million of cash and cash equivalents, securities, and other assets, including
the effect of the $18.8 million negative bid described in the following
paragraph.
In
connection with the acquisition, we conducted due diligence on the NorthWest
Bank and Trust’s loan portfolio and created financial models of the portfolio
to determine expected losses, the costs of administering the portfolio and
expected carrying costs and expenses.
Based on this due diligence, we submitted a negative bid to the FDIC to
purchase the assets of NorthWest Bank and Trust at a discount of $18.8 million
in exchange for the Bank assuming substantially all of NorthWest Bank and Trust’s
deposits and certain other liabilities.
We did not pay any deposit premium or other consideration. The negative bid represents an amount that we
believe will be adequate to absorb the probable losses and expenses relating to
NorthWest Bank and Trust’s loan portfolio, expected carrying costs for the
non-performing assets and the costs to manage that portfolio. Our judgment as to the adequacy of our
negative bid is based on a number of assumptions about future events that we
believe to be reasonable but which may or may not prove to be accurate.
The
Bank entered into two loss share agreements on approximately $102.0 million of
NorthWest Bank and Trust’s assets, including 100% of the acquired loans (with
the exception of consumer loans) and other real estate, similar to the loss
share agreements described above for the Security Banks. The FDIC agreed to assume 80% of losses and
share 80% of loss recoveries on the acquired loans and other real estate
owned. In addition to the $43.5 million
of fair value discounts on
5
Table of
Contents
loans
and other real estate owned, the Bank recorded a $24.5 million indemnification
asset from the FDIC as part of the loss share agreements.
In
this registration statement, we refer to the six bank subsidiaries of Security
Bank Corporation, Macon, Georgia; The Buckhead Community Bank, Atlanta,
Georgia; First Security National Bank, Norcross, Georgia; and NorthWest Bank
and Trust collectively as the “Acquired Banks”; and we refer to the
indemnification assets associated with the FDIC loss share agreements related
to the Acquired Banks as the “FDIC receivable.”
Strategic
Plan
As
a result of the nine FDIC acquisitions over the past 15 months and the fair
value discounts associated with each acquisition, we anticipate that a
significant portion of our revenue over the next three years will be derived
from the continued realization of accretable discounts on the loans that we
purchased. For example, in the second
quarter of 2010, we recognized $22.2 million of income, or 49.0% of our total
income from the quarter, from the realization of accretable discounts on
covered loans and the FDIC receivable.
(See “Lending Activities — General” on page 8 below for an
explanation of “accretable discounts.”)
Additionally, we have incurred, and expect to continue to incur,
significantly higher non-interest expenses than many peer banks. These additional expenses are primarily due to
the costs associated with staffing and operating our Special Assets Division,
which manages the non-performing assets acquired from the FDIC, and our
Regulatory Relations Department, which manages compliance with our loss share
agreements.
In
the short term, we expect that the resolution of our non-performing assets
acquired under the loss share agreements with the FDIC in the acquisitions of
the Acquired Banks will result in decreasing loan balances as our Special
Assets Division works to reduce and resolve these non-performing assets and
when necessary liquidate the real estate collateral associated with these
loans. We are also seeking to expand our
loan portfolio through traditional community bank lending, the purchase of
select loan portfolios, whole loans and loan participations from correspondent
banks and specialty lending, including loans acquired and marketed by the FDIC
from failed banks. We will also consider
the purchase of select lines of business that complement our existing
operations.
To
achieve our goals, we have assembled an experienced senior management team,
combining extensive market knowledge with an energetic and entrepreneurial
culture. The members of our management
team have close ties to, and are actively involved in, the communities where we
operate, which is critical to our relationship banking focus. We believe this experienced senior management
team has implemented the necessary infrastructure to allow us to integrate the
Acquired Banks into our operations and successfully manage the non-performing
assets we acquired under the loss share agreements with the FDIC.
As
noted above, we have created a Special Assets Division and a Regulatory
Relations Department to manage our problem assets and compliance with the loss
share agreements with the FDIC. These
departments are fully staffed with over 40 bankers with experience in debt
restructuring, loan collection and recovery, real estate appraisal and
evaluation and regulatory compliance.
The Special Assets Division works to resolve or liquidate those acquired
assets that are non-performing, while the Regulatory Relations Department
monitors compliance under the loss share agreements with the FDIC.
Our Market Area
Our
primary market area is middle Georgia (including Macon) and metropolitan
Atlanta. In addition to our administrative
offices located at 415 East Paces Ferry Road, NE, Suite 200, Atlanta,
Georgia, we have 22 full service banking offices. Our current banking market consists of Bibb,
Cobb, Dooly, Houston, Jones, Fulton and Gwinnett Counties.
6
Table of
Contents
The
following table shows key demographic information about our market areas:
|
County/
Market
|
|
Population (1)
|
|
2000-2009
Population
Growth (2)
|
|
2008-2009
Employment
Growth
(Loss) (3)
|
|
Unemployment
Rate (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle Georgia
|
|
|
|
|
|
|
|
|
|
|
Bibb
|
|
156,060
|
|
1.4
|
%
|
(5.2
|
)%
|
9.8
|
%
|
|
Dooly
|
|
11,819
|
|
2.6
|
%
|
0.6
|
%
|
9.6
|
%
|
|
Houston
|
|
135,715
|
|
22.5
|
%
|
1.2
|
%
|
7.0
|
%
|
|
Jones
|
|
27,740
|
|
17.3
|
%
|
(7.5
|
)%
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Metro Atlanta
|
|
|
|
|
|
|
|
|
|
|
Cobb
|
|
714,692
|
|
17.6
|
%
|
(5.1
|
)%
|
9.4
|
%
|
|
Fulton
|
|
1,033,756
|
|
26.7
|
%
|
(4.7
|
)%
|
10.5
|
%
|
|
Gwinnett
|
|
808,167
|
|
37.3
|
%
|
(5.2
|
)%
|
9.1
|
%
|
(1)
Estimated 2009 population
provided by the U.S. Census Bureau.
(2)
Estimate percentage
population change from April 1, 2000 to July 1, 2009 for counties
provided by the U.S. Census Bureau.
(3)
Estimate based on Bureau of
Labor Statistics Quarterly Census of Employment and Wages Year-to-Date
percentage change from December 2008 to December 2009 (preliminary).
(4)
Estimate based on Bureau of
Labor Statistics Labor force data by county, not seasonally adjusted, July 2009-August 2010
(preliminary).
Competition
The
banking business is highly competitive, and we experience competition in our
market areas from many other financial institutions. Competition among financial institutions is
based on interest rates offered on deposit accounts, interest rates charged on
loans, other credit and service charges relating to loans, the quality and
scope of the services rendered, the convenience of banking facilities, and, in
the case of loans to commercial borrowers, relative lending limits. We compete with commercial banks, credit
unions, savings institutions, mortgage banking firms, consumer finance
companies, securities brokerage firms, insurance companies, money market funds
and other mutual funds, as well as super-regional, national and international
financial institutions that operate offices in our market areas and elsewhere.
We
compete with these institutions both in attracting deposits and in making
loans. In addition, we have to attract
our customer base from other existing financial institutions and from new
residents. Many of our competitors are
well-established, larger financial institutions, such as SunTrust, Bank of
America, Wells Fargo and BB&T. These
institutions offer some services, such as extensive and established branch
networks, that we do not provide. In
addition, many of our non-bank competitors are not subject to the same
extensive federal regulations that govern bank holding companies and federally
insured banks.
Loss
Share Resolution
As
described above, we have completed nine FDIC-assisted acquisitions that
significantly grew our asset and liability base. As of June 30, 2010, 91.3% of our loans
are covered by loss share agreements with the FDIC. Because of the loss protection provided by
the FDIC, the risks associated with the loans and foreclosed real estate we
acquired in the FDIC-assisted acquisitions are significantly different from the
risks associated with our loans and foreclosed real estate that are not covered
under the FDIC loss share agreements.
Where applicable, we refer to loans subject to loss share agreements
with the FDIC as “covered loans” and loans that are not subject to loss share
agreements with the FDIC as “non-covered loans.” As of June 30, 2010, our covered loans
totaled $979.4 million and our non-covered loans totaled
$153.6 million. Given the FDIC loss
share protection for our covered loans, our business model since July 24,
2009 and for the immediate future relies heavily on our loss share resolution
business and on the income generated from the remediation
7
Table of
Contents
and
disposal of the assets we acquired from the FDIC, rather than interest earned
on loans and other assets like a traditional community bank.
Both
the Commercial Loss Agreement and the Single Family Loss Agreement for each of
our acquisitions contain specific terms and conditions regarding the management
of the covered assets that we must follow to receive reimbursement on losses
from the FDIC. In general, under the
loss share agreements, we must:
·
manage and administer
covered loans and other assets and collect and effect charge-offs and
recoveries in a manner consistent with our usual and prudent business and
banking practices and, with respect to single family shared-loss loans,
customary servicing procedures;
·
exercise our
best judgment in managing, administering and collecting amounts on covered
loans and other assets and effecting charge-offs with respect to covered loans
and other assets;
·
use
commercially reasonable efforts to maximize recoveries with respect to losses
on single family shared-loss loans and use our best efforts to maximize
collections with respect to shared-loss assets under the Commercial Loss
Agreement;
·
retain
sufficient staff to perform the duties under the loss share agreements;
·
adopt and
implement accounting, reporting, record-keeping and similar systems with
respect to the Commercial Loss Agreement;
·
comply with the
terms of the modification guidelines approved by the FDIC or another federal
agency for any single-family shared-loss loan; and
·
file quarterly
certificates with the FDIC specifying the amount of losses, charge-offs and
recoveries.
To
ensure compliance with the terms and conditions of the loss share agreements,
we use several departments to monitor, manage and administer the different
aspects of the loss share agreements.
Our
Credit Administration Department supervises the management of performing
covered loans. Our personnel use a loan
submission sheet to approve all new loans and renewals. The loan submission sheet requires credit
personnel completing the form to indicate whether or not the loan is covered
under loss share. We have trained our
credit personnel to watch for any actions that could remove a loan from loss
share protection and to contact the Regulatory Relations Department (described
below) with any concerns. In that event,
the Regulatory Relations Department reviews the situation and, if necessary,
obtains advice from the appropriate FDIC personnel.
We
have also created a 36-person Special Assets Division comprised of bankers with
extensive experience working with borrowers in distressed situations to manage
the part of the covered assets portfolio that consists of sub-performing loans,
non-performing loans and other real estate owned. The immediate objective of the Special Assets
Division is to remediate the covered problem assets to a satisfactory level of
performance or, when that cannot be achieved, liquidate the collateral securing
a loan in a manner to minimize the loss to the Bank and the FDIC. The Finance Department, working closely with
the Special Assets Division, manages and tracks all expenses and losses on
covered assets and reports these expenses and losses to the FDIC for
reimbursement on a quarterly basis. The
FDIC typically reimburses us for our reported losses and expenses within 30 to
40 days after submission.
We
monitor compliance with the loss share agreements through the Regulatory
Relations Department, a subpart of the Bank’s Risk Management Division. Specially trained personnel within the
Regulatory Relations Department are responsible for reviewing the management of
our covered assets to ensure full compliance with the loss share agreements.
Lending Activities
General
We
offer a range of lending services, including commercial and residential real
estate mortgage loans, real estate construction loans, commercial and
industrial loans and consumer loans. Our
customers are generally individuals, owner-managed businesses, farmers, professionals,
real estate investors and smaller community banks within our market areas. At June 30, 2010, the outstanding
principal balance of our loan portfolio was $1.8 billion. After subtracting the accretable discount,
non-accretable discount, allowance for loan losses and unamortized loan origination
fees, net, we had total loans of $1.1 billion, representing 61.4% of our total
earning assets.
8
Table
of Contents
We
recorded the loans we acquired in each of our FDIC-assisted acquisitions at
their estimated fair values on the date of each acquisition. We calculated the fair value of performing
loans by discounting scheduled cash flows through the estimated maturity date of
the loan using estimated market discount rates that reflect the credit risk
inherent in the loan. We refer to the
excess of the performing loans’ estimated cash flows expected at acquisition
over the estimated fair value as the “accretable discount.” The accretable discount is recognized into
interest income over the remaining life of the loan. The “non-accretable discount” is the
difference, calculated at acquisition, between contractually required payments
(of both performing and non-performing loans) and the cash flows expected to be
collected. We expect to have sufficient
non-accretable discounts to cover our estimated losses on the covered assets.
At
June 30, 2010, our loan portfolio was comprised of the following:
|
|
|
Loans
(dollars in thousands)
|
|
|
|
|
Balance
June 30, 2010
|
|
% of
Loans
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
314,701
|
|
17.67
|
%
|
|
Real estate construction and development
|
|
606,697
|
|
34.07
|
%
|
|
Commercial real estate
|
|
590,391
|
|
33.15
|
%
|
|
Commercial and industrial
|
|
179,831
|
|
10.10
|
%
|
|
Consumer and other
|
|
89,220
|
|
5.01
|
%
|
|
|
|
1,780,840
|
(1)
|
100.00
|
%
|
|
Less:
|
|
|
|
|
|
|
Non-accretable discount
|
|
501,769
|
|
|
|
|
Accretable discount
|
|
145,172
|
|
|
|
|
Allowance for loan losses
|
|
3,645
|
|
|
|
|
Unamortized loan origination fees, net
|
|
853
|
|
|
|
|
|
|
$
|
1,129,401
|
|
|
|
(1) As of June 30, 2010, 91.3% of our loans
were covered by loss share agreements with the FDIC.
Real Estate Loans
Loans
secured by real estate are the principal component of our loan portfolio. Real estate loans are subject to the same
general risks as other loans and are particularly sensitive to fluctuations in
the value of real estate. Fluctuations
in the value of real estate, as well as other factors arising after a loan has
been made, could negatively affect a borrower’s cash flow, creditworthiness and
ability to repay the loan. When we make
new real estate loans, we obtain a security interest in real estate whenever
possible, in addition to any other available collateral, to increase the
likelihood of the ultimate repayment of the loan. To control concentration risk, we monitor
collateral type and industry concentrations within this portfolio.
As
of June 30, 2010, loans secured by first or second mortgages on real
estate comprised approximately $905.1 million, or 50.8% of our loan portfolio.
These loans
generally fall into one of two categories: residential real estate loans or
commercial real estate loans.
·
Residential Real Estate
Loans
. We generally originate and
hold short-term first mortgages and traditional second mortgage residential
real estate loans and home equity lines of credit. With respect to fixed and adjustable rate
long-term residential real estate loans with terms of up to 30 years, we
typically originate these loans only for third-party investors. At June 30, 2010, residential real
estate loans amounted to $314.7 million, or 17.7% of our loan portfolio. Home equity loans comprised $73.1 million, or
23.2% of our residential real estate loan portfolio. Generally, at the inception of the loan, we
limit the loan-to-value ratio on
9
Table of
Contents
our residential real estate loans to 85%. Our underwriting criteria for, and the risks
associated with, home equity loans and lines of credit are generally the same
as those for first mortgage loans. Home
equity lines of credit typically have terms of 35 months or less, and we
generally limit the extension of credit to less than 90% of the available
equity of each property.
·
Commercial Real Estate Loans
. At June 30, 2010, commercial real estate
loans amounted to $590.4 million, or approximately 33.2% of our loan
portfolio. These loans generally have
terms of five years or less, although payments may be structured on a longer
amortization basis. We evaluate each
borrower on an individual basis and attempt to determine the business risks and
credit profile of each borrower. We
attempt to reduce credit risk in the commercial real estate portfolio by
emphasizing loans on owner-occupied office buildings where the loan-to-value
ratio, established by independent appraisals, does not exceed 85%. We also generally require that a borrower’s
cash flow exceeds 125% of monthly debt service obligations. To ensure secondary sources of payment and
liquidity to support a loan request, we typically review the personal financial
statements of the principal owners and require their personal guarantees.
Real Estate Construction and Development Loans
At
June 30, 2010, real estate construction and development loans amounted to
$606.7 million, or approximately 34.1% of our loan portfolio. We offer fixed and adjustable rate
residential and commercial construction loans to builders and developers and to
consumers who wish to build their own homes.
The term of our construction and development loans generally is limited
to 18 months. In some instances a
commercial construction loan may have an amortization period following the
completion of construction, with a balloon maturity of not more than five
years. Construction and development
loans generally carry a higher degree of risk than long-term financing of
existing properties because repayment depends on the ultimate completion of the
project and usually on the subsequent lease-up and/or sale of the
property. Specific risks include:
·
cost overruns;
·
mismanaged construction;
·
inferior or improper construction techniques;
·
economic changes or downturns during
construction;
·
a downturn in the real estate market;
·
rising interest rates which may prevent sale
of the property; and
·
failure to lease-up or sell completed
projects in a timely manner.
We
attempt to reduce the risk associated with construction and development loans
by obtaining personal guarantees and by keeping the loan-to-value ratio of the
completed project at or below 85%.
Generally, we do not build interest reserves into loan commitments but
require periodic cash payments for interest from the borrower’s cash flow.
We
make residential land loans to both commercial entities and consumer borrowers
for the purpose of financing land upon which to build a residential home. Residential land loans are reclassified as
residential construction loans once construction of the residential home commences. These loans are further categorized as:
·
pre-sold commercial, which is a loan to a
commercial entity with a pre-identified buyer for the finished home;
·
owner-occupied consumer, which is a loan to
an individual who intends to occupy the finished home; and
·
non owner-occupied commercial (speculative),
which is a loan to a commercial entity intending to lease or sell the finished
home.
We
make commercial land loans to commercial entities for the purpose of financing
land on which to build a commercial project.
These loans are for projects that typically involve small-and
medium-sized single and multi-use commercial buildings.
We
make commercial construction loans to the borrower for the purpose of financing
the construction of a commercial development.
These loans are further categorized depending on whether the borrower
intends (a) to occupy the finished development (owner-occupied) or (b) to
lease or sell the finished development (non owner-occupied).
10
Table
of Contents
Commercial and Industrial Loans
At
June 30, 2010, commercial and industrial loans amounted to $179.8 million,
or 10.1% of our total loan portfolio. We
make loans for commercial purposes in various lines of businesses, including
the manufacturing industry, service industry and professional service
areas. While these loans may have real
estate as partial collateral, they are generally considered to have greater risk
than first or second mortgages on real estate because these loans may be
unsecured or, if they are secured, the value of the non-real estate collateral
may be difficult to assess and more likely to decrease than real estate, and
the control of the collateral is more at risk.
Consumer and Other Loans
At
June 30, 2010, consumer and other loans amounted to $89.2 million, or 5.0%
of our loan portfolio. We make a variety
of loans to individuals for personal and household purposes, including secured
and unsecured installment loans and revolving lines of credit. We underwrite consumer loans based on the
borrower’s income, current debt level, balance sheet composition, past credit
history and the availability and value of collateral. Consumer rates are both fixed and variable,
with negotiable terms. Our installment
loans typically amortize over periods up to 60 months. Although we typically require monthly
payments of interest and a portion of the principal on our loan products, we
may offer consumer loans with a single maturity date when a specific source of
repayment is available. Consumer loans
not secured by real estate are generally considered to have greater risk than
first or second mortgages on real estate because they may be unsecured, or, if
they are secured, the value of the collateral may be difficult to assess and
more likely to decrease in value, and is more difficult to control, than real
estate.
Loan Approval
Certain
credit risks are inherent in making loans.
These include repayment risks, risks resulting from uncertainties in the
future value of collateral, risks resulting from changes in economic and
industry conditions and risks inherent in dealing with individual
borrowers. We attempt to mitigate
repayment risks by adhering to internal credit policies and procedures. We employ consistent analysis and
underwriting to examine credit information and prepare underwriting
documentation. We monitor and approve
exceptions to policy as required, and we also track and address technical
exceptions.
Our
loan approval policy contains modest officer lending limits, with approval
concurrence from experienced credit risk managers required as the size of the
transaction and relationship exposure increases. Generally, a lender must seek concurring approval
from an Executive Vice President Regional Credit Officer to approve
relationship debt of up to $2 million.
Relationship debt that exceeds $2 million requires approval of two or
more members of our loan committee, which includes our Executive Vice President
Regional Credit Officers and our Chief Credit Officer. Relationship debt of between $6 million and
$20 million must be approved by a loan committee consisting of at least three
members. All loan committee approvals
must be unanimous. Total approved
relationship debt that exceeds $10 million is reported to all senior executive
officers of the Bank.
As
a policy, we do not make loans to any director, executive officer or principal
shareholder, or the related interests of each.
One of the banks that we acquired, however, maintained a loan balance
with one of our directors totaling $48,519.
The director repaid the loan in January 2010.
Credit Administration and Loan Review
In
our loan review process, we apply a credit grading system to each loan, and use
an internal loan review specialist to review the loan underwriting of the
portfolio and validate assigned loan grades.
The internal loan review specialist also assesses the adequacy of and
adherence to our loan policy, systemic risk that may be inherent in our
practices and procedures, concentration risk and portfolio trends. Each loan officer is responsible for each
loan he or she makes, its performance and grade integrity, regardless of
whether other individuals or committees joined in the approval. This responsibility continues until the loan
is repaid or until the loan is officially assigned to another officer.
On
an ongoing basis, the internal loan review specialist monitors, tests and
reviews various areas of the loan portfolio to assess and report risk to the
Bank’s senior management. This internal
loan review is risk-based to measure areas of highest perceived risk. During the third quarter of 2010, we also
engaged Steve H. Powell & Company, a third
11
Table of
Contents
party
loan review specialist, to perform a review of our loan portfolio and to
validate the work performed by our internal loan review specialist. In addition, as our non-covered loan
portfolio grows, management plans to increase the frequency of the external
loan review from an annual to a semi-annual basis.
We
also manage our performing covered loans that are subject to loss share
agreements with the FDIC to ensure continued coverage under the loss share
agreements. Generally, under the
Commercial Loss Agreement, coverage will be lost on a covered loan if we make
certain advances, amendments, modifications, renewals or extensions that are not
permitted under the agreement. For
instance, coverage will be lost if we make any additional advance or commitment
on a covered loan unless:
·
the advance or commitment is made within one
year of the acquisition date;
·
total advances are less than 10% of the loan’s
book value; and
·
such advances are made in good faith and
supported by documentation in the credit files and in accordance with our
credit policy guidelines.
Covered
loans also cannot be amended, modified, renewed or extended, or any term, right
or remedy thereunder waived, unless made in good faith and otherwise in
accordance with our credit policy guidelines, provided that no such amendment,
modification, renewal, extension or waiver can:
·
extend the term of the loan beyond the end of
the final quarter in which the agreement terminates (or beyond the term of the
loan as currently in effect);
·
increase the amount of principal under a term
loan (unless such increase is a permitted advance described above); or
·
increase the maximum amount of principal
authorized under a revolving line of credit.
Under
both the Single Family Loss Agreement and Commercial Loss Agreement, the FDIC
is not required to make any payments with respect to any charge-off or loss
event that it determines we should not have effected. For instance, under the Single Family Loss
Agreement, the FDIC can deny coverage if it finds we failed to undertake
reasonable and customary loss mitigation efforts in accordance with the
applicable modification guidelines or failed to follow customary servicing
procedures. Under both loss share
agreements, the FDIC must provide the Bank with notice and an opportunity to
cure any such deficiency. Any unresolved
disputes with the FDIC regarding losses or payments will be subject to binding
arbitration.
We
have developed a loan submission sheet for all credit personnel to help us
track all actions with respect to loans covered under loss share. When we determine that a borrower is seeking
an advance, amendment, modification, renewal or extension with respect to a
covered loan, we first evaluate the covered loan as we would any other loan and
seek to make the right banking decision.
We then determine whether the terms, rates and collateral are in line
with our loan policy and whether the customer demonstrates the ability to repay
the loan. Because significant changes in
the terms of the loan could negate our loss share protection, we may need to
work with the customer to arrive at a solution other than amending the terms of
the loan. As of June 30, 2010,
approximately $5.1 million of covered loans have been renewed or modified out
of loss share coverage.
Lending Limits
Our
lending activities are subject to a variety of lending limits imposed by
federal law. In general, the Bank is
subject to a legal limit on loans to a single borrower equal to 15% of the Bank’s
capital and unimpaired surplus, or 25% if the loan is fully secured. This limit increases or decreases as the Bank’s
capital increases or decreases. Based
upon the capitalization of the Bank at June 30, 2010, our legal lending
limits were approximately $49.6 million (15%) and $82.7 million (25%) and we
maintained an internal lending limit of $20.0 million. We may seek to sell participations in our
larger loans to other financial institutions, which will allow us to manage the
risk involved in these loans and to meet the lending needs of our customers
requiring extensions of credit in excess of these limits. In the current economic environment, however,
it has been difficult to sell participations to other financial
institutions. As market conditions
improve and banks are in need of loan growth, however, we expect to be able to
sell participations in soundly underwritten loans.
12
Table of
Contents
Deposit
Products
We
offer a full range of deposit services that are typically available in most
banks and savings institutions, including checking accounts, commercial
accounts, savings accounts and other time deposits of various types, ranging
from daily money market accounts to longer-term certificates of deposit. Transaction accounts and time deposits are
tailored to and offered at rates competitive to those offered in our primary
market areas. In addition, we offer
certain retirement account services. We
solicit accounts from individuals, businesses, associations, organizations and
governmental authorities. We believe
that our branch infrastructure will assist us in obtaining retail deposits from
local customers in the future. Our
retail deposits were $2.2 billion at June 30, 2010, or 98.8% of our total
deposits.
Employees
As
of June 30, 2010, we had 403 full-time equivalent employees.
13
Table of
Contents
SUPERVISION AND REGULATION
Both
State Bank Financial Corporation and State Bank and Trust Company are subject
to extensive state and federal banking regulations that impose restrictions on
and provide for general regulatory oversight of their operations. These laws generally are intended to protect
depositors and not shareholders. The
following summary is qualified by reference to the statutory and regulatory
provisions discussed. Changes in
applicable laws or regulations may have a material effect on our business and
prospects. Our operations may be affected
by legislative changes and the policies of various regulatory authorities. We cannot predict the effect that fiscal or
monetary policies, economic control or new federal or state legislation may
have on our business and earnings in the future.
The
following discussion is not intended to be a complete list of all the activities
regulated by the banking laws or of the impact of those laws and regulations on
our operations. It is intended only to
briefly summarize some material provisions.
Recent Legislative and Regulatory Initiatives to Address the
Financial and Economic Crises
Markets
in the United States and elsewhere have experienced extreme volatility and
disruption for more than 18 months.
These circumstances have exerted significant downward pressure on prices
of equity securities and virtually all other asset classes, and have resulted
in substantially increased market volatility, severely constrained credit and
capital markets, particularly for financial institutions, and an overall loss
of investor confidence. Loan portfolio
performances have deteriorated at many institutions resulting from, among other
factors, a weak economy and a decline in the value of the collateral supporting
their loans. Dramatic slowdowns in the
housing industry, due in part to falling home prices and increasing
foreclosures and unemployment, have created strains on financial
institutions. Many borrowers are now
unable to repay their loans, and the collateral securing these loans has, in
some cases, declined below the loan balance.
In response to the challenges facing the financial services sector, the
following regulatory and governmental actions have recently been enacted.
Emergency Economic Stabilization Act
.
On
October 3, 2008, President Bush signed into law The Emergency Economic
Stabilization Act of 2008 (“EESA”), which, among other provisions, allowed the
U.S. Treasury to purchase up to $700 billion of mortgages, mortgage-backed
securities and certain other financial instruments from financial institutions
for the purpose of stabilizing and providing liquidity to the U.S. financial
markets.
Troubled Asset Relief Program
. On October 14, 2008, the U.S. Treasury
announced the creation of a new program, the Troubled Asset Relief Program (the
“TARP”) Capital Purchase Program (the “CPP”) that encourages and allows
financial institutions to build capital through the sale of senior preferred
shares to the U.S. Treasury on terms that are non-negotiable.
The American Recovery and Reinvestment Act
. On February 17, 2009, President Obama
signed into law The American Recovery and Reinvestment Act of 2009 (“ARRA”),
more commonly known as the economic stimulus or economic recovery package. ARRA
includes a wide variety of programs intended to stimulate the economy and
provide for extensive infrastructure, energy, health, and education needs. In addition, ARRA imposes certain executive
compensation and corporate expenditure limits on all current and future TARP
recipients that are in addition to those previously announced by the U.S.
Treasury.
The Dodd-Frank Wall Street Reform and Consumer
Protection Act
. On July 21,
2010, President Obama signed into law The Dodd-Frank Wall Street Reform and
Consumer Protection Act which, among other things, changes the oversight and
supervision of financial institutions, introduces minimum capital requirements,
creates a new federal agency to regulate consumer financial products and
services and implements changes to corporate governance and compensation
practices. The act is focused in large
part on the financial services industry, particularly large bank holding
companies with consolidated assets of $50 billion or more, and contains a
number of provisions that will affect us, including:
·
Minimum
Leverage and Risk-Based Capital Requirements
.
Under the act, the appropriate
Federal banking agencies are required to establish minimum leverage and
risk-based capital requirements on a consolidated basis for all insured
depository institutions and bank holding companies, which can be no less than
the currently applicable leverage and risk-based capital requirements for
depository institutions.
14
Table
of Contents
·
Deposit
Insurance Modifications
. The
act modifies the FDIC’s assessment base upon which deposit insurance premiums
are calculated. The new assessment base
will equal our average total consolidated assets minus the sum of our average
tangible equity during the assessment period.
The act also makes permanent the increase in maximum federal deposit
insurance limits from $100,000 to $250,000.
·
Creation
of New Consumer Protection Bureau
. The act creates a new Bureau of Consumer
Financial Protection within the Federal Reserve with broad powers to supervise
and enforce consumer protection laws. The Bureau of Consumer Financial
Protection will have broad rule-making authority for a wide range of consumer
protection laws that apply to all insured depository institutions. The Bureau
of Consumer Financial Protection has examination and enforcement authority over
all depository institutions with more than $10 billion in assets. Depository institutions with $10 billion or less
in assets, such as the Bank, will be examined by their applicable bank
regulators.
·
Executive
Compensation and Corporate Governance Requirements
. The act requires us to include, at least once
every three years, a separate non-binding “say on pay” vote in our proxy
statement by which shareholders may vote on the compensation of our named
executive officers. In addition, the act
also includes provisions that may impact our corporate governance. For instance, the act grants the SEC
authority to issue rules that allow shareholders to nominate directors by
using the company’s proxy solicitation materials and requires the SEC to adopt
rules:
·
prohibiting the listing of
any equity security of a company that does not have an independent compensation
committee; and
·
requiring all
exchange-traded companies to adopt clawback policies for incentive compensation
paid to executive officers in the event of accounting restatements based on
material non-compliance with financial reporting requirements.
Many
provisions of the act require the adoption of additional rules to
implement the changes. In addition, the
act mandates multiple studies that could result in additional legislative
action. Governmental intervention and
new regulations under these programs could materially and adversely affect our
business, financial condition and results of operations.
State
Bank Financial Corporation
We
own 100% of the outstanding capital stock of the Bank, and therefore we are
required to be registered as a bank holding company under the federal Bank
Holding Company Act of 1956 (the “Bank Holding Company Act”). As a result, we are primarily subject to the
supervision, examination and reporting requirements of the Board of Governors
of the Federal Reserve (the “Federal Reserve”) under the Bank Holding Company
Act and the regulations promulgated under it.
As a bank holding company located in Georgia, the Georgia Department of
Banking and Finance also regulates and monitors our operations.
Permitted Activities.
Under
the Bank Holding Company Act, a bank holding company is generally permitted to
engage in, or acquire direct or indirect control of more than 5% of the voting
shares of any company engaged in, the following activities:
·
banking or managing or controlling banks;
·
furnishing services to or performing services
for its subsidiaries; and
·
any activity that the Federal Reserve
determines to be so closely related to banking as to be a proper incident to
the business of banking.
Activities
that the Federal Reserve has found to be so closely related to banking as to be
a proper incident to the business of banking include:
·
factoring accounts receivable;
·
making, acquiring, brokering or servicing
loans and usual related activities;
·
leasing personal or real property;
·
operating a non-bank depository institution,
such as a savings association;
·
trust company functions;
15
Table
of Contents
·
financial and investment advisory activities;
·
conducting discount securities brokerage
activities;
·
underwriting and dealing in government
obligations and money market instruments;
·
providing specified management consulting and
counseling activities;
·
performing selected data processing services
and support services;
·
acting as agent or broker in selling credit
life insurance and other types of insurance in connection with credit
transactions; and
·
performing selected insurance underwriting
activities.
As
a bank holding company, we also can elect to be treated as a “financial holding
company,” which would allow us to engage in a broader array of activities. In sum, a financial holding company can
engage in activities that are financial in nature or incidental or
complementary to financial activities, including insurance underwriting, sales
and brokerage activities, providing financial and investment advisory services,
underwriting services and limited merchant banking activities. We have not sought financial holding company
status, but we may elect that status in the future as our business
matures. If we were to elect in writing
for financial holding company status, we would be required to be well
capitalized and well managed, and each insured depository institution we
control would also have to be well capitalized, well managed and have at least
a satisfactory rating under the CRA (discussed below).
The
Federal Reserve has the authority to order a bank holding company or its
subsidiaries to terminate any of these activities or to terminate its ownership
or control of any subsidiary when it has reasonable cause to believe that the
bank holding company’s continued ownership, activity or control constitutes a serious
risk to the financial safety, soundness or stability of it or any of its bank
subsidiaries.
Change in Control
.
In addition,
and subject to certain exceptions, the Bank Holding Company Act and the Change
in Bank Control Act, together with regulations promulgated under them, require
Federal Reserve approval before any person or company acquires “control” of a
bank holding company. Control is
conclusively presumed to exist if an individual or company acquires 25% or more
of any class of voting securities of a bank holding company. Following the relaxing of these restrictions
by the Federal Reserve in September 2008, control will be rebuttably
presumed to exist if a person acquires more than 33% of the total equity of a
bank or bank holding company, of which it may own, control or have the power to
vote not more than 15% of any class of voting securities.
Source of Strength
.
In accordance with Federal Reserve policy, we
are expected to act as a source of financial strength to the Bank and to commit
resources to support the Bank in circumstances in which we might not otherwise
do so. If the Bank were to become “undercapitalized,”
we would be required to provide a guarantee of the Bank’s plan to return to
capital adequacy. (See “State Bank and
Trust Company — Prompt Corrective Action” below). Additionally, under the Bank Holding Company
Act, the Federal Reserve may require a bank holding company to terminate any
activity or relinquish control of a nonbank subsidiary, other than a nonbank
subsidiary of a bank, upon the Federal Reserve’s determination that the
activity or control constitutes a serious risk to the financial soundness or
stability of any depository institution subsidiary of the bank holding
company. In addition, federal bank
regulatory authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiaries if the agency
determines that divestiture may aid the depository institution’s financial
condition. Further, any loans by a bank
holding company to a subsidiary bank are subordinate in right of payment to
deposits and certain other indebtedness of the subsidiary bank. In the event of a bank holding company’s
bankruptcy, any commitment by the bank holding company to a federal bank regulatory
agency to maintain the capital of a subsidiary bank at a certain level would be
assumed by the bankruptcy trustee and entitled to priority payment.
Capital Requirements.
The Federal Reserve imposes certain capital
requirements on the bank holding company under the Bank Holding Company Act,
including a minimum leverage ratio and a minimum ratio of “qualifying” capital
to risk-weighted assets. These
requirements are essentially the same as those that apply to the Bank and are
described below under “State Bank and Trust Company — Prompt Corrective Action.” Subject to our capital requirements and
certain other restrictions, including the consent of the Federal Reserve, we
are able to borrow money to make a capital contribution to the Bank, and these loans
may be repaid from dividends paid from the Bank to the Company. Our ability to pay dividends depends on the
Bank’s ability to pay dividends to us, which is subject to regulatory
restrictions as described below in “State Bank and Trust Company — Dividends.” We are also able to raise capital for
contribution to the bank by issuing securities without having to receive
regulatory approval, subject to compliance with federal and state securities
laws.
16
Table of
Contents
State
Bank and Trust Company
The
Bank operates as a state bank incorporated under the laws of the State of
Georgia and is subject to examination by the Georgia Department of Banking and
Finance and the FDIC. Deposits in the
Bank are insured by the FDIC up to a maximum amount of $250,000. The Bank is also participating in the FDIC’s
Temporary Liquidity Guarantee Program which expires on December 31, 2010
and fully insures non-interest bearing transaction accounts.
The
Georgia Department of Banking and Finance and the FDIC regulate or monitor
virtually all areas of the Bank’s operations, including:
·
security devices and
procedures;
·
adequacy of capitalization
and loss reserves;
·
loans;
·
investments;
·
borrowings;
·
deposits;
·
mergers;
·
issuances of securities;
·
payment of dividends;
·
interest rates payable on
deposits;
·
interest rates or fees
chargeable on loans;
·
establishment of branches;
·
corporate reorganizations;
·
maintenance of books and
records; and
·
adequacy of staff training
to carry on safe lending and deposit gathering practices.
The
Georgia Department of Banking and Finance requires the Bank to maintain
specified capital ratios and imposes limitations on the Bank’s aggregate
investment in real estate, bank premises, and furniture and fixtures. The Georgia Department of Banking and Finance
also requires the Bank to prepare quarterly reports on the Bank’s financial
condition in compliance with its minimum standards and procedures.
All
insured institutions must undergo regular on site examinations by their
appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured
institutions are required to submit annual reports to the FDIC, their federal
regulatory agency, and their state supervisor when applicable. The FDIC has developed a method for insured
depository institutions to provide supplemental disclosure of the estimated
fair market value of assets and liabilities, to the extent feasible and
practicable, in any balance sheet, financial statement, report of condition or
any other report of any insured depository institution. The FDIC Improvement Act also requires the
federal banking regulatory agencies to prescribe, by regulation, standards for
all insured depository institutions and depository institution holding
companies relating, among other things, to the following:
·
internal controls;
·
information systems and
audit systems;
·
loan documentation;
·
credit underwriting;
·
interest rate risk exposure;
and
·
asset quality.
Prompt Corrective Action
As
an insured depository institution, the Bank is required to comply with the
capital requirements promulgated under the Federal Deposit Insurance Act and
the regulations under it, which set forth
five capital
categories, each with specific regulatory consequences. Under these regulations, the categories are:
17
Table
of Contents
·
Well
Capitalized
- The institution exceeds the required minimum
level for each relevant capital measure.
A well capitalized institution:
·
has total
capital ratio of 10% or greater; and
·
has a tier 1 capital ratio of 6% or greater; and
·
has a leverage capital ratio of 5% or greater; and
·
is not subject to any order
or written directive to meet and maintain a specific capital level for any
capital measure.
·
Adequately
Capitalized
— The institution meets the required minimum level
for each relevant capital measure. The
institution may not make a capital distribution if it would result in the
institution becoming undercapitalized.
An adequately capitalized institution:
·
has a total
capital ratio of 8% or greater; and
·
has a tier 1
capital ratio of 4% or greater; and
·
has a leverage capital ratio
of 4% or greater or a leverage capital ratio of 3% or greater if the
institution is rated composite 1 under the CAMELS (Capital, Assets, Management,
Earnings, Liquidity and Sensitivity to market risk) rating system.
·
Undercapitalized
— The
institution fails to meet the required minimum level for any relevant capital
measure. An undercapitalized
institution:
·
has a total
capital ratio of less than 8%; or
·
has a tier 1
capital ratio of less than 4%; or
·
has a leverage capital ratio of less than 4%,
or if the institution is rated a composite 1 under the CAMELS rating system, a
leverage capital ratio of less than 3%.
·
Significantly
Undercapitalized
— The institution is significantly below the
required minimum level for any relevant capital measure. A significantly undercapitalized institution:
·
has a total
capital ratio of less than 6%; or
·
has a tier 1
capital ratio of less than 3%; or
·
has a leverage
capital ratio of less than 3%.
·
Critically
Undercapitalized
— The institution fails to meet a critical capital
level set by the appropriate federal banking agency. A critically undercapitalized institution has
a ratio of tangible equity to total assets that is equal to or less than 2%.
As
a condition to the FDIC’s approval of the Interagency Change in Control
Application filed by Joseph W. Evans, J. Daniel Speight and Kim M. Childers
(our new management team) in connection with the July 2009 private
placement and acquisition, the Bank was required to execute a Capital
Maintenance Agreement with the FDIC.
Under the terms of that agreement, the Bank must at all times maintain a
leverage ratio of at least 10% and a total risk-based capital ratio of at least
12%. The agreement terminates on July 23,
2012.
If
the FDIC determines, after notice and an opportunity for hearing, that the
institution is in an unsafe or unsound condition, the regulator is authorized
to reclassify the institution to the next lower capital category (other than
critically undercapitalized) and require the submission of a plan to correct
the unsafe or unsound condition.
If
the institution is not well capitalized, it cannot accept brokered deposits
without prior FDIC approval. Even if
approved, rate restrictions will govern the rate the institution may pay on the
brokered deposits. In addition, a bank
that is undercapitalized cannot offer an effective yield in excess of 75 basis
points over the “national rate” paid on deposits (including brokered deposits,
if approval is granted for the bank to accept them) of comparable size and
maturity. The “national rate” is defined
as a simple average of rates paid by insured depository institutions and
branches for which data are available and is published weekly by the FDIC. Institutions subject to the restrictions that
believe they are operating in an area where the rates paid on deposits are
higher than the “national rate” can use the local market to determine the
prevailing rate if they seek and receive a determination from the FDIC that it
is operating in a high-rate area.
Regardless of
18
Table of
Contents
the
determination, institutions must use the national rate to determine conformance
for all deposits outside their market area.
Moreover,
if the institution becomes less than adequately capitalized, it must adopt a
capital restoration plan acceptable to the FDIC. The institution also would become subject to
increased regulatory oversight, and is increasingly restricted in the scope of
its permissible activities. Each company
having control over an undercapitalized institution also must provide a limited
guarantee that the institution will comply with its capital restoration
plan. Except under limited circumstances
consistent with an accepted capital restoration plan, an undercapitalized
institution may not grow. An
undercapitalized institution may not acquire another institution, establish
additional branch offices or engage in any new line of business unless it is
determined by the appropriate federal banking agency to be consistent with an
accepted capital restoration plan, or unless the FDIC determines that the
proposed action will further the purpose of prompt corrective action. The appropriate federal banking agency may
take any action authorized for a significantly undercapitalized institution if
an undercapitalized institution fails to submit an acceptable capital
restoration plan or fails in any material respect to implement a plan accepted
by the agency. A critically
undercapitalized institution is subject to having a receiver or conservator
appointed to manage its affairs and for loss of its charter to conduct banking
activities.
An
insured depository institution may not pay a management fee to a bank holding
company controlling that institution or any other person having control of the
institution if, after making the payment, the institution would be
undercapitalized. In addition, an
institution cannot make a capital distribution, such as a dividend or other
distribution that is in substance a distribution of capital, to the owners of
the institution if following such a distribution the institution would be
undercapitalized.
As
of June 30, 2010, the Bank’s regulatory capital surpassed the levels
required to be considered “well capitalized” and met the requirements of the
Capital Maintenance Agreement with the FDIC.
Transactions with Affiliates and Insiders
The
Company is a legal entity separate and distinct from the Bank. Various legal limitations restrict the Bank
from lending or otherwise supplying funds to the Company or its non-bank
subsidiaries. The Company and the Bank
are subject to Sections 23A and 23B of the Federal Reserve Act and Federal
Reserve Regulation W. Section 23A
of the Federal Reserve Act places limits on the amount of loans or extensions
of credit to, or investments in, or certain other transactions with, affiliates
and on the amount of advances to third parties collateralized by the securities
or obligations of affiliates. The
aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of the Bank’s capital and surplus and, as to all affiliates
combined, to 20% of the Bank’s capital and surplus. Furthermore, within the foregoing limitations
as to amount, each covered transaction must meet specified collateral
requirements. The Bank is forbidden to
purchase low quality assets from an affiliate.
Section 23B
of the Federal Reserve Act, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
such institution or its subsidiaries, as those prevailing at the time for
comparable transactions with nonaffiliated companies.
Regulation
W generally excludes all non-bank and non-savings association subsidiaries of
banks from treatment as affiliates, except to the extent that the Federal
Reserve Board decides to treat these subsidiaries as affiliates. The regulation also limits the amount of
loans that can be purchased by a bank from an affiliate to not more than 100%
of the bank’s capital and surplus.
The
Bank is also subject to certain restrictions on extensions of credit to
executive officers, directors, certain principal shareholders, and their
related interests. Those extensions of
credit:
·
must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with third parties; and
·
must not involve more than
the normal risk of repayment or present other unfavorable features.
19
Table
of Contents
Branching
Under
current Georgia law, we may open branch offices throughout Georgia with the
prior approval of the Georgia Department of Banking and Finance. In addition, with prior regulatory approval,
the Bank will be able to acquire branches of existing banks located in
Georgia. Furthermore, the Dodd-Frank
Wall Street Reform and Consumer Protection Act authorizes a state or national
bank to branch into any state as if they were chartered in that state.
Anti-Tying Restrictions
Under
amendments to the Bank Holding Company Act and Federal Reserve regulations, a
bank is prohibited from engaging in certain tying or reciprocity arrangements
with its customers. In general, a bank
may not extend credit, lease, sell property, or furnish any services or fix or
vary the consideration for these on the condition that:
·
the customer obtain or
provide some additional credit, property, or services from or to the bank, the
bank holding company or its subsidiaries; or
·
the customer may not obtain
some other credit, property, or services from a competitor, except to the extent
reasonable conditions are imposed to assure the soundness of the credit
extended.
Certain
arrangements are permissible: a bank may offer combined-balance products and
may otherwise offer more favorable terms if a customer obtains two or more
traditional bank products; and certain foreign transactions are exempt from the
general rule. A bank holding company or
any bank affiliate also is subject to anti-tying requirements in connection
with electronic benefit transfer services.
Community Reinvestment Act
The
Community Reinvestment Act requires a financial institution’s primary
regulator, which is the FDIC for the Bank, to evaluate the record of each
financial institution in meeting the credit needs of its local community,
including low and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions and applications to open a branch or
facility. Failure to adequately meet
these criteria could result in the imposition of additional requirements and
limitations on the institution.
Additionally, the institution must publicly disclose the terms of
various Community Reinvestment Act-related agreements.
Finance Subsidiaries
Under
the Gramm-Leach-Bliley Act (the “GLBA”), subject to certain conditions imposed
by their respective banking regulators, national and state-chartered banks are
permitted to form “financial subsidiaries” that may conduct financial or
incidental activities, thereby permitting bank subsidiaries to engage in
certain activities that previously were impermissible. The GLBA imposes several safeguards and
restrictions on financial subsidiaries, including that the parent bank’s equity
investment in the financial subsidiary be deducted from the bank’s assets and
tangible equity for purposes of calculating the bank’s capital adequacy. In addition, the GLBA imposes new
restrictions on transactions between a bank and its financial subsidiaries
similar to restrictions applicable to transactions between banks and non-bank
affiliates.
Consumer Protection Regulations
Activities
of the Bank are subject to a variety of statutes and regulations designed to
protect consumers. Interest and other
charges collected or contracted for by the Bank are subject to state usury laws
and federal laws concerning interest rates.
The Bank’s loan operations are also subject to federal laws applicable
to credit transactions, such as:
·
the Dodd-Frank Wall Street Reform and
Consumer Protection Act that created the Bureau of Consumer Financial
Protection within the Federal Reserve, which has broad rule-making authority
over a wide range of consumer laws that apply to all insured depository
institutions;
·
the federal Truth-In-Lending Act, governing
disclosures of credit terms to consumer borrowers;
·
the Home Mortgage Disclosure
Act of 1975, requiring financial institutions to provide information to enable
the public and public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the community it
serves;
·
the Equal Credit Opportunity
Act, prohibiting discrimination on the basis of race, creed or other prohibited
20
Table of Contents
factors in extending credit;
·
the Fair Credit Reporting
Act of 1978, as amended by the Fair and Accurate Credit Transactions Act,
governing the use and provision of information to credit reporting agencies,
certain identity theft protections and certain credit and other disclosures;
·
the Fair Debt Collection
Act, governing the manner in which consumer debts may be collected by
collection agencies; and
·
the rules and
regulations of the various federal agencies charged with the responsibility of
implementing these federal laws.
The
deposit operations of the Bank also are subject to:
·
the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative
subpoenas of financial records; and
·
the Electronic Funds
Transfer Act and Regulation E issued by the Federal Reserve Board to implement
that Act, which governs automatic deposits to and withdrawals from deposit
accounts and customers’ rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
Enforcement Powers
The
Bank and its “institution-affiliated parties,” including its management,
employees, agents, independent contractors, and consultants such as attorneys
and accountants and others who participate in the conduct of the financial
institution’s affairs, are subject to potential civil and criminal penalties
for violations of law, regulations or written orders of a government
agency. These practices can include the
failure of an institution to timely file required reports or the filing of
false or misleading information or the submission of inaccurate reports. Civil penalties may be as high as $1,375,000
a day for those violations. Criminal
penalties for some financial institution crimes have been increased to 20
years. In addition, regulators are
provided with greater flexibility to commence enforcement actions against
institutions and institution-affiliated parties. Possible enforcement actions include the
termination of deposit insurance.
Furthermore, banking agencies’ power to issue cease-and-desist orders
were expanded. These orders may, among
other things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnifications
or guarantees against loss. A financial
institution may also be ordered to restrict its growth, dispose of certain
assets, rescind agreements or contracts, or take other actions as determined by
the ordering agency to be appropriate.
Anti-Money Laundering
Financial
institutions must maintain anti-money laundering programs that include
established internal policies, procedures and controls; a designated compliance
officer; an ongoing employee training program; and testing of the program by an
independent audit function. Financial
institutions are also prohibited from entering into specified financial
transactions and account relationships and must meet enhanced standards for due
diligence and “knowing your customer” in their dealings with foreign financial
institutions, foreign customers and other high risk customers. Financial institutions must take reasonable
steps to conduct enhanced scrutiny of account relationships to guard against
money laundering and to report any suspicious transactions, and recent laws
provide law enforcement authorities with increased access to financial
information maintained by banks.
Anti-money laundering obligations have been substantially strengthened
as a result of the USA PATRIOT Act, enacted in 2001 and renewed in 2006, as
described below. Bank regulators
routinely examine institutions for compliance with these obligations and are
required to consider compliance in connection with the regulatory review of
applications. The regulatory authorities
have been active in imposing “cease and desist” orders and money penalty
sanctions against institutions found to be violating these obligations.
USA PATRIOT Act
The USA PATRIOT Act became effective on
October 26, 2001 and amended the Bank Secrecy Act. The USA PATRIOT Act provides, in part, for
the facilitation of information sharing among governmental entities and
financial institutions for the purpose of combating terrorism and money
laundering by enhancing anti-money laundering and financial transparency laws,
as well as enhanced information collection tools and enforcement mechanics for
the U.S. government, including:
·
requiring standards for
verifying customer identification at account opening;
21
Table
of Contents
·
rules to promote
cooperation among financial institutions, regulators and law enforcement
entities in identifying parties that may be involved in terrorism or money
laundering;
·
reports by nonfinancial
trades and businesses filed with the Treasury Department’s Financial Crimes
Enforcement Network for transactions exceeding $10,000; and
·
filing suspicious
activities reports by brokers and dealers if they believe a
customer may be violating U.S. laws and regulations.
The USA PATRIOT Act requires
enhanced due diligence requirements for financial institutions that administer,
maintain, or manage private bank accounts or correspondent accounts for
non-U.S. persons. Bank regulators
routinely examine institutions for compliance with these obligations and are
required to consider compliance in connection with the regulatory review of
applications.
Under
the USA PATRIOT Act, the Federal Bureau of Investigation can send our banking
regulatory agencies lists of the names of persons suspected of involvement in
terrorist activities. The Bank can be
requested to search its records for any relationships or transactions with
persons on those lists. If the Bank
finds any relationships or transactions, it must file a suspicious activity
report and contact the FBI.
The Office of Foreign Assets Control
The
Office of Foreign Assets Control (“OFAC”), which is a division of the U.S.
Department of the Treasury, is responsible for helping to insure that United
States entities do not engage in transactions with “enemies” of the United
States, as defined by various Executive Orders and Acts of Congress. OFAC has sent, and will send, our banking
regulatory agencies lists of names of persons and organizations suspected of
aiding, harboring or engaging in terrorist acts. If the Bank finds a name on any transaction,
account or wire transfer that is on an OFAC list, it must freeze the account,
file a suspicious activity report and notify the FBI. The Bank has appointed an OFAC compliance
officer to oversee the inspection of its accounts and the filing of any
notifications. The Bank actively checks
high-risk OFAC areas such as new accounts, wire transfers and customer
files. The Bank performs these checks
using software that is updated each time a modification is made to the lists
provided by OFAC and other agencies of Specially Designated Nationals and
Blocked Persons.
Privacy and Credit Reporting
Financial
institutions are required to disclose their policies for collecting and
protecting confidential information. Customers
generally may prevent financial institutions from sharing nonpublic personal
financial information with nonaffiliated third parties except under narrow
circumstances, such as the processing of transactions requested by the consumer
or when the financial institution is jointly sponsoring a product or service
with a nonaffiliated third party.
Additionally, financial institutions generally may not disclose consumer
account numbers to any nonaffiliated third party for use in telemarketing,
direct mail marketing or other marketing to consumers. The Bank’s policy is not to disclose any
personal information unless required by law.
Like
other lending institutions, the Bank uses credit bureau data in its
underwriting activities. Use of that
data is regulated under the Federal Credit Reporting Act on a uniform,
nationwide basis, including credit reporting, prescreening, sharing of
information between affiliates, and the use of credit data. The Fair and Accurate Credit Transactions Act
of 2003 authorizes states to enact identity theft laws that are not
inconsistent with the conduct required by the provisions of the act.
Payment of Dividends
The
Company is a legal entity separate and distinct from its subsidiary. While there are various legal and regulatory
limitations under federal and state law on the extent to which our Bank can pay
dividends or otherwise supply funds to the Company, the principal source of the
Company’s cash revenues is dividends from our Bank. The relevant federal and state regulatory
agencies also have authority to prohibit a bank or bank holding company, which
would include the Company and the Bank, from engaging in what, in the opinion
of the regulatory body, constitutes an unsafe or unsound practice in conducting
its business. The payment of dividends
could, depending upon the financial condition of the subsidiary, be deemed to
constitute an unsafe or unsound practice in conducting its business.
22
Table
of Contents
Under
Georgia law, the prior approval of the Georgia Department of Banking and
Finance is required before any cash dividends may be paid by a state bank if:
·
total classified assets at
the most recent examination of the bank exceed 80% of the equity capital (as
defined, which includes the reserve for loan losses) of the bank;
·
the aggregate amount of
dividends declared or anticipated to be declared in the calendar year exceeds
50% of the net profits (as defined) for the previous calendar year; and
·
the ratio of equity capital
to adjusted total assets is less than 6%.
In addition, under the Georgia Department of Banking and Finance’s
letter dated July 24, 2009, issuing its approval of the Interagency Notice
of Change in Control filing with respect to the Bank, for a period of three
years after consummation of the change in control transaction, the Bank must
also obtain approval from the Georgia Department of Banking and Finance before
paying any dividends, including dividend payments to the Company. The Bank received approval from the Georgia
Department of Banking and Finance to make a $718,000 dividend payment to the
Company to fund its expected operating expenses for 2010.
Check 21
The
Check Clearing for the 21st Century Act gives “substitute checks,” such as a
digital image of a check and copies made from that image, the same legal
standing as the original paper check.
Some of the major provisions include:
·
allowing check truncation
without making it mandatory;
·
requiring every financial
institution to communicate to accountholders in writing a description of its
substitute check processing program and their rights under the law;
·
legalizing substitutions for
and replacements of paper checks without agreement from consumers;
·
retaining in place the
previously mandated electronic collection and return of checks between
financial institutions only when individual agreements are in place;
·
requiring that when
accountholders request verification, financial institutions produce the
original check (or a copy that accurately represents the original) and
demonstrate that the account debit was accurate and valid; and
·
requiring the re-crediting
of funds to an individual’s account on the next business day after a consumer
proves that the financial institution has erred.
Effect of Governmental Monetary Policies
Our
earnings are affected by domestic economic conditions and the monetary and
fiscal policies of the United States government and its agencies. The Federal Reserve Board’s monetary policies
have had, and are likely to continue to have, an important effect on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the
Federal Reserve Board have major effects on the levels of bank loans,
investments and deposits through its open market operations in United States
government securities and through its regulation of the discount rate on
borrowings of member banks and the reserve requirements against member bank
deposits. We cannot predict the nature
or effect of future changes in monetary and fiscal policies.
Insurance of Accounts and Regulation
by the FDIC
Our
deposits are insured up to applicable limits by the Deposit Insurance Fund of
the FDIC. As insurer, the FDIC imposes
deposit insurance premiums and is authorized to conduct examinations of and to
require reporting by FDIC insured institutions.
It also may prohibit any FDIC insured institution from engaging in any
activity the FDIC determines by regulation or order to pose a serious risk to
the insurance fund.
Due to the large number
of recent bank failures and the FDIC’s new Temporary Liquidity Guarantee
Program,
the FDIC adopted a revised risk-based deposit insurance assessment
schedule in February 2009 that raised deposit insurance premiums. The FDIC also implemented a five basis
point special assessment of each insured depository institution’s assets minus
Tier 1 capital as of June 30, 2009, which special assessment amount was
capped at 10 basis points times the institution’s assessment base for the
second quarter of 2009. In addition, the
FDIC required financial institutions like us to
23
Table of
Contents
prepay
their estimated quarterly risk-based assessments for the fourth quarter of 2009
and for all of 2010 through and including 2012 to re-capitalize the Deposit
Insurance Fund. During 2009, we paid $12.8 million in
deposit insurance, which included regular premiums, the special
assessment and the prepayment for all of 2010 through and including 2012.
The
Dodd-Frank Wall Street Reform and Consumer Protection Act requires the FDIC to
amend its regulations to modify the FDIC’s assessment base on which deposit
premiums are calculated. The new
assessment base will be equal to (1) the average consolidated total assets
of an insured depository institution during the assessment period, minus (2) the
average tangible equity of such insured depository institution during the
assessment period.
FDIC
insured institutions are required to pay an assessment to fund the interest on
bonds issued to resolve thrift failures in the 1980s. For the first quarter of 2009, the assessment
equaled 1.14 basis points for domestic deposits. These assessments, which may be revised based
upon the level of deposits, will continue until the bonds mature in the years
2017 through 2019.
The
FDIC may terminate the deposit insurance of any insured depository institution
if it determines after a hearing that the institution has engaged in unsafe or
unsound practices, is in an unsafe or unsound condition to continue operations
or has violated any applicable law, regulation, rule, order or condition
imposed by the FDIC. It also may suspend
deposit insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of accounts is terminated, the
accounts at the institution at the time of the termination, less subsequent
withdrawals, remain insured for a period of six months to two years, as
determined by the FDIC.
Proposed Legislation and Regulatory Action
New
regulations and statutes are regularly proposed that contain wide-ranging
provisions for altering the structures, regulations and competitive
relationships of the nation’s financial institutions. We cannot predict whether or in what form any
proposed regulation or statute will be adopted or the extent to which our
business may be affected by any new regulation or statute.
Item 1A. Risk Factors
Our business is subject to certain risks, including
those described below. The risks below
do not describe all risks applicable to our business and are intended only as a
summary of certain material factors that affect our operations in our industry
and markets. New risks may emerge at any
time, and we cannot predict those risks or estimate the extent to which they
may affect our financial performance.
More detailed information concerning these and other risks is contained
in other sections of this registration statement, including
“Business” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
Risks
Related to Our Business
Recent negative developments in the financial industry and the current
economic environment pose significant challenges for our industry and us and
could adversely affect our business, financial condition and results of
operations
.
We
are operating in a challenging and uncertain economic environment, including
generally uncertain national and local conditions. Recent negative developments in the global
credit and securitization markets have resulted in uncertainty in the financial
markets in general, and the economy has continued to be weak in 2010, both
nationally and in our Georgia markets.
As a result of this “credit crunch,” commercial as well as consumer loan
portfolio performances have deteriorated at many institutions, and the
competition for deposits and quality loans has increased significantly. Global securities markets, and bank and bank
holding company stock prices in particular, have been negatively affected, as
has the ability of banks and bank holding companies to raise capital or borrow
in the debt markets.
Financial
institutions like us have been, and may continue to be, affected by sharp
declines in the real estate market, including falling home prices and
increasing delinquencies, foreclosures and increased unemployment. Concerns over the stability of the financial
markets and the economy have resulted in decreased lending by financial
institutions to their customers and to each other. Those concerns have lead to increased
commercial and consumer deficiencies, lack of customer confidence, increased
market volatility and widespread reduction in general business activity. We do not expect
24
Table of
Contents
these
difficult conditions to improve in the near future. A worsening of these conditions would likely
exacerbate the adverse effects on us.
As
a result, we may face the following risks:
·
economic conditions that negatively affect
housing prices and the job market may cause the credit quality of our loan
portfolios to deteriorate;
·
market developments that affect consumer
confidence may cause adverse changes in payment patterns by our customers,
causing increases in delinquencies and default rates on loans and other credit
facilities;
·
the processes that we use to estimate our
allowance for loan losses and reserves may no longer be reliable because they
rely on judgments, such as forecasts of economic conditions, that may no longer
be capable of accurate estimation;
·
the value of our securities portfolio may
decline; and
·
we face increased regulation
of our industry, and the costs of compliance with such regulation may increase.
These
conditions or similar ones may continue to persist or worsen, causing us to
experience continuing or increased adverse effects on our business, financial
condition, results of operations and the price of our common stock.
A further adverse change in real estate
market values may result in losses and otherwise adversely affect our
profitability.
As
of June 30, 2010, approximately 77.6% of our non-covered loan portfolio
(those loans not covered by loss share agreements with the FDIC) was comprised
of loans with real estate as a primary or secondary component of
collateral. The real estate collateral
in each case provides an alternate source of repayment in the event of default
by the borrower and may deteriorate in value during the time the credit is
extended. The recent negative
developments in the financial industry and economy as a whole have adversely
affected the real estate market values generally and in our market areas in
Georgia specifically and may continue to decline. A further decline in real estate values could
further impair the value of our collateral and our ability to sell the
collateral upon any foreclosure. In the
event of a default with respect to any of these loans, the amounts we receive
on the sale of the collateral may be insufficient to recover the outstanding
principal and interest on the loan. As a
result, our profitability and financial condition may be adversely affected by
a further decrease in real estate market values.
If, over the next three years, we are unable to replace the revenue we
expect to derive from the continued realization of accretable discounts on our
acquired loans and the FDIC receivable with new loans and other earning assets,
our financial condition and earnings may be adversely affected.
As
a result of the nine FDIC-assisted acquisitions we have made over the past 15
months and the negative purchase price associated with each acquisition, we
anticipate that a significant portion of our income over the next three years
will be derived from the continued realization of accretable discounts on the
loans that we purchased in our FDIC-assisted acquisitions and from the FDIC
receivable. For the six months ended June 30,
2010, we recognized $45.6 million of
income, or 49.0 % of our total income from the period, from the realization of
accretable discounts on our acquired loans and the FDIC receivable. The accretable discount on the acquired loans
will be recognized into interest income and the discount recorded on the FDIC
receivable will be accreted into non-interest income over a period of four
years from the date of each acquisition.
During this period, if we are unable to replace our acquired loans and
the related accretion with new performing loans and other earning assets, our
financial condition and earnings may be adversely affected.
We may decide to make future acquisitions,
which could expose us to additional risks.
We
periodically evaluate opportunities to acquire additional financial
institutions, including additional purchases from the FDIC. As a result, we may engage in negotiations or
discussions that, if they were to result in a transaction, could have a
material effect on our operating results and financial condition, including
short and long-term liquidity.
Our
acquisition activities could be material and could require us to use a
substantial amount of cash, other liquid assets, and/or incur debt. In addition, if goodwill recorded in
connection with our prior or potential future acquisitions were determined to
be impaired, then we would be required to recognize a charge against our
earnings, which could materially and adversely affect our results of operations
during the period in which the impairment was recognized.
25
Table
of Contents
Our
acquisition activities could involve a number of additional risks, including
the risks of:
·
incurring time
and expense associated with identifying and evaluating potential acquisitions
and negotiating potential transactions, resulting in management’s attention
being diverted from the operation of our existing business;
·
using
inaccurate estimates and judgments to evaluate credit, operations, management
and market risks with respect to the target institution or assets;
·
incurring time
and expense required to integrate the operations and personnel of the combined
businesses, creating an adverse short-term effect on results of operations; and
·
losing key
employees and customers as a result of an acquisition that is poorly received.
We may be exposed to difficulties in
combining the operations of acquired institutions, including the Acquired Banks,
into our own operations, which may prevent us from achieving the expected
benefits from our acquisition activities.
We
may not be able to fully achieve the strategic objectives and operating
efficiencies that we anticipate in our acquisition activities, including our
recent acquisition of the Acquired Banks.
Inherent uncertainties exist in integrating the operations of an
acquired institution. In addition, the
markets in which we and our potential acquisition targets operate are highly
competitive. We may lose customers or
the customers of an acquired institution as a result of an acquisition. We also may lose key personnel from the
acquired institution as a result of an acquisition. We may not discover all known and unknown
factors when examining an institution for acquisition during the due diligence
period. These factors could produce
unintended and unexpected consequences.
Undiscovered factors as a result of an acquisition could bring civil,
criminal and financial liabilities against us, our management and the
management of the institutions we acquire.
These factors could contribute to our not achieving the expected
benefits from our acquisitions within desired time frames, if at all.
Our business is subject to interest rate
risk, and fluctuations in interest rates may adversely affect our earnings and
capital levels and overall results.
The
majority of our assets are monetary in nature and, as a result, we are subject
to significant risk from changes in interest rates. Changes in interest rates may affect our net
interest income as well as the valuation of our assets and liabilities. Our earnings depend significantly on our net
interest income, which is the difference between interest income on interest-earning
assets, such as loans and securities, and interest expense on interest-bearing
liabilities, such as deposits and borrowings.
We expect to periodically experience “gaps” in the interest rate
sensitivities of our assets and liabilities, meaning that either our
interest-bearing liabilities will be more sensitive to changes in market
interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates
move contrary to our position, this “gap” may work against us, and our earnings
may be adversely affected.
An
increase in the general level of interest rates may also, among other things,
adversely affect the demand for loans and our ability to originate loans. Conversely, a decrease in the general level
of interest rates, among other things, may lead to prepayments on our loan and
mortgage-backed securities portfolios and increased competition for
deposits. Accordingly, changes in the
general level of market interest rates may adversely affect our net yield on interest-earning
assets, loan origination volume and our overall results.
Although
our asset-liability management strategy is designed to control and mitigate
exposure to the risks related to changes in the general level of market
interest rates, those rates are affected by many factors outside of our
control, including inflation, recession, unemployment, money supply,
international disorder and instability in domestic and foreign financial
markets. We may not be able to
accurately predict the likelihood, nature and magnitude of those changes or how
and to what extent they may affect our business. We also may not be able to adequately prepare
for or compensate for the consequences of such changes. Any failure to predict and prepare for
changes in interest rates or adjust for the consequences of these changes may
adversely affect our earnings and capital levels and overall results.
26
Table of
Contents
We depend on our management team, and the
loss of our senior executive officers or other key employees could impair our
relationship with customers and adversely affect our business and financial
results.
Our
success largely depends on the continued service and skills of our existing
management team, including Joseph W. Evans, our Chairman and Chief
Executive Officer, J. Daniel Speight, our Vice Chairman, Chief Operating
Officer and Chief Financial Officer, Kim M. Childers, our President and
Chief Credit Officer and Stephen W. Doughty, our Chief Banking Officer and
Executive Risk Officer, as well as other key employees with long-term customer
relationships. Our growth strategy is
built primarily on our ability to retain employees with experience and business
relationships within their respective segments.
The loss of one or more of these key personnel could have an adverse
effect on our business because of their skills, knowledge of the market, years
of industry experience and the difficulty of finding qualified replacement personnel.
Our management team’s strategies for the enhancement of shareholder
value may not succeed.
Our
management team is taking actions to enhance shareholder value, including
consolidating operation centers, reviewing personnel, assembling a team for
correspondent banking and purchasing performing loans from the FDIC and others,
and continuing to review FDIC-assisted deals on a whole bank and deposit only
basis. These actions may not enhance
shareholder value.
FDIC-assisted acquisition opportunities may not become
available to us, and increased competition may make it more difficult for us to
bid on failed bank transactions on terms we consider to be acceptable.
Our
near-term business strategy includes consideration of potential acquisitions of
failing banks that the FDIC plans to place in receivership. The FDIC may not place banks that meet our
strategic objectives into receivership.
Failed bank transactions are attractive opportunities in part because of
loss-sharing arrangements with the FDIC that limit the acquirer’s downside risk
on the purchased loan portfolio and, apart from our assumption of deposit
liabilities, we have significant discretion as to the nondeposit liabilities
that we assume. In addition, assets
purchased from the FDIC are marked to their fair value and in many cases there
is little or no addition to goodwill arising from an FDIC-assisted
transaction. The bidding process for
failing banks could become very competitive, and the increased competition may
make it more difficult for us to bid on terms we consider to be acceptable.
We are subject to extensive regulation that
could limit or restrict our activities and adversely affect our earnings.
We
operate in a highly regulated industry and are subject to examination,
supervision and comprehensive regulation by various federal and state agencies,
including the Federal Reserve, the FDIC and the Georgia Department of Banking
and Finance. Our compliance with these
regulations is costly and restricts our activities, including payment of
dividends, mergers and acquisitions, investments, loans and interest rates
charged, interest rates paid on deposits and locations of offices. Our failure to comply with these requirements
can lead to, among other remedies, administrative enforcement actions,
termination or suspension of our licenses, rights of rescission for borrowers,
and class action lawsuits. Many of these
regulations are intended to protect depositors, the public and the FDIC rather
than our shareholders. The laws and
regulations applicable to the banking industry are changing rapidly to reflect
the government’s concerns about the economy and the banking system, and these
changes may adversely affect our business and profitability. Changes to statutes, regulations or
regulatory policies, and the interpretation and implementation of new statutes,
regulations or policies could affect us in substantial and unpredictable ways,
including limiting the types of financial services and products we may offer
and/or increasing the ability of nonbanks to offer competing financial services
and products.
In
addition, following the effective date of this registration statement, we will
be an SEC registrant subject to the requirements of the Sarbanes-Oxley Act of
2002. Failure to have in place adequate
programs and procedures could cause us to have weakness in our internal control
environment, putting us and our shareholders at risk of loss.
These
and other potential changes in government regulation or policies could increase
our costs of doing business and could adversely affect our operations and the
manner in which we conduct our business.
27
Table
of Contents
Regulatory reform of the U.S. banking system may adversely
affect us.
On
July 21, 2010, President Obama signed into law The Dodd-Frank Wall Street
Reform and Consumer Protection Act which, among other things, changes the
oversight and supervision of financial institutions, introduces minimum capital
requirements, creates a new federal agency to regulate consumer financial
products and services and implements changes to corporate governance and
compensation practices.
Other recent
developments include:
·
the Federal
Reserve’s proposed guidance on incentive compensation policies at banking
organizations; and
·
proposals to limit a lender’s
ability to foreclose on mortgages or make those foreclosures less economically
viable, including by allowing Chapter 13 bankruptcy plans to “cram down” the
value of certain mortgages on a consumer’s
principal residence to its market value and/or
reset interest rates and monthly payments to permit defaulting debtors to
remain in their home.
These
initiatives may increase our expenses or decrease our income
.
Further, the overall effects of these and other legislative and
regulatory efforts on the financial markets remain uncertain, and they may not
have the intended results. These efforts
may even have unintended harmful consequences on the U.S. financial system and
our business. Should these or other legislative
or regulatory initiatives have unintended effects, our business, financial
condition, results of operations and prospects could be materially and
adversely affected.
In addition, we
may need to modify our strategies and business operations in response to these
changes. We may also incur increased
capital requirements and constraints or additional costs to satisfy new
regulatory requirements. Given the
volatile nature of the current market and the uncertainties underlying efforts
to mitigate or reverse disruptions, we may not timely anticipate or manage
existing, new or additional risks, contingencies or developments in the current
or future environment. Our failure to do
so could materially and adversely affect our business, financial condition,
results of operations and prospects.
Recent
legislative and regulatory initiatives to address the
current difficult market and economic conditions may not achieve the desired
effect.
Beginning
in October 2008,
a host of legislation and regulation has been enacted in response to the
financial crises affecting the banking system and financial markets and the
threats to investment banks and other financial institutions. These include the following:
·
On October 3,
2008, President Bush signed into law Emergency Economic Stabilization Act (“EESA”),
under which the U.S. Treasury Department has the authority, among other things,
to purchase up to $700 billion of mortgages, mortgage-backed securities and certain
other financial instruments from financial institutions under the Troubled
Asset Relief Program for the purpose of stabilizing and providing liquidity to
the U.S. financial markets.
·
On October 14,
2008, the Treasury Department announced the Capital Purchase Plan under the
EESA under which it would purchase senior preferred stock and warrants to
purchase common stock from participating financial institutions.
·
On November 21,
2008, the FDIC adopted a Final Rule with respect to its Temporary Liquidity
Guarantee Program under which the FDIC will guarantee certain “newly-issued
unsecured debt” of banks and certain holding companies and also guarantee, on
an unlimited basis, non-interest bearing bank transaction accounts.
·
On February 10,
2009, the Treasury Department announced the Financial Stability Plan under the
EESA, which is intended to further stabilize financial institutions and
stimulate lending across a broad range of economic sectors.
·
On February 18,
2009, President Obama signed the American Recovery and Reinvestment Act, a
broad economic stimulus package that included additional restrictions on, and
potential additional regulation of, financial institutions.
·
On March 18,
2009, the Federal Reserve announced its decision to purchase as much as $300
billion of long-term treasuries in an effort to maintain low interest rates.
28
Table of
Contents
·
On March 23,
2009, the Treasury Department announced the Public-Private Investment Program,
which will purchase real estate related loans from banks and securities from
the broader markets, and is intended to create a market for those distressed
debt and securities.
Each of these programs was implemented to help
stabilize and provide liquidity to the financial system. However, the long-term effect that these or
any other governmental program may have on the financial markets or our business
or financial performance is unknown. A
continuation or worsening of current financial market conditions could
materially and adversely affect our business, financial condition, results of
operations, access to credit or the trading price of our common stock.
We will incur increased costs as a result
of being a public company.
As
a privately held company, we have not been responsible for the corporate
governance and financial reporting practices and policies required of a
publicly traded company. Following the
effectiveness of this registration statement, we will be a public company. As a public company, we will incur
significant legal, accounting and other expenses that we did not incur in the
past and are not reflected in our historical financial statements. In addition, the Sarbanes-Oxley Act, as well
as new rules implemented by the SEC under the Dodd-Frank Act, will require
changes in corporate governance practices.
We expect that these rules and regulations will increase our legal
and financial compliance costs.
If our allowance for loan losses is not
sufficient to cover actual loan losses, our earnings will be adversely
affected.
Our
success depends significantly on the quality of our assets, particularly
loans. Like other financial
institutions, we are exposed to the risk that our loan customers may not repay
their loans according to their terms, and the collateral securing the payment
of these loans may be insufficient to fully compensate us for the outstanding
balance of the loan plus the costs to dispose of the collateral. As a result, we may experience significant
loan losses that may have a material adverse effect on our operating results
and financial condition.
We
maintain an allowance for loan losses with respect to our non-covered loan
portfolio not subject to loss share agreements with the FDIC, in an attempt to
cover loan losses inherent in our loan portfolio. In determining the size of the allowance, we
rely on an analysis of our loan portfolio, our experience and our evaluation of
general economic conditions. We also
make various assumptions and judgments about the collectibility of our loan
portfolio, including the diversification in our loan portfolio, the effect of
changes in the economy on real estate and other collateral values, the results
of recent regulatory examinations, the effects on the loan portfolio of current
economic indicators and their probable impact on borrowers, the amount of
charge-offs for the period and the amount of non-performing loans and related
collateral security. If our assumptions
prove to be incorrect, our current allowance may not be sufficient, and
adjustments may be necessary to allow for different economic conditions or
adverse developments in our loan portfolio.
Material additions to the allowance for loan losses would materially
decrease our net income and adversely affect our financial condition generally.
In
addition, federal and state regulators periodically review our allowance for
loan losses and may require us to increase our allowance for loan losses or
recognize further loan charge-offs, based on judgments different than our
management. Any increase in our
allowance for loan losses or loan charge-offs required by these regulatory
agencies could have a material adverse effect on our operating results and
financial condition.
We are exposed to higher credit risk by construction and development,
commercial real estate, and commercial and industrial lending.
Construction
and development, commercial real estate, and commercial and industrial lending
usually involves higher credit risks than single-family residential
lending. As of June 30, 2010, the
following loan types accounted for the stated percentages of our total loan
portfolio: real estate construction and development — 34.1 %, commercial real
estate — 33.2 %, and commercial and industrial — 10.1 %. As of June 30, 2010, of these loans, 91.3
% are covered by loss share agreements with the FDIC. However, over time, we expect that the number
of non-covered loans in these categories will increase. These types of loans involve larger loan
balances to a single borrower or groups of related borrowers.
Commercial
real estate loans may be affected to a greater extent than residential loans by
adverse conditions in real estate markets or the economy because commercial
real estate borrowers’ ability to repay their loans depends on successful
development of their properties, in addition to the factors affecting
residential real estate borrowers. These
loans
29
Table of
Contents
also
involve greater risk because they generally are not fully amortizing over the
loan period, but have a balloon payment due at maturity. A borrower’s ability to make a balloon
payment typically will depend on being able to either refinance the loan or
sell the underlying property in a timely manner.
Risk
of loss on a construction and development loan depends largely upon whether our
initial estimate of the property’s value at completion of construction equals
or exceeds the cost of the property construction (including interest), the
availability of permanent take-out financing and the builder’s ability to
ultimately sell the property. During the
construction phase, a number of factors can result in delays and cost
overruns. If estimates of value are
inaccurate or if actual construction costs exceed estimates, the value of the
property securing the loan may be insufficient to ensure full repayment when
completed through a permanent loan or by seizure of collateral.
Commercial
and industrial loans are typically based on the borrowers’ ability to repay the
loans from the cash flow of their businesses.
These loans may involve greater risk because the availability of funds to
repay each loan depends substantially on the success of the business
itself. In addition, the assets securing
the loans have the following characteristics: (a) they depreciate over
time, (b) they are difficult to appraise and liquidate, and (c) they
fluctuate in value based on the success of the business.
Construction
and development loans, commercial real estate loans, and commercial and
industrial loans are more susceptible to a risk of loss during a downturn in
the business cycle. Our underwriting,
review and monitoring cannot eliminate all of the risks related to these loans.
As of June 30, 2010, our outstanding commercial
real estate loans were equal to 176.2% of our total capital. The banking regulators are giving commercial
real estate lending greater scrutiny, and may require banks with higher levels
of commercial real estate loans to implement improved underwriting, internal
controls, risk management policies and portfolio stress testing, as well as
possibly higher levels of allowances for losses and capital levels as a result
of commercial real estate lending growth and exposures.
Changes in local economic conditions where we operate could have a
negative effect
.
Our
success depends significantly on growth in population, income levels, deposits
and housing starts in our markets in Georgia.
The local economic conditions in these areas have a significant effect
on our loans, the ability of borrowers to repay our loans, and the value of the
collateral securing our loans. Adverse
changes in, and further deterioration of, the economic conditions of the
Southeastern United States in general or any one or more of our local markets
could negatively affect our financial condition, results of operations and our
profitability. A continuing deterioration
in economic conditions could result in the following consequences, any of which
could have a material adverse effect on our business:
·
loan delinquencies may increase;
·
problem assets and foreclosures may increase;
·
demand for our products and services may
decline; and
·
collateral for loans that we make, especially
real estate, may decline in value, in turn reducing a customer’s borrowing
power, and reducing the value of assets and collateral associated with our
loans.
We face strong competition for customers, which
could prevent us from obtaining customers or may cause us to pay higher
interest rates to attract customer deposits
.
The
banking business is highly competitive, and we experience competition in our
markets from many other financial institutions.
Customer loyalty can be easily influenced by a competitor’s new
products, especially offerings that could provide cost savings or a higher
return to the customer. Moreover, this
competitive industry could become even more competitive as a result of
legislative, regulatory and technological changes and continued
consolidation. We compete with
commercial banks, credit unions, savings and loan associations, mortgage
banking firms, consumer finance companies, securities brokerage firms,
insurance companies, money market funds and other mutual funds, as well as
super-regional, national and international financial institutions that operate
offices in our primary market areas and elsewhere.
We
compete with these institutions both in attracting deposits and in making
loans. In addition, we have to attract
our customer base from other existing financial institutions and from new
residents. Many of our competitors are
well-
30
Table of
Contents
established,
larger financial institutions, such as SunTrust Bank, Bank of America, Wells
Fargo (formerly Wachovia) and BB&T.
We also compete with local community banks in our market. We may not be able to compete successfully
with other financial institutions in our market, and we may have to pay higher
interest rates to attract deposits, accept lower yields on loans to attract
loans and pay higher wages for new employees, resulting in reduced
profitability. In addition, competitors
that are not depository institutions are generally not subject to the extensive
regulations that apply to us.
Future growth or operating results may require us to raise additional
capital, but that capital may not be available or may be dilutive.
We
are required by federal and state regulatory authorities to maintain adequate
levels of capital to support our operations.
We may at some point need to raise additional capital to support our
operations and any future growth.
Our
ability to raise capital will depend on conditions in the capital markets,
which are outside of our control and largely do not depend on our financial
performance. Accordingly, we may be
unable to raise capital when needed or on favorable terms. If we cannot raise additional capital when
needed, we will be subject to increased regulatory supervision and the
imposition of restrictions on our growth and business. These restrictions could negatively affect
our ability to operate or further expand our operations through loan growth,
acquisitions or the establishment of additional branches. These restrictions may also result in
increases in operating expenses and reductions in revenues that could have a
material adverse effect on our financial condition, results of operations and
the price of our common stock.
Higher FDIC deposit insurance premiums and
assessments could adversely affect our financial condition.
FDIC
insurance premiums increased substantially in 2009, and we expect to pay significantly
higher FDIC premiums in the future. As
the large number of recent bank failures continues to deplete the Deposit
Insurance Fund, the FDIC adopted a revised risk-based deposit insurance
assessment schedule in February 2009, which raised deposit insurance
premiums. The FDIC required financial
institutions, such as the Bank, to prepay their estimated quarterly risk-based
assessments for the fourth quarter of 2009 and for all of 2010 through and
including 2012 to re-capitalize the Deposit Insurance Fund. The rule also provides for increasing
the FDIC-assessment rates by three basis points effective January 1,
2011. If FDIC deposit insurance premiums
and assessments continue to increase, it could adversely affect our financial
condition.
The accuracy of our financial statements
and related disclosures could be affected if the judgments, assumptions or
estimates used in our critical accounting policies are inaccurate.
The
preparation of financial statements and related disclosure in conformity with
accounting principles generally accepted in the United States requires us to
make judgments, assumptions and estimates that affect the amounts reported in
our consolidated financial statements and accompanying notes. Our critical accounting policies, which are
included in this registration statement, describe those significant accounting
policies and methods used in the preparation of our consolidated financial
statements that we consider “critical” because they require judgments,
assumptions and estimates that materially affect our consolidated financial
statements and related disclosures. As a
result, if future events differ significantly from the judgments, assumptions
and estimates in our critical accounting policies, those events or assumptions
could have a material impact on our audited consolidated financial statements
and related disclosures.
We must respond to rapid technological
changes, and these changes may be more difficult or expensive than anticipated.
We
will have to respond to future technological changes. Specifically, if our competitors introduce
new banking products and services embodying new technologies, or if new banking
industry standards and practices emerge, then our existing product and service
offerings, technology and systems may be impaired or become obsolete. Further, if we fail to adopt or develop new
technologies or to adapt our products and services to emerging industry
standards, then we may lose current and future customers, which could have a
material adverse effect on our business, financial condition and results of
operations. The financial services
industry is changing rapidly, and to remain competitive, we must continue to
enhance and improve the functionality and features of our products, services
and technologies. These changes may be
more difficult or expensive than we anticipate.
31
Table
of Contents
Our inability to use a short form registration statement on Form S-3
may affect our short-term ability to access the capital markets.
A
registration statement on Form S-3 permits an eligible issuer to
incorporate by reference its past and future filings and reports made under the
Exchange Act. In addition, Form S-3
enables eligible issuers to conduct primary offerings “off the shelf” under Rule 415
of the Securities Act. The shelf
registration process under Form S-3, combined with the ability to
incorporate information on a forward basis, allows issuers to avoid additional
delays and interruptions in the offering process and to access the capital
markets in a more expeditious and efficient manner than raising capital in a
standard registered offering on Form S-1.
One of the requirements for Form S-3 eligibility is for an issuer
to have been subject to the reporting requirements for the 12-month period
immediately preceding the filing of the Form S-3. Because we will not become subject to the
reporting requirements of the Exchange Act until this registration statement on
Form 10 becomes effective, we will not be able to use Form S-3 until
12 months following the effective date of this Form 10. We may experience delays in our ability to
raise capital in the capital markets during the period that we are unable to
use Form S-3. Any such delay may
result in offering terms that may not be advantageous to us or may cause us not
to obtain capital in a timely fashion to execute our business strategies.
Risks
Related to the Acquisition of the Acquired Banks
We are subject to risks related to FDIC-assisted
transactions.
The
ultimate success of our past FDIC-assisted transactions, and any FDIC-assisted
transactions in which we may participate in the future, will depend on a number
of factors, including our ability:
·
to fully integrate, and to integrate
successfully, the branches acquired into the Bank’s operations;
·
to limit the outflow of deposits held by our
new customers in the acquired branches and to successfully retain and manage
interest-earning assets (loans) acquired in FDIC-assisted transactions;
·
to retain existing deposits and to generate
new interest-earning assets in the geographic areas previously served by the
acquired banks;
·
to effectively compete in new markets in
which we did not previously have a presence;
·
to deploy the cash received in the
FDIC-assisted transactions into assets bearing sufficiently high yields without
incurring unacceptable credit or interest rate risk;
·
to control the incremental non-interest
expense from the acquired branches in a manner that enables us to maintain a
favorable overall efficiency ratio;
·
to retain and attract the appropriate
personnel to staff the acquired branches;
·
to earn acceptable levels of interest and
non-interest income, including fee income, from the acquired branches; and
·
to reasonably estimate cash flows for
acquired loans to mitigate exposure greater than estimated losses at the time
of acquisition.
As
with any acquisition involving a financial institution, particularly one
involving the transfer of a large number of bank branches as is often the case
with FDIC-assisted transactions, there may be higher than average levels of
service disruptions that would cause inconveniences to our new customers or
potentially increase the effectiveness of competing financial institutions in
attracting our customers. We anticipate
challenges and opportunities because of the unique nature of each
acquisition. Integration efforts will
also likely divert our management’s attention and resources. We may be unable to integrate acquired
branches successfully, and the integration process could result in the loss of
key employees, the disruption of ongoing business or inconsistencies in
standards, controls, procedures and policies that adversely affect our ability
to maintain relationships with clients, customers, depositors and employees or
to achieve the anticipated benefits of the FDIC-assisted transactions. We may also encounter unexpected difficulties
or costs during the integration that could adversely affect our earnings and
financial condition, perhaps materially.
Additionally, we may be unable to achieve results in the future similar
to those achieved by our existing banking business, to compete effectively in
the market areas previously served by the acquired branches or to manage
effectively any growth resulting from FDIC-assisted transactions.
Our
willingness and ability to grow acquired branches following FDIC-assisted
transactions depend on several factors, most importantly the ability to retain
the key personnel whom we hire or transfer in connection with FDIC-assisted
32
Table of
Contents
transactions. Our failure to retain these employees could
adversely affect the success of FDIC-assisted transactions and our future
growth.
Our ability to continue to receive the benefits of our loss
share arrangements with the FDIC is conditioned upon our compliance with certain
requirements under the agreements.
We
are the beneficiary of loss share agreements with the FDIC that call for the
FDIC to fund a portion of our losses on a majority of the assets we acquired in
connection with our recent FDIC-assisted transactions. To recover a portion of our losses and retain
the loss share protection, we must comply with certain requirements imposed by
the agreements. The requirements of the
agreements relate primarily to our administration of the assets covered by the
agreements, as well as our obtaining the consent of the FDIC to engage in
certain corporate transactions that may be deemed under the agreements to
constitute a transfer of the loss share benefits. For example, any merger or consolidation of
the Bank or any public or private offering of common stock by us that would
increase our outstanding shares by more than 9% requires the consent of the
FDIC.
When
the consent of the FDIC is required under the loss share agreements, the FDIC
may withhold its consent or may condition its consent on terms that we do not
find acceptable. If the FDIC does not
grant its consent to a transaction we would like to pursue, or conditions its
consent on terms that we do not find acceptable, we may be unable to engage in
a corporate transaction that might otherwise benefit our shareholders or we may
elect to pursue such a transaction without obtaining the FDIC’s consent, which
could result in termination of our loss share agreements with the FDIC.
Changes in national and local economic conditions
could lead to higher loan charge-offs in connection with the acquisition of the
Acquired Bank,s and the loss sharing agreement with the FDIC may not cover all
of those charge-offs.
In
connection with the acquisition of the Acquired Banks, we acquired a
significant portfolio of loans. Although
we have marked down the loan portfolios we have acquired, the non-impaired
loans we acquired may become impaired or may further deteriorate in value,
resulting in additional charge-offs to the loan portfolio. The fluctuations in national, regional and
local economic conditions, including those related to local residential,
commercial real estate and construction markets, may increase the level of
charge-offs that we make to our loan portfolio and consequently reduce our
capital. These fluctuations are not
predictable, cannot be controlled and may have a material adverse impact on our
operations and financial condition even if other favorable events occur.
Our loss sharing arrangements with the FDIC
will not cover all of our losses on loans we acquired through the acquisition
of the Acquired Banks.
Although
we have entered into loss share agreements with the FDIC that provide that the
FDIC will bear a significant portion of losses related to specified loan portfolios
that we acquired through the Acquired Banks, we are not protected for all
losses resulting from charge-offs with respect to those specified loan
portfolios. Additionally, the loss
sharing agreements have limited terms (10 years for losses on single-family
residential real estate loans, five years for losses on non-residential real
estate loans and eight years with respect to recoveries on non-residential real
estate loans). Therefore, the FDIC will
not reimburse us for any charge-off or related losses that we experience after
the term of the loss share agreements, and any such charge-offs would
negatively impact our net income.
Moreover, the loss share provisions in the loss share agreement may be
administered improperly, or the FDIC may interpret those provisions in a way
different than we do. In any of those
events, our losses could increase.
The FDIC requires that we make a “true-up” payment to the FDIC if our
realized losses are less than expected.
The
loss share agreements between the Bank and the FDIC with respect to The
Buckhead Community Bank, First Security National Bank and NorthWest Bank and
Trust each contain a provision that obligates us to make a “true-up” payment to
the FDIC if the realized losses of each of these acquired banks are less than
expected. The “true-up” calculation is
scheduled to be made as of the 45th day following the last day of the calendar
month of the tenth anniversary of the closing of the acquisitions of The
Buckhead Community Bank, First Security National Bank and NorthWest Bank and
Trust. Any such “true-up” payment could
have a negative effect on our business, financial condition and results of
operations.
33
Table
of Contents
Risks
Related to Our Common Stock
Although we may seek to list our shares on
a national exchange, we may not be successful in doing so. The lack of any established trading market
may significantly restrict our shareholders’ ability to sell shares of our
common stock.
There
is no established trading market for our common stock. The absence of an active trading market may
significantly restrict our shareholders’ ability to transfer shares of our
common stock. We cannot predict the
extent to which investor interest in our company will lead to the development
of an active trading market or how liquid that market might become. Although we may seek to be listed on a
national securities exchange such as the NYSE, NASDAQ or NYSE Amex, each market
or exchange has its own listing criteria, including criteria related to minimum
bid price, public float, market makers, minimum number of round lot holders and
board independence requirements, that we may not meet.
In
addition, even if our common stock is approved for listing or inclusion on a
national exchange, we will have no prior trading history, and thus there is no
way to determine the prices or volumes at which our common stock will trade. Holders of shares of our common stock may not
be able to resell the shares at or near their original acquisition price, or at
any price. Additionally, each national
securities exchange has its own corporate governance and other requirements
that we must meet to maintain our listing.
If we qualify for listing and subsequently fail to meet the ongoing
listing requirements of the exchange, our shares could be delisted.
Shares of our common stock are subject to
dilution.
As
of October 15, 2010, we had approximately 31,607,604 shares of common
stock issued and outstanding and warrants to purchase another 2,717,261 shares
of our common stock. If we issue
additional shares of common stock in the future and that issuance is not made
to all then-existing common shareholders proportionate to their interests, then
the issuance will result in dilution to each shareholder by reducing the
shareholder’s percentage ownership of the total outstanding shares of our
common stock.
Our board of directors may issue shares of
preferred stock that would adversely affect the rights of our common
shareholders.
Our
authorized capital stock includes 2,000,000 shares of preferred stock of which
no preferred shares are issued and outstanding.
Our board of directors, in its sole discretion, may designate and issue
one or more series of preferred stock from the authorized and unissued shares
of preferred stock. Subject to
limitations imposed by law or our articles of incorporation, our board of
directors is empowered to determine:
·
the designation
of, and the number of, shares constituting each series of preferred stock;
·
the dividend
rate for each series;
·
the terms and
conditions of any voting, conversion and exchange rights for each series;
·
the amounts
payable on each series on redemption or our liquidation, dissolution or
winding-up;
·
the provisions
of any sinking fund for the redemption or purchase of shares of any series; and
·
the preferences
and the relative rights among the series of preferred stock.
We
could issue preferred stock with voting and conversion rights that could
adversely affect the voting power of the shares of our common stock and with
preferences over the common stock with respect to dividends and in liquidation.
We do not anticipate declaring dividends in
the foreseeable future
.
Holders
of our common stock are not entitled to receive dividends unless our board of
directors declares them. Since the
inception of the Company in January 2010, we have not paid any dividends
on our common stock and do not intend to pay dividends in the foreseeable
future. The Company’s principal source of funds to pay dividends is the cash
dividends that it receives from the Bank.
Under the Georgia Department of Banking and Finance’s letter
dated July 24, 2009 issuing its approval of the Interagency Notice of
Change in Control application filed by Joseph W. Evans, J. Daniel Speight and
Kim M. Childers, with respect to the Bank, the Bank must obtain approval from
the Georgia Department of Banking and Finance before paying any dividends,
including dividend payments to the Company, until July 2012. In addition, even after this condition
expires, our ability to pay dividends will be limited by regulatory
restrictions, our
34
Table of
Contents
financial
condition, results of operations, capital requirements, level of indebtedness
and other factors as our board of directors deems relevant.
Our securities are not FDIC insured.
Our
securities, including our common stock, are not savings or deposit accounts or
other obligations of the Bank, are not insured by the Deposit Insurance Fund,
the FDIC or any other governmental agency and are subject to investment risk,
including the possible loss of principal.
35
Table
of Contents
Item 2. Financial Information
Selected Financial Data
The
following table provides summary historical consolidated financial information
for the periods and as of the dates indicated.
You should read this information in conjunction with our audited
consolidated financial statements, including the related notes, and with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” which
are included elsewhere in this registration statement. The historical information at December 31,
2009 and 2008 and for the successor period from July 24, 2009 through December 31,
2009, the predecessor period from January 1, 2009 through July 23,
2009 and for the fiscal years ended December 31, 2008 and 2007 is derived
from our audited consolidated financial statements that appear in this
registration statement. The historical
information at December 31, 2007, 2006 and 2005 and for the fiscal years
ended December 31, 2006 and 2005 is derived from our audited financial
statements that do not appear in this registration statement. The historical information at June 30,
2010 and for the six months ended June 30, 2010 and 2009 is derived from
our unaudited interim consolidated financial statements, which are included
elsewhere in this registration statement.
The historical results shown below and elsewhere in this registration
statement are not necessarily indicative of our future performance.
|
|
|
|
|
At December 31,
|
|
|
|
|
At June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
2009
|
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
(in thousands)
|
|
Successor Period
|
|
|
Predecessor Period
|
|
|
Selected Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
2,593,497
|
|
$
|
2,497,958
|
|
|
$
|
33,591
|
|
$
|
27,623
|
|
$
|
20,452
|
|
$
|
13,785
|
|
|
Investment securities
|
|
422,654
|
|
317,988
|
|
|
3,008
|
|
4,031
|
|
3,984
|
|
2,988
|
|
|
FDIC receivable for loss share agreements, net
|
|
482,928
|
|
605,502
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not covered under FDIC loss share agreements
|
|
75
|
|
120
|
|
|
73
|
|
—
|
|
—
|
|
—
|
|
|
Covered under FDIC loss share agreements
|
|
166,424
|
|
141,690
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Loan receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not covered under FDIC loss share agreements
|
|
153,618
|
|
47,389
|
|
|
22,539
|
|
19,189
|
|
11,669
|
|
2,193
|
|
|
Covered under FDIC loss share agreements, net
|
|
979,428
|
|
1,134,499
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Allowance for loan losses
|
|
3,645
|
|
2,524
|
|
|
445
|
|
316
|
|
139
|
|
22
|
|
|
Goodwill and other intangible assets, net
|
|
10,343
|
|
12,334
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Deposits
|
|
2,236,076
|
|
2,153,791
|
|
|
26,061
|
|
21,347
|
|
13,977
|
|
6,749
|
|
|
Shareholders’ equity
|
|
335,005
|
|
310,764
|
|
|
5,646
|
|
6,106
|
|
6,384
|
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
Table of Contents
|
|
|
For the Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
Successor Period
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from July 24,
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
2009 to December
|
|
|
January 1, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
31, 2009
|
|
|
to July 23, 2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Selected Results of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
80,822
|
|
|
$
|
953
|
|
$
|
57,843
|
|
|
$
|
1,114
|
|
$
|
1,917
|
|
$
|
1,789
|
|
$
|
939
|
|
$
|
217
|
|
|
Interest expense
|
|
18,760
|
|
|
416
|
|
14,741
|
|
|
500
|
|
823
|
|
585
|
|
229
|
|
15
|
|
|
Net interest income
|
|
62,062
|
|
|
537
|
|
43,102
|
|
|
614
|
|
1,094
|
|
1,204
|
|
710
|
|
202
|
|
|
Provision for loan losses
|
|
1,192
|
|
|
261
|
|
2,689
|
|
|
261
|
|
312
|
|
196
|
|
117
|
|
22
|
|
|
Net interest income after provision for loan
losses
|
|
60,870
|
|
|
276
|
|
40,413
|
|
|
353
|
|
782
|
|
1,008
|
|
593
|
|
180
|
|
|
Noninterest income
|
|
12,251
|
|
|
103
|
|
10,293
|
|
|
119
|
|
177
|
|
132
|
|
52
|
|
4
|
|
|
Noninterest expenses
|
|
39,107
|
|
|
619
|
|
22,345
|
|
|
719
|
|
1,481
|
|
1,446
|
|
1,244
|
|
801
|
|
|
Income (loss) before income taxes
|
|
34,014
|
|
|
(240
|
)
|
28,361
|
|
|
(247
|
)
|
(522
|
)
|
(306
|
)
|
(599
|
)
|
(617
|
)
|
|
Income taxes
|
|
12,721
|
|
|
—
|
|
10,339
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(4
|
)
|
|
Net income (loss)
|
|
$
|
21,293
|
|
|
$
|
(240
|
)
|
$
|
18,022
|
|
|
$
|
(247
|
)
|
$
|
(522
|
)
|
$
|
(306
|
)
|
$
|
(599
|
)
|
$
|
(613
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
0.68
|
|
|
(0.31
|
)
|
0.59
|
|
|
(0.32
|
)
|
(0.68
|
)
|
(0.40
|
)
|
(0.78
|
)
|
(0.80
|
)
|
|
Diluted
|
|
0.67
|
|
|
(0.31
|
)
|
0.58
|
|
|
(0.32
|
)
|
(0.68
|
)
|
(0.40
|
)
|
(0.78
|
)
|
(0.80
|
)
|
|
Tangible book value
|
|
$
|
10.29
|
|
|
$
|
7.05
|
|
$
|
9.46
|
|
|
$
|
7.04
|
|
$
|
7.36
|
|
$
|
7.96
|
|
$
|
8.32
|
|
$
|
9.10
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
31,541
|
|
|
767
|
|
30,584
|
|
|
767
|
|
767
|
|
767
|
|
767
|
|
767
|
|
|
Diluted
|
|
31,828
|
|
|
767
|
|
31,014
|
|
|
767
|
|
767
|
|
767
|
|
767
|
|
767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
1.70
|
%
|
|
(1.38
|
)%
|
2.04
|
%
|
|
(1.25
|
)%
|
(1.69
|
)%
|
(1.33
|
)%
|
(3.73
|
)%
|
(6.36
|
)%
|
|
Return on average equity
|
|
13.30
|
%
|
|
(8.36
|
)%
|
14.14
|
%
|
|
(7.61
|
)%
|
(8.73
|
)%
|
(4.87
|
)%
|
(9.04
|
)%
|
(8.77
|
)%
|
|
Net interest margin(1)(4)
|
|
7.29
|
%
|
|
3.33
|
%
|
6.95
|
%
|
|
3.33
|
%
|
3.83
|
%
|
4.36
|
%
|
5.30
|
%
|
9.19
|
%
|
|
Interest rate spread(2)(4)
|
|
7.60
|
%
|
|
2.73
|
%
|
7.16
|
%
|
|
2.65
|
%
|
2.98
|
%
|
5.78
|
%
|
4.73
|
%
|
8.50
|
%
|
|
Efficiency ratio(3)(4)
|
|
52.62
|
%
|
|
96.72
|
%
|
41.69
|
%
|
|
98.09
|
%
|
116.52
|
%
|
108.23
|
%
|
163.25
|
%
|
388.83
|
%
|
|
Average interest-earning assets to average
interest-bearing liabilities
|
|
85.96
|
%
|
|
123.32
|
%
|
90.98
|
%
|
|
125.11
|
%
|
129.45
|
%
|
150.49
|
%
|
198.31
|
%
|
390.28
|
%
|
|
Average loans receivable to average deposits
|
|
56.41
|
%
|
|
97.02
|
%
|
61.51
|
%
|
|
87.89
|
%
|
105.13
|
%
|
115.94
|
%
|
95.41
|
%
|
38.25
|
%
|
37
Table of Contents
|
|
|
For the Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
Successor Period
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from July 24,
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
2009 to December
|
|
|
January 1, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
31, 2009
|
|
|
to July 23, 2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans to loans receivable: (5)(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered under loss shares agreements with the FDIC
|
|
34.59
|
%
|
|
—
|
|
26.61
|
%
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Not covered under loss shares agreements with the
FDIC
|
|
2.01
|
%
|
|
0.73
|
%
|
1.17
|
%
|
|
0.68
|
%
|
0.83
|
%
|
0.05
|
%
|
—
|
|
—
|
|
|
Non-performing assets to total assets: (6)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered under loss shares agreements with the FDIC
|
|
40.66
|
%
|
|
—
|
|
31.52
|
%
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Not covered under loss shares agreements with the
FDIC
|
|
0.40
|
%
|
|
0.74
|
%
|
0.18
|
%
|
|
0.70
|
%
|
0.77
|
%
|
0.03
|
%
|
—
|
|
—
|
|
|
Allowance for loan losses to non-covered loans
receivable
|
|
2.37
|
%
|
|
2.80
|
%
|
5.33
|
%
|
|
2.72
|
%
|
1.96
|
%
|
1.65
|
%
|
1.19
|
%
|
1.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average equity to average assets
|
|
12.80
|
%
|
|
16.29
|
%
|
14.41
|
%
|
|
16.11
|
%
|
19.35
|
%
|
27.23
|
%
|
41.21
|
%
|
72.49
|
%
|
|
Leverage ratio
|
|
12.63
|
%
|
|
18.08
|
%
|
14.57
|
%
|
|
18.08
|
%
|
18.05
|
%
|
23.23
|
%
|
37.88
|
%
|
72.49
|
%
|
|
Tier 1 risk-based capital ratio (9)
|
|
57.35
|
%
|
|
20.54
|
%
|
30.60
|
%
|
|
20.54
|
%
|
21.60
|
%
|
27.13
|
%
|
45.91
|
%
|
164.22
|
%
|
|
Total risk-based capital ratio (9)
|
|
58.00
|
%
|
|
21.56
|
%
|
30.85
|
%
|
|
21.56
|
%
|
22.67
|
%
|
28.38
|
%
|
46.91
|
%
|
164.74
|
%
|
(1) Net interest income divided by average
interest-earning assets.
(2) Yield on interest-earning assets less costs
of interest-bearing liabilities.
(3) Noninterest expenses divided by net interest
income and noninterest income.
(4) Calculated on a fully tax-equivalent basis.
(5) Non-performing loans include nonaccrual loans
and loans past due 90 days or more and still accruing interest.
(6) Non-performing assets are non-performing
loans plus other real estate.
(7) Ratio of non-covered non-performing loans to
non-covered loans receivable and covered non-performing loans to covered loans
receivable.
(8) Ratio of non-covered non-performing assets to
non-covered assets and covered non-performing assets to covered assets.
(9) The increase in our risk-based capital ratios
from December 31, 2009 to June 30, 2010 resulted from the FDIC
Financial Institutions Letter (FIL-7-2010) dated February 26, 2010,
entitled “Regulatory Capital Standards Clarification of the Risk Weights for
FDIC Claims and Guarantees,” which clarifies that the FDIC receivable may be
assigned a zero risk weight.
38
Table
of Contents
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
The
following discussion and analysis of our consolidated financial condition and
results of operations should be read in conjunction with our consolidated
financial statements and related notes.
Historical results of operations and the percentage relationships among
any amounts included, and any trends that may appear, may not indicate trends
in operations or results of operations for any future periods.
We
have made, and will continue to make, various forward-looking statements with
respect to financial and business matters.
Comments regarding our business that are not historical facts are
considered forward-looking statements that involve inherent risks and
uncertainties. Actual results may differ
materially from those contained in these forward-looking statements. For additional information regarding our
cautionary disclosures, see the “Cautionary
Note Regarding Forward-Looking Statements” at the beginning of this
registration statement.
Overview
On
July 23, 2010, the Company became the bank holding company of the Bank
under a plan of reorganization and share exchange that was approved by the
boards of directors of the Company and the Bank and adopted by the shareholders
of the Bank at the annual meeting held on March 11, 2010. The Bank is a Georgia state-chartered bank
that opened in October 2005 in Pinehurst, Georgia. From October 2005 until July 23,
2009, the Bank operated as a small community bank with two branch offices
located in Dooly County, Georgia with total assets of approximately $33.6
million, total loans receivable of approximately $22.5 million, total deposits
of approximately $26.1 million and total shareholders’ equity of approximately
$5.7 million at December 31, 2008.
On
July 24, 2009, the Bank raised approximately $292.1 million in gross
proceeds (before expenses) from investors in a private offering of its common
stock. Immediately following the private
offering, these investors owned approximately 97% of the Bank’s outstanding
common stock. In connection with the
private offering, the FDIC and the Georgia Department of Banking and Finance
approved the Interagency Notice of Change in Control application filed by our
new management team, which took control of the Bank on July 24, 2009. As a result of the private offering and the
2009 acquisitions described below, the Bank was transformed from a small community
bank in Pinehurst, Georgia to a large commercial bank operating 21 full service
branches throughout middle Georgia and metropolitan Atlanta. As of June 30, 2010, our total assets
were approximately $2.6 billion, our total loans receivable were approximately
$1.1 billion, our total deposits were approximately $2.2 billion and our total
shareholders’ equity was approximately $335.0 million.
As
a result of the private offering and change in control transaction, we applied
the push-down basis of accounting to our 2009 audited financial
statements. Our 2009 financial
statements present two periods that reflect our historical basis of accounting
for the period from January 1, 2009 through July 23, 2009 (the “predecessor
period”) and our new basis of push-down accounting for the period from July 24,
2009 through December 31, 2009 (the “successor period”).
Our
2009 acquisitions resulted in total assets acquired of approximately $3.0
billion, compared to the Bank’s total asset size of only $33.6 million at December 31,
2008, an increase of almost 9,000%.
Given the enormous change in assets and the similar changes in deposits,
shareholders’ equity and earnings from the predecessor period to the successor
period, the discussion in this section of the registration statement primarily
focuses on the successor period and 2010.
Although we have included a summary discussion and analysis of our
results of operations for the six months ended June 30, 2009, the
predecessor period from January 1, 2009 through July 23, 2009 and the
years ended December 31, 2008 and 2007, and of our financial condition as
of December 31, 2008 and 2007, we believe that the financial information
for the periods before July 24, 2009 does not contribute meaningfully to
an investor’s understanding of our operations and financial condition after the
July 24, 2009 private offering and our acquisition of the Acquired Banks.
Acquisitions
Six Security Banks
On
July 24, 2009, immediately following the private offering, the Bank
entered into a purchase and assumption agreement with a loss share arrangement
with the FDIC, as receiver, under which the Bank assumed all of the $2.2
billion
39
Table of Contents
of
liabilities of the Security Banks and acquired approximately $2.0 billion of
the assets of the Security Banks. The
Bank now operates 14 former Security Bank branches in Macon, Warner Robins,
Gray, Alpharetta and Perry, Georgia.
The
Bank entered into 12 loss share agreements with the FDIC for the Security Banks
(two for each Security Bank) that collectively cover $1.6 billion of the
acquired assets, including 100% of the acquired loans and other real estate
owned (“OREO”). Under the loss share
agreements for the Security Banks, the FDIC agreed to cover 80% of losses on
the disposition of loans and OREO up to $563.0 million, and 95% of the losses
that exceed $563.0 million. The term for
loss sharing on single-family residential real estate loans is 10 years, while
the term for loss sharing on non-residential real estate loans is five years
with respect to losses and eight years with respect to recoveries. The reimbursable losses from the FDIC are
based on the book value of the relevant loans as determined by the FDIC at the
date of the transaction. The loss share
agreements do not cover new loans made after that date. At the time of acquisition, the Bank recorded
a receivable from the FDIC of $403.6 million, which represented the estimated
fair value of the FDIC’s portion of the losses that we expected to be incurred
and reimbursed to us as of that date.
The value of the FDIC receivable will continue to fluctuate over time
based upon the continued performance of the loans and as the Bank receives
payments from the FDIC under the loss share agreements. Realized losses in excess of acquisition date
estimates will result in an increase in the FDIC receivable. Conversely, if realized losses are less than
acquisition date estimates, the FDIC receivable for loss share agreements will
be reduced.
Accounting
standards prohibit carrying over an allowance for loan losses for impaired
loans purchased in the acquisition of the Security Banks. On the July 24, 2009 acquisition date,
the preliminary estimate of the contractually required principal payments
receivable for all impaired loans acquired from the Security Banks was $340.9
million, and the estimated fair value of those loans was $113.7 million. We valued the impaired loans based on the
liquidation value of the underlying collateral because we could not reasonably
estimate the timing and amount of the expected cash flows. As a result, we recorded no accretable
discount on these impaired loans. We
established a credit risk discount (non-accretable) of $227.2 million on the
acquisition date relating to these impaired loans, reflected in the recorded
net fair value of the impaired loans.
Our
preliminary estimate on the acquisition date of the contractually required principal
payments receivable for all other loans acquired in the acquisition of the
Security Banks was $1.2 billion, and the estimated fair value of the loans was
$751.2 million. At the acquisition date,
we established a credit risk discount (non-accretable) of $255.0 million
on these loans, representing amounts we did not expect to collect either from
the customers or from the liquidation of collateral. In our estimate of cash flows for the
non-impaired loans of the Security Banks, we also recorded an accretable
discount of $173.1 million relating to the loans, which represents the
undiscounted cash flows expected to be collected in excess of the estimated
fair value of the acquired loans. This
accretable discount is accreted into interest income on a method that
approximates level yield over the estimated life of the related performing
covered loans (which we estimate will be four years). This accretion, which totaled $26.3 million
in 2009 and $32.1 million for the six months ended June 30, 2010, is included
in interest income on loans in the consolidated statements of income.
As
a result of the FDIC acquisition and the loss share agreements, our financial
results and future risks related to the acquired assets and liabilities of the
Security Banks are completely altered, making historical financial information
of Security Bank Corporation, or the Security Banks, immaterial to an
understanding of our present and planned future operations. In addition, our business since July 24,
2009 and for the immediate future relies heavily on our loss share resolution
business and on the income generated from the remediation and disposal of the
assets we acquired from the FDIC and is fundamentally different from the
business of Security Bank Corporation.
In light of the foregoing, we have determined that Security Bank
Corporation is not the predecessor entity of the Company because we did not
succeed to substantially all of the business of Security Bank Corporation in
the acquisition, and we have therefore omitted historical financial statements
of Security Bank Corporation and the Security Banks in this registration
statement.
The Buckhead Community Bank
On
December 4, 2009, the Bank entered into a purchase and assumption
agreement with a loss share arrangement with the FDIC, as receiver of The
Buckhead Community Bank, Atlanta, Georgia, to assume substantially all of the
$810.0 million in liabilities and acquire approximately $880.5 million in
assets of The Buckhead Community Bank, a former full-service community bank
headquartered in Atlanta, Georgia. The
Bank now operates three former Buckhead Community Bank branches in Atlanta and
Sandy Springs, Georgia.
40
Table
of Contents
All
of the loans and OREO of The Buckhead Community Bank that we acquired are
covered by loss share agreements between the Bank and the FDIC that give the
Bank significant protection against future losses in the same manner as the
loss share agreements for the Security Banks except as noted below. Under the loss share agreements, the FDIC
agreed to cover 80% of losses on the disposition of loans and OREO up to $254.0
million, and 95% of the losses that exceed $254.0 million. At the time of acquisition, the Bank recorded
a receivable from the FDIC of $213.8 million, which represented the estimated
fair value of the FDIC’s portion of the losses that we expected to be incurred
and reimbursed to us as of that date.
Accounting
standards prohibit carrying over an allowance for loan losses for impaired
loans purchased in the acquisition of The Buckhead Community Bank. On the December 4, 2009 acquisition
date, the preliminary estimate of the contractually required principal payments
receivable for all impaired loans acquired from The Buckhead Community Bank was
$184.9 million, and the estimated fair value of those loans was $68.7
million. We valued the impaired loans
based on the liquidation value of the underlying collateral because we could
not reasonably estimate the timing and amount of the expected cash flows. As a result, we recorded no accretable
discount on these impaired loans. We
established a credit risk discount (non-accretable) of $116.2 million on the
acquisition date relating to these impaired loans, reflected in the recorded
net fair value of the impaired loans.
Our
preliminary estimate on the acquisition date of the contractually required
principal payments receivable for all other loans acquired in the acquisition
of The Buckhead Community Bank was $450.4 million, and the estimated fair value
of the loans was $274.9 million. At the
acquisition date, we established a credit risk discount (non-accretable) of
$140.6 million on these loans, representing amounts we did not expect to
collect either from the customers or from the liquidation of collateral. In our estimate of cash flows for the
non-impaired loans of The Buckhead Community Bank, we also recorded an
accretable discount of $35.4 million relating to the loans, which represents
the undiscounted cash flows expected to be collected in excess of the estimated
fair value of the acquired loans. This
accretable discount is accreted into interest income on a method that approximates
level yield over the estimated life of the related performing covered loans
(which we estimate will be four years).
This accretion, which totaled $1.0 million in 2009 and $5.9 for the six
months ended June 30, 2010, is included in interest income on loans in the
consolidated statements of income.
First Security National Bank
Also
on December 4, 2009, the Bank entered into a purchase and assumption
agreement with a loss share arrangement with the FDIC, as receiver of First
Security National Bank, Norcross, Georgia, to assume substantially all of the
$118.9 million in liabilities and acquire approximately $113.0 million in
assets of First Security National Bank, a former full-service community bank
headquartered in Norcross, Georgia. The
Bank now operates two former First Security National Bank branches in Norcross
and Atlanta, Georgia.
All
of the loans and OREO that were acquired are covered by loss share agreements
between the Bank and the FIDC that give the Bank significant protection against
future losses in the same manner as the loss share agreements for the Security
Banks except as noted below. Under the
loss share agreements, the FDIC agreed to cover 80% of losses on the
disposition of loans and OREO up to $27.0 million, and 95% of the losses that
exceed $27.0 million. At the time of
acquisition, the Bank recorded a receivable from the FDIC of $19.8 million,
which represented the estimated fair value of the FDIC’s portion of the losses
that we expected to be incurred and reimbursed to us as of that date.
Accounting
standards prohibit carrying over an allowance for loan losses for impaired
loans purchased in the acquisition of First Security National Bank. On the December 4, 2009 acquisition
date, the preliminary estimate of the contractually required principal payments
receivable for all impaired loans acquired from First Security National Bank
was $4.3 million, and the estimated fair value of those loans was $1.9
million. We valued the impaired loans
based on the liquidation value of the underlying collateral because we could not
reasonably estimate the timing and amount of the expected cash flows. As a result, we recorded no accretable
discount on these impaired loans. We
established a credit risk discount (non-accretable) of $2.4 million on the
acquisition date relating to these impaired loans, reflected in the recorded
net fair value of the impaired loans.
Our
preliminary estimate on the acquisition date of the contractually required
principal payments receivable for all other loans acquired in the acquisition
of First Security National Bank was $46.4 million, and the estimated fair value
of the loans was $31.3 million. At the
acquisition date, we established a credit risk discount (non-accretable) of
$12.3 million on these loans, representing amounts we did not expect to collect
either from the customers or from the liquidation of
41
Table of Contents
collateral. In our estimate of cash flows for the
non-impaired loans of First Security National Bank, we also recorded an
accretable discount of $2.8 million relating to the loans, which represents the
undiscounted cash flows expected to be collected in excess of the estimated
fair value of the acquired loans. This
accretable discount is accreted into interest income on a method that
approximates level yield over the estimated life of the related performing
covered loans (which we estimate will be four years). This accretion, which totaled $137,000 in 2009
and $700,000 for the six months ended June 30, 2010, is included in
interest income on loans in the consolidated statements of income.
NorthWest Bank and Trust
On
July 30, 2010, the Bank entered into a purchase and assumption agreement
with a loss share arrangement with the FDIC, as receiver of NorthWest Bank and
Trust, Acworth, Georgia, to assume $133.3 million in liabilities and acquire
approximately $154.6 million in assets of NorthWest Bank and Trust, a former
full-service community bank headquartered in Acworth, Georgia. The Bank now operates one former NorthWest
Bank and Trust branch in Marietta, Georgia.
All
of the loans and OREO that were acquired are covered by loss share agreements
between the Bank and the FIDC that give the Bank significant protection against
future losses in the same manner as the loss share agreements for the Security
Banks except as noted below. Under the
loss share agreements, the FDIC agreed to cover 80% of losses on the disposition
of loans and OREO. At the time of
acquisition, the Bank recorded a receivable from the FDIC of $24.5 million,
which represented the estimated fair value of the FDIC’s portion of the losses
that we expected to be incurred and reimbursed to us as of that date.
Accounting
standards prohibit carrying over an allowance for loan losses for impaired
loans purchased in the acquisition of NorthWest Bank and Trust. On the July 30, 2010 acquisition date,
the preliminary estimate of the contractually required principal payments
receivable for all impaired loans acquired from NorthWest Bank and Trust was
$18.6 million, and the estimated fair value of those loans was $4.9
million. At the acquisition date, we
established a credit risk discount (non-accretable) of $13.0 million on
these loans, representing amounts we did not expect to collect either from the
customers or from the liquidation of collateral. In our estimate of cash flows
on the impaired loans, we also recorded an accretable discount of $681,000
relating to the loans, which represents the undiscounted cash flows expected to
be collected in excess of the fair value of these loans.
Our
preliminary estimate on the acquisition date of the contractually required
principal payments receivable for all other loans acquired in the acquisition
of NorthWest Bank and Trust was $79.2 million, and the estimated fair value of
the loans was $51.9 million. At the
acquisition date, we established a credit risk discount (non-accretable) of
$16.7 million on these loans, representing amounts we did not expect to
collect either from the customers or from the liquidation of collateral. In our estimate of cash flows for the
non-impaired loans of NorthWest Bank and Trust, we also recorded an accretable
discount of $10.7 million relating to the loans, which represents the
undiscounted cash flows expected to be collected in excess of the estimated
fair value of the acquired loans. This
accretable discount is accreted into interest income on a method that
approximates level yield over the estimated life of the related performing
covered loans (which we estimate will be four years).
Summary of Acquisition and Loss Share Accounting
We determined current fair value accounting estimates of the acquired
assets and liabilities for the acquisitions in accordance with accounting
requirements for fair value measurement and acquisition transactions as
promulgated in FASB Accounting Standards Codification (“ASC”) Topic 310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality
,
(AICPA SOP 03-3), FASB ASC Topic No. 805,
Business
Combinations
, (formerly Statement of Financial Accounting Standards
No. 141(R),
Business Combinations
) and FASB ASC Topic 820,
Fair Value Measurements and Disclosures
,
(formerly Statements of Financial Accounting Standards No. 157,
Fair Value Measurements
). We recorded identifiable intangible assets,
including core deposit intangible assets, at fair value. Because the fair value of assets acquired and
intangible assets created as a result of three of our acquisitions exceeded the
fair value of liabilities assumed in the acquisitions, we recorded a gain in
our consolidated statements of income.
In addition, in one of our acquisitions the fair value of liabilities
assumed exceeded the fair value of assets acquired. As a result, we recorded goodwill on that
acquisition in our consolidated financial statements.
We
expect to have sufficient non-accretable discounts (discounts representing
amounts that are not expected to be collected from the customer and liquidation
of collateral) to cover our estimated losses on the covered assets. Furthermore,
42
Table of Contents
we
expect to have accretable discounts (discounts representing the excess of a
loan’s cash flows expected to be collected over the initial investment in the
loan) to provide for market yields on the covered loans. We recorded both the purchased assets and the
liabilities assumed at their respective acquisition date fair values.
The
loss share agreements will have a material effect on our cash flows and
operating results in both the short term and the long term. In the short term, we believe it is likely
that a significant amount of the covered loans will become delinquent and the
proceeds from the liquidation of collateral will be inadequate to repay the
loans. In those instances, we will stop
accruing interest on the loans, which will affect operating results. Management believes that it has established sufficient
non-accretable discounts on covered assets representing the expected losses
compared to their acquired contractual payment amounts. As a result, our operating results would only
be adversely affected by loan losses on covered assets to the extent that those
losses exceed the expected losses reflected in the fair value of the covered
assets at the acquisition date.
The
effects of the loss share agreements on cash flows and operating results in the
long term will be similar to the short-term effects described above. The long-term effects will depend primarily
on the ability of borrowers to make required payments over time. As the loss share agreements cover up to a
10-year period (five years for loans other than single family residential
mortgage loans), changing economic conditions will likely affect the timing of
future charge-offs and the resulting reimbursements from the FDIC. Management believes that any recapture of
interest income and recognition of cash flows from borrowers or amounts received
from the FDIC arising from the FDIC receivable may be recognized unevenly over
this period, as we exhaust our collection efforts under our normal practices.
In
the income statement, the covered expenses incurred to manage and dispose of
covered assets are expensed per our percentage under loss share (generally
20%), and the remaining amount (generally 80%) is added to the FDIC receivable
each quarter. We include these covered
expenses in our quarterly reporting to the FDIC, and the FDIC reimburses us for
them under the terms of the loss share agreements.
Critical Accounting Policies
We have adopted various
accounting policies that govern the application of accounting principles
generally accepted in the United States and with general practices within the
banking industry in the preparation of our financial statements. We describe our significant accounting
policies in the notes to our audited consolidated financial statements as of December 31,
2009. Management has discussed these
critical accounting policies with the Audit Committee of our board of
directors.
Some of the accounting
policies involve significant judgments and assumptions by us that have a
material impact on the carrying value of our assets and liabilities. We consider these accounting policies to be
critical accounting policies. The
judgment and assumptions we use are based on historical experience and other
factors that we believe to be reasonable under the circumstances. Because of the nature of the judgment and
assumptions we make, actual results could differ from these judgments and
estimates and could materially affect the carrying values of our assets and
liabilities and our results of operations.
The following is a summary
of the more judgmental estimates and complex accounting principles.
Acquisition Accounting
Generally accepted
accounting principles require the use of fair values in determining the
carrying values of certain assets and liabilities, as well as for specific
disclosures. The most significant uses
of fair values include impaired loans and foreclosed property and the net
assets acquired in business combinations.
We recorded assets purchased and liabilities assumed in our
FDIC-assisted acquisitions at their fair values. The fair value of a loan portfolio acquired
in a business combination requires greater levels of management estimates and
judgment than the remainder of purchased assets or assumed liabilities. The credit risks inherent and evidenced in
the FDIC-assisted transactions resulted in substantially all loans purchased in
the transaction were purchased with a credit discount. On the date of acquisition, when the loans
have evidence of credit deterioration since their origination and we believe it
is probable that we will not collect all contractually required principal and
interest payments, we refer to the difference between contractually required
payments and the cash flows expected to be collected as the non-accretable
discount. We must estimate expected cash
flows at each reporting date. Subsequent
decreases to the expected cash flows will generally result in a provision for
loan losses. Subsequent
43
Table of Contents
increases in cash flows
result in a reversal of the provision for loan losses to the extent of prior
charges and adjusted accretable discount, which will have a positive effect on
interest income. We also use this method
to handle purchased loans without evidence of credit deterioration.
Because
we record loans acquired in connection with FDIC-assisted acquisitions at fair
value, we record no allowance for loan losses related to the acquired covered
loans on the acquisition date, given that the fair value of the loans acquired
incorporates assumptions regarding credit risk.
We record acquired loans at fair value in accordance with the fair value
methodology, exclusive of the loss share agreements with the FDIC. These fair value estimates associated with
the loans include estimates related to expected prepayments and the amount and
timing of expected principal, interest and other cash flows.
We
continue to measure the loss share agreements on the same basis as the related
covered loans. Because the acquired
covered loans are subject to the accounting prescribed by FASB ASC Topic 310,
subsequent changes to the basis of the loss share agreements also follow that
model. Deterioration in the credit
quality of the loans (immediately recorded as an adjustment to the allowance
for loan losses) would immediately increase the basis of the loss share
agreements, with the offset recorded through the consolidated statement of
income. Increases in the credit quality
or cash flows of loans (reflected as an adjustment to the discount and accreted
into income over the remaining life of the loans) decrease the basis of the
loss share agreements. That decrease is
accreted into income over either the same period or the life of the loss share
agreements, whichever is shorter. Loss
assumptions used in the basis of the covered loans are consistent with the loss
assumptions used to measure the FDIC receivable. Fair value accounting incorporates into the
fair value of the FDIC receivable an element of the time value of money, which
is accreted back into income over the life of the loss share agreements.
FDIC Receivable
for Loss Share Agreements
The majority of our loan and other real estate assets are
covered under loss share agreements with the FDIC in which the FDIC has agreed
to reimburse us for between 80% and 95% of all losses incurred in connection
with those assets. We estimated the
amount that we will receive from the FDIC under the loss share agreements that
will result from losses incurred as we dispose of covered loans and other real
estate assets, and we recorded the estimate as a receiveable from the FDIC.
The FDIC receivable for loss
share agreements is measured separately from the related covered assets because
it is not contractually embedded in the assets and is not transferable if we
sell the assets. We estimated the fair
value of the FDIC receivable using the present value of cash flows related to
the loss share agreements based on the expected reimbursements for losses and
the applicable loss share percentages.
We will review and update the fair value of the FDIC receivable
prospectively as loss estimates related to covered loans and other real estate
owned change. Subsequent decreases in
the amount expected to be collected result in a provision for loan and lease
losses, an increase in the allowance for loan and lease losses, and a
proportional adjustment to the FDIC receivable for the estimated amount to be
reimbursed. Subsequent increases in the
amount expected to be collected result in the reversal of any
previously-recorded provision for loan and lease losses and related allowance
for loan and lease losses and adjustments to the FDIC receivable, or
prospective adjustment to the accretable discount if no provision for loan and
lease losses had been recorded.
Based on our due diligence
review for each of our acquisitions, including estimates of the timing of cash
flow receipts and the disposition of non-performing assets, we expect to
dispose of the acquired covered assets over a period of four years and have
estimated a four-year life for collection of the FDIC receivable. We discounted
the receivable for the expected timing and receipt of these cash flows using a
risk free rate plus a premium for risk.
For the risk free rate, we interpolated the three- and five-year U.S.
Treasury rate. The ultimate realization
of the FDIC receivable depends on the performance of the underlying covered
assets, the passage of time and claims paid by the FDIC. The accretion of the FDIC receivable discount
is recorded into noninterest income using the level yield method over the
estimated life of the receivable.
44
Table
of Contents
Allowance for Loan and Lease Losses (ALLL)
We
assess the adequacy of the ALLL quarterly with respect to non-covered
loans. This assessment includes
procedures to estimate the allowance and test the adequacy and appropriateness
of the resulting balance. The ALLL
consists of two components:
(1)
a specific amount
representative of identified credit exposures that are readily predictable by
the current performance of the borrower and underlying collateral; and
(2)
a general amount based upon
historical losses that is then adjusted for various stress factors
representative of various economic factors and characteristics of the loan
portfolio.
Even
though the ALLL is composed of two components, the entire ALLL is available to
absorb any credit losses.
We
establish the specific amount by examining impaired loans. Under generally accepted accounting
principles, we may measure the loss either by:
(1)
the observable market price
of the loan;
(2)
the present value of
expected future cash flows discounted at the loan’s effective interest rate; or
(3)
the fair value of the
collateral if the loan is collateral dependent.
Because
the majority of our impaired loans are collateral dependent, we calculate
nearly all of our specific allowances based on the fair value of the collateral.
We
establish the general amount by taking the remaining loan portfolio (excluding
those impaired loans discussed above) with allocations based on historical
losses in the total loan portfolio. We
then subject the calculation of the general amount to stress factors that are
somewhat subjective. The stress testing
attempts to correlate the historical loss rates with current economic factors
and current risks in the portfolio. The
stress factors consist of:
(1)
economic factors including
changes in the local or national economy;
(2)
the depth of experience in
the lending staff;
(3)
any concentrations of credit
(such as commercial real estate) in any particular industry group;
(4)
new banking laws or
regulations;
(5)
the credit grade of the
loans in our unsecured consumer loan portfolio; and
(6)
additional risks resulting
from the level of speculative real estate loans in the portfolio.
After
we assess the applicable factors, we evaluate the remaining amount based on
management’s experience.
Finally,
we compare the level of the ALLL with historical trends and peer information as
a reasonableness test. Management then
evaluates the result of the procedures performed, including the result of our
testing, and makes a conclusion regarding the appropriateness of the ALLL in
its entirety.
Income Taxes
Income Tax Expense.
The calculation of our
income tax expense requires significant judgment and the use of estimates. We periodically assess tax positions based on
current tax developments, including enacted statutory, judicial and regulatory
guidance. In analyzing our overall tax
position, we consider the amount and timing of recognizing income tax
liabilities and benefits. In applying
the tax and accounting guidance to the facts and circumstances, we adjust
income tax balances appropriately through the income tax provision. We maintain reserves for income tax
uncertainties at levels we believe are adequate to absorb probable
payments. Actual amounts paid, if any,
could differ significantly from these estimates.
Deferred Income Taxes.
We use the asset and
liability method of accounting for income taxes. Under this method, we recognize deferred tax
assets and liabilities for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.
We measure deferred tax assets and liabilities using enacted tax rates
expected to apply to taxable income in the years in which those
45
Table of Contents
temporary
differences are expected to be recovered or settled. We assess deferred tax assets based on
expected realizations, and we establish a valuation allowance for any amounts
we do not expect to realize.
Results of Operations
General
We
reported net income of $21.3 million for the six months ended June 30,
2010 and $18.0 million for the successor period from July 24, 2009 to December 31,
2009. Earnings per share on a diluted
basis were $0.67 for the six months ended June 30, 2010 and $0.58 for the
successor period from July 24, 2009 to December 31, 2009. The accretion of fair value discounts on
covered loans under our loss share agreements with the FDIC has significantly
affected our earnings for the 2009 successor period and the first six months of
2010. Additionally, we recorded a gain
of $1.2 million in 2009 related to two of our acquisitions.
We
expect that over the next four years, as we manage the disposition of our
covered loans and other real estate assets acquired from the FDIC, a
significant portion of our earnings will result from the accretion of fair
value discounts on our covered loan portfolio.
We recorded the covered loans at fair value on the date of each
acquisition. In our estimate of cash
flows for the acquired non-impaired loans, we recorded an accretable discount
relating to the loans, which represents the undiscounted cash flows expected to
be collected in excess of the estimated fair value of the acquired loans. This accretable discount is accreted into
interest income on a method that approximates level yield over the estimated
life of the related performing covered loans (which we estimate will be four
years from the date of each acquisition).
During this four-year period, as we dispose of our covered loans, we
also plan to grow our balance sheet by replacing our covered loans and the
related accretion on the accretable discount with new performing loans and
related interest income.
As part of our acquisitions,
we also established an FDIC receivable for loss share agreements, which
represents the present value of the estimated losses on covered loans and other
real estate assets to be reimbursed by the FDIC. We based the estimated losses on the same
cash flow estimates we used to determine the fair value of the covered
loans. The FDIC receivable will be
reduced as losses are recognized on covered loans and other real estate assets
and loss share payments are received from the FDIC. We expect to dispose of the acquired covered
assets from our 2009 acquisitions over a period of four years and have
estimated a four-year life from the date of each acquisition for collection of
the FDIC receivable. We record the
accretion of the FDIC receivable discount into noninterest income using the
level yield method over the estimated life of the receivable.
We
report covered loans under loss share agreements with the FDIC exclusive of the
FDIC receivable. The covered loans
acquired in our acquisitions are, and will continue to be, reviewed for
collectability, based on the expectations of cash flows on these loans. As a result, if there is a decrease in
expected cash flows due to an increase in estimated credit losses compared to
the estimate made on the acquisition date, we will record the decrease in the
present value of expected cash flows as a provision for covered loan losses
charged to earnings and will establish an allowance for covered loan losses. We will recognize a related credit to income
and an increase in the FDIC receivable at the same time, measured based on the
applicable loss share percentage.
Net Interest Income
Our
earnings depend to a large extent on net interest income, which is the excess
of the interest income recognized on interest earning assets (such as loans and
investment securities), as well as any accretion of fair value discounts on our
covered loans, over the interest expense incurred on interest bearing
liabilities such as deposits and borrowings.
Net interest income depends upon the volume of average interest-earning
assets and average interest-bearing liabilities and the interest rates earned
and paid on them. The significance of
net interest income is a function of our balances of interest-earning assets
and interest-bearing liabilities and the effect of market rates of interest as
influenced by the Federal Reserve’s monetary policy. Following our acquisitions, the accretion of
fair value discounts on covered loans under our loss share agreements with the
FDIC has significantly affected our net interest income, and we expect that to
continue for the immediate future.
Six months ended June 30,
2010 and 2009.
Our net
interest income was $62.1 million for the six months ended June 30,
2010. Our net interest rate spread,
which is the yield on interest earning assets, including the accretion of the
fair value discount on our covered loans, minus the cost of interest bearing
liabilities, was 7.60 % for the six months ended June
46
Table of Contents
30, 2010, while our net
interest margin, which is net interest income divided by average interest
earnings assets, was 7.29%. Excluding
the accretion of the fair value discount on our covered loans, our net interest
rate spread for the six months ended June 30, 2010 would have been 3.06%
and our net interest margin would have been 2.75%. Our net interest income was $537,000 for the
six months ended June 30, 2009.
This net interest income resulted from our average interest earning
assets of $32.5 million and our net interest margin of 3.33%.
Our interest income was
$80.8 million for the six months ended June 30, 2010, which included
interest and fees earned on loans of $37.8 million and the accretion of the
fair value discounts on our covered loans of $38.7 million. We anticipate that the amortization period
related to the accretion of the fair value discounts will run for a period of
four years from the date of each of our FDIC-assisted acquisitions. Our interest income was $953,000 for the six
months ended June 30, 2009, consisting primarily of interest and fees
earned on loans of $829,000 and $85,000 earned on investment securities.
Interest expense was $18.8
million for the six months ended June 30, 2010 and was comprised almost
entirely of interest paid on deposit accounts of $18.7 million. The average balance of interest bearing
deposit accounts was $2.0 billion or 99.6 % of total interest bearing
liabilities for the six months ended June 30, 2010. Interest expense was $416,000 for the six
months ended June 30, 2009 and was comprised primarily of interest paid on
deposit accounts.
Successor period ended December 31,
2009.
Our net interest income was
$43.1 million for the successor period ended December 31, 2009. Our net interest rate spread, including the
accretion of the fair value discount on our covered loans, was 7.16%, while our
net interest margin, was 6.95% for the successor period ended 2009. Excluding the accretion of the fair value
discount on our covered loans, our net interest rate spread would have been
2.74% and our net interest margin would have been 2.53% for the successor
period ended December 31, 2009.
Our interest income was
$57.8 million for the successor period ended December 31, 2009, which
included interest and fees earned on loans of $27.6 million and the accretion
of the fair value discount on our covered loans of $27.4 million. We anticipate that the amortization period
related to the accretion of the fair value discounts will run for a period of
four years from the date of each of our FDIC-assisted acquisitions.
Interest expense was $14.7
million for the successor period ended December 31, 2009 and was comprised
primarily of interest paid on deposit accounts of $13.6 million. The average balance of interest bearing
deposit accounts was $1.4 billion or 92% of total interest bearing liabilities
for the successor period ended December 31, 2009. Interest expense on deposits was reduced by
$1.9 million from July 24, 2009 to December 31, 2009, due to the
amortization of certificate of deposit discounts that resulted from our 2009
acquisitions. The remaining discount of
$4.6 million will be amortized over the life of the acquired certificates of
deposit and will become fully amortized by October 2010.
Predecessor period ended July 23,
2009 and the years ended December 31, 2008 and 2007.
Our net interest income was $614,000 for the
predecessor period from January 1, 2009 through July 23, 2009. Our net interest income was $1.1 million and
$1.2 million for the years ended December 31, 2008 and 2007,
respectively. Net interest income
remained relatively consistent in these periods as the growth in the volume of
interest earning assets was offset by declining asset yields as rates
decreased. The decline in loan yields
outpaced the decline in deposit costs.
Our interest income was $1.1
million for the predecessor period from January 1, 2009 through July 23,
2009, consisting primarily of interest and fees earned on loans of $974,000 and
$99,000 earned on investment securities.
Our interest income was $1.9 million for the year ended December 31,
2008, consisting primarily of interest and fees earned on loans of $1.7 million
and $190,000 earned on investment securities.
Our interest income was $1.8 million for the year ended December 31,
2007, consisting primarily of interest and fees earned on loans of $1.5 million
and $203,000 earned on investment securities.
Growth in earning assets drove increases in interest income, while rate
reductions significantly offset these volume increases.
Interest expense was
$500,000 for the predecessor period from January 1, 2009 through July 23,
2009 and was comprised primarily of interest paid on deposit accounts of
$454,000. Interest expense was $823,000
for the year ended December 31, 2008 and was comprised primarily of
interest paid on deposit accounts of $807,000.
Interest expense was $585,000 for the year ended December 31, 2007
and was comprised primarily of interest paid on deposit accounts of
$583,000. Deposit growth drove the
increases in interest expense as the average costs of deposits partially offset
the volume increases.
47
Table of
Contents
Average Balances, Income and Expenses, and Rates
The
following tables show our average balance sheet and our average yields on
assets and average costs of liabilities for the periods indicated. We derive these yields by dividing income or
expense by the average balance of the corresponding assets or liabilities. We have derived average balances from the
daily balances throughout the periods indicated.
|
|
|
For the Period From July 24, 2009
Through December 31, 2009
|
|
|
For the Period From January 1, 2009
Through July 23, 2009
|
|
|
(dollars in thousands)
|
|
Average
Balance
|
|
Income/
Expense
|
|
Yield/
Rate(1)
|
|
|
Average
Balance
|
|
Income/
Expense
|
|
Yield/
Rate(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning balances
|
|
$
|
297,323
|
|
$
|
305
|
|
0.23
|
%
|
|
$
|
5,005
|
|
$
|
41
|
|
1.46
|
%
|
|
Taxable investment securities
|
|
241,889
|
|
2,531
|
|
2.39
|
%
|
|
3,934
|
|
99
|
|
4.48
|
%
|
|
Non-taxable investment securities, tax- equivalent
basis
(2)
|
|
574
|
|
15
|
|
5.81
|
%
|
|
—
|
|
—
|
|
—
|
|
|
Loans receivable
(3)
|
|
876,131
|
|
54,998
|
|
14.32
|
%
|
|
23,905
|
|
974
|
|
7.25
|
%
|
|
Total earning assets
|
|
1,415,917
|
|
57,849
|
|
9.32
|
%
|
|
32,844
|
|
1,114
|
|
6.04
|
%
|
|
Total nonearning assets
|
|
603,072
|
|
|
|
|
|
|
2,208
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,018,989
|
|
|
|
|
|
|
$
|
35,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing transaction accounts
|
|
$
|
247,629
|
|
$
|
1,538
|
|
1.42
|
%
|
|
$
|
2,709
|
|
16
|
|
1.05
|
%
|
|
Savings & money market
|
|
223,026
|
|
1,757
|
|
1.80
|
%
|
|
4,777
|
|
59
|
|
2.20
|
%
|
|
Time deposits less than $100,000
|
|
488,240
|
|
656
|
|
0.31
|
%
|
|
9,184
|
|
183
|
|
3.55
|
%
|
|
Time deposits greater than $100,000
|
|
473,927
|
|
9,685
|
|
4.66
|
%
|
|
7,783
|
|
196
|
|
4.48
|
%
|
|
Advances from FHLB
|
|
118,006
|
|
1,093
|
|
2.11
|
%
|
|
1,800
|
|
46
|
|
4.55
|
%
|
|
Repurchase agreements and federal funds sold
|
|
5,443
|
|
12
|
|
0.51
|
%
|
|
—
|
|
—
|
|
—
|
|
|
Total interest-bearing liabilities
|
|
1,556,271
|
|
14,741
|
|
2.16
|
%
|
|
26,253
|
|
500
|
|
3.39
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing demand deposits
|
|
149,008
|
|
|
|
|
|
|
2,746
|
|
|
|
|
|
|
Other liabilities
|
|
22,866
|
|
|
|
|
|
|
270
|
|
|
|
|
|
|
Shareholders’ equity
|
|
290,844
|
|
|
|
|
|
|
5,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,018,989
|
|
|
|
|
|
|
$
|
35,052
|
|
|
|
|
|
|
Net interest income
|
|
|
|
$
|
43,108
|
|
|
|
|
|
|
$
|
614
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
7.16
|
%
|
|
|
|
|
|
2.65
|
%
|
|
Net interest margin
|
|
|
|
|
|
6.95
|
%
|
|
|
|
|
|
3.33
|
%
|
(1)
Annualized for the applicable period.
(2)
Reflects taxable equivalent adjustments using the
statutory tax rate of 35% in adjusting interest on tax-exempt securities to a
fully taxable basis. The taxable equivalent
adjustments included above amounts to $5,000 for the successor period ended December 31,
2009.
(3)
Includes nonaccruing loans.
For the successor period ended December 31, 2009,
interest income on loans receivable in the above table includes $27.4 million
of accretion from the accretable discount recorded from our 2009
acquisitions. Without this accretion,
interest income on loans would have been $27.6 million resulting in a yield on
loans receivable of 7.18%, a yield on earning assets of 4.90%, a net interest
spread of 2.74% and a net interest margin of 2.53%.
48
Table of
Contents
|
|
|
For the Year Ended
December 31, 2008
|
|
For the Year Ended
December 31, 2007
|
|
|
|
|
Average
Balance
|
|
Income/
Expense
|
|
Yield/
Rate(1)
|
|
Average
Balance
|
|
Income/
Expense
|
|
Yield/
Rate(1)
|
|
|
|
|
(dollars
in thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning balances
|
|
$
|
2,432
|
|
$
|
56
|
|
2.30
|
%
|
$
|
751
|
|
$
|
54
|
|
7.20
|
%
|
|
Taxable investment securities
|
|
4,000
|
|
190
|
|
4.75
|
%
|
4,085
|
|
203
|
|
4.97
|
%
|
|
Non-taxable investment securities, tax- equivalent
basis
|
|
0
|
|
|
|
|
|
0
|
|
|
|
|
|
|
Loans receivable
(3)
|
|
22,155
|
|
1,671
|
|
7.54
|
%
|
15,994
|
|
1,532
|
|
9.58
|
%
|
|
Total earning assets
|
|
28,587
|
|
1,917
|
|
6.71
|
%
|
20,827
|
|
1,789
|
|
8.59
|
%
|
|
Total nonearning assets
|
|
2,301
|
|
|
|
|
|
2,255
|
|
|
|
|
|
|
Total assets
|
|
$
|
30,888
|
|
|
|
|
|
$
|
23,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing transaction accounts
|
|
$
|
2,839
|
|
35
|
|
1.23
|
%
|
$
|
2,522
|
|
$
|
32
|
|
1.27
|
%
|
|
Savings & money market
|
|
3,497
|
|
82
|
|
2.34
|
%
|
2,801
|
|
96
|
|
3.43
|
%
|
|
Time deposits less than $100,000
|
|
7,203
|
|
352
|
|
4.89
|
%
|
5,258
|
|
272
|
|
5.17
|
%
|
|
Time deposits greater than $100,000
|
|
7,535
|
|
338
|
|
4.49
|
%
|
3,215
|
|
183
|
|
5.69
|
%
|
|
Advances from FHLB
|
|
900
|
|
14
|
|
1.56
|
%
|
—
|
|
—
|
|
—
|
|
|
Repurchase agreements and federal funds sold
|
|
109
|
|
2
|
|
1.83
|
%
|
44
|
|
2
|
|
4.55
|
%
|
|
Total interest-bearing liabilities
|
|
22,083
|
|
823
|
|
3.73
|
%
|
13,840
|
|
585
|
|
4.23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing demand deposits
|
|
2,471
|
|
|
|
|
|
2,743
|
|
|
|
|
|
|
Other liabilities
|
|
358
|
|
|
|
|
|
214
|
|
|
|
|
|
|
Shareholders’ equity
|
|
5,976
|
|
|
|
|
|
6,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
30,888
|
|
|
|
|
|
$
|
23,082
|
|
|
|
|
|
|
Net interest income
|
|
|
|
$
|
1,094
|
|
|
|
|
|
$
|
1,204
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
2.98
|
%
|
|
|
|
|
4.36
|
%
|
|
Net interest margin
|
|
|
|
|
|
3.83
|
%
|
|
|
|
|
5.78
|
%
|
(1)
Annualized for the applicable period.
(2)
Includes nonaccruing loans.
The decrease in loan yields during the year ended December 31,
2008 outpaced the decreases in deposit costs.
Higher cost time deposits comprised the majority of funding during 2007
and 2008. Increases in non-performing
loans further decreased the net interest margin.
49
Table of
Contents
|
|
|
For the Six Months
Ended June 30, 2010
|
|
|
For the Six Months
Ended June 30, 2009
|
|
|
(dollars in thousands)
|
|
Average
Balance
|
|
Income/
Expense
|
|
Yield/
Rate(1)
|
|
|
Average
Balance
|
|
Income/
Expense
|
|
Yield/
Rate(1)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning balances
|
|
$
|
234,266
|
|
$
|
291
|
|
0.25
|
%
|
|
$
|
4,764
|
|
$
|
39
|
|
1.65
|
%
|
|
Taxable investment securities
|
|
358,256
|
|
3,981
|
|
2.24
|
%
|
|
4,076
|
|
85
|
|
4.21
|
%
|
|
Non-taxable investment securities, tax- equivalent
basis
(2)
|
|
3,077
|
|
100
|
|
6.58
|
%
|
|
—
|
|
—
|
|
—
|
%
|
|
Loans receivable
(3)
|
|
1,122,898
|
|
76,488
|
|
13.74
|
%
|
|
23,665
|
|
829
|
|
7.06
|
%
|
|
Total earning assets
|
|
1,718,497
|
|
80,860
|
|
9.49
|
%
|
|
32,505
|
|
953
|
|
5.91
|
%
|
|
Total nonearning assets
|
|
804,166
|
|
|
|
|
|
|
3,096
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,522,663
|
|
|
|
|
|
|
$
|
35,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing transaction accounts
|
|
$
|
230,303
|
|
$
|
1,060
|
|
0.93
|
%
|
|
$
|
2,743
|
|
$
|
14
|
|
1.03
|
%
|
|
Savings & money market
|
|
941,528
|
|
9,837
|
|
2.11
|
%
|
|
4,888
|
|
50
|
|
2.06
|
%
|
|
Time deposits less than $100,000
|
|
444,314
|
|
251
|
|
0.11
|
%
|
|
7,730
|
|
156
|
|
4.07
|
%
|
|
Time deposits greater than $100,000
|
|
374,598
|
|
7,590
|
|
4.09
|
%
|
|
9,030
|
|
168
|
|
3.75
|
%
|
|
Advances from FHLB
|
|
81
|
|
—
|
|
0.30
|
%
|
|
1,800
|
|
27
|
|
3.02
|
%
|
|
Repurchase agreements and federal funds sold
|
|
8,253
|
|
22
|
|
0.53
|
%
|
|
168
|
|
1
|
|
1.20
|
%
|
|
Total interest-bearing liabilities
|
|
1,999,077
|
|
18,760
|
|
1.89
|
%
|
|
26,359
|
|
416
|
|
3.18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing demand deposits
|
|
180,533
|
|
|
|
|
|
|
3,336
|
|
|
|
|
|
|
Other liabilities
|
|
20,159
|
|
|
|
|
|
|
105
|
|
|
|
|
|
|
Shareholders’ equity
|
|
322,894
|
|
|
|
|
|
|
5,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,522,663
|
|
|
|
|
|
|
$
|
35,601
|
|
|
|
|
|
|
Net interest income
|
|
|
|
$
|
62,100
|
|
|
|
|
|
|
$
|
537
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
7.60
|
%
|
|
|
|
|
|
2.73
|
%
|
|
Net interest margin
|
|
|
|
|
|
7.29
|
%
|
|
|
|
|
|
3.33
|
%
|
(1)
Annualized for the applicable period.
(2)
Reflects taxable equivalent adjustments using the
statutory tax rate of 35% in adjusting interest on tax-exempt securities to a
fully taxable basis. The taxable
equivalent adjustments included above amounts to $38,000 for 2010.
(3)
Includes nonaccruing loans.
For the six months ended ended June 30, 2010, interest
income on loans receivable in the above table includes $38.7 million of
accretion from the accretable discount recorded from our 2009
acquisitions. Without this accretion,
interest income on loans would have been $37.8 million resulting in a yield on
loans receivable of 6.79%, a yield on earning assets of 4.95%, a net interest
spread of 3.06% and a net interest margin of 2.75%. The net interest margin for the six months
eded June 30, 2009 declined 44 basis points compared to 2008 as lower
asset yields pressured the margin.
Inreased non-performing loans also decreased the net interest margin.
50
Table of Contents
Rate/Volume Analysis
Net
interest income can be analyzed in terms of the impact of changing interest
rates and changing volume. The following
tables reflect the effect that varying levels of interest-earning assets and
interest-bearing liabilities and the applicable rates have had on changes in net
interest income for the periods presented.
|
|
|
Successor Period Ended
December 31, 2009 vs.
Predecessor Period Ended
July 23, 2009
|
|
Predecessor Period Ended
July 23, 2009 vs.
Year Ended
December 31, 2008
|
|
|
|
|
Increase (Decrease) Due to
|
|
Increase (Decrease) Due to
|
|
|
|
|
(in thousands)
|
|
|
|
|
Volume
|
|
Rate
|
|
Net
Change
|
|
Volume
|
|
Rate
|
|
Net
Change
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
61,824
|
|
$
|
(7,800
|
)
|
$
|
54,024
|
|
$
|
132
|
|
$
|
(829
|
)
|
$
|
(697
|
)
|
|
Taxable investment securities
|
|
10,661
|
|
(8,229
|
)
|
2,432
|
|
(3
|
)
|
(88
|
)
|
(91
|
)
|
|
Non-taxable investment securities
|
|
15
|
|
—
|
|
15
|
|
—
|
|
—
|
|
—
|
|
|
Interest bearing balances and federal funds sold
|
|
4,264
|
|
(4,000
|
)
|
264
|
|
59
|
|
(74
|
)
|
(15
|
)
|
|
Total interest income
|
|
76,764
|
|
(20,029
|
)
|
56,735
|
|
188
|
|
(991
|
)
|
(803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
45,271
|
|
(32,089
|
)
|
13,182
|
|
136
|
|
(489
|
)
|
(353
|
)
|
|
Advances from FHLB and other borrowings
|
|
5,288
|
|
(4,241
|
)
|
1,047
|
|
14
|
|
18
|
|
32
|
|
|
Securities sold under repurchase agreements and
federal funds purchased
|
|
12
|
|
—
|
|
12
|
|
(2
|
)
|
—
|
|
(2
|
)
|
|
Total interest expense
|
|
50,571
|
|
(36,330
|
)
|
14,241
|
|
148
|
|
(471
|
)
|
(323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
26,193
|
|
$
|
16,301
|
|
$
|
42,494
|
|
$
|
(40
|
)
|
$
|
(520
|
)
|
$
|
(480
|
)
|
|
|
|
Year Ended
December 31, 2008 vs.
December 31, 2007
|
|
Six Months Ended
June 30, 2010 vs. June 30, 2009
|
|
|
|
|
Increase (Decrease) Due to
|
|
Increase (Decrease) Due to
|
|
|
|
|
(in thousands)
|
|
|
|
|
Volume
|
|
Rate
|
|
Net
Change
|
|
Volume
|
|
Rate
|
|
Net
Change
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
590
|
|
$
|
(451
|
)
|
$
|
139
|
|
$
|
77,652
|
|
$
|
(1,993
|
)
|
$
|
75,659
|
|
|
Taxable investment securities
|
|
(4
|
)
|
(9
|
)
|
(13
|
)
|
14,894
|
|
(10,998
|
)
|
3,896
|
|
|
Non-taxable investment securities
|
|
—
|
|
—
|
|
—
|
|
3,077
|
|
(2,977
|
)
|
100
|
|
|
Interest bearing balances and federal funds sold
|
|
121
|
|
(119
|
)
|
2
|
|
3,789
|
|
(3,537
|
)
|
252
|
|
|
Total interest income
|
|
707
|
|
(579
|
)
|
128
|
|
99,412
|
|
(19,505
|
)
|
79,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
374
|
|
(150
|
)
|
224
|
|
53,146
|
|
(34,796
|
)
|
18,350
|
|
|
Advances from FHLB and other borrowings
|
|
14
|
|
—
|
|
14
|
|
(52
|
)
|
25
|
|
(27
|
)
|
|
Securities sold under repurchase agreements and
federal funds purchased
|
|
3
|
|
(3
|
)
|
—
|
|
97
|
|
(76
|
)
|
21
|
|
|
Total interest expense
|
|
391
|
|
(153
|
)
|
238
|
|
53,191
|
|
(34,847
|
)
|
18,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
316
|
|
$
|
(426
|
)
|
$
|
(110
|
)
|
$
|
46,221
|
|
$
|
15,342
|
|
$
|
61,563
|
|
51
Table of
Contents
Provision for Loan Losses
We have established an
allowance for loan losses through a provision for loan losses charged as an
expense on our statement of operations.
We review our non-covered loan portfolio, consisting of loans that are
not covered by loss share agreements with the FDIC, on a quarterly basis to
evaluate our outstanding loans and to measure both the performance of the
portfolio and the adequacy of the allowance for loan losses. Please see the discussion below under “Balance
Sheet Review — Provision and Allowance for Loan Losses” for a description of
the factors we consider in determining the amount of the provision we expense
each period to maintain this allowance.
We
do not maintain an allowance for loan loss for the covered loans in our loan
portfolio that we acquired under the loss share agreements with the FDIC,
because we recorded these loans at fair value at the time of each respective
acquisition and subsequent to this date, there has been no significant
deterioration that would require an allowance.
However, we do evaluate the adequacy of the non-accretable discounts on
our covered loans, and we determined that no additional provision for loan
losses on covered loans was required for the six months ended June 30,
2010. At June 30, 2010, our
non-covered loans totaled $153.6 million, or 13.6% of our total loan portfolio,
compared to $47.4 million, or 4.0% of our total loan portfolio at December 31,
2010. Before July 24, 2009, all of
our loans were non-covered loans.
Six months ended June 30, 2010 and 2009.
For the six months ended June 30,
2010, our provision for loan losses was $1.2 million, compared to $261,000 for
the six months ended June 30, 2009.
The allowance for loan losses was approximately $3.6 million and $706,000
as of June 30, 2010 and 2009, respectively. Our allowance for loan losses as a percentage
of gross non-covered loans was 2.37% at June 30, 2010. Our allowance for loan losses as a percentage
of total loans receivable was 2.8% at June 30, 2009.
Successor period ended December 31, 2009
. For the successor period ended December 31,
2009, our provision for loan losses was $2.7 million. Our allowance for loan losses was
approximately $2.5 million at December 31, 2009. Excluding our covered loans, our allowance
for loan losses as a percentage of gross non-covered loans was 5.3% at December 31,
2009.
Predecessor period ended July 23, 2009 and the years ended December 31,
2008 and 2007
. For the
predecessor period ended July 23, 2009, our provision for loan losses was
$261,000, compared to $312,000 and $196,000 for the years ended December 31,
2008 and 2007, respectively. The
allowance for loan losses was approximately $445,000 and $316,000, as of December 31,
2008 and 2007, respectively. Our allowance
for loan losses as a percentage of total loans receivable was 1.97% and 1.65%
at December 31, 2008 and 2007, respectively.
We
review our loss experience on our covered loan portfolio periodically and
compare our losses to the estimated losses in the fair value discounts. In the future, if our actual losses exceed
the estimated losses, we will need to record an adjustment to these discounts
through a provision for loan losses charged as an expense on our statement of
operations. In that event, due to the
FDIC loss share agreements, we would only expense between 5% and 20% of the
estimated loss, depending upon the applicable acquisition and loss share
agreement to which the loss is related.
No such adjustments were required for successor period ended December 31,
2009 or the six months ended June 30, 2010.
Noninterest Income
Six months ended June 30, 2010 and 2009.
Noninterest income totaled
$12.3 million for the six months ended June 30, 2010. The accretion of the FDIC receivable discount
of $6.9 million comprised 56.4% of our noninterest income for the six months
ended June 30, 2010. The FDIC
receivable discount had an estimated original life of four years from the date
of each acquisition, thus we expect the accretion to be completed in 2013. Service charges on deposits of $4.6 million
comprised 37.7% of our noninterest income for the six months ended June 30,
2010. These service charges are
primarily from fees related to insufficient funds checks and the Bank’s bounce
protection product. For the six months
ended June 30, 2009, noninterest income totaled $103,000, which was
primarily composed of service charges on deposit accounts.
Successor period ended December 31, 2009.
Noninterest income totaled
$10.3 million for the successor period from July 24, 2009 through December 31,
2009. The accretion of the FDIC
receivable discount of $4.7 million comprised 46.1% of our noninterest income
for the successor period ended December 31, 2009. The FDIC receivable discount had an estimated
original life of four years from the date of each acquisition, thus we expect
the accretion to be completed in 2013.
Service charges on deposits of $3.3 million comprised 32.7% of our
noninterest income for the successor period ended
52
Table of Contents
December 31,
2009. These service charges are
primarily from fees related to insufficient funds checks and the Bank’s bounce
protection product.
Predecessor period ended July 23, 2009 and the years ended December 31,
2008 and 2007
. For the
predecessor period from January 1, 2009 through July 23, 2009, our
noninterest expense totaled $119,000, which was primarily comprised of service
charges on deposit accounts. For the
years ended December 31, 2008 and 2007, noninterest income totaled
$212,000 and $203,000, respectively, which was primarily composed of service
charges on deposit accounts.
Noninterest Expense
Six months ended June 30, 2010 and 2009.
Noninterest expense totaled
$39.1 million for the six months ended June 30, 2010. Salaries and employee benefits were our most
significant expense totaling $20.8 million, or 53.1% of noninterest expense for
the six months ended June 30, 2010.
Total salaries were $14.9 million, cash incentive plan expenses were
$2.6 million and payroll taxes were $1.2 million. Salaries and benefits increased in 2010 as
our mortgage division began operations and we implemented our 401(k) savings
and profit sharing plan. We currently
have higher than peer average expenses associated with the operation of our
Special Assets Division, which services the problem assets acquired under the
loss share agreements with the FDIC, and our Regulatory Relations Department,
which manages our compliance with the FDIC loss share agreements.
Federal
deposit insurance premiums and fees were $2.5 million, or 6.4%, of noninterest
expense for the six months ended June 30, 2010, increasing in 2010 with
our growth in insured deposits. Occupancy
and equipment expenses were $4.1 million, or 10.5% of noninterest expense for
the six months ended June 30, 2010.
During the first half of 2010, we leased each of the acquired branch
locations from our 2009 acquisitions from the FDIC. As a result, our occupancy and equipment
expenses include very little depreciation expense. The settlement with the FDIC on the 2009
acquisitions occurred in the third quarter of 2010, when we purchased the
acquired branch locations for $21.9 million from the FDIC. We have now begun depreciating the acquired
assets. Subsequently to the branch purchases from the FDIC, we anticipate
monthly depreciation expense to increase approximately $100,000.
Legal
and professional expenses were $1.6 million, or 4.1% of noninterest expense for
the six months ended June 30, 2010, comprised of $599,000 in legal fees,
$514,000 in accounting and audit fees and $451,000 of consulting and other
professional fees. Following the
effective date of this registration statement, we will be obligated to file
various reports required by the Exchange Act, including current reports on Form 8-K,
quarterly reports on Form 10-Q and annual reports on Form 10-K. As a result, we anticipate we will incur
significant legal, accounting and other expenses that we did not incur in the
past and, therefore, are not reflected in our historical financial statements.
Net
costs of operations of other real estate owned were $4.8 million, or 12.2% of
noninterest expense, for the six months ended June 30, 2010. These costs include losses on sales of other
real estate of $2.5 million and expenses related to the management and
collection of other real estate of $2.3 million. Under the loss share agreements, we record a
portion of these losses and expenses in our statements of income (generally
20%) and we add the remaining 80% to the FDIC receivable.
Noninterest
expense totaled $619,000 for the six months ended June 30, 2009,
consisting primarily of $324,000 in salaries and employee benefits, $101,000 in
occupancy expenses and $95,000 in other expense. Such expenses were consistent with calendar
2008 as the Company’s costs were primarily fixed in nature during this period.
Successor period ended December 31, 2009.
Noninterest expense totaled
$22.3 million for the successor period from July 24, 2009 through December 31,
2009. Salaries and employee benefits
were our most significant expense totaling $13.2 million, or 58.9% of
noninterest expense for the successor period ended December 31, 2009. Total salaries were $10.3 million, cash
incentive plan expenses were $1.7 million and payroll taxes were $851,000.
Federal
deposit insurance premiums and fees were $1.7 million, or 7.8% of noninterest
expense, for the successor period ended December 31, 2009. During the fourth quarter of 2009, like other
banks, we prepaid an amount estimated to be three years of deposit premiums to
the FDIC totaling $12.0 million. This
prepayment will be amortized to expense over the three-year period and adjusted
for changes in deposit levels and risk factors.
53
Table
of Contents
Occupancy
and equipment expenses were $1.7 million, or 7.5% of noninterest expense for
the successor period ended December 31, 2009. During 2009, we leased each of the acquired
branch locations from the FDIC. As a
result, our occupancy and equipment expenses include very little depreciation
expense but a significant amount of leasing expense. The settlement with the FDIC on the 2009
acquisitions occurred in the third quarter of 2010, and we have begun
depreciating the acquired assets.
Subsequent to the branch purchases from the FDIC, we anticipate monthly
depreciation expense to increase approximately $100,000.
Legal
and professional expenses were $1.4 million, or 6.4% of noninterest expense for
the successor period ended December 31, 2009, comprised of $427,000 in
legal fees, $578,000 in accounting and audit fees and $469,000 of consulting
and other professional fees. Our
resolution efforts with respect to our covered assets and our acquisition
activity in 2009 have resulted in increased legal and professional expenses.
Predecessor period ended July 23, 2009 and the years ended December 31,
2008 and 2007.
For the
predecessor period from January 1, 2009 through July 23, 2009, our
noninterest expense totaled $719,000, consisting primarily of $380,000 in
salaries and employee benefits, $115,000 in occupancy expenses, $64,000 in data
processing and $89,000 in other expense.
For the year ended December 31, 2008, noninterest expense totaled
$1.5 million, consisting primarily of $728,000 in salaries and employee
benefits, $289,000 in occupancy expenses, $111,000 in data processing and
$156,000 in other expense. For the year
ended December 31, 2007, noninterest expense totaled $1.4 million,
consisting primarily of $783,000 in salaries and employee benefits, $303,000 in
occupancy expenses, $99,000 in data processing and $187,000 in other
expense. Because of the small size of
the Bank during these periods, there was very little variability in noninterest
expenses as the Bank was experiencing expected growth designed to better absorb
fixed costs.
Balance
Sheet Review
General
At
June 30, 2010, we had total assets of $2.6 billion, consisting principally
of $1.1 billion in loans, $422.7 million in investment securities, $482.9
million in FDIC receivable, $166.5 million in other real estate owned and
$304.2 million in cash and cash equivalents.
Our liabilities at June 30, 2010 totaled $2.3 billion, consisting
principally of $2.2 billion in deposits.
At June 30, 2010, our shareholders’ equity was $335.0 million.
At
December 31, 2009, we had total assets of $2.5 billion, consisting
principally of $1.2 billion in loans, $318.0 million in investment securities,
$605.5 million in FDIC receivables, $141.8 million in other real estate owned
and $200.2 million in cash and cash equivalents. Our liabilities at December 31, 2009
totaled $2.2 billion, consisting principally of $2.2 billion in deposits. At December 31, 2009, our shareholders’
equity was $310.8 million.
Investments
Our
investment portfolio serves as a source of liquidity and earnings and is used
to manage interest rate risk. At June 30, 2010, the $422.7 million in our
available-for-sale investment securities portfolio represented approximately 16.3% of our total assets
compared to $318.0 million, or 12.7% of total assets, at December 31,
2009. We anticipate maintaining
an investment portfolio to provide both increased earnings and liquidity.
Our
investment portfolio primarily consists of U.S. government agency securities
and agency mortgage-backed securities.
As of June 30, 2010, $201.8 million, or 47.7%, of our
available-for-sale securities were invested in agency mortgage-backed
securities, compared to $229.5 million, or 72.2%, as of December 31,
2009. Agency mortgage-backed securities
are securities that have been developed by pooling a number of real estate
mortgages and are principally issued by “quasi-federal” agencies such as Fannie
Mae and Freddie Mac. These securities
are deemed to have high credit ratings, and the minimum monthly cash flows of
principal and interest are guaranteed by the issuing agencies. Although investors generally assume that the
federal government will support these agencies, it is under no obligation to do
so. Other agency mortgage-backed
securities are issued by Ginnie Mae, which is a federal agency, and are
guaranteed by the U.S. government. As of
June 30, 2010, $217.3 million, or 51.4%, of our available-for-sale
securities were invested in U.S. government agencies, compared to $84.7
million, or 26.6%, as of December 31, 2009.
At December 31, 2008, the $3.0 million in our
available-for-sale investment securities portfolio represented approximately 9.0% of our total assets compared
to $4.0 million, or 14.6% of total assets at December 31, 2007.
54
Table of Contents
Following is a summary of our available for sale investment portfolio
for the periods presented.
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
December 31, 2008
|
|
December 31, 2007
|
|
|
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
|
|
|
(in thousands)
|
|
|
Available
for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored
enterprises
|
|
$
|
216,456
|
|
$
|
217,348
|
|
$
|
85,227
|
|
$
|
84,716
|
|
$
|
2,000
|
|
$
|
2,115
|
|
$
|
2,998
|
|
$
|
3,043
|
|
|
FNMA,
GNMA, FHLMC and Agency CMO mortgage-backed securities
|
|
197,802
|
|
201,792
|
|
228,649
|
|
229,542
|
|
867
|
|
893
|
|
993
|
|
987
|
|
|
State,
county and municipals
|
|
2,913
|
|
3,009
|
|
3,176
|
|
3,212
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Other
investments
|
|
337
|
|
505
|
|
325
|
|
518
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total
|
|
$
|
417,508
|
|
$
|
422,654
|
|
$
|
317,377
|
|
$
|
317,988
|
|
$
|
2,867
|
|
$
|
3,008
|
|
$
|
3,991
|
|
$
|
4,030
|
|
The
following table shows contractual maturities and yields on our investments at June 30,
2010 and December 31, 2009.
Expected maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations with or without call
or prepayment penalties.
|
|
|
Government-
sponsored enterprises
|
|
Mortgage-backed
securities
|
|
State, county
and
municipals
|
|
Other investments
|
|
|
|
|
Amount
|
|
Yield
|
|
Amount
|
|
Yield
|
|
Amount
|
|
Yield
|
|
Amount
|
|
Yield
|
|
|
|
|
(in thousands)
|
|
|
Maturity
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
year or less
|
|
$
|
56,421
|
|
0.55
|
%
|
$
|
—
|
|
—
|
|
$
|
—
|
|
—
|
|
$
|
—
|
|
—
|
|
|
After
one year through five years
|
|
147,557
|
|
0.90
|
%
|
318
|
|
2.24
|
%
|
716
|
|
2.43
|
%
|
—
|
|
—
|
|
|
After
five years through 10 years
|
|
8,682
|
|
3.48
|
%
|
2,128
|
|
2.22
|
%
|
456
|
|
5.13
|
%
|
505
|
|
17.04
|
%
|
|
After
10 years
|
|
4,688
|
|
4.37
|
%
|
199,346
|
|
3.08
|
%
|
1,837
|
|
7.56
|
%
|
—
|
|
—
|
|
|
Total
|
|
$
|
217,348
|
|
0.98
|
%
|
$
|
201,792
|
|
3.06
|
%
|
$
|
3,009
|
|
5.97
|
%
|
$
|
505
|
|
17.04
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
year or less
|
|
$
|
6,026
|
|
4.98
|
%
|
$
|
—
|
|
—
|
|
$
|
251
|
|
0.10
|
%
|
$
|
—
|
|
—
|
|
|
After
one year through five years
|
|
55,261
|
|
1.45
|
%
|
33
|
|
1.82
|
%
|
—
|
|
—
|
|
—
|
|
—
|
|
|
After
five years through 10 years
|
|
9,686
|
|
3.40
|
%
|
2,754
|
|
2.54
|
%
|
1,159
|
|
3.47
|
%
|
518
|
|
17.04
|
%
|
|
After
10 years
|
|
13,743
|
|
4.47
|
%
|
226,755
|
|
2.58
|
%
|
1,802
|
|
7.56
|
%
|
—
|
|
—
|
|
|
Total
|
|
$
|
84,716
|
|
2.42
|
%
|
$
|
229,542
|
|
2.58
|
%
|
$
|
3,212
|
|
5.49
|
%
|
$
|
518
|
|
17.04
|
%
|
Loans
Loans
receivable constitutes our largest interest-earning asset. Total loans outstanding at June 30, 2010
were approximately $1.1 billion and were
$1.2 billion at December 31, 2009, in each case after subtracting the
accretable discount, non-accretable discount, allowance for loan losses and net
unamortized loan origination fees. Total
loans outstanding at December 31, 2008 and 2007 were $22.5 million and
$19.2 million, respectively.
Loans
secured by real estate mortgages are the principal component of our loan
portfolio. Most of our real estate loans
are secured by residential or commercial property. We do not generally originate traditional
long-term residential mortgages for the portfolio, but we do issue traditional
second mortgage residential real estate loans and home equity lines of
credit. We obtain a security interest in
real estate whenever possible, in addition to any other available collateral,
to
55
Table of Contents
increase
the likelihood of the ultimate repayment of the loan. Generally, we limit the loan-to-value ratio
on loans we make to 85%.
We
acquired the vast majority of our loans in our nine FDIC-assisted
transactions. We refer to these acquired
loans as “covered loans” in the table below.
Before we acquired the Security Banks from the FDIC on July 24,
2009, we had no covered loans. The current concentrations in our loan
portfolio may not be indicative of concentrations in our loan portfolio in the
future. We will attempt to maintain a
relatively diversified loan portfolio to help reduce the risk inherent in concentration
in certain types of collateral.
As
seen below, during 2010 our covered loans decreased by 17.4% and our
non-covered loans increased by 225.5%.
We have planned for and expect these trends to continue. The covered
loans will decrease as they are collected or charged-off or the underlying
collateral is foreclosed on and sold.
Our covered loans may increase in the future if we acquire more failed
banks from the FDIC in transactions that include loss share agreements. Our
non-covered loans will increase as we originate and purchase well-underwritten
loans. Due to the current economic environment we are operating in, covered
loans may continue to decrease faster than non-covered loans increase thereby
resulting in a net decrease in loans receivable.
The following tables summarize the composition of our loan
portfolio for the periods presented:
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
Covered
Loans
|
|
Non-
Covered
Loans
|
|
Total
Amount
|
|
% of
Total
|
|
Covered
Loans
|
|
Non-
Covered
Loans
|
|
Total
Amount
|
|
% of
Total
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and
industrial
|
|
$
|
161,699
|
|
$
|
18,132
|
|
$
|
179,831
|
|
10.1
|
%
|
$
|
187,388
|
|
$
|
5,552
|
|
$
|
192,940
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage(1)
|
|
293,880
|
|
20,821
|
|
314,701
|
|
17.7
|
%
|
321,326
|
|
8,219
|
|
329,545
|
|
16.3
|
|
|
Commercial
|
|
527,153
|
|
63,238
|
|
590,391
|
|
33.1
|
%
|
568,245
|
|
14,487
|
|
582,732
|
|
28.8
|
|
|
Construction
|
|
570,962
|
|
35,735
|
|
606,697
|
|
34.1
|
%
|
810,057
|
|
8,019
|
|
818,076
|
|
40.5
|
|
|
Total real estate
|
|
1,391,995
|
|
119,794
|
|
1,511,789
|
|
84.9
|
%
|
1,699,628
|
|
30,725
|
|
1,730,353
|
|
85.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
72,675
|
|
16,545
|
|
89,220
|
|
5.0
|
%
|
85,643
|
|
11,172
|
|
96,815
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
loans receivable
|
|
$
|
1,626,369
|
|
$
|
154,471
|
|
$
|
1,780,840
|
|
100.0
|
%
|
$
|
1,972,659
|
|
$
|
47,449
|
|
2,020,108
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
origination fees, net
|
|
|
|
|
|
(853
|
)
|
|
|
|
|
|
|
(60
|
)
|
|
|
|
Total gross
loans, net of deferred fees
|
|
|
|
|
|
1,779,987
|
|
|
|
|
|
|
|
2,020,048
|
|
|
|
|
Less — allowance
for loan losses
|
|
|
|
|
|
(3,645
|
)
|
|
|
|
|
|
|
(2,524
|
)
|
|
|
|
Less — discounts
|
|
|
|
|
|
(646,941
|
)
|
|
|
|
|
|
|
(838,160
|
)
|
|
|
|
Total
loans, net
|
|
|
|
|
|
$
|
1,129,401
|
|
|
|
|
|
|
|
$
|
1,179,364
|
|
|
|
(1) Real
Estate-Mortgage loans are the only type of loan covered by the Single Family
Loss Agreement; all other classes are covered by the Commercial Loss Agreement.
56
Table of Contents
|
|
|
December 31,
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
(dollars in thousands)
|
|
Amount
|
|
% of
Total
|
|
Amount
|
|
% of
Total
|
|
Amount
|
|
% of
Total
|
|
Amount
|
|
% of
Total
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and industrial
|
|
$
|
3,960
|
|
17.6
|
%
|
$
|
2,857
|
|
14.9
|
%
|
$
|
1,540
|
|
13.2
|
%
|
$
|
852
|
|
38.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
|
1,374
|
|
6.1
|
%
|
1,863
|
|
9.7
|
%
|
1,614
|
|
13.8
|
%
|
213
|
|
9.7
|
%
|
|
Commercial
|
|
9,612
|
|
42.6
|
%
|
7,728
|
|
40.3
|
%
|
6,779
|
|
58.1
|
%
|
535
|
|
24.4
|
%
|
|
Construction
|
|
3,810
|
|
16.9
|
%
|
3,286
|
|
17.1
|
%
|
430
|
|
3.7
|
%
|
—
|
|
—
|
|
|
Total
real estate
|
|
14,796
|
|
65.6
|
%
|
12,877
|
|
67.1
|
%
|
8,823
|
|
75.6
|
%
|
748
|
|
34.1
|
%
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
3,784
|
|
16.8
|
%
|
3,457
|
|
18.0
|
%
|
1,309
|
|
11.2
|
%
|
593
|
|
27.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
22,540
|
|
100.0
|
%
|
19,191
|
|
100.0
|
%
|
11,672
|
|
100.0
|
%
|
2,193
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
origination fees, net
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
|
Total
gross loans, net of deferred fees
|
|
22,539
|
|
|
|
19,189
|
|
|
|
11,669
|
|
|
|
2,193
|
|
|
|
|
Less
— allowance for loan losses
|
|
(445
|
)
|
|
|
(316
|
)
|
|
|
(139
|
)
|
|
|
(22
|
)
|
|
|
|
Total loans, net
|
|
$
|
22,094
|
|
|
|
$
|
18,873
|
|
|
|
$
|
11,530
|
|
|
|
$
|
2,171
|
|
|
|
Maturities and Sensitivity of Loans to Changes in
Interest Rates
The information in the
following table is based on the contractual maturities of individual loans,
including loans that may be subject to renewal at their contractual
maturity. Renewal of these loans is
subject to review and credit approval, as well as modification of terms upon
maturity. Actual repayments of loans may
differ from the maturities reflected below because borrowers have the right to
prepay obligations with or without prepayment penalties. The following table summarizes the loan
maturity distribution by type and related interest rate characteristics at June 30,
2010 and December 31, 2009:
|
|
|
One year
or less
|
|
After one
but
within
five years
|
|
After five
years
|
|
Total
|
|
|
|
|
(in thousands)
|
|
|
June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
93,383
|
|
$
|
82,086
|
|
$
|
4,362
|
|
$
|
179,831
|
|
|
Real estate
|
|
834,550
|
|
582,660
|
|
94,579
|
|
1,511,789
|
|
|
Consumer
|
|
31,076
|
|
57,463
|
|
681
|
|
89,220
|
|
|
Total gross loans
|
|
$
|
959,009
|
|
$
|
722,209
|
|
$
|
99,622
|
|
$
|
1,780,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loans maturing after one year with:
|
|
|
|
|
|
|
|
|
|
|
Fixed interest rates
|
|
$
|
490,483
|
|
|
|
|
|
|
|
|
Floating or adjustable interest rates
|
|
331,348
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
821,831
|
|
|
|
|
|
|
|
57
Table of Contents
|
|
|
One year
or less
|
|
After one
but
within
five years
|
|
After five
years
|
|
Total
|
|
|
|
|
(in thousands)
|
|
|
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
110,449
|
|
$
|
67,363
|
|
$
|
15,128
|
|
$
|
192,940
|
|
|
Real estate
|
|
1,014,794
|
|
471,881
|
|
243,678
|
|
1,730,353
|
|
|
Consumer
|
|
55,566
|
|
39,748
|
|
1,501
|
|
96,815
|
|
|
Total gross loans
|
|
$
|
1,180,809
|
|
$
|
578,992
|
|
$
|
260,307
|
|
$
|
2,020,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loans maturing after one year with:
|
|
|
|
|
|
|
|
|
|
|
Fixed interest rates
|
|
$
|
348,813
|
|
|
|
|
|
|
|
|
Floating or adjustable interest rates
|
|
490,486
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
839,299
|
|
|
|
|
|
|
|
FDIC Receivable for Loss Share Agreements
As of June 30, 2010,
91.3% of our loans and 99.9% of our other real estate assets were covered under
loss share agreements with the FDIC in which the FDIC has agreed to reimburse
us for between 80% and 95% of all losses incurred in connection with those
assets. We estimated the FDIC
reimbursement that will result from losses incurred as we dispose of covered
loans and other real estate assets, and we recorded the estimate as a
receivable from the FDIC. The FDIC
receivable for loss share agreements was approximately $482.9 million as
of June 30, 2010 and $605.5 million as of December 31, 2009. Realized losses in excess of acquisition date
estimates will result in an increase in the FDIC receivable for loss share
agreements. Conversely, if realized
losses are less than acquisition date estimates, the FDIC receivable for loss
share agreements will be reduced. The
discount on the FDIC receivable is accreted into noninterest income using the
level yield method over the estimated life of the receivable, including
estimates of the timing of cash flow receipts and the disposition of
non-performing assets. We expect to
dispose of the acquired covered assets in our 2009 acquisitions over a period
of four years from the date of each acquisition and we have estimated a
four-year life for the collection of the FDIC receivable.
Allowance for Loan Losses
We
recorded the loans acquired in our acquisitions at their acquisition date fair value,
which was based on expected cash flows and included an estimation of expected
future loan losses. As a result, the
loans acquired are excluded from the calculation of allowance for loan losses
and thus we have not recorded any provision for loan losses for these
loans. Under current accounting
principles, information regarding our estimate of loan fair values may be
adjusted for a period of up to one year as we continue to refine our estimate
of expected future cash flows in the acquired portfolio. Within a one-year period, if we discover that
we have materially underestimated the loan losses inherent in the loan
portfolio at each of the acquisition dates, we will retroactively reduce or
eliminate the gain or adjust goodwill recorded on each acquisition. Beyond the one-year period, if we determine
that losses arose after the acquisition date, our portion of the additional
losses will be reflected as a provision for loan losses. Through June 30, 2010, we have not
recorded any material adjustments to the allowance for loan losses.
For
our non-covered loans, we have established an allowance for loan losses through
a provision for loan losses charged to expense on our statement of income. We maintain the allowance at a level deemed
appropriate by management to provide adequately for known and inherent losses
in our non-covered loan portfolio. Our
judgment as to the adequacy of the allowance for loan losses is based on a
number of assumptions about future events, which we believe to be reasonable,
but which may or may not prove to be accurate.
In general, loans do not begin to show
signs of credit deterioration or default until they have been outstanding for
some period of time, a process we refer to as “seasoning.” As a result, a portfolio of older loans will
usually behave more predictably than a newer portfolio. Because our non-covered loan portfolio is
relatively new, the current level of delinquencies and defaults may not be
representative of the level that will prevail when the portfolio becomes more
seasoned, which may be higher than current levels.
Our determination of the allowance for loan losses is based
on evaluations of the collectability of loans, including consideration of
factors such as the balance of impaired loans, the quality, mix and size of our
non-covered loan portfolio,
58
Table of
Contents
economic conditions that may affect the borrower’s ability to
repay, the amount and quality of collateral securing the loans and a review of
specific problem loans. In addition,
because of the lack of seasoning in our non-covered loan portfolio, we use peer
data to develop our historical loss migration analysis, rather than our own
historical loan loss data. We also
consider subjective issues such as changes in the lending policies and
procedures, changes in the local/national economy, changes in volume or type of
credits, changes in volume/severity of problem loans, quality of loan review
and board of director oversight, concentrations of credit and peer group
comparisons. More specifically, in
determining our allowance for loan losses, we review loans for specific
impaired reserves based on current appraisals of collateral less disposal
costs. We determine general reserves by
using the peer data applied to risk rated loans grouped by FDIC call report
classification code. We calculate the general
reserves by applying the appropriate historical loss ratio to the loan categories
grouped by risk rating (pass, special mention, substandard and doubtful) and
adjusted for quantitative factors.
Impaired loans are excluded from this analysis as they are individually
reviewed for valuation.
We
assign the relationships that comprise our loan portfolio a risk grade based on
a common set of parameters. These
parameters include debt to worth, liquidity of the borrower, net worth,
experience in a particular field and other factors. We also give weight to the relative strength
of any guarantors on the loan. We have
an internal loan specialist dedicated to the review of loan files on a test
basis to confirm the grading of each loan.
A
significant portion of our non-covered
loan portfolio has been booked within the last 12 months under stringent
underwriting standards and has not experienced any significant losses to
date. Due to the lack of historical loss
data, we use peer group data to determine an appropriate basis for historical
losses. As a result of the economic
conditions present in the country in general and in our markets in particular,
we believe the use of peer group data to develop loss estimates is appropriate
until our non-covered loan portfolio ages and reaches a size that will yield
its own loss characteristics.
Separately,
we review all impaired non-covered loans individually to determine a specific
allocation for each. In our assessment
of impaired loans, we consider the primary source of repayment when determining
whether loans are collateral dependent.
We measure impairment of a loan based on the present value of expected
future cash flows discounted at the loan’s effective interest rate or the fair
value of the collateral if the loan is collateral dependent. When management determines that a loan is
impaired, the difference between our investment in the related loan and the
present value of the expected future cash flows, or the fair value of the
collateral, is generally charged against the allowance for loan losses.
Periodically,
we adjust the amount of the allowance based on changing circumstances. We recognize loan losses to the allowance and
add back subsequent recoveries. In
addition, on a quarterly basis we informally compare our allowance for loan
losses to various peer institutions. We
recognize, however, that allowances will vary because financial institutions
are unique in the make-up of their loan portfolios and customers, which
necessarily creates different risk profiles for the institutions. We would only consider further adjustments to
our allowance for loan losses based on this peer review if our allowance was
significantly different from our peer group.
To date, we have not made any such adjustment. Loan charge-offs in future periods may exceed
the allowance for loan losses as estimated at any point in time, and provisions
for loan losses may be significant to a particular accounting period, especially considering the overall weakness in the
commercial and residential real estate markets in our market areas.
The
following table summarizes the activity related to our allowance for loan
losses related to our non-covered loans for the periods presented. All of our loans before July 24, 2009
were non-covered loans.
59
Table of Contents
|
|
|
|
|
Successor
Period from
July 24, 2009
to December
|
|
Predecessor
Period from
January 1,
2009 to
|
|
December 31,
|
|
|
|
|
June 30, 2010
|
|
31, 2009
|
|
July 23, 2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
(dollars in thousands)
|
|
|
Balance,
at the beginning of period
|
|
2,524
|
|
$
|
—
|
|
$
|
445
|
|
316
|
|
139
|
|
22
|
|
$
|
—
|
|
|
Charge-offs
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and industrial
|
|
—
|
|
459
|
|
—
|
|
—
|
|
23
|
|
—
|
|
—
|
|
|
Real
estate mortgage
|
|
—
|
|
—
|
|
—
|
|
178
|
|
—
|
|
—
|
|
—
|
|
|
Real
estate construction and development
|
|
68
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Consumer
|
|
3
|
|
—
|
|
—
|
|
10
|
|
1
|
|
—
|
|
—
|
|
|
Total
charge-offs
|
|
$
|
71
|
|
$
|
459
|
|
$
|
—
|
|
$
|
188
|
|
$
|
24
|
|
$
|
—
|
|
$
|
—
|
|
|
Recoveries
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and industrial
|
|
—
|
|
294
|
|
—
|
|
—
|
|
5
|
|
—
|
|
—
|
|
|
Real
estate mortgage
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Real
estate construction and development
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Consumer
|
|
—
|
|
—
|
|
—
|
|
5
|
|
—
|
|
—
|
|
—
|
|
|
Total
recoveries
|
|
$
|
—
|
|
$
|
294
|
|
$
|
—
|
|
$
|
5
|
|
$
|
5
|
|
$
|
—
|
|
$
|
—
|
|
|
Net
charge-offs
|
|
71
|
|
165
|
|
—
|
|
183
|
|
19
|
|
—
|
|
—
|
|
|
Provision
for loan losses
|
|
1,192
|
|
2,689
|
|
261
|
|
312
|
|
196
|
|
117
|
|
22
|
|
|
Balance, at end of period
|
|
$
|
3,645
|
|
$
|
2,524
|
|
$
|
706
|
|
$
|
445
|
|
$
|
316
|
|
$
|
139
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses to non- covered loans receivable
|
|
2.37
|
%
|
5.32
|
%
|
2.10
|
%
|
1.97
|
%
|
1.65
|
%
|
1.19
|
%
|
1.00
|
%
|
|
Ratio
of net charge-offs to average loans outstanding
|
|
0.01
|
%
|
0.09
|
%
|
0.00
|
%
|
0.83
|
%
|
0.12
|
%
|
0.00
|
%
|
0.00
|
%
|
Allocation of Allowance for Loan Losses
The
following tables present the allocation of the allowance for loan losses and
the percentage of the total amount of loans in each loan category listed as of
the dates indicated.
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
|
|
|
Amount
|
|
% of loans
in each
category to
total loans
|
|
Amount
|
|
% of loans
in each
category to
total loans
|
|
|
|
|
(dollars in thousands)
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
368
|
|
10.1
|
%
|
$
|
241
|
|
9.6
|
%
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
|
644
|
|
17.7
|
|
412
|
|
16.3
|
|
|
Commercial
|
|
1,208
|
|
33.1
|
|
728
|
|
28.8
|
|
|
Construction
|
|
1,242
|
|
34.1
|
|
1,022
|
|
40.5
|
|
|
Total real estate
|
|
3,094
|
|
84.9
|
|
2,162
|
|
85.6
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
183
|
|
5.0
|
|
121
|
|
4.8
|
|
|
Total allowance for loan losses
|
|
$
|
3,645
|
|
100.0
|
%
|
$
|
2,524
|
|
100.0
|
%
|
60
Table of Contents
|
|
|
December 31,
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
Amount
|
|
% of
loans in
each
category
to total
loans
|
|
Amount
|
|
% of
loans in
each
category
to total
loans
|
|
Amount
|
|
% of
loans in
each
category
to total
loans
|
|
Amount
|
|
% of
loans in
each
category
to total
loans
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
78
|
|
17.6
|
%
|
$
|
47
|
|
14.9
|
%
|
$
|
18
|
|
13.2
|
%
|
$
|
9
|
|
38.9
|
%
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
|
27
|
|
6.1
|
|
31
|
|
9.7
|
|
19
|
|
13.8
|
|
2
|
|
9.7
|
|
|
Commercial
|
|
190
|
|
42.6
|
|
127
|
|
40.3
|
|
81
|
|
58.1
|
|
5
|
|
24.4
|
|
|
Construction
|
|
75
|
|
16.9
|
|
54
|
|
17.1
|
|
5
|
|
3.7
|
|
—
|
|
—
|
|
|
Total real estate
|
|
292
|
|
65.6
|
|
212
|
|
67.1
|
|
105
|
|
75.6
|
|
7
|
|
34.1
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
75
|
|
16.8
|
|
57
|
|
18.0
|
|
16
|
|
11.2
|
|
6
|
|
27.0
|
|
|
Total allowance for loan losses
|
|
$
|
445
|
|
100.0
|
%
|
$
|
316
|
|
100.0
|
%
|
$
|
139
|
|
100.0
|
%
|
$
|
22
|
|
100.0
|
%
|
Non-performing Assets
Non-performing
assets consist of nonaccrual loans, loans past due 90 days or more as to
interest or principal and still accruing, and other real estate owned, which is
real estate acquired through foreclosure.
Nonaccrual loans are those loans on which we have discontinued
recognition of interest income. When
management believes there is sufficient doubt as to the collectibility of
principal or interest on any loan, or generally when loans are 90 days or more
past due, we discontinue the accrual of the applicable interest and designate
the loan as “nonaccrual,” unless the loan is well secured and in the process of
collection. Management reviews past due
loans on a monthly basis and will place certain loans on nonaccrual status at
60 days past due in some circumstances.
We apply interest payments received on nonaccrual loans against
principal. We return loans to an accrual
status when factors indicating doubtful collectibility on a timely basis no
longer exist. We initially record other
real estate owned at the lower of cost or estimated market value at the date of
acquisition. We record a provision for
estimated losses if a subsequent decline in value occurs.
The
following tables set forth our non-performing assets for the periods presented.
|
|
|
At June 30, 2010
|
|
At December 31, 2009
|
|
|
|
|
Covered
Loans
|
|
Non-
Covered
Loans
|
|
Total
|
|
Covered
Loans
|
|
Non-
Covered
Loans
|
|
Total
|
|
|
|
|
(dollars in thousands)
|
|
|
Nonaccrual loans
|
|
$
|
562,539
|
|
$
|
3,088
|
|
$
|
565,627
|
|
$
|
524,855
|
|
$
|
555
|
|
$
|
525,410
|
|
|
Accruing loans 90 days or more past due
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Troubled debt restructurings not included in above
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total non-performing loans
|
|
562,539
|
|
3,088
|
|
565,627
|
|
524,855
|
|
555
|
|
525,410
|
|
|
Other real estate owned
|
|
166,424
|
|
75
|
|
166,499
|
|
141,690
|
|
120
|
|
141,810
|
|
|
Total non-performing assets
|
|
$
|
728,963
|
|
$
|
3,163
|
|
$
|
732,126
|
|
$
|
666,545
|
|
$
|
675
|
|
$
|
667,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans to total loans
|
|
34.59
|
%
|
2.01
|
%
|
36.60
|
%
|
26.61
|
%
|
1.17
|
%
|
27.78
|
%
|
|
Non-performing assets to total assets
|
|
40.66
|
%
|
0.40
|
%
|
41.06
|
%
|
31.52
|
|
0.18
|
%
|
31.70
|
%
|
61
Table of Contents
|
|
|
At December 31,
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
(in thousands)
|
|
|
Nonaccrual loans
|
|
$
|
161
|
|
$
|
4
|
|
$
|
—
|
|
$
|
—
|
|
|
Accruing loans 90 days or more past due
|
|
27
|
|
3
|
|
—
|
|
—
|
|
|
Troubled debt restructurings not included in above
|
|
0
|
|
0
|
|
—
|
|
—
|
|
|
Total non-performing loans
|
|
$
|
188
|
|
7
|
|
—
|
|
—
|
|
|
Other real estate owned
|
|
73
|
|
0
|
|
—
|
|
—
|
|
|
Total non-performing assets
|
|
$
|
261
|
|
$
|
7
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans to total loans
|
|
0.83
|
%
|
0.04
|
%
|
—
|
|
—
|
|
|
Non-performing assets to total assets
|
|
0.77
|
%
|
0.03
|
%
|
—
|
|
—
|
|
Non-performing
assets, defined as nonaccrual loans, loans past due 90 days or more as to
interest or principal and still accruing, and other real estate owned, totaled
$732.1 million, or 28.2% of total assets at June 30, 2010, compared to
$667.2 million, or 26.7% of total assets at December 31, 2009. Of the $732.1 million in non-performing
assets at June 30, 2010 and the $667.2 million in non-performing assets at
December 31, 2009, $729.0 million and $666.5 million, respectively, relate
to assets that are covered by loss share agreements with the FDIC. Total non-performing covered assets accounted
for 99.6% and 99.9% of total non-performing assets at June 30, 2010 and December 31,
2009, respectively.
Interest
income that would have been reported on the nonaccrual loans for the six months
ended June 30, 2010 and the successor period from July 24, 2009
through December 31, 2009 was approximately $9.1 million and $8.4 million,
respectively. Interest income recognized
on non-covered impaired loans for the six months ended June 30, 2010 and
the successor period from July 24, 2009 through December 31, 2009 was
approximately $520,000 and $783,000, respectively.
At
December 31, 2009, we had approximately $230.6 million in potential
problem loans, compared to $177.6 million at June 30, 2010. Potential problem loans are those loans where
management has a concern about the financial health of a borrower that causes
management to have serious doubts as to the ability of the borrower to comply
with the present loan terms. At December 31,
2009 and June 30, 2010, substantially all of our potential problem loans
were covered loans, with only $6.0 million in non-covered potential problem
loans at June 30, 2010.
Deposits
Total
deposits at June 30, 2010 and December 31, 2009 were $2.2 billion and $2.2 billion,
respectively. At June 30, 2010,
noninterest bearing accounts totaled $206.0
million, or 9.2% of total deposits, compared to $187.7 million, or 8.7% of
total deposits at December 31, 2009.
Time deposits totaled $737.3 million, or 36.3% of interest bearing
deposits at June 30, 2010, compared to $1.2 billion, or 60.5% of interest
bearing deposits at December 31, 2009.
Out of market brokered and wholesale time deposits totaled $26.3 million and $50.9 million at June 30,
2010 and December 31, 2009, respectively.
Money market and savings accounts totaled $1.07 billion, or 52.8% of
interest bearing deposits, at June 30, 2010, compared to $460.2 million,
or 23.4% of interest bearing deposits at December 31, 2009. During 2010, we continued our strategy of
actively marketing our State of Banking Money Market account in order to grow
transaction accounts and reduce our reliance on time deposits.
During
2009, we were able to use the liquidity from our recapitalization and our
FDIC-assisted acquisitions to pay off more than $628.1 million in brokered and
wholesale time deposits. In addition,
under the terms of our purchase and assumption agreements with the FDIC, for
each FDIC-assisted acquisition, we were able to reprice these deposits at a
market rate that resulted in many being redeemed (without penalty), which
improved our net interest margin.
62
Table of Contents
The
following table shows the average balance amounts and the average rates paid on
deposit held by us for the periods presented.
|
|
|
Six Months Ended
|
|
Years Ended
|
|
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
December 31, 2008
|
|
December 31, 2007
|
|
|
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
|
|
|
(in thousands)
|
|
|
Noninterest
bearing demand deposits
|
|
$
|
180,533
|
|
0.00
|
%
|
$
|
149,008
|
|
0.00
|
%
|
$
|
2,471
|
|
0.00
|
%
|
$
|
2,743
|
|
0.00
|
%
|
|
Interest
bearing demand deposits
|
|
230,303
|
|
0.93
|
%
|
247,628
|
|
1.42
|
%
|
2,839
|
|
1.23
|
%
|
2,522
|
|
1.27
|
%
|
|
Savings
and money market accounts
|
|
941,528
|
|
2.11
|
%
|
223,026
|
|
1.80
|
%
|
3,497
|
|
2.34
|
%
|
2,801
|
|
3.43
|
%
|
|
Time
deposits less than $100,000
|
|
444,314
|
|
0.11
|
%
|
488,240
|
|
0.31
|
%
|
7,203
|
|
4.89
|
%
|
5,258
|
|
5.17
|
%
|
|
Time
deposits greater than $100,000
|
|
374,598
|
|
4.09
|
%
|
473,927
|
|
4.66
|
%
|
7,535
|
|
4.49
|
%
|
3,215
|
|
5.69
|
%
|
|
Total
deposits
|
|
$
|
2,171,276
|
|
1.90
|
%
|
$
|
1,581,829
|
|
1.92
|
%
|
$
|
23,545
|
|
3.83
|
%
|
$
|
16,539
|
|
4.23
|
%
|
The
maturity distribution of our time deposits of $100,000 or more at June 30,
2010 and December 31, 2009 was as follows:
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
|
|
|
(in thousands)
|
|
|
Three months or less
|
|
$
|
86,663
|
|
$
|
109,259
|
|
|
Over three through six months
|
|
74,730
|
|
91,425
|
|
|
Over six though twelve months
|
|
83,236
|
|
208,924
|
|
|
Over twelve months
|
|
99,789
|
|
135,804
|
|
|
Total
|
|
$
|
344,418
|
|
$
|
545,412
|
|
63
Table
of Contents
Borrowings
and Other Interest-Bearing Liabilities
The
following table outlines our various sources of borrowed funds for the six
months ended June 30, 2010 and the successor period ended December 31,
2009, and the amounts outstanding at the end of each period, the maximum amount
for each component during such period, the average amounts for each period and
the average interest rate that we paid for each borrowing source. The maximum month-end balance represents the
high indebtedness for each component of borrowed funds at any time during each
of the periods shown.
|
|
|
Ending
|
|
Period
End
|
|
Maximum
Month
End
|
|
Average
for the Period
|
|
|
|
|
Balance
|
|
Rate
|
|
Balance
|
|
Balance
|
|
Rate
|
|
|
|
|
(dollars in thousands)
|
|
|
At or for the six months ended
June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreement to repurchase
|
|
$
|
7,415
|
|
0.37
|
%
|
$
|
11,438
|
|
$
|
8,238
|
|
0.52
|
%
|
|
Advances from FHLB
|
|
—
|
|
—
|
|
—
|
|
81
|
|
0.00
|
%
|
|
Federal funds purchased
|
|
—
|
|
—
|
|
—
|
|
15
|
|
1.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the successor period
ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreement to repurchase
|
|
$
|
9,606
|
|
0.25
|
%
|
$
|
11,796
|
|
$
|
4,239
|
|
0.59
|
%
|
|
Advances from FHLB
|
|
5,000
|
|
0.28
|
%
|
161,255
|
|
118,006
|
|
2.11
|
%
|
|
Federal funds purchased
|
|
—
|
|
—
|
|
—
|
|
97
|
|
2.35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the year ended
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreement to repurchase
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Advances from FHLB
|
|
1,800
|
|
0.79
|
%
|
1,800
|
|
1,800
|
|
0.39
|
%
|
|
Federal funds purchased
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the year ended
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreement to repurchase
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Advances from FHLB
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Federal funds purchased
|
|
—
|
|
—
|
|
305
|
|
202
|
|
0.58
|
%
|
Capital
Resources
We
strive to maintain an adequate capital base to support our activities in a safe
manner while at the same time maximizing shareholder returns. At June 30, 2010, we exceeded all
minimum regulatory capital requirements as shown in the tables below. At June 30, 2010, our equity capital was
$335.0 million, or 12.9% of total assets, compared to $310.8 million, or 12.4%
of total assets, at December 31, 2009.
On
July 24, 2009, the Bank raised approximately $292.1 million in gross
proceeds (before expenses) from investors in a private offering of its common
stock, including the sale of 28,455,000 shares of common stock to accredited
investors at $10.00 per share. Following
this recapitalization, the Bank raised an additional $15.7 million in common
equity through the sale of 1,518,540 shares and 458,029 warrants to acquire
shares of common stock to certain investors, including officers, directors and
employees of the Bank. In October 2010,
the Company raised an additional $878,000 in common equity through the sale of
66,627 shares and 56,627 warrants to acquire shares of common stock to certain
members of the Bank’s senior management and one of our directors.
The
following table shows the return on average assets (net income divided by
average total assets), return on average equity (net income divided by average
equity), and average equity to average assets ratio (average equity divided by
average total assets) for the periods presented:
64
Table of Contents
|
|
|
|
|
December 31,
|
|
|
|
|
June 30, 2010
|
|
2009
|
|
2008
|
|
2007
|
|
|
Return on average assets
|
|
1.70
|
%
|
2.04
|
%
|
(1.69
|
)%
|
(1.33
|
)%
|
|
Return on average equity
|
|
13.30
|
%
|
14.14
|
%
|
(8.73
|
)%
|
(4.87
|
)%
|
|
Equity to assets ratio
|
|
12.80
|
%
|
14.41
|
%
|
19.35
|
%
|
27.23
|
%
|
The
Federal Reserve and bank regulatory agencies require bank holding companies and
financial institutions to maintain capital at adequate levels based on a
percentage of assets and off-balance sheet exposures, adjusted for risk weights
ranging from 0% to 100%. Under the
capital adequacy guidelines, regulatory capital is classified into two
tiers. These guidelines require an
institution to maintain a certain level of Tier 1 and Tier 2 capital to
risk-weighted assets. Tier 1 capital
consists of common shareholders’ equity, excluding the unrealized gain or loss
on securities available for sale, minus certain intangible assets. In determining the amount of risk-weighted
assets, all assets, including certain off-balance sheet assets, are multiplied
by a risk-weight factor of 0% to 100% based on the risks believed to be
inherent in the type of asset. Tier 2
capital consists of Tier 1 capital plus the general reserve for loan losses,
subject to certain limitations. The Bank
is required to maintain capital at a minimum level based on total average
assets, which is known as the Tier 1 leverage ratio.
To
be considered “well capitalized” under capital guidelines, we must maintain
total risk-based capital of at least 10%, Tier 1 capital of at least 6%, and a
leverage ratio of at least 5%. To be
considered “adequately capitalized” under capital guidelines, we must maintain
a minimum total risk-based capital of 8%, with at least 4% being Tier 1
capital. In addition, banking regulators
have established a minimum Tier 1 leverage ratio of at least 4%. We expect banking regulators to increase
these minimum levels in the future.
The
following table shows the Bank’s regulatory capital ratios for the periods
presented. The capital ratios of the
Company have been omitted for the periods presented, as the Company did not
become the Bank’s holding company until July 23, 2010. For all periods, the Bank was considered “well
capitalized.”
|
|
|
|
|
December 31,
|
|
|
|
|
June 30, 2010
|
|
2009
|
|
2008
|
|
2007
|
|
|
Leverage ratio
|
|
12.63
|
%
|
14.57
|
%
|
18.05
|
%
|
23.23
|
%
|
|
Tier 1 risk-based capital ratio(1)
|
|
57.35
|
%
|
30.60
|
%
|
21.60
|
%
|
27.13
|
%
|
|
Total risk-based capital ratio(1)
|
|
58.00
|
%
|
30.85
|
%
|
22.67
|
%
|
28.38
|
%
|
(1)
The increase in our risk-based capital ratios from December 31,
2009 to June 30, 2010 resulted from the FDIC Financial Institutions Letter
(FIL-7-2010) dated February 26, 2010, entitled “Regulatory Capital
Standards Clarification of the Risk Weights for FDIC Claims and Guarantees,”
which clarifies that the FDIC receivable may be assigned a zero risk weight.
We
intend to maintain a capital level for the Bank that exceeds the FDIC
requirements to be classified as a “well capitalized” bank. In addition, as a condition to the FDIC’s
approval of the Notice of Change in Control filing of Mr. Evans, Mr. Speight
and Mr. Childers (our management team) in connection with the July 2009
recapitalization and acquisition, the Bank was required to execute a Capital
Maintenance Agreement with the FDIC.
Under the terms of the agreement, the Bank must at all times maintain a
leverage ratio of at least 10% and a total risk-based capital ratio of at least
12%. The agreement terminates on July 23,
2012. At June 30, 2010, the Bank
was in compliance with the Capital Maintenance Agreement.
Effect
of Inflation and Changing Prices
The
effect of relative purchasing power over time due to inflation is not reflected
in our consolidated financial statements.
Rather, our financial statements have been prepared on an historical
cost basis in accordance with generally accepted accounting principles.
65
Table of Contents
Unlike
most industrial companies, our assets and liabilities are primarily monetary in
nature. Therefore, the effect of changes
in interest rates will have a more significant effect on our performance than
will the effect of changing prices and inflation in general. In addition, interest rates may generally
increase as the rate of inflation increases, although not necessarily in the
same magnitude.
Off-Balance
Sheet Arrangements
Commitments
to extend credit are agreements to lend to a customer as long as the customer
has not violated any material condition established in the contract. Commitments generally have fixed expiration
dates or other termination clauses and may require the payment of a fee. At June 30, 2010, unfunded commitments
to extend credit were $148.7 million, and at December 31, 2009, unfunded
commitments to extend credit were $109.5 million. A significant portion of the unfunded
commitments related to commercial real estate and land development and consumer
equity lines of credit. Based on
experience, we anticipate that a significant portion of these lines of credit
will not be funded. We evaluate each
customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by us upon extension of credit, is based on our credit evaluation of
the borrower. The type of collateral
varies but may include accounts receivable, inventory, property, plant and
equipment, and commercial and residential real estate.
At
June 30, 2010 and December 31, 2009, there were commitments totaling
approximately $2.6 million and $5.9 million,
respectively, under letters of credit.
The credit risk and collateral involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. Because most of the letters
of credit are expected to expire without being drawn upon, they do not
necessarily represent future cash requirements.
Except
as disclosed in this registration statement, we are not involved in off-balance
sheet contractual relationships, unconsolidated related entities that have
off-balance sheet arrangements, or transactions that could result in liquidity
needs or other commitments that significantly impact earnings.
66
Table of Contents
Contractual
Obligations
In
the normal course of business, we have various outstanding contractual
obligations that will require future cash outflows. The following table presents our contractual
obligations as of June 30, 2010.
|
|
|
Payments Due by Period
|
|
|
Contractual Obligations
|
|
Total
|
|
Less than
1 year
|
|
1 to 3
years
|
|
3 to 5
years
|
|
More
than
5 years
|
|
|
|
|
(in thousands)
|
|
|
FHLB Advances
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Operating Lease Obligations
|
|
3,760
|
|
663
|
|
2,962
|
|
135
|
|
—
|
|
|
Securities Repurchase Agreements
|
|
7,415
|
|
7,415
|
|
—
|
|
—
|
|
—
|
|
|
Other Borrowings
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
$
|
11,175
|
|
$
|
8,078
|
|
$
|
2,962
|
|
$
|
135
|
|
$
|
—
|
|
The
following table presents our contractual obligations as of December 31,
2009.
|
|
|
Payments Due by Period
|
|
|
Contractual Obligations
|
|
Total
|
|
Less than
1 year
|
|
1 to 3
years
|
|
3 to 5
years
|
|
More
than
5 years
|
|
|
|
|
(in thousands)
|
|
|
FHLB Advances
|
|
$
|
5,000
|
|
$
|
—
|
|
$
|
5,000
|
|
$
|
—
|
|
$
|
—
|
|
|
Operating Lease Obligations
|
|
5,978
|
|
1,591
|
|
2,191
|
|
1,456
|
|
740
|
|
|
Securities Repurchase Agreements
|
|
9,606
|
|
9,606
|
|
—
|
|
—
|
|
—
|
|
|
Other Borrowings
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
$
|
20,584
|
|
$
|
11,197
|
|
$
|
7,191
|
|
$
|
1,456
|
|
$
|
740
|
|
Liquidity
Liquidity
represents the ability of a company to convert assets into cash or cash
equivalents without significant loss, and the ability to raise additional funds
by increasing liabilities. Liquidity
management involves monitoring our sources and uses of funds to meet our
day-to-day cash flow requirements while maximizing profits. Liquidity management is made more complicated
because different balance sheet components are subject to varying degrees of
management control. For example, the
timing of maturities of our investment portfolio is fairly predictable and
subject to a high degree of control when we make investment decisions. Net deposit inflows and outflows, however,
are far less predictable and are not subject to the same degree of control.
At
June 30, 2010, our liquid assets, which consist of cash and due from
banks, interest bearing deposits and federal funds sold, amounted to $304.2 million, or 11.7% of total assets,
compared to $200.2 million, or 8.0% of total assets at December 31,
2009. Our available for sale securities
at June 30, 2010 and December 31, 2009 amounted to $422.7 million, or 16.3% of total assets, and
$318.0 million, or 12.7% of total assets, respectively. Investment securities traditionally provide a
secondary source of liquidity because they can be converted into cash in a
timely manner.
Our
ability to maintain and expand our deposit base and borrowing capabilities
serves as our primary source of liquidity.
We plan to meet our future cash needs through the generation of deposits
and through collection of the FDIC receivable as we dispose of our covered
loans and assets. In addition, we
receive cash on the maturity and sale of loans and the maturity of investment
securities. We maintain three federal
funds lines of credit with correspondent banks totaling $120.0 million. We are also a member of the Federal Home Loan
Bank of Atlanta, from which we can borrow for leverage or liquidity
purposes. The FHLB requires that
securities, qualifying mortgage loans and stock of the FHLB owned by the Bank
be pledged to secure any advances. At June 30,
2010, we had no advances from the FHLB and a remaining credit availability of
$59.6 million. In addition, we maintain
a line of credit with the Federal Reserve Bank of $87.8 million secured by
certain loans in our loan portfolio.
67
Table of Contents
Quantitative and Qualitative Disclosures about Market Risk
Market
risk is the risk of loss from adverse changes in market prices and rates, which
principally arise from interest rate risk inherent in our lending, investing,
deposit gathering and borrowing activities.
Other types of market risk, such as foreign currency exchange rate risk
and commodity price risk, do not generally arise in the normal course of our
business. Asset/liability management is
the process by which we monitor and control the mix and maturities of our
assets and liabilities. The essential
purposes of asset/liability management are to ensure adequate liquidity and to
maintain an appropriate balance between interest sensitive assets and
liabilities to minimize potentially adverse effects on earnings from changes in
market interest rates. Our
asset/liability committee monitors and considers methods of managing exposure
to interest rate risk. The asset/liability
committee is responsible for maintaining the level of interest rate sensitivity
of our interest sensitive assets and liabilities within board-approved limits.
At
June 30, 2010, approximately 35.6% of our loans were variable rate loans,
compared to 63.4% at December 31, 2009.
Approximately 25.9% of our interest-bearing liabilities reprice within
one year. However, interest rate
movements typically result in changes in interest rates on assets that are
different in magnitude from the corresponding changes in rates paid on
liabilities. While a substantial portion
of our loans reprice within the first three months of the year, a larger
majority of our deposits will reprice within a 12-month period. Interest rate sensitivity is a function of
the repricing characteristics of the portfolio of assets and liabilities. These repricing characteristics are the time
frames within which the interest-earning assets and interest-bearing
liabilities are subject to change in interest rates either at replacement,
repricing or maturity during the life of the instruments. Interest rate sensitivity management focuses
on the maturity structure of assets and liabilities and their repricing
characteristics during periods of changes in market interest rates. Effective interest rate sensitivity
management seeks to ensure that both assets and liabilities respond to changes
in interest rates within an acceptable timeframe that minimizes the changes in
net interest income.
One of the tools management uses to estimate the sensitivity
of net interest revenue changes to interest rates is an asset/liability
simulation model. The resulting
estimates are based upon a number of assumptions for each scenario, including
the level of balance sheet growth, loan and deposit repricing characteristics
and the rate of prepayments. The
asset/liability committee actively monitors the assumptions and estimates based
on input data and future expectations.
Actual net interest revenue, however,
may vary from model results.
Our
policy is based on a 12-month impact on net interest income of interest rate
ramps that increase 200 basis points and decrease 200 basis points from the
base scenario. In the ramp scenarios,
rates change 16.7 basis points per month over 12 months. The policy limits the change in net interest
income over 12 months to a 10% decrease in either scenario. The policy ramp and base scenarios assume a
static balance sheet. Given the
historically low rate environment, management has determined that the use of
the down 200 basis point scenario is not meaningful and, therefore, has used
what it believes to be a more reasonable rate scenario of down 100 basis points
over a 12-month period. At March 31,
2010, our most recent asset/liability simulation run, the model indicated that
a 200 basis point increase would cause an approximate 70 basis point decrease
in net interest income over the next 12 months and a 100 basis point decrease
in rates would cause an approximate 20 basis point increase in net interest
income over the next 12 months.
In
addition, management seeks to reduce overall interest rate risk by maintaining
relatively short maturities. For
additional detail on loan maturity and distribution and information regarding
sensitivity of loans and leases to changes in interest rates see the table
entitled “Maturities and Sensitivities of Loans to Changing Interest Rates” on pages
57 and 58. Information on the maturity
of our investment securities is located in the tables on pages 55 and 56. The maturity distributions of our time
deposits with balances in excess of $100,000 is located on page 63.
68
Table of Contents
Item 3. Properties
Our
administrative office is located at 415 East Paces Ferry, Atlanta, Georgia
30305 and the Bank’s executive office is located at 4219 Forsyth Road, Macon,
Georgia 31210. In addition, the Bank
operates 20 additional branches located in Bibb, Cobb, Dooly, Houston, Fulton,
Gwinnett and Jones Counties, Georgia.
The address locations of these branches are provided below.
|
Branch
|
|
Address
|
|
City, State, Zip
|
|
Alpharetta
|
|
2380
Old Milton Parkway
|
|
Alpharetta,
Georgia 30008
|
|
Bass
Road
|
|
1535
Bass Road
|
|
Macon,
Georgia 31210
|
|
Chastain
|
|
4241
Roswell Road
|
|
Atlanta,
Georgia 30342
|
|
Gray
|
|
282
W. Clinton Street
|
|
Gray,
Georgia 31032
|
|
Hartley
Bridge
|
|
4315
Hartley Bridge Road
|
|
Macon,
Georgia 31216
|
|
Houston
Lake
|
|
119
S. Houston Lake Road
|
|
Warner
Robins, Georgia 31088
|
|
Hwy
96
|
|
849
Warren Drive
|
|
Warner
Robins, Georgia 31088
|
|
Log
Cabin
|
|
4699
Log Cabin Drive
|
|
Macon,
Georgia 31206
|
|
Marietta
|
|
250
Church Street
|
|
Marietta,
Georgia 30060
|
|
Midtown
|
|
860
Peachtree Street, Suite J
|
|
Atlanta,
Georgia 30308
|
|
Norcross
|
|
6170
Peachtree Parkway
|
|
Norcross,
Georgia 30092
|
|
Northeast
|
|
614
Shurling Drive
|
|
Macon,
Georgia 31201
|
|
Perry
|
|
1208
Washington Street
|
|
Perry,
Georgia 31069
|
|
Pinehurst
|
|
321
Fullington Avenue
|
|
Pinehurst,
Georgia 31070
|
|
Pio
Nono
|
|
3945
Pio Nono Avenue
|
|
Macon,
Georgia 31206
|
|
Riverside
|
|
2918
Riverside Drive
|
|
Macon,
Georgia 31204
|
|
Sandy
Springs
|
|
6000
Sandy Springs Circle
|
|
Sandy
Springs, Georgia 30328
|
|
Unadilla
|
|
2206
Pine Street
|
|
Unadilla,
Georgia 31091
|
|
Walnut
|
|
700
Walnut Street
|
|
Macon,
Georgia 31201
|
|
Zebulon
|
|
5980
Zebulon Road
|
|
Macon,
Georgia 31210
|
With
the exception of our Marietta branch office, which we currently lease from the
FDIC, we own all of the properties in which our bank branch offices are
located, including our administrative and executive offices. In connection with our acquisition of
NorthWest Bank and Trust from the FDIC, pursuant to the terms and conditions of
the purchase and assumption agreement, we have the opportunity to purchase
and/or assume certain contracts associated with NorthWest Bank and Trust’s
assets, including its branch office location in Marietta, Georgia. To date, we have not finalized the terms and
conditions associated with our purchase of this branch office. The approximate value of the initial
commitment to purchase this location from the FDIC was $750,000.
69
Table of Contents
Item 4. Security Ownership of
Certain Beneficial Owners and Management
General
The
following table shows owners of more than 5% of our outstanding common stock,
as of July 23, 2010:
|
Name and Address
|
|
Number of
Shares Owned
|
|
Right to Acquire
|
|
Percentage of
Beneficial
Ownership(1)
|
|
|
|
|
|
|
|
|
|
|
|
Franklin Mutual Advisers, LLC(2)
101 John F. Kennedy Parkway, Short Hills,
New Jersey 07078
|
|
2,100,000
|
|
—
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Greenlight Capital, Inc.(3)
140 East 45
th
Street, 24
th
Floor, New York,
New York, 10017
|
|
2,100,000
|
|
—
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Kensico Capital Management Corporation(4)
55 Railroad Avenue, 2
nd
Floor, Greenwich,
Connecticut 06830
|
|
2,325,000
|
|
—
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Luxor Capital Group, LP(5)
767 5
th
Avenue, 19
th
Floor, New York,
New York 10153
|
|
1,660,000
|
|
—
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Paulson Recovery Master Fund Ltd.(6)
1251 Avenue of Americas, New York,
New York 10020
|
|
2,325,000
|
|
—
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Sandler O’Neill Asset Management, LLC(7)
780 Third Avenue, 5
th
Floor, New York,
New York 10017
|
|
2,325,000
|
|
—
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Sageview Capital Master, L.P.(8)
55 Railroad Ave., Greenwich,
Connecticut 06830
|
|
2,000,000
|
|
—
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
The Banc Funds Company, L.L.C.(9)
20 North Wacker Drive, Suite 3300,
Chicago, Illinois 60606
|
|
2,325,000
|
|
—
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Waterstone Market Neutral Master Fund, Ltd(10)
2 Carlson Parkway, Suite 260, Plymouth,
Minnesota 55447
|
|
1,750,000
|
|
—
|
|
5.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Ithan Creek Investors USB, LLC(11)
c/o Wellington Management Company, LLP
75 State Street, Boston,
Massachusetts 02109
|
|
2,325,000
|
|
—
|
|
7.4
|
%
|
|
(1)
|
The
percentages shown are based on 31,540,977 shares of common stock of the
Company outstanding on July 23, 2010.
|
|
|
|
|
(2)
|
Includes
1,467,000 shares beneficially owned by Mutual Shares Fund,
433,000 shares beneficially owned by Mutual Shares Securities Fund, and
200,000 shares beneficially owned by Mutual Financial Services Fund,
collectively “the
|
70
Table of Contents
|
|
Funds.”
The Funds are investment advisory clients of Franklin Mutual Advisers, LLC
(“FMA”). Pursuant to investment advisory agreements with each of the Funds,
FMA has sole voting and investment power over all the securities owned by the
Funds, including the shares of the Company’s common stock. Peter Langerman,
chairman, president, and chief executive officer of FMA, has overall
responsibility for exercising voting and investment control over the Funds’
shares. For purposes of the reporting requirements of the Exchange Act, FMA
and Peter Langerman may be deemed to be beneficial owners of the shares;
however, FMA and Mr. Langerman each expressly disclaim beneficial
ownership of the shares as neither Mr. Langerman nor FMA has any right
to any economic benefits in, nor any interest in, dividends or proceeds from
the sale of shares.
|
|
|
|
|
(3)
|
Includes
95,558 shares beneficially owned by Greenlight Capital, LP and 673,835 shares
beneficially owned by Greenlight Capital Qualified, LP. Greenlight Capital,
LLC, as general partner of both Greenlight Capital, LP and Greenlight Capital
Qualified, LP may be deemed to share voting and dispositive power
over their combined 769,393 shares.
|
|
|
|
|
|
Greenlight
Capital Offshore Partners beneficially owns 923,981 shares. Greenlight
Capital, Inc. is the investment advisor of Greenlight Capital, LP,
Greenlight Capital Qualified, LP and Greenlight Capital Offshore Partners and
may be deemed to share voting and dispositive power
over their combined 1,693,374 shares.
|
|
|
|
|
|
An
account managed by DME Advisors, LP beneficially owns 284,000 shares and its
investment advisor, DME Advisors, LP, may also be deemed to share voting and
dispositive power over these shares. Greenlight Capital (Gold), LP
beneficially owns 80,607 shares and its general partner, DME Management GP,
LLC, may also be deemed to share voting and dispositive power over these shares.
Greenlight Capital Offshore Master (Gold), Ltd. beneficially owns 42,019
shares. DME Capital Management, LP, as investment advisor to both Greenlight
Capital (Gold), LP and Greenlight Capital Offshore Master (Gold), Ltd.
may also be deemed to share voting and dispositive power over their
combined 122,626 shares. DME Advisors GP, LLC is the general partner of DME
Advisors, LP and DME Capital Management, LP and, therefore, may be deemed to
share voting and dispositive power over their combined 406,626 shares.
|
|
|
|
|
|
David
Einhorn controls Greenlight Capital, Inc., Greenlight Capital, LLC, DME
Advisors GP, LLC, DME Management GP, LLC and DME Capital Management, LP and
is therefore deemed to share voting and dispositive power over all 2,100,000
shares.
|
|
|
|
|
(4)
|
Kensico
Capital Management Corporation has shared voting and dispositive power over
the 570,700 shares beneficially owned by Kensico Partners, LP, the 818,200
shares beneficially owned by Kensico Associates, LP, the 736,100 shares
beneficially owned by Kensico Offshore Fund Master, Ltd. and the 200,000
shares beneficially owned by Kensico Offshore Fund II Master, Ltd.
|
|
|
|
|
(5)
|
Luxor
Capital Group, LP has shared voting and dispositive power over the 160,989
shares beneficially owned by Gam Equity Six, Inc., the 862,984 shares
beneficially owned by Luxor Capital Partners Offshore Master Fund, LP and the
636,027 shares beneficially owned by Luxor Capital Partners, LP.
|
|
|
|
|
(6)
|
Voting
and dispositive power with respect to the securities is shared with
Paulson & Co. Inc.
|
|
|
|
|
(7)
|
Sandler
O’Neill Asset Management, LLC and Terry Maltese have shared voting and
dispositive power over the 51,100 shares beneficially owned by Malta Hedge
Fund, L.P., the 250,600 shares beneficially owned by Malta Hedge
Fund II, L.P., the 218,600 shares beneficially owned by Malta MLC
Fund, L.P., the 80,100 shares beneficially owned by Malta MLC
Offshore, Ltd., the 87,900 shares beneficially owned by Malta
Offshore, Ltd., the 16,700 shares beneficially owned by Malta Partners,
L.P., the 450,000 shares beneficially owned by Malta Titan Fund, L.P.,
the 1,000,000 shares beneficially owned by SOAM Capital Partners, L.P., and
the 170,000 share beneficially owned by Valescere Capital, LLC. SOAM
Holdings, LLC, by reason of its position as General Partner of Malta
Partners, L.P., Malta Hedge Fund, L.P., Malta Hedge Fund II, L.P., Malta MLC
Fund, L.P., and Malta Titan Fund, L.P., may be deemed to beneficially own the
shares held by each.
|
|
|
|
|
(8)
|
Voting
and dispositive power with respect to the securities is shared with Sageview
Capital Partners (A), L.P., Sageview Capital Partners (B), L.P., Sageview
Partners (C) (Master), L.P., Sageview Capital GenPar, L.P., Sageview
Capital MGP, LLC, Edward A. Gilhuly and Scott M. Stuart.
|
71
Table of Contents
|
(9)
|
Includes
325,000 shares beneficially owned by Banc Fund VI L.P., 1,150,000 shares
beneficially owned by Banc Fund VII L.P. and 850,000 shares beneficially
owned by Banc Fund VIII L.P. The general partner of Banc Fund VI L.P. is
MidBanc VI L.P., the general partner of Banc Funds VII L.P. is MidBanc VII
L.P. and the general partner of Banc Funds VIII L.P. is MidBanc VIII L.P. The
Banc Funds Company, L.L.C.’s principal business is to be a general partner of
MidBanc VI L.P., MidBanc VII L.P. and MidBanc VIII L.P. The Banc Funds
Company, L.L.C.’s principal shareholder is Charles J. Moore. Mr. Moore
has also been the manager of Banc Funds VI L.P., Banc Funds VII L.P. and Banc
Funds VIII L.P. since their respective inceptions. As managing member,
Mr. Moore has voting and dispositive power over the securities held by
each of those entities. Mr. Moore also controls The Banc Funds Company,
L.L.C. and each of the partnership entities directly and indirectly
controlled by it.
|
|
|
|
|
(10)
|
Waterstone
Capital Offshore Advisors, LP is the investment manager of Waterstone Market
Neutral Master Fund Ltd. and may be deemed to share beneficial ownership of
the securities. Waterstone Asset Management, LLC, as general partner of
Waterstone Capital Offshore Advisors, LP, may also be deemed to share
beneficial ownership of the securities.
|
|
|
|
|
(11)
|
Ithan
Creek Investors USB, LLC, is a wholly-owned subsidiary of Ithan Creek
Master Investors (Cayman) L.P. Ithan Creek Master Investors (Cayman)
L.P. is also the sole manager of Ithan Creek USB, LLC. Wellington Hedge
Management, LLC is the sole general partner of Ithan Creek Master Investors
(Cayman) L.P. All three entities may be deemed to have or share beneficial
ownership over the shares held by Ithan Creek Investors USB, LLC.
Wellington Management Company, LLP, an investment adviser registered under
the Investment Advisers Act of 1940, as amended, is the investment adviser to
Ithan Creek Investors USB, LLC. In such capacity, Wellington Management
Company, LLP may be deemed to share beneficial ownership of the shares held
by Ithan Creek Investors USB, LLC.
|
Security
Ownership of Management
The
following table sets forth the number of shares of the Company’s common stock
beneficially owned as of October 15, 2010 by (a) each director and
executive officer named below, and (b) the executive officers and all
directors, as a group.
|
Name and Address (1)
|
|
Number of
Shares Owned
|
|
Right to Acquire
|
|
Percentage of
Beneficial
Ownership (2)
|
|
|
James R. Balkcom, Jr.
|
|
2,000
|
|
2,000
|
|
*
|
|
|
W. Carter Bates, III
|
|
20,000
|
|
20,000
|
|
*
|
|
|
Archie L. Bransford, Jr.(3)
|
|
6,000
|
|
6,000
|
|
*
|
|
|
Kim M. Childers
|
|
120,000
|
|
400,521
|
|
1.6
|
%
|
|
Stephen W. Doughty
|
|
120,000
|
|
400,521
|
|
1.6
|
%
|
|
Joseph W. Evans
|
|
220,000
|
|
400,521
|
|
1.9
|
%
|
|
Virginia A. Hepner
|
|
—
|
|
—
|
|
—
|
|
|
J. Daniel Speight
|
|
120,000
|
|
400,521
|
|
1.6
|
%
|
|
J. Thomas Wiley, Jr.
|
|
120,000
|
|
400,521
|
|
1.6
|
%
|
|
All Directors and Executive
Officers as a Group (9 persons)
|
|
728,000
|
|
2,030,605
|
|
8.3
|
%
|
*
Denotes beneficial ownership of less than 1%.
(1)
The information as to
beneficial ownership has been provided by the respective persons listed in the
above table. The address of each of
these listed individuals is 415 East Paces Ferry Road, NE, Suite 200,
Atlanta, Georgia 30305.
72
Table of Contents
(2)
The percentages shown are
based on 31,607,604 shares of common stock of the Company outstanding on October 15,
2010. Under Rule 13d-3 under the
Exchange Act, shares of common stock that a person has the right to acquire
pursuant to the exercise of stock options and warrants held by that person that
are exercisable within 60 days of October 15, 2010 are deemed
outstanding for the purpose of computing the percentage ownership of the
person, but those shares are not deemed outstanding for computing the
percentage ownership of any other person.
(3)
Includes 3,000 common shares
and 3,000 warrants jointly held by Mr. Bransford’s wife.
Item 5. Directors and Executive Officers
Our
directors and executive officers and their ages and positions with us are as
follows:
|
Name
|
|
Age
|
|
Director or
Officer Since
|
|
Position
|
|
James
R. Balkcom, Jr.
|
|
66
|
|
2009
|
|
Director
|
|
W.
Carter Bates, III
|
|
53
|
|
2009
|
|
Director
|
|
Archie
L. Bransford, Jr.
|
|
58
|
|
2009
|
|
Director
|
|
Kim
M. Childers
|
|
51
|
|
2009
|
|
President,
Chief Credit Officer, Vice Chairman, Director
|
|
Stephen
W. Doughty
|
|
59
|
|
2009
|
|
Chief
Banking Officer, Executive Risk Officer
|
|
Joseph
W. Evans
|
|
61
|
|
2009
|
|
Chief
Executive Officer, Chairman, Director
|
|
Virginia
A. Hepner
|
|
53
|
|
2010
|
|
Director
|
|
J.
Daniel Speight
|
|
53
|
|
2009
|
|
Chief
Financial Officer, Chief Operating Officer, Vice Chairman, Director
|
|
J.
Thomas Wiley, Jr.
|
|
57
|
|
2010
|
|
Director
|
The
business experience and background of each of our directors and executive
officers is provided below. Our
directors and executive officers are also directors and executive officers of
the Bank.
Executive Officers
Kim M. Childers
. Mr. Childers
serves as our president and chief credit officer. Mr. Childers is from Fort Valley,
Georgia. Prior to joining our Bank, Mr. Childers
held senior positions with Flag Bank and RBC Centura Bank, including executive
vice president and chief credit officer of Flag Bank from 2002 through
2007. Before joining Flag Bank in 2002, Mr. Childers
was employed with Century South Banks, Inc., the holding company of 12
banks located in Georgia, Tennessee, Alabama and North Carolina, acting in a
number of capacities, including regional chief executive officer for the North
Georgia Region (which included eight charters and $600 million in assets),
chief credit officer and senior vice president/credit administration. Mr. Childers also serves as a managing
principal of Bankers Capital Group, LLC, an investment company that primarily
buys and sells notes, a position he has held since 2007. Mr. Childers also serves on our board of
directors. His depth of knowledge and
years of experience in banking make him well qualified to be a member of our
board. His extensive personal
understanding of the markets that we serve is also a valuable asset to the
board.
Stephen W. Doughty
. Mr. Doughty serves as our chief banking
officer and executive risk officer. Mr. Doughty
is a native of Atlanta, Georgia. Prior
to joining our Bank, from 2007 until 2009, Mr. Doughty served as a
principal at Banker’s Capital Group, LLC, an investment company that primarily
buys and sells notes. He was the
former vice chairman and chief risk management officer of Flag Financial
Corporation, where he served from 2002 until it was sold to RBC Centura in
2006. Before joining Flag Bank, he
served as an executive officer at Century South Banks, Inc., the holding
company of 12 banks located in Georgia, Tennessee, Alabama and North Carolina,
from 1997 until 2001. Mr. Doughty
is a graduate of Valdosta State University and the School of Banking of the
South, Louisiana State University.
73
Table
of Contents
Joseph W. Evans
. Mr. Evans
serves as our chief executive officer and chairman. He is a native of Smarr, Georgia and the
former chief executive officer of Flag Financial Corp., where he served from
2002 until it was sold to RBC Centura in 2006.
Mr. Evans previously served as president and chief executive
officer of Macon-based Bank Corporation of Georgia, until it was merged with
Century South Banks, Inc. in 1997.
Following the merger, Mr. Evans served as chief executive officer
of Century South Banks, Inc, until it was acquired by BB&T. Mr. Evans also serves as a managing
principal of Bankers Capital Group, LLC, an investment company that primarily
buys and sells notes, a position he has held since 2006. Mr. Evans is a director of Southern
Trust Insurance Company and a member of the Investment Committee of the
Methodist Childrens Home in Macon, Georgia.
He also serves on the board of trustees of the Georgia Tech Foundation
and the board of directors of the Alexander-Tharpe Fund, and as chairman of the
board of trustees of the Georgia Tech Alumni Association. Mr. Evans also serves on our board of
directors. His depth of knowledge and
years of experience in banking make him well qualified to be a member of our
board. His ties to our market area also
provide him with personal contacts and an awareness of the social environment
within which we operate.
J. Daniel Speight
. Mr. Speight
serves as our chief operating officer, chief financial officer and vice
chairman. Mr. Speight resides in
Pinehurst, Georgia and spent more than 20 years, between 1984 and 2006, with
Citizens Bank in Vienna, Georgia and Flag Bank and Flag Financial Corp., where
he served as chief executive officer of Citizens Bank, vice chairman/director
of Flag Bank and vice chairman, chief financial officer, chief executive
officer and director of Flag Financial Corp.
Mr. Speight is a member of the State Bar of Georgia and, from February 2008
until July 2009, he practiced banking law with the law firm of James,
Bates, Pope & Spivey LLP in Macon, Georgia. Mr. Speight is also a managing principal
of Bankers Capital Group, LLC, an investment company that primarily
buys and sells notes, a position he has held since 2006. He is a director of Reagan Holding
Corporation of Petaluma, California and also served as a director of The
Bankers Bank of Atlanta for nine years, from 1990 until 1999, serving as
chairman of the board of directors twice during that term. Mr. Speight has also served as president
of the Community Bankers Association of Georgia, served as a director of the
Georgia Bankers Association, was chairman of the Georgia Bankers Association
Community Banking Committee and also served as a director of the Independent
Community Bankers Association of America.
Mr. Speight also serves on our board of directors. The depth of his banking knowledge and
experience and his legal background make Mr. Speight well qualified to be
a member of our board. His extensive
personal understanding of the markets that we serve is also a valuable asset to
the board.
Board of Directors
James R. Balkcom, Jr.
Mr. Balkcom is currently the chairman of
the board of EndoChoice, Inc. and an operating partner with Council Ventures, Inc. He served as chairman of the board of
advisors for Talent Quest, a leadership consultancy, from 2004 through
2009. He also served as chairman of the
board of iKobo, Inc., a provider of online money transfer services, from
2006 until 2009. He served as chairman
of the board of Commerce South Bank, Inc. from 2001 to 2004 and as a
director and chairman of the compensation committee of Century South Banks, Inc.
from 1997 to 2001. He was also a
director and chairman of the audit committee of DataPath, Inc. from 2007
to 2009. Mr. Balkcom also served as
chief executive officer of Techsonic Industries, Inc. from 1977 to
1994. He serves as a Civilian Aide to
the Secretary of the Army for Georgia and as Chairman of the Georgia Military
Affairs Coordinating Committee. Mr. Balkcom’s
extensive experience in corporate governance and finance, together with his
management experience as a senior executive with several companies, make him
well qualified to be a member of our board.
W. Carter Bates, III
. Mr. Bates is a partner at the law firm of
James, Bates, Pope & Spivey, LLP in Macon, Georgia, where he has
practiced since 1999, specializing in tax and business law, tax-exempt
organizations and estate and asset protection planning. Mr. Bates is also an adjunct professor
of law at the Walter F. Georgia School of Law, Mercer University. Mr. Bates is active in numerous civic
and business organizations in Macon and Middle Georgia, including Central
Georgia Health Systems, where he serves on the audit and investment
committees. He has previously served on
the boards of directors of Central Georgia Health Services, Inc. and
Community Foundation of Central Georgia and was a board member of the State
Board of Accountancy. Mr. Bates’
legal experience, as well as his service as a director of a number of companies
over the past 25 years, including SunTrust Bank of Middle Georgia, N.A.,
provides him with a wealth of knowledge and understanding of the role of the
board of directors, and makes him well qualified to be a member of our
board. His extensive personal
understanding of the markets that we serve is also a valuable asset to the
board.
Archie L. Bransford, Jr
. Mr. Bransford is the president of
Bransford & Associates, LLC, a bank regulatory consulting group which
consults with banks on risk management and regulatory matters, a position he
has held since 2004. Prior to that, Mr. Bransford
served in numerous positions at the Office of the Comptroller of the Currency,
including most
74
Table of Contents
recently
as a deputy comptroller for the Southern District. Mr. Bransford’s depth of knowledge and
valuable experience with regulatory matters make him well qualified to be a
member of our board.
Virginia A. Hepner
. Ms. Hepner is a business development
consultant with the firm Venadar, LLC, which advises Fortune 500 companies, a
position she has held since 2008. Ms. Hepner
is also a principal investor in GHC, LLC, a private real estate investment
partnership for commercial assets. Ms. Hepner
has over 25 years of corporate banking experience with Wachovia Bank serving in
North Carolina, Chicago and Atlanta. She
joined Wachovia in 1979 and has held numerous positions in corporate banking
and capital markets, including Atlanta Corporate District Manager, Manager of
the Foreign Exchange and Derivatives Group, Executive Vice President and
Manager of the U.S. Corporate Client Group and Atlanta Commercial Banking
Manager. Ms. Hepner retired from
Wachovia in 2005. Ms. Hepner is a
former director at Chexar Corporation, a private technology company. She is also active in many Atlanta non-profit
and civic organizations, including Emory University Board of Visitors, Children’s
Healthcare Community Board, Theater of the Stars and Georgia Communities for
Growth. In 2008, she received the
Phoenix Award from Atlanta Mayor Shirley Franklin for outstanding community
service. Ms. Hepner’s depth of knowledge
and years of experience in corporate banking make her well qualified to be a
member of our board.
J. Thomas Wiley, Jr
. Mr. Wiley is the chairman, president and
chief executive officer of Coastal Bankshares, Inc. and its subsidiary
bank, The Coastal Bank, where he has served since 2007. Prior to joining The Coastal Bank, Mr. Wiley
served as the vice chairman of Flag Financial Corporation from 2002 until
2007. Mr. Wiley is also a managing
principal of Bankers’ Capital Group, LLC, an investment company that primarily
buys and sells notes, a position he has held since 2007. His depth of knowledge and years of
experience in banking make him well qualified to be a member of our board.
Item 6. Executive Compensation
This
section explains how our executive compensation programs are designed and
operate with respect to the “named executive officers” identified below.
The
individuals who served as our principal executive officer and as our principal
financial officer during the successor period from July 24, 2009 through December 31,
2009, as well as our two other most highly compensated executive officers, are
referred to as the “named executive officers.”
For the 2009 successor period, our named executive officers were:
·
Joseph W. Evans, Chief Executive Officer and
Chairman;
·
J. Daniel Speight, Chief Financial Officer, Chief
Operating Officer and Vice Chairman;
·
Kim M. Childers, President, Chief Credit Officer and
Vice Chairman; and
·
Stephen W. Doughty, Executive Risk Officer and Chief
Banking Officer.
The
following compensation discussion and analysis, executive compensation tables
and related narrative describe the compensation awarded to, earned by or paid
to the named executive officers for services provided to us in 2009 and their
compensation arrangements with us.
Overview
The
Company did not become the Bank’s holding company until July 23, 2010,
when the plan of reorganization and share exchange was filed with the Georgia
Secretary of State. Before consummating
the holding company reorganization, the Company did not engage in any
operations other than organizational activities. As a result, unless the context indicates
otherwise, the following discussion and analysis of executive compensation
relates to the successor period ended December 31, 2009, and refers solely
to the Bank, its management and Board of Directors. Each member of the Company’s Board of
Directors also serves on the Bank’s Board of Directors. The Bank also has two additional directors,
John D. Houser and Stephen W. Doughty, who do not serve on the Company’s Board
of Directors.
In
connection with the closing of the private July 2009 offering and the
acquisition of the six Security Banks in July 2009, the FDIC and the
Georgia Department of Banking and Finance approved the Interagency Notice of
Change in Control application filed by Joseph W. Evans, J. Daniel Speight and
Kim M. Childers to serve as our new management team. As part of that approval process, the FDIC
and the Georgia Department of Banking and Finance reviewed and issued their
non-objection to the form of employment agreements to be entered into between
the Bank and each of Mr. Evans, Mr.
75
Table of Contents
Speight
and Mr. Childers. On July 24,
2009, the Board of Directors formally approved these employment agreements and Mr. Evans,
Mr. Speight and Mr. Childers were appointed to serve as our new
management team.
In
September 2009, we entered into amendments to the employment agreements of
Mr. Evans, Mr. Speight and Mr. Childers to memorialize
compliance with Internal Revenue Code (the “Code”) Section 409A and to
confirm that any termination of employment will constitute a “separation from
service” within the meaning of Code Section 409A. These amendments were subject to regulatory
non-objection from the FDIC, which we received on May 11, 2010. The amendments were executed by each of the
three executive officers and the Bank on May 11, 2010.
We
hired Mr. Stephen W. Doughty in October 2009. The Board of Directors approved Mr. Doughty’s
employment agreement on substantially the same terms and conditions as the
employment agreements of Mr. Evans, Mr. Speight and Mr. Childers,
as amended, subject to regulatory review and non-objection of the FDIC and the
Georgia Department of Banking and Finance, pursuant to the conditions imposed
on the Bank in connection with the FDIC’s and the Georgia Department of Banking
and Finance’s approval of the Interagency Change in Control filing of Mr. Evans,
Mr. Speight and Mr. Childers.
The FDIC and the Georgia Department of Banking and Finance issued their
non-objection on July 19, 2010 and May 12, 2010, respectively, and Mr. Doughty
and the Bank formally entered into the employment agreement on July 19,
2010.
For
the successor period from July 24, 2009 through December 31, 2009, we
did not change the material elements of the executive compensation provided in
the employment agreements, as amended, with the named executive officers. Following the change in control transaction
on July 24, 2009, we began to establish the Bank’s basic employee
compensation and benefit programs. We
expect that the Company’s Compensation Committee, described below, will
continue to establish our compensation and benefits programs in 2010.
In
April 2010, the Bank engaged Matthews, Young & Associates, Inc.
(“Matthews Young”) as an independent advisor to assist the Compensation
Committee in determining and evaluating executive compensation. Matthews Young will review executive
compensation and prepare an analysis of the components of compensation and the
total compensation with its recommendations.
Matthews Young will also provide the Compensation Committee with
information on executive compensation trends and best practices.
The Compensation Committee
Our
Compensation Committee was established in July 2010, and is currently
composed of James R. Balkcom, Jr. (Chairman), Archie L. Bransford, Jr.,
W. Carter Bates, III, Virginia A. Hepner and J. Thomas Wiley, Jr. Our common stock is not currently listed on
any national exchange, or quoted on any inter-dealer quotation service, that
imposes independence requirements on our board of directors or any committee
thereof. We have selected the director
independence requirements of The NASDAQ Global Market, to evaluate whether our
directors and committee members meet the independence criteria. Based upon this standard, our Board of
Directors has determined that each of the members of our Compensation Committee
is independent.
Overview, Philosophy and Objectives of
Executive Compensation
The
following discussion of the philosophy and objectives of executive compensation
refers to the basic principles endorsed by the Compensation Committee in its
charter and is generally reflective of the philosophy underlying the employment
agreements of the named executive officers.
However, for the 2009 successor period, the Compensation Committee did
not meet. The Bank’s Board of Directors
acted to the extent needed in lieu of the Compensation Committee during the
2009 successor period, including approving employment agreements and amendments
for the executive officers.
Under
the Compensation Committee’s charter adopted in July 2010, the
Compensation Committee of our Board of Directors has authority to establish the
salaries and incentive compensation for the named executive officers and senior
management. The Compensation Committee
also has the authority to annually review and approve corporate goals and
objectives applicable to the compensation of the Chief Executive Officer,
review and approve the annual base salary, annual incentive bonus levels for
the executive officers, review and approve employment agreements, severance
arrangements and change in control agreements, establish and administer the
annual incentive and equity and equity-based plans and supplemental benefits,
and otherwise review and approve our compensation plans. In addition, the Compensation Committee is to
annually review, evaluate and establish levels of director compensation. The Compensation Committee
76
Table of Contents
evaluates
the performance of our Chief Executive Officer and, with input from the Chief
Executive Officer, evaluates the performance of our other named executive
officers and senior management.
The
objectives of the Compensation Committee with respect to the compensation of
our named executive officers are to encourage achievement of the Company’s
long-range objectives by relating compensation to achievement of internal
strategic objectives, to attract, and retain talented and dedicated executives
through a level of compensation that is competitive within the financial
services industry and to promote a direct relationship between compensation and
Company performance by facilitating equity ownership.
In
2009, we compensated our named executive officers primarily through a
combination of base salary and discretionary bonus payments. For 2010, the Compensation Committee intends
to examine other factors and compensation methods.
Regulation
During
the first three years following the July 24, 2009 change in control
transaction, any revisions to compensation which represent a material increase
in compensation to senior officers must receive the approval of the Georgia
Department of Banking and Finance. In
2010, the Company intends to seek regulatory approval for a formal annual
incentive bonus plan. The process of
this regulatory review may restrict the authority of the Compensation Committee
to approve executive compensation arrangements on a timely basis.
Base Salary
The
base salary of our named executive officers is intended to provide a base level
of pay for the services they provide that is competitive within the financial
services industry. We believe that the
fixed base annual salary levels for the named executive officers helps us to
retain qualified executives and to provide a measure of income stability to the
executive which allows them to stay focused on the business of the Bank. The Summary Compensation Tables reflect the
base salary paid to each of our named executive officers for the successor period
from July 24, 2009 through December 31, 2009 and our chief executive
officer and chief financial officer for the predecessor period from January 1,
2009 through July 23, 2009. The
base salary rates for our named executive officers for 2010 are unchanged from
2009 and have not yet been reviewed by the Compensation Committee. The executive employment agreement with each
named executive officer provides that base salary will be increased based on
the performance of the Bank and its compliance with regulatory standards, as
determined by the Board of Directors.
The
base salary of each of Mr. Evans, Mr. Speight and Mr. Childers
was recommended by the new management team members prior to the consummation of
the July 24, 2009 private offering and change in control transaction and
was based, in part, on each executive officer’s banking experience, their
consultation with the Bank’s placement agent for the offering and discussions
with potential investors. On July 24,
2009, the Bank’s full Board of Directors formally approved their employment
agreements, which set their base salaries.
The base salary of Mr. Doughty was determined by the Bank to be
consistent with the base salary rate of the other named executive officers,
other than the chief executive officer.
The minimum base compensation for Mr. Evans, Mr. Speight, Mr. Childers
and Mr. Doughty was intended to allow us to maintain the continuity and
focus of our management team through the consolidation of the Acquired Banks
into our operations and beyond.
Annual Incentive Payments
We
include an annual discretionary cash incentive award as part of our management
compensation program for all of our management team, including our named
executive officers. We believe this
element of compensation helps focus management on, and motivate management to
achieve, key financial performance objectives.
Annual cash incentive payments are an integral component of compensation
that link and reinforce executive decision-making and performance with our
annual strategic objectives.
For 2009, no formal bonus or
incentive program was established and no specific performance criteria were
set. In January 2010, the Bank’s
Board of Directors awarded a discretionary bonus, subject to review and
approval of the Georgia Department of Banking and Finance, for each of the
named executive officers, as set forth in the Summary Compensation Table,
below, for the successor period ended 2009.
The Board of Directors determined that the 2009 annual incentive
77
Table of Contents
award for each of the named
executive officers would be equal to 75% of the target bonus of 50% of the
annual rate of base salary, as provided in the employment agreements.
The Board of Directors’
determination to award a discretionary incentive award to each of our named
executive officers for 2009 was based on its review of both objective and
subjective criteria. In particular, the
Board of Directors found that the Bank’s net income for the period beginning July 24,
2009 and ending December 31, 2009 was $18.0 million and the Bank completed
the acquisition of the assets of eight failed institutions. The Board of Directors also took into consideration
that beginning early in 2009, our named executive officers worked diligently to
develop a plan to recapitalize the Bank and acquire the six failed bank
subsidiaries of Security Bank Corporation.
During this process, the named executive officers performed extensive
due diligence on the acquisition targets, recruited new personnel, raised
contingent capital from investors, negotiated the change in control transaction
with prior management of the Bank, and obtained the necessary support and
approval of the Bank’s primary regulators.
Our named executive officers performed this work prior to becoming
members of our management team and without compensation. The annual incentive awards were paid in
2010.
Other Executive Benefits
Perquisites.
We do not offer any perquisites to our named
executive officers. Part of our
compensation philosophy is to pay a competitive annual base salary and reward
the achievement of our financial objectives through an annual incentive award,
which allows our named executive officers to allocate their income at their
discretion.
Benefit Plans.
Our named executive officers
are eligible to participate in our company-provided benefit plans and programs,
including medical, life and disability plans, on the same basis as other
salaried, full-time employees. They will
also be able to participate in our 401(k) Plan in 2010, once that plan is
implemented.
Summary
Compensation
The
following table shows the compensation we paid for the successor period from July 24,
2009 to December 31, 2009 to our named executive officers. For a description of executive compensation
arrangements entered into between the Bank and Mr. Evans, Mr. Speight,
Mr. Childers and Mr. Doughty, please see the discussion below
entitled “Executive Compensation Arrangements.”
Summary Compensation Table
|
Name and Principal Positions(1)
|
|
Year
|
|
Salary
|
|
Bonus (3)
|
|
All Other
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
W. Evans
|
|
2009
|
|
$
|
173,184
|
|
$
|
150,000
|
|
—
|
|
$
|
323,184
|
|
|
Chief
Executive Officer/Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Daniel Speight
|
|
2009
|
|
149,124
|
|
131,250
|
|
—
|
|
280,374
|
|
|
Chief
Financial Officer/Chief Operating Officer/Vice Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kim
M. Childers
|
|
2009
|
|
149,124
|
|
131,250
|
|
—
|
|
280,374
|
|
|
President/Chief
Credit Officer/Vice Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
W. Doughty(2)
|
|
2009
|
|
88,947
|
|
131,250
|
|
—
|
|
220,197
|
|
|
Executive
Risk Officer and Chief Banking Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Reflects principal positions
held as of December 31, 2009.
(2)
Mr. Doughty joined the
Bank in October 2009.
(3)
Bonus amounts were awarded
and paid in 2010 and expensed by us in 2009.
78
Table of Contents
The
following table shows the compensation we paid for the predecessor period from January 1,
2009 to July 23, 2009 to our named executive officers. Mr. Carter and Ms. Wright resigned
from their respective positions effective July 24, 2009.
Summary Compensation Table
|
Name and Principal Positions
|
|
Year
|
|
Salary
|
|
Bonus
|
|
All Other
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John T. Carter
|
|
2009
|
|
$
|
80,630
|
|
$
|
—
|
|
$
|
50,000
|
(1)
|
$
|
130,630
|
|
|
Former President and Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bunny E. Wright
|
|
2009
|
|
74,341
|
|
—
|
|
—
|
|
74,341
|
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Mr. Carter resigned
from the Bank effective July 24, 2009. The Bank agreed to pay Mr. Carter
$50,000 as a severance payment related to his termination of employment with
the Bank.
Executive Compensation Arrangements
On
July 24, 2009, following the non-objection of the FDIC and the Georgia
Department of Banking and Finance, the Bank entered into employment agreements
with Mr. Evans to serve as Chief Executive Officer and Chairman, Mr. Speight
to serve as Chief Financial Officer, Chief Operating Officer and Vice Chairman
and Mr. Childers to serve as President, Chief Credit Officer and Vice
Chairman. Each employment agreement
provides for a term of three years that automatically renews each day after the
effective date so that the term remains a three-year term until either party
notifies the other that the automatic renewals should discontinue. Each employment agreement provides for an
annual salary that is reviewed at least annually by the Board of Directors of
the Bank. Mr. Evans’, Mr. Speight’s
and Mr. Childers’ current annual base salaries as determined under each of
their employment agreements are $400,000, $350,000 and $350,000,
respectively. Each employment agreement
also provides that Mr. Evans, Mr. Speight and Mr. Childers,
respectively, is eligible to receive an annual bonus of up to 50% of his
respective annual base salary, as well as stock options and other benefits as
they are made available for senior executives of the Bank. This also includes business and professional
association reimbursements and paid vacation.
For 2010, the annual bonus for each of Mr. Evans, Mr. Speight
and Mr. Childers is subject to a 1% per day reduction, up to 100%
reduction, for each day after December 31, 2010 a registration statement
on Form 10 was not effective, as provided in the Stock Purchase Agreement
dated July 14, 2009. On May 11,
2010, each of Mr. Evans, Mr. Speight and Mr. Childers entered
into a First Amendment to his employment agreement to memorialize compliance
with Code Section 409A and to confirm that any termination of employment
will constitute a “separation from service” within the meaning of Code Section 409A.
In
October 2009, the Bank engaged Mr. Stephen W. Doughty to serve as
Executive Risk Officer. In March 2010,
the Bank submitted to the FDIC and the Georgia Department of Banking and
Finance an employment agreement for Mr. Doughty to serve as Executive Risk
Officer and Chief Banking Officer. The
form of Mr. Doughty’s employment agreement was substantially similar to
the form of agreement with Mr. Evans, Mr. Speight and Mr. Childers. Mr. Doughty’s current annual base salary
as determined under the employment agreement is $350,000, and he is also
eligible to receive an annual bonus of up to 50% of his annual base salary, as
well as stock options and other benefits made available for senior executives
of the Bank. Mr. Doughty’s
employment agreement was not formally entered into until July 19, 2010,
following regulatory non-objection by the FDIC and the Georgia Department of
Banking and Finance. Prior to that time,
Mr. Doughty was compensated as if the employment agreement were in effect.
Each
of the employment agreements provide for payments upon termination of
employment, including in connection with a change in control, as described
below. Each employment agreement also
requires the executive officer to keep confidential Bank information and trade
secrets during employment for 12 months following termination of the employment
agreement. In addition, each executive
officer is subject to provisions for non-competition and non-solicitation of
customers and employees of the Bank, as described below. Controversies or claims related to the
employment agreements will be settled by binding arbitration, with the Bank
paying the fees and expenses of the arbitration
79
Table of Contents
proceeding. If litigation to enforce an arbitration award
is brought, the Bank will advance the executive officer reasonable fees, costs
and expenses and the executive officer will reimburse the advances within 60
days of the final disposition of the matter, unless the arbitrators or court
has ruled in favor of the executive officer on the merits of the substantive
issues in dispute.
The
Board of Directors believes that it is important to protect these officers in
the event of a change in control by providing the officers with a structured
process for leaving the Bank as a result of a change in control. Further, the Board believes that the
interests of shareholders will be best served if the interests of executive
management are aligned with them, and providing change in control benefits
should eliminate, or at least reduce, the reluctance of executive management to
pursue potential change in control transactions that may be in the best
interests of shareholders.
Potential Payments Upon Termination or Change in Control
Mr. Evans’,
Mr. Speight’s, Mr. Childers’ and Mr. Doughty’s employment
agreements each have terms regarding potential payments upon termination of
employment or a change in control of the Bank which are substantially the same.
For
purposes of the benefits provided in the employment agreements, a change in
control is deemed to occur, in general, if:
·
a person or group of persons acquires 25% or more of
the Bank’s common stock;
·
within any twelve-month period, individuals who, at
the beginning of such period, are directors of the Bank cease to constitute at
least a majority of the board of directors thereof (with certain exceptions
provided, including that 2/3 of the incumbent directors may approve or
recommend election of a non-incumbent director);
·
the shareholders of the Bank approve a
reorganization, merger or consolidation of the Bank with respect to which
shareholders of the Bank immediately prior to such reorganization, merger, or
consolidation do not immediately thereafter own more than 50% of the combined
voting power of the surviving entity; or
·
the sale, transfer or assignment of all or
substantially all of the assets of the Bank and its subsidiaries to any third
party.
If
the officer chooses to terminate employment within the period commencing three
months prior to and ending twelve months after a change in control and upon 30
days written notice, the officer is entitled to receive a severance payment in
a lump sum amount equal to the (a) greater of (x) his current base
salary divided by 12, or (y) his average monthly compensation; (b) multiplied
by the number of months from the effective date of his termination through the
unexpired portion of the term of the employment agreement or, if greater,
24. For purposes of these calculations, “average
monthly compensation” means: (a) the sum of (x) the officer’s then
current annual base salary plus (y) his most recent annual bonus or, if
greater, his average bonus for the three prior years; (b) divided by
12. In addition, the Bank will also pay
the officer an amount equal to the cost of COBRA health continuation coverage
for the officer and his eligible dependents for the longer of (a) the
unexpired portion of the term of the employment agreement, (b) 24 months,
or (c) the period during which the officer and his eligible dependents are
entitled to COBRA health continuation coverage.
In
addition, if the officer’s employment is terminated (a) by the Bank other
than for “cause,” or (b) by the officer for “cause,” the officer will be
entitled to receive a severance payment in a lump sum amount equal to (a) the
greater of (x) his current base salary divided by 12, or (y) his
average monthly compensation (as defined above); (b) multiplied by
12. For purposes of the employment
agreements, “cause” is generally defined to mean the following:
With
respect to termination of the officer by the Bank:
·
a material breach of the terms of the employment
agreement by the officer;
·
conduct by the officer that constitutes fraud,
dishonesty, gross malfeasance of duty or conduct grossly inappropriate to the
officer’s office and is demonstrably likely to lead to material injury to the
Bank or which results in direct or indirect personal enrichment of the officer,
as confirmed by a vote of the Board of Directors following written notice and
an opportunity to be heard by the Board of Directors;
·
conduct resulting in the conviction of the officer
of a felony; or
·
conduct that results in the permanent removal of the
officer from his position as on officer of the Bank pursuant to a written order
by any regulatory agency.
80
Table of Contents
With
respect to termination by the officer:
·
a material diminution in the powers,
responsibilities, duties or total compensation of the officer;
·
the failure of the Board of Directors of the Bank to
maintain the officer’s appointment to his role as officer, the Bank’s
non-renewal of the employment agreement, or the failure of the shareholders of
the Bank to elect the officer as a director of the Bank; or
·
a material breach of the employment agreement by the
Bank.
With
respect to termination by the officer for cause, the officer must give 30 days
written notice to the Bank, other than for failure of the Board of Directors to
maintain the officer’s appointment or non-renewal of the employment agreement.
In
addition, if the officer’s employment is terminated by the Bank other than for “cause”
or by the officer for “cause,” as described above, the officer will also be
entitled to receive an amount equal to the cost of COBRA health continuation
coverage costs for the officer and his eligible dependents for the longer of (a) 12
months or (b) the period during which the officer and his eligible
dependents are entitled to COBRA health continuation coverage from the Bank.
The
employment agreements also provide that during the term of each officer’s
employment and for 36 months following his termination of employment, the
officer agrees not to compete with the Bank within designated counties in Georgia. In addition, during the term of each officer’s
employment and for 24 months following his termination of employment, the
officer agrees not to solicit (a) any of the Bank’s customers with whom he
had material contact or (b) employees of the Bank. The agreement not to compete and not to
solicit customers or employees does not apply if:
(a)
the Bank
terminates the officer’s employment without “cause”; or
(b)
the executive
terminates his employment in connection with a change in control of the Bank;
or
(c)
the officer
terminates his employment for “cause.”
For
at least 12 months following the termination of the employment agreement, the
officer will not disclose the Bank’s confidential information and will protect
the Bank’s trade secrets for so long as permitted by applicable law.
The
employment agreements also provide that if the payments on termination of
employment would constitute a “parachute payment” as defined in Code Section 280G,
the officer shall receive the total payments made under the employment
agreement; provided, if the after-tax amount retained by the officer after
taking into account the excise taxes would have a lesser aggregate value than
the after-tax amount retained by the officer if the total payments were reduced
so that no Code Section 280G taxes would be incurred, the officer will
receive reduced payments. Under the
employment agreement, the officer has agreed to provide post-termination
personal services to the Bank for payments which might otherwise be designated “parachute
payments” to the extent needed to comply with Code Section 280G and to
avoid excise taxes under Code Section 4999.
The
employment agreements provide for automatic termination of the agreement upon
death and permanent disability.
Permanent disability is defined as a condition providing for payments
under any long term disability coverage provided by the Bank, or in the absence
of such coverage, when the officer is unable to perform the material aspects of
his duties for at least 180 days. Upon
termination for permanent disability, the officer is paid average monthly
compensation for each full month until long term disability benefits become
payable, or if longer, six months.
The
employment agreements are intended to comply with Code Section 409A, including
any applicable exemption under Code Section 409A. If an officer is a “specified employee”
(within the meaning of Code Section 409A) when the officer separates from
service with the Bank, any deferred compensation subject to Code Section 409A
will be paid on the first day of the seventh month following the termination of
employment, unless an exemption is otherwise available.
The
following table summarizes the potential post-employment payments due to the
officers with employment agreements upon termination or a change in control of
the Bank assuming those events occurred on the last business day of the last
fiscal year.
81
Table of Contents
|
Name(1)
|
|
Benefit (2)
|
|
Change in
Control(3)
|
|
Termination
without
“cause” by
Bank
|
|
Termination
for “cause”
by Officer
|
|
Permanent
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
W. Evans
|
|
Cash
compensation — lump sum multiple (12, or up to 36 if a change in control) of monthly
compensation (4)
|
|
$
|
1,350,302
|
|
$
|
561,854
|
|
$
|
561,854
|
|
$
|
275,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-termination
health continuation payments for up to 18 months (up to 36 months if a change in control) (5)
|
|
28,675
|
|
14,338
|
|
14,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Daniel Speight
|
|
Cash
compensation — lump sum multiple (12, or up to 36 if a change in control) of monthly
compensation (4)
|
|
1,180,555
|
|
488,367
|
|
488,367
|
|
240,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-termination
health continuation payments for up to 18 months (up to 36 months if a change
in control) (5)
|
|
21,350
|
|
10,675
|
|
10,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kim M.
Childers
|
|
Cash
compensation — lump sum multiple (12, or up to 36 if a change in control) of monthly
compensation (4)
|
|
1,180,566
|
|
488,367
|
|
488,367
|
|
240,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-termination
health continuation payments for up to 18 months (up to 36 months if a change
in control) (5)
|
|
21,350
|
|
10,675
|
|
10,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Mr. Doughty
has been omitted from this table because he was not entitled to any potential
payments upon termination of employment for any reason, including a change in
control, during 2009, given that his employment agreement had not been approved
by regulatory agencies and he had not executed it.
(2)
Benefit
amounts are expressed as a single amount, even if paid over time. Any delay of payment required to comply with
Code Section 409A has been ignored for purposes of this chart. Benefit amounts do not include any benefits
available generally to all salaried employees.
82
Table of Contents
(3)
Upon
the officer’s termination of employment on account of a change in control under
the terms of the employment agreement, the amounts reported could be reduced if
such reduced amount would provide a greater value to the officer after taking
into account Code Section 4999 excise taxes and other taxes. For purposes of this table, only the maximum
amounts are shown.
(4)
Monthly
compensation was determined as the rate of base salary divided by 12. Average monthly compensation was not used
because it includes the most recently paid incentive compensation and no
incentive compensation had been paid as of December 31, 2009. The remaining term of the employment agreement
used is three years, assuming that no notice of non-renewal has been given by
either party.
(5)
The
COBRA health continuation coverage rate for an employee and family (based on
each employee’s age) in effect at December 31, 2009 was multiplied by the
number of months over which the amount would be paid.
Compensation Committee Interlocks and Insider Participation
The
Company was not incorporated until January 2010 and, therefore, did not
have a compensation committee as of December 31, 2009. Presently, the members of our Compensation
Committee are: James R. Balkcom, Jr. (Chairman), Archie L. Bransford, Jr.,
W. Carter Bates, III, Virginia A. Hepner and John Thomas Wiley, Jr. None of the members of the Compensation
Committee was an officer or employee, or former officer or employee of the
Company or the Bank. In addition, none
of these individuals had any relationship requiring disclosure under “Certain
Relationships and Related Transactions,” with the exception of Mr. Bates
as disclosed in Item 7.
Director Compensation
Both
the Company’s and the Bank’s bylaws permit our directors to receive
compensation as determined by the Board of Directors. None of our employee-directors received
compensation for their service to the Company in 2009. The Bank paid its non-employee directors a
fee of $10,000 per quarter, payable in advance and prorated for the number of
months the individual served as a director.
Non-employee directors are also reimbursed for reasonable expenses
incurred in connection with serving as a director. The fees paid to the Bank’s directors for the
period ended December 31, 2009 are set forth in the table below.
|
Name
|
|
Fees Earned or
Paid in
Cash
|
|
All Other
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
James R. Balkcom, Jr.
|
|
$
|
16,667
|
|
—
|
|
$
|
16,667
|
|
|
W. Carter Bates, III
|
|
16,667
|
|
—
|
|
16,667
|
|
|
Archie L. Bransford, Jr.
|
|
10,000
|
|
—
|
|
10,000
|
|
|
Kim M. Childers
|
|
—
|
|
—
|
|
—
|
|
|
Stephen W. Doughty(1)
|
|
—
|
|
—
|
|
—
|
|
|
Joseph W. Evans
|
|
—
|
|
—
|
|
—
|
|
|
Virginia A. Hepner(2)
|
|
—
|
|
—
|
|
—
|
|
|
John D. Houser(3)
|
|
16,667
|
|
—
|
|
16,667
|
|
|
J. Daniel Speight
|
|
—
|
|
—
|
|
—
|
|
|
J. Thomas Wiley(4)
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Mr. Doughty was not
appointed as a director of the Bank until July 28, 2010.
(2)
Ms. Hepner was not appointed as a director of
the Bank and the Company until September 2010.
(3)
Mr. Houser is a director of the Bank, but is
not a director of the Company.
(4)
Mr. Wiley was not appointed as a director of
the Bank and the Company until July 28, 2010.
83
Table
of Contents
Item 7. Certain Relationships
and Related Transactions, and Director Independence
W.
Carter Bates, III, one of our directors, is a partner in the law firm of
James, Bates, Pope & Spivey LLP, which provides various legal services
to us. Between July 24, 2009 and December 31,
2009, we paid James, Bates, Pope & Spivey LLP approximately $221,000
in fees and expenses for legal services.
We believe that the terms of this related party transaction are no less
favorable than could be obtained from an unaffiliated party.
We
conduct a review of all related party transactions for potential conflict of
interest situations on an ongoing basis, and all such transactions must be
approved by our Audit Committee or our disinterested directors. For purposes of this review, related party
transactions include all transactions that are required to be disclosed
pursuant to SEC regulations.
In
addition, the Bank is subject to the provisions of Section 23A of the
Federal Reserve Act, which limits the amount of loans or extensions of credit
to, or investments in, or certain other transactions with, affiliates and the
amount of advances to third parties collateralized by the securities or
obligations of affiliates. The Bank is
also subject to the provisions of Section 23B of the Federal Reserve Act
which, among other things, prohibits an institution from engaging in certain
transactions with certain affiliates unless the transactions are on terms
substantially the same, or at least as favorable to such institution or its
subsidiaries, as those prevailing at the time for comparable transactions with
nonaffiliated companies. Our policy is
not to make loans and enter into other banking transactions in the ordinary
course of business with our directors and officers and their affiliates.
Director
Independence
Our board of directors has determined that James R. Balkcom, Jr.,
W. Carter Bates, III, Archie L. Bransford, Jr. Virginia A. Hepner and
J. Thomas Wiley are “independent” directors, based upon the independence
criteria set forth in the corporate governance listing standards of The NASDAQ
Global Market, the exchange that we selected to determine whether our directors
and committee members meet the independence criteria of a national securities
exchange, as required by Item 407(a) of Regulation S-K.
Mr. Evans, Mr. Speight and Mr. Childers are considered
inside directors because of their employment as executive officers of our
company.
Item 8. Legal Proceedings
We are not a party to any material pending legal proceedings, other
than ordinary routine litigation incident to our business.
Item 9. Market Price of and Dividends on the
Registrant’s Common Equity and Related Stockholder Matters.
As of October 15, 2010, we had
31,607,604
shares of common stock
issued and outstanding and approximately 243 shareholders of record. In addition, we have issued warrants to
purchase 2,717,261 shares of our common stock.
No public market exists for our common stock, and there can be no
assurance that a public trading market for our common stock will develop. Consequently, management is only aware of a
few trades of the Bank’s common stock and it not aware of any trades of the
Company’s common stock.
Our executive officers and directors collectively own 728,000 shares of
our common stock that are eligible for resale subject to the limitations of Rule 144
promulgated under the Securities Act.
We have not declared or paid any cash dividends on our common
stock. For the foreseeable future we do
not intend to declare cash dividends and instead we plan to retain earnings to
grow our business. Our ability to pay
dividends depends on the ability of the Bank to pay dividends to us. Under Georgia law, the prior approval of the
Georgia Department of Banking and Finance is required before the Bank may pay
any cash dividends if:
(a)
total classified assets at
the Bank’s most recent examination exceed 80% of equity capital (which includes
the reserve for loan losses);
(b)
the aggregate amount of
dividends declared or anticipated to be declared in the calendar year exceeds
50% of the net profits for the previous calendar year; or
84
Table of Contents
(c)
the Bank’s ratio of equity
capital to adjusted total assets is less than 6%.
In
addition, for a period of three years after consummation of the July 24,
2009 change in control transaction, the Bank must also obtain approval from the
Georgia Department of Banking and Finance before paying any dividends,
including dividend payments to the Company.
The Bank received approval from the Georgia Department of Banking and
Finance to make a $718,000 dividend payment to the Company to fund its
operating expenses for 2010.
Item 10. Recent Sales of
Unregistered Securities
On
October 14, 2010, we sold 66,927 shares of our common stock and warrants
to purchase 59,927 shares of our common stock to certain members of the Bank’s senior management and one of our
directors for aggregate gross proceeds of $922,912. The shares and warrants were sold in reliance
upon the exemption from registration for transactions not involving a public
offering under Section 4(2) of the Securities Act, and, in
particular, the safe harbor provisions afforded by Rule 504 of
Regulation D, as promulgated thereunder.
On
July 23, 2010, we consummated our plan of reorganization and share
exchange with the Bank pursuant to which we have issued 31,540,977 shares of
our common stock in exchange for 31,540,977 shares of the Bank’s common stock
pursuant to the exemption from registration contained in Section 3(a)(12)
of the Securities Act.
On
December 9, 2009, the Bank sold 850,000 shares of common stock to an
investment fund for aggregate gross proceeds of $8.5 million. The shares were sold in reliance upon the
exemption from registration for transactions not involving a public offering
under Section 4(2) of the Securities Act, and, in particular, the
safe harbor provisions afforded by Rule 506 of Regulation D, as
promulgated thereunder. The investor
represented to us that it was an “accredited investor” as defined in
Rule 501(a) of Regulation D.
In addition, the shares were securities of the Bank, a banking
institution supervised by the Georgia Department of Banking and Finance and the
FDIC and, therefore, are considered exempt securities pursuant to Section 3(a)(2) of
the Securities Act and are not required to be registered with the SEC.
On
September 30, 2009, the Bank sold 350,740 shares of common stock and
warrants to purchase 217,900 shares of common stock to certain members of its
senior management for aggregate gross proceeds of $3,742,732. On November 30, 2009, the Bank sold an
additional 266,800 shares of common stock and warrants to purchase 187,129
shares of common stock to certain members of its senior management for
aggregate gross proceeds of $2,870,099.
Similarly, in December 2009, the Bank sold 51,000 shares of common
stock and warrants to purchase 53,000 shares of common stock to certain members
of its senior management team for aggregate proceeds of $567,240. The shares and warrants were sold in reliance
upon the exemption from registration for transactions not involving a public
offering under Section 4(2) of the Securities Act, and, in
particular, the safe harbor provisions afforded by Rule 506 of
Regulation D, as promulgated thereunder.
Each of the investors represented to us that he or she is an “accredited
investor” as defined in Rule 501(a) of Regulation D. In addition, the shares and warrants were
securities of the Bank, a banking institution supervised by the Georgia
Department of Banking and Finance and the FDIC and, therefore, are considered exempt
securities pursuant to Section 3(a)(2) of the Securities Act and are
not required to be registered with the SEC.
On
July 24, 2009, the Bank completed a private offering of 28,455,000 shares
of its common stock for aggregate gross proceeds of $284,550,000. The Bank engaged FBR Capital Markets &
Co. (“FBR”) as its placement agent to assist with the offering. The investors in the offering, either
directly or through affiliated funds, included hedge funds, mutual funds, an
insurance company and individuals.
Also
on July 24, 2009, the Bank closed on the sale of 700,000 units to certain
of our current executive officers, a member of the Bank’s senior management and
one of our directors for aggregate gross proceeds of $7.0 million. The units consisted of 700,000 shares of
common stock and warrants to purchase an additional 2,102,605 shares of our
common stock for $10.00 per share. The
Bank also closed on the sale of 100,000 units to certain of the Bank’s former
directors for aggregate gross proceeds of $500,000, which units consisted of
100,000 shares of our common stock and warrants to purchase 100,000 shares of
our common stock for $5.00 per share.
All
of the shares and warrants sold in the July 24, 2009 private offerings
were sold in reliance upon the exemption from registration for transactions not
involving a public offering under Section 4(2) of the Securities Act,
and, in particular, the safe harbor provisions afforded by Rule 506 of
Regulation D, as promulgated thereunder.
Each of the investors represented to us that he or she is an “accredited
investor” as defined in Rule 501(a) of Regulation D. In addition, the
85
Table of Contents
shares and warrants were securities of the
Bank, a banking institution supervised by the Georgia Department of Banking and
Finance and the FDIC and, therefore, are considered exempt securities pursuant
to Section 3(a)(2) of the Securities Act and are not required to be
registered with the SEC.
For
a description of the terms of the warrants described above, see Item 11,
Description of Registrant’s Securities to be Registered — Warrants, below.
Item 11. Description of
Registrant’s Securities to be Registered
General
Our amended and
restated articles of incorporation authorize us to issue up to 100,000,000
shares of common stock, $0.01 par value per share, and 2,000,000 shares of
preferred stock, $0.01 par value per share.
As of October 15
,
2010, there were 31,607,604 shares of our common
stock outstanding and no shares of our preferred stock outstanding.
Common Stock
All shares of our
common stock are entitled to share equally in dividends from funds legally
available therefor, when, as and if declared by our board of directors. All shares of our common stock, upon our
liquidation, dissolution or winding-up, whether voluntary or involuntary, shall
be entitled to share equally and ratably in all of our assets legally available
for distribution to the shareholders after payment of all of our debts and
liabilities and the liquidation preference of any outstanding preferred stock.
Each share of our
common stock is entitled to one vote in all matters that may be presented to
the shareholders. The shares of our
common stock are not convertible into any other security, nor are the shares
subject to any call, assessment or redemption.
There are no sinking fund provisions with respect to the shares of our
common stock. The holders of the shares
of our common stock do not have preemptive rights to subscribe to authorized
but unissued shares of common stock, except as described under “Right of First
Offer to Certain Shareholders” below.
Preferred Stock
Our
articles of incorporation provide that the board of directors is authorized,
without further action by the holders of our common stock, to provide for the
issuance of shares of preferred stock in one or more series and to fix the preferences, limitations and relative rights
and the number of shares to be included in any such series.
Warrants
In
connection with the July 2009 private offering and acquisition, we sold
700,000 units to some of our current executive officers, a member of the Bank’s
senior management and one of our directors for aggregate gross proceeds of $7.0
million. The units consisted of 700,000
shares of common stock and warrants to purchase an additional 2,102,605 shares
of our common stock for $10.00 per share.
In addition, some of the Bank’s former directors purchased units and entered
into non-compete agreements with the Bank.
These parties purchased a total of 100,000 units for $5.00 per
unit. These units consist of 100,000
shares of our common stock and warrants to purchase 100,000 shares of our
common stock for $5.00 per share.
Following
the July 2009 private offering, some of the members of our senior
management purchased individual warrants at fair value that gave them the right
to purchase an additional 458,029 shares of our common stock at $10.00 per
share. These warrants were not part of a
unit and, therefore, did not include shares of common stock. We used the Black-Scholes valuation model to
determine the fair value of the warrants, which at the date of issuance was
$494,671 based on a $1.08 warrant value.
On
October 14, 2010, some of the members of our senior management and one of
our directors purchased individual warrants that gave them the right to
purchase an additional 56,627 shares of our common stock at $11.21 per
share. These warrants were not part of a
unit and, therefore, did not include shares of common stock. We used the Black-Scholes valuation model to
determine the fair value of the warrants, which at the date of issuance was
$131,375 based on a $2.32 warrant value.
86
Table of
Contents
Each
warrant issued was fully exercisable on the date of grant and remains
exercisable for a 10-year period following the date of grant. The warrants issued to our executive
officers, directors and senior management are subject to repurchase agreements
should they leave their employment or their role as a director, as applicable,
or in some cases should other executive officers leave their respective
roles. The repurchase is at our option
at $2 per warrant (or $12 per share for exercised warrants) for the first three
years from issuance. The repurchase
applies to all warrants for the first 12 months of grant, two-thirds for the
next 12 months and one-third for the third 12 months. After three years, the holders’ warrants are
not subject to repurchase.
Right
of First Offer to Certain Shareholders
In connection with the closing of the July 2009 private offering,
the Bank entered into a stock purchase agreement dated July 14, 2009 with
the purchasers of an aggregate of 28,455,000 shares of the Bank’s common
stock. Under the stock purchase
agreement, the Bank, or any newly formed holding company of the Bank, agreed to
provide each purchaser with a right of first offer to purchase equity
securities of the Bank, or its newly formed holding company, in any subsequent
offer or sale of its securities, subject to limited exceptions.
The right of first offer will allow each purchaser to purchase a portion
of any of our newly issued equity securities in an amount that will enable each
purchaser to maintain its pro rata ownership interest in us on the date we
provide notice of the new offer or sale.
Each sale will be made on the same terms and at the same price as those
sales to all other purchasers. The right
of first offer expires upon the earlier of (a) an initial public offering,
or (b) when we begin trading on a national securities exchange.
Anti-Takeover
Provisions
Under
our amended and restated articles of incorporation, t
he authorized but unissued shares of our
common stock and preferred stock are available for issuance upon approval by
our board of directors without further approval by our shareholders,
except where
shareholder approval is required by law
. These
shares are available for issuance for a range of corporate purposes, which may
include public offerings to raise additional capital, acquisitions and employee
benefits. Additionally, our board of
directors could issue shares of stock to persons deemed friendly to our
management, which may have the effect of discouraging or otherwise making more
difficult an attempt to obtain control of us by means of a proxy contest,
tender offer, merger or otherwise, including those attempts that might result
in a premium over the market price for shares of common stock.
Transfer Agent
The
transfer agent and registrar for our common stock is American Stock Transfer &
Trust Company, LLC. Its address is 59
Maiden Lane, New York, New York 10038, and its telephone number is (800)
937-5449.
Item
12. Indemnification of Directors and
Officers
Under
our bylaws, each of our directors and officers, absent certain circumstances,
shall be indemnified by us for certain expenses incurred in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
Expenses for which directors and officers may be indemnified include any
judgment, settlement, penalty, fine or reasonable expenses (including attorneys’
fees and disbursements, court costs and expert witness fees). We may advance expenses incurred with respect
to any claim, action, suit or proceeding for which officers and directors may
be indemnified before the final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay that amount if it is
ultimately determined that he or she is not entitled to indemnification under
our bylaws. In addition, our amended and
restated articles of incorporation also provide that each of our directors and
officers has the right to be indemnified by us to the maximum extent permitted
by law.
Under
the Georgia Business Corporation Code (the “GBCC”), a Georgia corporation has
the power to indemnify its directors and officers provided that they act in
good faith and reasonably believe that their conduct was lawful and in the
corporation’s best interest (or not opposed thereto), as set forth in the
GBCC. Under the GBCC, a corporation must
indemnify a director or officer who is wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he or she was a party
because he or she is or was a director or officer, against reasonable expenses
incurred by the director or officer in connection with the proceeding. The GBCC permits a corporation to pay for or
reimburse reasonable
87
Table of
Contents
expenses in advance of final disposition of
an action, suit or proceeding only upon: (a) the director’s certification
that he or she acted in good faith and in the corporation’s best interest (or
not opposed thereto); and (b) the director furnishing a written
undertaking to repay the advance if it is ultimately determined that he or she
did not meet this standard of conduct.
The
GBCC also empowers a corporation to provide insurance for directors and
officers against liability arising out of their positions, even though the
insurance coverage may be broader than the corporation’s power to
indemnify. We maintain directors and
officers’ liability insurance for the benefit of our directors and officers.
88
Table of
Contents
Item
13. Financial Statements and
Supplementary Data
The
financial statements required to be included in this registration statement on Form 10
appear in Item 15. The following
information sets forth certain quarterly data for the periods presented.
|
|
|
Quarterly Period Ended
|
|
|
|
|
March 31, 2010
|
|
June 30, 2010
|
|
|
|
|
(dollars in thousands, except per share amounts)
|
|
|
Interest income
|
|
$
|
41,037
|
|
$
|
39,785
|
|
|
Interest expense
|
|
8,680
|
|
10,079
|
|
|
Net interest income
|
|
32,357
|
|
29,706
|
|
|
Provision for loan losses
|
|
497
|
|
695
|
|
|
Noninterest income
|
|
5,275
|
|
5,522
|
|
|
Noninterest expense
|
|
18,533
|
|
19,120
|
|
|
Income before income taxes
|
|
18,602
|
|
15,413
|
|
|
Incomes taxes
|
|
6,883
|
|
5,839
|
|
|
Net income
|
|
$
|
11,719
|
|
$
|
9,574
|
|
|
Basic earnings per share
|
|
$
|
0.37
|
|
$
|
0.30
|
|
|
Diluted earnings per share
|
|
$
|
0.37
|
|
$
|
0.30
|
|
89
Table of Contents
|
|
|
Quarterly Period Ended
|
|
|
Year Ended December 31, 2009
|
|
March 31
|
|
June 30
|
|
Predecessor
Period July
1, 2009
through
July 23,
2009
|
|
Successor
Period July
24, 2009
through
September 30
|
|
December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
478
|
|
$
|
475
|
|
$
|
161
|
|
$
|
27,048
|
|
$
|
30,795
|
|
|
Interest expense
|
|
211
|
|
204
|
|
85
|
|
6,766
|
|
7,975
|
|
|
Net interest income
|
|
267
|
|
271
|
|
76
|
|
20,282
|
|
22,820
|
|
|
Provision for loan losses
|
|
130
|
|
131
|
|
—
|
|
1,280
|
|
1,409
|
|
|
Noninterest income
|
|
41
|
|
62
|
|
16
|
|
2,546
|
|
7,747
|
|
|
Noninterest expense
|
|
311
|
|
308
|
|
100
|
|
9,298
|
|
13,047
|
|
|
Income before income taxes
|
|
(133
|
)
|
(106
|
)
|
(8
|
)
|
12,250
|
|
16,111
|
|
|
(Benefit) provision for income taxes
|
|
—
|
|
—
|
|
—
|
|
4,402
|
|
5,937
|
|
|
Net (loss) income
|
|
$
|
(133
|
)
|
$
|
(106
|
)
|
$
|
(8
|
)
|
$
|
7,848
|
|
$
|
10,174
|
|
|
Basic earnings per share
|
|
$
|
(0.17
|
)
|
$
|
(0.14
|
)
|
$
|
(0.01
|
)
|
$
|
0.26
|
|
$
|
0.33
|
|
|
Diluted earnings per share
|
|
$
|
(0.17
|
)
|
$
|
(0.14
|
)
|
$
|
(0.01
|
)
|
$
|
0.26
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
Table
of Contents
|
|
|
Quarterly Period Ended
|
|
|
|
|
Year Ended December 31, 2008
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
Total Year
|
|
|
|
|
(dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
495
|
|
$
|
467
|
|
$
|
488
|
|
$
|
467
|
|
$
|
1,917
|
|
|
Interest expense
|
|
204
|
|
204
|
|
197
|
|
218
|
|
823
|
|
|
Net interest income
|
|
291
|
|
263
|
|
291
|
|
249
|
|
1,094
|
|
|
Provision for loan losses
|
|
—
|
|
151
|
|
—
|
|
161
|
|
312
|
|
|
Noninterest income
|
|
38
|
|
44
|
|
51
|
|
44
|
|
177
|
|
|
Noninterest expense
|
|
351
|
|
394
|
|
398
|
|
338
|
|
1,481
|
|
|
Income before income taxes
|
|
(22
|
)
|
(238
|
)
|
(56
|
)
|
(206
|
)
|
(522
|
)
|
|
(Benefit) provision for income taxes
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Net (loss) income
|
|
$
|
(22
|
)
|
$
|
(238
|
)
|
$
|
(56
|
)
|
$
|
(206
|
)
|
$
|
(522
|
)
|
|
Basic earnings per share
|
|
$
|
(0.03
|
)
|
$
|
(0.31
|
)
|
$
|
(0.07
|
)
|
$
|
(0.27
|
)
|
$
|
(0.68
|
)
|
|
Diluted earnings per share
|
|
$
|
(0.03
|
)
|
$
|
(0.31
|
)
|
$
|
(0.07
|
)
|
$
|
(0.27
|
)
|
$
|
(0.68
|
)
|
Item 14. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Nichols, Cauley & Associates, LLC, the Bank’s principal accounting
firm since the fiscal year ended December 31, 2006, was dismissed on August 24,
2009. The audit committee of the Bank
approved the dismissal. Except for its
report for the fiscal year ended December 31, 2008, Nichols, Cauley’s reports
on the Bank’s financial statements did not contain an adverse opinion or
disclaimer of opinion, nor were they modified as to uncertainty, audit scope,
or accounting principles, which, if not resolved to the satisfaction of
Nichols, Cauley, would have caused it to make reference to the subject matter
of the disagreement(s) in connection with its report. There were no reportable events as described
by Item 304(a)(1)(v) of Regulation S-K.
On August 24, 2009, the audit committee of the Bank engaged Dixon
Hughes PLLC as the Bank’s new independent registered public accounting
firm. All of the audited financial
statements in this registration statement have been audited by Dixon Hughes. Prior to August 24, 2009, neither the Bank
nor anyone on its behalf consulted Dixon Hughes regarding either: (i) the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Bank’s financial statements, in each case where written or oral advice was
provided that Dixon Hughes concluded was an important factor considered by the
Bank in reaching a decision as to the accounting, auditing or financial
reporting issue or (ii) any matter that was either the subject of a
disagreement or a reportable event (both as defined in Item 304 of Regulation
S-K).
Nichols, Cauley’s report on the Bank’s financial statements for the
fiscal year ended December 31, 2008 contained a qualified opinion regarding the
sufficiency of the Bank’s allowance for loan losses. The Bank’s management at that time, who were
replaced in July 2009, declined to make Nichols, Cauley’s recommended
adjustment to the Bank’s allowance for loan losses, resulting in the qualified
opinion. Current management made the
recommended adjustments to the Bank’s allowance for loan losses, and, following
their engagement, Dixon Hughes audited the Bank’s financial statements for the
fiscal year ended December 31, 2008, and issued an unqualified opinion. The dismissal of Nichols, Cauley and the
engagement of Dixon Hughes were unrelated to this matter.
The Company has provided a copy of this disclosure to Nichols, Cauley
and requested it to furnish a letter to the SEC stating whether it agrees with
the statements made by the Company and, if not, stating the respects in which
it does not agree. A copy of Nichols,
Cauley’s response was unavailable at the time of filing this registration
statement and will be filed by amendment to this registration statement within
two business days of receipt.
Item 15. Financial Statements and Exhibits
(a) Financial Statements
Please see the following financial statements set forth below beginning
on page F-1 of this registration statement on Form 10.
|
Page
|
|
Description
|
|
F-1
|
|
Reports of
Independent Registered Public Accounting Firm
|
|
|
|
|
|
F-3
|
|
Consolidated
Statement of Financial Condition as of December 31, 2009 and 2008
|
|
|
|
|
|
F-4
|
|
Consolidated
Statements of Income (Loss) for the Period Ended December 31, 2009, July 23,
2009 and the Years Ended December 31, 2008 and 2007
|
|
|
|
|
|
F-5
|
|
Consolidated
Statements of Shareholders’ Equity as of December 31, 2009, 2008 and 2007
|
|
|
|
|
|
F-6
|
|
Consolidated
Statements of Comprehensive Income (Loss) for the Periods Ended December 31,
2009, July 23, 2009 and the Years Ended December 31, 2008 and 2007
|
|
|
|
|
|
F-7
|
|
Consolidated
Statements of Cash Flows for the Period from December 31, 2009, July 23, 2009
and the Years Ended December 31, 2008 and 2007
|
|
|
|
|
|
F-9
|
|
Notes to
Consolidated Financial Statements
|
91
|
|
(b)
|
Exhibits. The following documents are filed as
exhibits hereto:
|
|
Exhibit
No.
|
|
Document
|
|
|
|
|
|
2.1
|
|
Purchase
and Assumption Agreement dated as of July 24, 2009 among the Federal
Deposit Insurance Corporation, Receiver of Security Bank of Bibb County,
Macon Georgia; Security Bank of Gwinnett County, Suwannee, Georgia; Security
Bank of Houston County, Perry, Georgia; Security Bank of Jones County, Gray,
Georgia; Security Bank of North Fulton, Alpharetta, Georgia; Security Bank of
North Metro, Woodstock, Georgia, State Bank and Trust Company and the Federal
Deposit Insurance Corporation acting in its corporate capacity
|
|
|
|
|
|
2.2
|
|
Purchase
and Assumption Agreement dated as of December 4, 2009 among the Federal
Deposit Insurance Corporation, Receiver of The Buckhead Community Bank,
Atlanta, Georgia, State Bank and Trust Company and the Federal Deposit
Insurance Corporation acting in its corporate capacity
|
|
|
|
|
|
2.3
|
|
Purchase
and Assumption Agreement dated as of December 4, 2009 among the Federal
Deposit Insurance Corporation, Receiver of First Security National Bank,
Norcross, Georgia, State Bank and Trust Company and the Federal Deposit
Insurance Corporation acting in its corporate capacity
|
|
|
|
|
|
2.4
|
|
Plan
of Reorganization and Share Exchange dated January 27, 2010
|
|
|
|
|
|
2.5
|
|
Purchase
and Assumption Agreement dated as of July 30, 2010 among the Federal
Deposit Insurance Corporation, Receiver of NorthWest Bank and Trust, Acworth,
Georgia, State Bank and Trust Company and the Federal Deposit Insurance
Corporation acting in its corporate capacity
|
|
|
|
|
|
3.1
|
|
Amended
and Restated Articles of Incorporation of State Bank Financial Corporation
|
|
|
|
|
|
3.2
|
|
Bylaws
of State Bank Financial Corporation
|
|
|
|
|
|
4.1
|
|
See
Exhibits 3.1 and 3.2 for provisions in State Bank Financial Corporation’s
Articles of Incorporation and Bylaws defining the rights of holders of common
stock
|
|
|
|
|
|
4.2
|
|
Form of
certificate of common stock
|
|
|
|
|
|
10.1
|
|
Employment
Agreement dated July 24, 2009 by and among of Joseph W. Evans and State
Bank and Trust Company
|
|
|
|
|
|
10.2
|
|
Employment
Agreement dated July 24, 2009 by and among of Kim M. Childers and State
Bank and Trust
|
92
|
Exhibit
No.
|
|
Document
|
|
|
|
|
|
|
|
Company
|
|
|
|
|
|
10.3
|
|
Employment
Agreement dated July 24, 2009 by and among of J. Daniel Speight and
State Bank and Trust Company
|
|
|
|
|
|
10.4
|
|
Employment
Agreement dated July 19, 2010 by and among of Stephen W. Doughty and
State Bank and Trust Company
|
|
|
|
|
|
10.5
|
|
First
Amendment to Employment Agreement dated May 11, 2010 by and among Joseph
W. Evans and State Bank and Trust Company
|
|
|
|
|
|
10.6
|
|
First
Amendment to Employment Agreement dated May 11, 2010 by and among Kim M.
Childers and State Bank and Trust Company
|
|
|
|
|
|
10.7
|
|
First
Amendment to Employment Agreement dated May 11, 2010 by and among J.
Daniel Speight and State Bank and Trust Company
|
|
|
|
|
|
10.8
|
|
Stock
Purchase Agreement dated July 14, 2009
|
|
|
|
|
|
10.9
|
|
Form of
Warrant Agreement (Pursuant to Instruction 2 of Item 601, one form of Warrant
Agreement has been filed which has been executed by each of the following
executive officers and the following director: Kim M. Childers, Stephen W.
Doughty, Joseph W. Evans, J. Daniel Speight and John Thomas Wiley, Jr.)
|
|
|
|
|
|
10.10
|
|
Form of
Purchase Agreement (Pursuant to Instruction 2 of Item 601, one form of
Purchase Agreement has been filed which has been executed by Kim M. Childers,
Joseph W. Evans and J. Daniel Speight)
|
|
|
|
|
|
10.11
|
|
Form of
Purchase Agreement (Pursuant to Instruction 2 of Item 601, one form of
Purchase Agreement has been filed which has been executed by Stephen W.
Doughty and John Thomas Wiley, Jr.)
|
|
|
|
|
|
21.1
|
|
Subsidiaries
of State Bank Financial Corporation
|
93
Table
of Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
FINANCIAL STATEMENTS
TABLE OF
CONTENTS
Audited Consolidated Financial Statements for the
Periods Ended December 31, 2009, July 23, 2009 and the Years Ended December 31,
2008 and 2007
|
Reports of Independent Registered Public Accounting
Firm
|
F-1
|
|
|
|
|
Consolidated
Statements of Financial Condition as of December 31, 2009 and 2008
|
F-3
|
|
|
|
|
Consolidated Statements of Income (Loss) for the
Periods Ended December 31, 2009, July 23, 2009, and Years Ended
December 31, 2008 and 2007
|
F-4
|
|
|
|
|
Consolidated Statements of Shareholders’ Equity as of
December 31, 2009, 2008 and 2007
|
F-5
|
|
|
|
|
Consolidated Statements of Comprehensive Income (Loss)
for the Periods Ended December 31, 2009, July 23, 2009, and Years
Ended December 31, 2008 and 2007
|
F-6
|
|
|
|
|
Consolidated Statements of Cash Flows for the Periods
Ended December 31, 2009, July 23, 2009, and Years Ended
December 31, 2008 and 2007
|
F-7
|
|
|
|
|
Notes to Consolidated Financial Statements
|
F-9
|
Table of
Contents
Report of Independent Registered Public Accounting
Firm
The Board of Directors
State Bank Financial
Corporation and Subsidiary:
We have audited the
accompanying consolidated statement of financial condition of State Bank
Financial Corporation and Subsidiary (the “Company”) as of December 31,
2009, and the related consolidated statements of income, shareholders’ equity,
comprehensive income, and cash flows for the successor period from July 24,
2009 through December 31, 2009.
These consolidated financial statements are the responsibility of the
successor Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. We were not
engaged to perform an audit of the Company’s internal control over financial
reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.
Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of State Bank
Financial Corporation and Subsidiary as of December 31, 2009, and the
results of the Company’s operations and its cash flows for the successor period
from July 24, 2009 through December 31, 2009, in conformity with
accounting principles generally accepted in the United States of America.
Atlanta,
Georgia
June 1, 2010
(except
for Note 1, as to which
the
date is July 30, 2010)
F-1
Table of
Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors
State Bank Financial
Corporation and Subsidiary:
We have audited the
accompanying consolidated statement of financial condition of State Bank
Financial Corporation and Subsidiary (the “Company”) as of December 31,
2008, and the related consolidated statements of loss, shareholders’ equity,
comprehensive loss, and cash flows for the predecessor period from January 1,
2009 through July 23, 2009 and for the years ended December 31, 2008
and 2007. These consolidated financial
statements are the responsibility of the predecessor Company’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. We were not
engaged to perform an audit of the Company’s internal control over financial
reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.
Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of State Bank
Financial Corporation and Subsidiary as of December 31, 2008, and the
results of the Company’s operations and its cash flows for the predecessor
period from January 1, 2009 through July 23, 2009, and for the years
ended December 31, 2008 and 2007, in conformity with accounting principles
generally accepted in the United States of America.
Atlanta,
Georgia
October 28, 2010
F-2
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of
Financial Condition
December 31, 2009 and 2008
(Dollars in Thousands)
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and amounts due from depository institutions
|
|
$
|
48,681
|
|
|
$
|
6,829
|
|
|
Interest-bearing deposits in other financial
institutions
|
|
151,485
|
|
|
170
|
|
|
Cash and cash equivalents
|
|
200,166
|
|
|
6,999
|
|
|
Investment securities available for sale
|
|
317,988
|
|
|
3,008
|
|
|
Federal Home Loan Bank stock
|
|
12,559
|
|
|
131
|
|
|
Loans receivable:
|
|
|
|
|
|
|
|
Not covered under FDIC loss sharing agreements
|
|
47,389
|
|
|
22,539
|
|
|
Covered under FDIC loss sharing agreements, net
|
|
1,134,499
|
|
|
—
|
|
|
Allowance for loan losses
|
|
(2,524
|
)
|
|
(445
|
)
|
|
Loans receivable, net
|
|
1,179,364
|
|
|
22,094
|
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
Not covered under FDIC loss sharing agreements
|
|
120
|
|
|
73
|
|
|
Covered under FDIC loss sharing agreements
|
|
141,690
|
|
|
—
|
|
|
Premises and equipment, net
|
|
2,295
|
|
|
930
|
|
|
Goodwill and other intangibles, net
|
|
12,334
|
|
|
—
|
|
|
FDIC receivable for loss sharing agreements, net
|
|
605,502
|
|
|
—
|
|
|
Other assets
|
|
25,940
|
|
|
356
|
|
|
Total assets
|
|
$
|
2,497,958
|
|
|
$
|
33,591
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Non-interest bearing deposits
|
|
$
|
187,746
|
|
|
$
|
2,652
|
|
|
Interest-bearing deposits
|
|
1,966,045
|
|
|
23,409
|
|
|
FHLB advances
|
|
5,000
|
|
|
1,800
|
|
|
Securities sold under agreements to repurchase
|
|
9,606
|
|
|
—
|
|
|
Other liabilities
|
|
18,797
|
|
|
84
|
|
|
Total liabilities
|
|
2,187,194
|
|
|
27,945
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
Preferred stock $1 par value; 2,000,000 shares authorized;
zero shares issued and outstanding at December 31, 2009 and 2008
|
|
—
|
|
|
—
|
|
|
Common stock, $0.01 par value; 100,000,000 and
10,000,000 shares authorized; 31,540,977 and 767,437 shares issued and
outstanding at December 31, 2009 and 2008, respectively
|
|
315
|
|
|
8
|
|
|
Additional paid-in capital
|
|
292,030
|
|
|
7,592
|
|
|
Retained earnings (deficit)
|
|
18,022
|
|
|
(2,041
|
)
|
|
Accumulated other comprehensive income - net
unrealized holding gains on securities available for sale, net of tax
|
|
397
|
|
|
87
|
|
|
Total shareholders’ equity
|
|
310,764
|
|
|
5,646
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,497,958
|
|
|
$
|
33,591
|
|
See accompanying notes to
consolidated financial statements.
F-3
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Income (Loss)
For the Periods Ended December 31, 2009, July 23, 2009 and
Years Ended December 31, 2008 and 2007
(Dollars in Thousands)
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
Period
|
|
|
Period
|
|
|
|
|
|
|
|
|
July 24, 2009
|
|
|
January 1, 2009
|
|
|
|
|
|
|
|
|
through
|
|
|
through
|
|
Years Ended
|
|
|
|
|
December 31,
|
|
|
July 23,
|
|
Predecessor
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable
|
|
$
|
54,998
|
|
|
$
|
974
|
|
$
|
1,671
|
|
$
|
1,532
|
|
|
Investment securities
|
|
2,540
|
|
|
99
|
|
190
|
|
203
|
|
|
Deposits in other banks and other
|
|
305
|
|
|
41
|
|
56
|
|
54
|
|
|
Total interest and dividend income
|
|
57,843
|
|
|
1,114
|
|
1,917
|
|
1,789
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
13,636
|
|
|
454
|
|
807
|
|
583
|
|
|
Federal Home Loan Bank advances
|
|
1,093
|
|
|
46
|
|
14
|
|
—
|
|
|
Federal funds purchased and repurchase agreements
|
|
12
|
|
|
—
|
|
2
|
|
2
|
|
|
Total interest expense
|
|
14,741
|
|
|
500
|
|
823
|
|
585
|
|
|
Net interest income
|
|
43,102
|
|
|
614
|
|
1,094
|
|
1,204
|
|
|
Provision for loan losses
|
|
2,689
|
|
|
261
|
|
312
|
|
196
|
|
|
Net interest income after provision for loan
losses
|
|
40,413
|
|
|
353
|
|
782
|
|
1,008
|
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of FDIC receivable for loss sharing
agreements
|
|
4,748
|
|
|
—
|
|
—
|
|
—
|
|
|
Service charges on deposit accounts
|
|
3,307
|
|
|
99
|
|
170
|
|
119
|
|
|
Gain on acquisitions
|
|
1,185
|
|
|
—
|
|
—
|
|
—
|
|
|
Other
|
|
1,053
|
|
|
20
|
|
7
|
|
13
|
|
|
Total noninterest income
|
|
10,293
|
|
|
119
|
|
177
|
|
132
|
|
|
Noninterest expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
13,162
|
|
|
380
|
|
728
|
|
783
|
|
|
Occupancy
|
|
1,668
|
|
|
115
|
|
289
|
|
303
|
|
|
Legal and professional
|
|
1,438
|
|
|
36
|
|
175
|
|
52
|
|
|
Marketing
|
|
583
|
|
|
5
|
|
4
|
|
10
|
|
|
Federal insurance premiums and other regulatory
fees
|
|
1,736
|
|
|
30
|
|
18
|
|
12
|
|
|
Net cost of operations of real estate owned
|
|
887
|
|
|
—
|
|
—
|
|
—
|
|
|
Data processing
|
|
671
|
|
|
64
|
|
111
|
|
99
|
|
|
Core deposit intangible amortization
|
|
210
|
|
|
—
|
|
—
|
|
—
|
|
|
Other
|
|
1,990
|
|
|
89
|
|
156
|
|
187
|
|
|
Total noninterest expenses
|
|
22,345
|
|
|
719
|
|
1,481
|
|
1,446
|
|
|
Income (loss) before income taxes
|
|
28,361
|
|
|
(247
|
)
|
(522
|
)
|
(306
|
)
|
|
Income tax expense
|
|
10,339
|
|
|
—
|
|
—
|
|
—
|
|
|
Net income (loss)
|
|
$
|
18,022
|
|
|
$
|
(247
|
)
|
$
|
(522
|
)
|
$
|
(306
|
)
|
|
Basic net income (loss) per share
|
|
$
|
0.59
|
|
|
$
|
(0.32
|
)
|
$
|
(0.68
|
)
|
$
|
(0.40
|
)
|
|
Diluted net income (loss) per share
|
|
$
|
0.58
|
|
|
$
|
(0.32
|
)
|
$
|
(0.68
|
)
|
$
|
(0.40
|
)
|
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
30,584
|
|
|
767
|
|
767
|
|
767
|
|
|
Diluted
|
|
31,014
|
|
|
767
|
|
767
|
|
767
|
|
See accompanying notes to
consolidated financial statements.
F-4
Table
of Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of
Shareholders’ Equity
Years Ended December 31, 2009, 2008 and 2007
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
Other
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
Earnings/
|
|
Comprehensive
|
|
|
|
|
|
|
Warrants
|
|
Shares
|
|
Stock
|
|
Surplus
|
|
(Deficit)
|
|
Income
|
|
Total
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2007
|
|
—
|
|
767,437
|
|
$
|
8
|
|
$
|
7,592
|
|
$
|
(1,213
|
)
|
$
|
(4
|
)
|
$
|
6,383
|
|
|
Change
in accumulated other comprehensive income, net of tax
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
28
|
|
28
|
|
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(306
|
)
|
—
|
|
(306
|
)
|
|
Balance,
December 31, 2007
|
|
—
|
|
767,437
|
|
8
|
|
7,592
|
|
(1,519
|
)
|
24
|
|
6,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in accumulated other comprehensive income, net of tax
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
63
|
|
63
|
|
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(522
|
)
|
—
|
|
(522
|
)
|
|
Balance,
December 31, 2008
|
|
—
|
|
767,437
|
|
8
|
|
7,592
|
|
(2,041
|
)
|
87
|
|
5,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued-Organizers and Investors
|
|
2,202,605
|
|
30,022,437
|
|
$
|
300
|
|
$
|
276,364
|
|
$
|
—
|
|
$
|
—
|
|
$
|
276,664
|
|
|
Common
shares issued-employees
|
|
458,029
|
|
1,518,540
|
|
15
|
|
15,666
|
|
—
|
|
—
|
|
15,681
|
|
|
Change
in accumulated other comprehensive income
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
397
|
|
397
|
|
|
Net
income
|
|
—
|
|
—
|
|
—
|
|
—
|
|
18,022
|
|
—
|
|
18,022
|
|
|
Balance,
December 31, 2009
|
|
2,660,634
|
|
31,540,977
|
|
$
|
315
|
|
$
|
292,030
|
|
$
|
18,022
|
|
$
|
397
|
|
$
|
310,764
|
|
See accompanying notes to
consolidated financial statements.
F-5
Table
of Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of
Comprehensive Income (Loss)
For the Periods Ended December 31, 2009, July 23, 2009 and the
Years Ended
December 31, 2008 and 2007
(Dollars in thousands)
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
Period
|
|
|
Period
|
|
|
|
|
|
|
|
|
July 24, 2009
|
|
|
January 1, 2009
|
|
|
|
|
|
|
|
|
through
|
|
|
through
|
|
Years Ended
|
|
|
|
|
December 31,
|
|
|
July 23,
|
|
Predecessor
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
18,022
|
|
|
$
|
(247
|
)
|
$
|
(522
|
)
|
$
|
(306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
(loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities arising
during the period, net of tax
|
|
397
|
|
|
(46
|
)
|
63
|
|
28
|
|
|
Reclassification adjustment
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
397
|
|
|
(46
|
)
|
63
|
|
28
|
|
|
Comprehensive income (loss)
|
|
$
|
18,419
|
|
|
$
|
(293
|
)
|
$
|
(459
|
)
|
$
|
(278
|
)
|
See accompanying notes to consolidated financial statements.
F-6
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of
Cash Flows
or the Periods Ended December 31, 2009, July 23, 2009 and the
Years Ended
December 31, 2008 and 2007
(Dollars in thousands)
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
Period
|
|
|
Period
|
|
|
|
|
|
|
|
|
July 24, 2009
|
|
|
January 1, 2009
|
|
|
|
|
|
|
|
|
through
|
|
|
through
|
|
Years Ended
|
|
|
|
|
December 31,
|
|
|
July 23,
|
|
Predecessor
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
Cash Flows from Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
18,022
|
|
|
$
|
(247
|
)
|
$
|
(522
|
)
|
$
|
(306
|
)
|
|
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion on premises
and equipment and investments
|
|
1,326
|
|
|
44
|
|
120
|
|
130
|
|
|
Amortization of intangible assets
|
|
210
|
|
|
—
|
|
—
|
|
—
|
|
|
Provision for loan losses
|
|
2,689
|
|
|
261
|
|
312
|
|
196
|
|
|
Amortization of premiums and discounts on
acquisitions, net
|
|
(32,437
|
)
|
|
—
|
|
—
|
|
—
|
|
|
Loss on sale of other real estate
|
|
143
|
|
|
—
|
|
—
|
|
—
|
|
|
Write downs of other real estate owned
|
|
3,248
|
|
|
—
|
|
—
|
|
—
|
|
|
Increase in FDIC receivable for covered losses
|
|
(3,993
|
)
|
|
—
|
|
—
|
|
—
|
|
|
Funds collected from FDIC receivable
|
|
40,474
|
|
|
—
|
|
—
|
|
|
|
|
Deferred income taxes
|
|
2,177
|
|
|
—
|
|
(242
|
)
|
(170
|
)
|
|
Impairment of deferred income taxes
|
|
—
|
|
|
—
|
|
242
|
|
170
|
|
|
Gain on acquisitions
|
|
1,185
|
|
|
—
|
|
—
|
|
—
|
|
|
Increase in prepaid FDIC assessments
|
|
(11,183
|
)
|
|
—
|
|
—
|
|
—
|
|
|
Change in other liabilities, net
|
|
(7,631
|
)
|
|
23
|
|
(87
|
)
|
79
|
|
|
Other operating activities, net
|
|
(6,182
|
)
|
|
(5
|
)
|
7
|
|
(128
|
)
|
|
Cash provided by (used in) operating activities
|
|
8,048
|
|
|
76
|
|
(170
|
)
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of investment securities available for
sale
|
|
(50,452
|
)
|
|
(815
|
)
|
(1,000
|
)
|
(1,999
|
)
|
|
Proceeds from sales, calls, maturities and
paydowns of investment securities available for sale
|
|
43,492
|
|
|
—
|
|
2,125
|
|
2,004
|
|
|
Federal Home Loan Bank stock
|
|
(36
|
)
|
|
(11
|
)
|
(94
|
)
|
(8
|
)
|
|
Loans to customers, net of repayments
|
|
56,850
|
|
|
(3,411
|
)
|
(3,606
|
)
|
(7,537
|
)
|
|
Purchase of premises and equipment
|
|
(1,440
|
)
|
|
—
|
|
(3
|
)
|
(70
|
)
|
|
Disposal of premises and equipment
|
|
—
|
|
|
—
|
|
19
|
|
|
|
|
Proceeds from sales of other real estate
|
|
20,483
|
|
|
—
|
|
—
|
|
—
|
|
|
Capitalized improvements to other real estate
|
|
(64
|
)
|
|
—
|
|
—
|
|
—
|
|
|
Net cash proceeds from FDIC-assisted transactions
|
|
802,910
|
|
|
—
|
|
—
|
|
—
|
|
|
Cash provided by (used in) investing activities
|
|
871,743
|
|
|
(4,237
|
)
|
(2,559
|
)
|
(7,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing customer deposits
|
|
(798,032
|
)
|
|
2,847
|
|
4,609
|
|
7,213
|
|
|
Noninterest-bearing customer deposits
|
|
(4,737
|
)
|
|
—
|
|
105
|
|
157
|
|
|
Proceeds from other borrowings
|
|
—
|
|
|
—
|
|
1,800
|
|
—
|
|
|
Federal funds purchased and securities sold under
repurchase agreements
|
|
(5,454
|
)
|
|
—
|
|
—
|
|
—
|
|
|
Repayments of other borrowed money
|
|
(169,432
|
)
|
|
—
|
|
—
|
|
—
|
|
|
Issuance of common stock subsequent to
reorganization
|
|
15,681
|
|
|
—
|
|
—
|
|
—
|
|
|
Issuance of common stock at reorganization
|
|
276,664
|
|
|
—
|
|
—
|
|
—
|
|
|
Cash provided by (used in) financing activities
|
|
(685,310
|
)
|
|
2,847
|
|
6,514
|
|
7,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
194,481
|
|
|
(1,314
|
)
|
3,785
|
|
(269
|
)
|
|
Cash and cash equivalents,
beginning
|
|
5,685
|
|
|
6,999
|
|
3,214
|
|
3,483
|
|
|
Cash and cash equivalents,
ending
|
|
$
|
200,166
|
|
|
$
|
5,685
|
|
$
|
6,999
|
|
$
|
3,214
|
|
See accompanying notes to consolidated financial statements.
F-7
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
For the Periods Ended December 31, 2009, July 23, 2009 and
the Years Ended
December 31, 2008 and 2007
(Dollars in thousands)
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
Period
|
|
|
Period
|
|
|
|
|
|
|
|
|
July 24, 2009
|
|
|
January 1, 2009
|
|
|
|
|
|
|
|
|
through
|
|
|
through
|
|
Years Ended
|
|
|
|
|
December 31,
|
|
|
July 23,
|
|
Predecessor
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment For:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
4,204
|
|
|
$
|
473
|
|
$
|
851
|
|
$
|
552
|
|
|
Income taxes
|
|
$
|
8,615
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of
Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities, net of
tax
|
|
$
|
397
|
|
|
$
|
(46
|
)
|
$
|
63
|
|
$
|
28
|
|
|
Transfers of loans to other real estate
|
|
$
|
55,887
|
|
|
$
|
—
|
|
$
|
73
|
|
$
|
—
|
|
|
Acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired
|
|
$
|
3,127,175
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Liabilities assumed
|
|
$
|
3,135,207
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Net liabilities assumed
|
|
$
|
(8,032
|
)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
See accompanying notes to
consolidated financial statements.
F-8
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(1)
Subsequent
Events
Holding Company Formation
Companies
must consider events that occur after the balance sheet date but before the
financial statements are issued or are available to be issued. Subsequent
to December 31, 2009, the annual shareholder meeting was held March 11,
2010 at which time the approval was granted through proxy vote for the
formation of a bank holding company. Shareholders of the Bank will
receive common shares of the holding company in exchange for their Bank common
shares in this reorganization. The exchange is accounted for on a
historical cost basis similar to a transaction between entities under a common
control. The bank holding company’s primary business will be conducted
through State Bank and Trust Company, its wholly-owned banking
subsidiary. The bank holding company will be subject to regulations of
certain federal and state agencies and will be periodically examined by those
regulatory agencies. Although the shareholders approved the formation of
a bank holding company in March 2010, the required regulatory approvals
were not obtained until July 2010.
The holding company reorganization was completed on July 23,
2010. As this subsequent event transaction is considered a reorganization
under common control, these financial statements are presented as a
consolidated entity.
As
of the subsequent event transaction, the holding company’s primary asset was
the investment in the subsidiary of $310.8 million, which included $18.0
million equity in subsidiary earnings.
Building Purchase
On
May 5, 2010, the Bank purchased a corporate center located in Macon, GA
for $4.5 million. The building will be
the new location for the operations department and additional office space will
be leased to businesses currently occupying the space.
Acquisition
On July 30, 2010, the Company entered into a
Purchase and Assumption Agreement (the “Agreement”) with the Federal Deposit
Insurance Corporation (“FDIC”) to purchase substantially all the assets and
assume a majority of the liabilities of Northwest Bank and Trust (“NWBT”) of
Acworth, Georgia. Immediately prior to
the effectiveness of the NWBT Agreement, the FDIC was appointed receiver of
NWBT.
In
its call report dated June 30, 2010, NWBT reported (
in thousands
):
|
Total
assets
|
|
$
|
160,763
|
|
|
|
|
|
|
|
Loans
and leases
|
|
92,475
|
|
|
|
|
|
|
|
Deposits
(includes $37,725 of brokered deposits)
|
|
155,531
|
|
|
|
|
|
|
|
Nonaccrual
loans
|
|
21,145
|
|
|
|
|
|
|
|
Other
real estate
|
|
5,398
|
|
During
the third quarter of 2010, the Company recorded the purchased assets and
assumed liabilities at fair value. Under
the terms of the NWBT Agreement, the Company also had the option to purchase
any owned bank premises or to assume the leases on any or all of the banking
offices. During the third quarter, the
Company decided to close one of the two branches and to lease the remaining
branch from the FDIC, if and until it is purchased from the FDIC during final
settlement.
Loans,
other real estate owned by NWBT and purchased by the Company, and reimbursable
expenses incurred by the Company are subject to loss sharing agreements that
allocate prospective
F-9
Table of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
losses
between the Company and the FDIC. The
Company entered into two loss sharing agreements with the FDIC which will
absorb 80% of losses incurred on covered assets.
The
Company has not completed the acquisition accounting for the assets acquired
and liabilities assumed in the transaction.
This acquisition accounting will be completed during the third quarter
2010.
FDIC Cash
Receipts
Subsequent
to December 31, 2009, the Company has filed the quarterly loss share
reports with the FDIC for the first and second quarters of 2010. The cash
reimbursements through the date of subsequent events review, October 28,
2010, have totaled $212.6 million.
FDIC Settlement
Final
settlement with the FDIC on the 2009 acquisitions occurred on July 14,
2010 for the purchased assets and liabilities of the former Security Banks and August 16,
2010 for the assets and liabilities of the former The Buckhead Community Bank
and First Security National Bank. The
various bank locations were acquired through payment to the FDIC of $21.9
million.
(2)
Summary of
Significant Accounting Policies and Nature of Business
The
consolidated financial statements of State Bank Financial Corporation and
Subsidiary (the “Company”) include the financial statements of State Bank
Financial Corporation and its wholly owned subsidiary, State Bank and Trust
Company (the “Bank”). All intercompany
accounts and transactions have been eliminated in consolidation.
State
Bank and Trust Company was organized as a Georgia-state chartered bank, which
opened October 4, 2005 in Pinehurst, Georgia. The Bank is primarily regulated by the FDIC
and undergoes periodic examinations by this regulatory authority. On July 24, 2009 (“date of successor”),
State Bank and Trust Company entered into investment agreements under which new
investors infused $277 million of additional capital into the Bank which
resulted in a successor entity. This
significant recapitalization resulted in a change of control and a new basis of
accounting was applied. As such, the
2009 financial statements are presented for the period from July 24, 2009
through December 31, 2009 (“successor period”) and January 1, 2009
through July 23, 2009 (“predecessor period”).
The
Company primarily provides real estate loans and a full range of deposit
products to individual and small business consumers through its 22 branch
offices ranging in locations from Metro Atlanta to middle Georgia. The Company primarily competes with other
financial institutions in its market area within middle Georgia. The Company considers its primary lending
market to be the state of Georgia. The
Company has no reportable segments.
The
accounting and reporting policies of the Company conform to accounting
principles generally accepted in the United States of America and to prevailing
practices within the financial institutions industry. The following is a summary of the significant
accounting policies that the Company follows in presenting its consolidated
financial statements.
(a)
Nature of Business
State
Bank Financial Corporation is a bank holding company whose primary business is
presently conducted through State Bank and Trust Company, its wholly-owned
banking subsidiary. Through the Bank,
the Company operates a full service banking business and offers a broad range
of commercial and retail banking products to its customers, with a significant
focus on the resolution of assets acquired from the FDIC, which range from
Metro
F-10
Table of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
Atlanta
to middle Georgia. The Company is
subject to regulations of certain federal and state agencies and is periodically
examined by those regulatory agencies.
(b)
Basis of Presentation
In
preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenue and expenses for
the period. Actual results could differ
significantly from those estimates.
Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance for loan
losses, the valuation of real estate acquired in connection with foreclosures
or in satisfaction of loans, the estimates used for fair value acquisition
accounting and the FDIC receivable for loss sharing agreements, the assessment
for other-than-temporary impairment of investment securities, mortgage-backed
securities, and collateralized mortgage obligations. In connection with the determination of the
allowance for loan losses and the value of real estate owned, management
obtains independent appraisals for significant properties. In connection with the assessment for
other-than-temporary impairment of investment securities, mortgage-backed
securities, and collateralized mortgage obligations, management obtains fair
value estimates by independent quotations, assesses current credit ratings and
related trends, reviews relevant delinquency and default information, assesses
expected cash flows and coverage ratios, assesses the relative strength of
credit support from less senior tranches of the securities, reviews average
credit score data of underlying mortgagees, and assesses other current
data. The severity and duration of
impairment and the likelihood of potential recovery of impairment is considered
along with the intent and ability to hold any impaired security to maturity or
recovery of carrying value.
A
substantial portion of the Company’s loans are secured by real estate located
in its market area. Accordingly, the
ultimate collectability of a substantial portion of the Company’s loan
portfolio is susceptible to changes in the real estate market conditions of
this market area.
As
a result of the FDIC acquisition and the loss share agreements, the Company’s
financial results and future risks related to the acquired assets and liabilities
of the six bank subsidiaries of Security Bank Corporation are completely
altered, making historical financial information of Security Bank Corporation,
or its six subsidiary banks, irrelevant to an understanding of the Company’s operations. In addition, the Company’s business since July 24,
2009 and for the immediate future relies heavily on the Company’s loss share
resolution business and on the income generated from the remediation and
disposal of the assets it acquired from the FDIC and is fundamentally different
from the business of Security Bank Corporation.
In light of the foregoing, the Company has determined that Security Bank
Corporation is not the predecessor entity of the Company because the Company
did not succeed to substantially all of the business of Security Bank
Corporation in the acquisition, the Company has therefore omitted historical
financial statements of Security Bank Corporation and its six bank subsidiaries
in these financial statements.
(c)
Cash and Cash Equivalents
Cash
and cash equivalents, as presented in the consolidated financial statements,
include amounts due from other depository institutions and interest—bearing
deposits in other financial institutions.
Generally, interest—bearing deposits in other financial institutions are
for one—day periods.
(d)
Investments
Investments,
mortgage—backed securities, and collateralized mortgage obligations available
for sale are reported at fair value, as determined by independent
quotations. Investment in stock of the
Federal Home Loan Bank (“FHLB”) is required of every federally insured
F-11
Table of
Contents
STATE BANK FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated
Financial Statements
financial
institution, which utilizes its services.
The investment in FHLB stock is carried at cost and such stock is
evaluated for any potential impairment.
Purchase
premiums and discounts on investment securities are amortized and accreted to
interest income using a method which approximates a level yield over the period
to maturity of the related securities.
Purchase premiums and discounts on mortgage—backed securities and
collateralized mortgage obligations are amortized and accreted to interest
income using the interest method over the remaining lives of the securities,
taking into consideration assumed prepayment patterns.
Gains
and losses on sales of investments, mortgage—backed securities, and
collateralized mortgage obligations are recognized on the trade date, based on
the net proceeds received and the adjusted carrying amount of the specific
security sold.
A
decline in the market value of any available for sale security below cost that
is deemed other-than-temporary results in a charge to earnings and the
establishment of a new cost basis for that security. At December 31, 2009 and 2008, the
Company did not have any securities with other-than-temporary impairment.
(e)
Loans and Interest Income
Loans
are reported at the principal amounts outstanding, net of unearned income,
deferred loan fees/origination costs, and the allowance for loan losses.
Interest
income is recognized using the simple interest method on the balance of the
principal amount outstanding. Unearned
income, primarily arising from deferred loan fees, net of certain origination
costs, and deferred gains on the sale of the guaranteed portion of Small
Business Administration (SBA) loans, is amortized over the lives of the
underlying loans using the interest method.
Generally,
the accrual of interest income is discontinued on loans when reasonable doubt
exists as to the full, timely collection of interest or principal. Interest previously accrued but not collected
is reversed against current period interest income when such loans are placed
on nonaccrual status. Interest on
nonaccrual loans, which is ultimately collected, is credited to income in the
period received.
Impaired
loans are measured based on the present value of expected future cash flows,
discounted at the loan’s effective interest rate, or at the loan’s observable
market price, or the fair value of the collateral if the loan is collateral
dependent. The Company considers a loan
impaired when, based on current information and events, it is probable that the
Company will be unable to collect all amounts due according to the contractual
terms of the note agreement. Large pools
of smaller balance homogeneous loans, such as consumer and installment loans,
are collectively evaluated for impairment by the Company. Impairment losses are included in the
allowance for loan losses through a charge to the provision for loan
losses. Cash receipts on impaired loans
for which the accrual of interest has been discontinued are recorded as income
when received unless full recovery of principal is in doubt whereby cash
received is recorded as principal reduction.
Acquired
loans are recorded at fair value at the date of acquisition
exclusive of expected reimbursement cash flows from the FDIC
. The fair values of loans with evidence of
credit deterioration (impaired loans) are recorded net of a non-accretable
discount and, if appropriate, an accretable discount. The difference between contractually required
payments at acquisition and the cash flows expected to be collected at
acquisition is the non-accretable discount, which is included in the carrying
amount of acquired loans. Subsequent
decreases to the expected cash flows will generally result in a provision for
loan losses. Subsequent increases in
cash flows result in a reversal of the provision for loan losses to the extent
of
F-12
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
prior
changes or a reclassification of the difference from non-accretable to
accretable with a positive impact on the accretable discount. Any excess of cash flows expected at
acquisition over the estimated fair value is referred to as the accretable
discount and is recognized in interest income over the remaining life of the
loan when there is reasonable expectation about the amount and timing of such
cash flows. The Company was unable to
make such an estimate for acquired impaired loans.
The
Company accounts for performing loans acquired in business combinations using
the expected cash flows method of recognizing discount accretion based on the
acquired loans’ expected cash flows.
Purchased performing loans are recorded at fair value, including a
credit discount. Credit losses on
acquired performing loans are estimated based on analysis of the performing
portfolio. Such estimated credit losses
are recorded as non-accretable discounts in a manner similar to purchased
impaired loans. The fair value discount
other than for credit loss is accreted as an adjustment to yield over the
estimated lives of the loans. There is
no allowance for loan losses established at the acquisition date for purchased
performing loans. A provision for loan
losses is recorded for any further deterioration in these loans subsequent to
the acquisition.
(f)
Allowance for Loan Losses
The
allowance for loan losses is adjusted through provisions for loan losses
charged or credited to operations. Loans
are charged off against the allowance for loan losses when management believes
that the collection of the principal is unlikely. Subsequent recoveries are added to the
allowance. The allowance is determined
through consideration of such factors as changes in the nature and volume of
the portfolio, overall portfolio quality, delinquency trends, and adequacy of
collateral, loan concentrations, specific problem loans, and economic
conditions that may affect the borrowers’ ability to pay.
To
the best of management’s ability, all known and inherent losses that are both
probable and reasonable to estimate have been recorded. While management uses available information
to recognize losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions. In addition, various regulatory agencies, as
an integral part of their examination process, periodically review the Company’s
allowance for loan losses. Such agencies
may require the Company to adjust the allowance based on their judgment about
information available to them at the time of their examination.
(g)
Other Real Estate Owned
Real
estate acquired through foreclosure, consisting of properties obtained through
foreclosure proceedings or acceptance of a deed in lieu of foreclosure, is
reported on an individual asset basis at the lower of cost or fair value, less
disposal costs. Fair value is determined
on the basis of current appraisals, comparable sales, and other estimates of
value obtained principally from independent sources. When properties are acquired through
foreclosure, any excess of the loan balance at the time of foreclosure over the
fair value of the real estate held as collateral is recognized and charged to
the allowance for loan losses. Based
upon management’s evaluation of the real estate acquired through foreclosure,
additional expense is recorded when necessary in an amount sufficient to
reflect any estimated declines in fair value.
Gains or losses recognized on the disposition of the properties are
recorded in other income in the consolidated statements of income.
Other
real estate acquired through foreclosure covered under loss sharing agreements
with the FDIC is reported exclusive of expected reimbursement cash flows from
the FDIC. Subsequent adjustments to the
estimated recoverable value of covered other real estate result in a reduction
of covered other real estate, and a charge to other expense, and an increase in
the FDIC receivable for the estimated amount to be reimbursed, with a
corresponding net offsetting amount recorded to other expense.
F-13
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
Costs
of improvements to real estate are capitalized, while costs associated with
holding the real estate are charged to operations.
(h)
Premises and Equipment
Premises and
equipment are stated at cost, less accumulated depreciation, which is computed
using the straight—line method over the estimated useful lives of the
assets. The estimated useful lives of
the assets range from 20 to 39 years for buildings and improvements and 3 to 15
years for furniture, fixtures, and equipment.
(i)
Receivable from FDIC for Loss Sharing Agreements
Under
loss sharing agreements with the FDIC, the Company is entitled to recover 80
percent of certain losses related to acquired loans and other real estate
incurred below a stated threshold and 95 percent of losses incurred that exceed
the stated threshold. The Company does
not expect that losses will exceed the stated threshold, except for one
acquired bank. Therefore, the Company recorded a receivable from the FDIC equal
to 80 percent or 95 percent, as applicable, of the estimated net losses on the
covered loans and other real estate acquired in excess of any applicable first
loss tranche. The receivable was
recorded at the present value of the estimated cash flows at the date of the
respective acquisitions and will be reviewed and updated prospectively as loss
estimates related to loans covered under loss share agreements with the FDIC (“Covered
Loans”), and other real estate owned change.
Changes to the FDIC receivable are classified in noninterest income.
Covered
Loans are reported in loans exclusive of the expected reimbursement from the
FDIC. Subsequent decreases in the amount
expected to be collected result in a provision for loan losses, an increase in
the allowance for loan losses, and a proportional adjustment to the FDIC
receivable for the estimated amount to be reimbursed. Subsequent increases in the amount expected
to be collected result in the reversal of any previously-recorded provision for
loan losses and related allowance for loan losses and adjustments to the FDIC
receivable, or prospective adjustment to the accretable discount if no
provision for loan losses had been recorded.
(j)
Income Taxes
The
Company recognizes deferred tax assets and liabilities for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. In assessing the realization of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income, and tax planning
strategies by jurisdiction and entity in making this assessment.
(k)
Comprehensive Income
Comprehensive
income for the Company consists of net income for the period and unrealized
holding gains and losses on investments, mortgage—backed securities, and
collateralized mortgage obligations classified as available for sale, net of
income taxes.
F-14
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(l)
Goodwill and other Intangible Assets
Intangible
assets include goodwill, which is the costs in excess of net assets acquired
and core deposit intangibles recorded in connection with a business
combination. The core deposit intangible
is being amortized over 4 years on a straight-line basis.
The
Company will test its goodwill for impairment annually during its fourth
quarter and upon certain triggering events on an interim basis if circumstances
exist that indicate a possible reduction in the fair value of the business
below its carrying value. No impairment
charges have been recognized through the successor period or the predecessor
period.
(m)
Acquisitions
Accounting
principles generally accepted in the United States (“US GAAP”) require that the
acquisition method of accounting, formerly referred to as purchase method, be
used for all business combinations and that an acquirer be identified for each
business combination. Under US GAAP, the
acquirer is the entity that obtains control of one or more businesses in the
business combination, and the acquisition date is the date the acquirer
achieves control. US GAAP requires that
the acquirer recognize the fair value of assets acquired, liabilities assumed,
and any non-controlling interest in the acquiree at the acquisition date.
The
Bank acquired substantially all of the assets and assumed substantially all of
the deposits and certain other liabilities of the six bank subsidiaries of
Security Bank Corporation headquartered in Macon, Georgia on July 24,
2009, The Buckhead Community Bank headquartered in Atlanta, Georgia on December 4,
2009, and First Security National Bank headquartered in Norcross, Georgia on December 4,
2009 (collectively, the “Acquired Banks”).
The acquisitions were completed with the assistance of the FDIC, which
had been appointed Receiver of these entities by their state or federal banking
authority, as applicable, immediately prior to the acquisitions. The acquired assets and assumed liabilities
of the Acquired Banks were measured at estimated fair value. Management made significant estimates and
exercised significant judgment in accounting for the acquisition of the
Acquired Banks. Management judgmentally
assigned risk ratings to loans based on appraisals and estimated collateral
values, expected cash flows, and estimated loss factors to measure fair values
for loans. Other real estate acquired
through foreclosure was valued based upon pending sales contracts and appraised
values, adjusted for current market conditions.
Management used quoted or current market prices to determine the fair
value of investment securities, short-term borrowings and long-term obligations
that were assumed from the Acquired Banks.
F-15
Table
of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(n)
Net Income Per Share
Basic
net income per share is computed on the weighted average number of shares
outstanding. Diluted net income per
share is computed by dividing net income by weighted average shares outstanding
plus potential common shares resulting from dilutive stock options, determined
using the treasury stock method. Income
per share for the successor and predecessor periods are as follows (
in thousands, except per share data
):
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Predecessor
|
|
Predecessor
|
|
|
|
|
Period
|
|
|
Period
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
18,022
|
|
|
$
|
(247
|
)
|
$
|
(522
|
)
|
$
|
(306
|
)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
30,584
|
|
|
767
|
|
767
|
|
767
|
|
|
Equivalent shares issuable upon exercise of stock
warrants
|
|
430
|
|
|
—
|
|
—
|
|
—
|
|
|
Diluted Shares
|
|
31,014
|
|
|
767
|
|
767
|
|
767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.59
|
|
|
$
|
(0.32
|
)
|
$
|
(0.68
|
)
|
$
|
(0.40
|
)
|
|
Diluted
|
|
$
|
0.58
|
|
|
$
|
(0.32
|
)
|
$
|
(0.68
|
)
|
$
|
(0.40
|
)
|
(o)
Recent Accounting Pronouncements
In
April 2009, the Financial Accounting Standards Board (“FASB”) issued
Financial Statement Position (FSP) (FSP FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments) (“ASC
320”).
This guidance amends
the previous other-than-temporary impairment (“OTTI”) guidance for debt
securities and included additional presentation and disclosure requirements for
both debt and equity securities. The
guidance is effective for interim reporting periods ending after June 15,
2009. The adoption of this guidance
requires an adjustment to retained earnings and other comprehensive income (“OCI”)
in the period of adoption to reclassify non-credit related impairment to OCI
for securities that the Company does not intend to sell (and will not more
likely than not be required to sell).
The adoption of this guidance did not have a material impact on the
Company’s consolidated financial statements.
In
May 2009, the FASB issued Statement of Financial Accounting Standards No. 165
(Statement No. 165,
Subsequent Events) (“ASC
855”).
ASC Topic 855,
Subsequent Events, establishes general standards of accounting for and
disclosure of subsequent events.
Subsequent events are events that occur after the balance sheet date but
before financial statements are issued or available to be issued. The guidance is effective for interim or annual
periods ending after June 15, 2009.
In
June 2009, the FASB issued Accounting Standards Update No. 2009-01 (“ASU
2009-01”),
Topic 105-Generally Accepted Accounting Principles
amendments based on Statement of Financial Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles.
ASU 2009-1 includes SFAS 168 in
its entirety, including the accounting standards update instructions contained
in Appendix B of the Statement. The FASB
Accounting Standards Codification (“Codification”) became the source of
authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive
releases of the Securities and Exchange Commission (“SEC”) under authority of
federal securities laws are also sources of authoritative U.S. GAAP for SEC
registrants. On the effective date of
this Statement, the Codification will supersede all then-existing non-SEC
F-16
Table of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
accounting
and reporting standards. All other
non-grandfathered non-SEC accounting literature not included in the
Codification will become non-authoritative.
This Statement is effective for financial statements issued for interim
periods ending after September 15, 2009.
In
August 2009, the FASB issued Accounting Standards Update No. 2009-05
(“ASU-2009-05”),
Fair Value Measurements and Disclosures
(Topic 820)-Measuring Liabilities at Fair Value.
ASU 2009-05 applies to all
entities that measure liabilities at fair value within the scope of ASC Topic
820. ASU 2009-05 provides clarification
that in circumstances in which a quoted market price in an active market for
the identical liability is not available, a reporting entity is required to
measure fair value using specific techniques as identified in the Update. The guidance provided by ASU 2009-05 is
effective for the first reporting period beginning after issuance. The adoption of ASU 2009-05 will not have a
material impact on the Company’s consolidated financial condition and results
of operations.
In
January 2010, the FASB issued Accounting Standards Update No. 2010-06
(“ASU 2010-01”),
Fair Value Measurements and Disclosures
(Topic 820)-Improving Disclosures about Fair Value Measurements.
ASU 2010-06 provides amendments to
Subtopic 820-10 that require additional provisions are made to the
disclosure. The new disclosures and
clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances and settlements in the
rollforward activity in Level 3 fair value measurements. Those disclosures are effective for fiscal
periods beginning after December 15, 2010 and for interim periods within
those fiscal years. The adoption of this
guidance will not have a material effect on the Company’s consolidated
financial condition or results of operations.
In
April 2010, the FASB issued Accounting Standards Update No. 2010-18,
Effect of a Loan Modification When the Loan Is Part of
a Pool That Is Accounted for as a Single Asset
(“ASU No. 2010-18”).
ASU No. 2010-18 provides guidance on the accounting for loan modifications
when the loan is part of a pool of loans accounted for as a single asset such
as acquired loans that have evidence of credit deterioration upon acquisition
that are accounted for under the guidance in ASC 310-30,
Loans and Debt Securities Acquired with Deterioration
of Credit Quality
(“ASC 310-30”).
ASU No. 2010-18 addresses diversity in practice on whether a loan
that is part of a pool of loans accounted for as a single asset should be removed
from that pool upon a modification that would constitute a troubled debt
restructuring (“TDR”) or remain in the pool after modification. ASU No. 2010-18 clarifies that
modifications of loans that are accounted for within a pool under ASC 310-30 do
not result in the removal of these loans from the pool even if the modification
of these loans would otherwise be considered a TDR. An entity will continue to be required to
consider whether the pool of assets in which the loan is included is impaired
if the expected cash flows for the pool change.
The amendments in this update do not require any additional disclosures
and are effective for modifications of loans accounted for within pools under
ASC 310-30 occurring in the first interim or annual period ending on or after
July 15, 2010. ASU 2010-18 is not
expected to have a material impact on the Company’s results of operations,
financial position or disclosures.
In
July 2010, the FASB issued Accounting Standards Update No. 2010-20,
Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses
(“ASU
No. 2010-20”). ASU No. 2010-20
requires disclosures regarding loans and the allowance for loan losses that are
disaggregated by portfolio segment and class of financing receivable. Existing
disclosures were amended to require a roll-forward of the allowance for loan
losses by portfolio segment, with the ending balance broken out by basis of
impairment method, as well as the recorded investment in the respective loans. Nonaccrual and impaired loans by class must
also be shown. ASU No. 2010-20 also requires disclosures regarding: (1) credit
quality indicators by class, (2) aging of past due loans by class, (3) TDRs
by class and their effect on the allowance for loan losses, (4) defaults
on TDRs by class and their effect on the
F-17
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
allowance
for loan losses, and (5) significant purchases and sales of loans
disaggregated by portfolio segment. This guidance is effective for interim and
annual reporting periods ending on or after December 15, 2010, for end of
period type disclosures. Activity
related disclosures are effective for interim and annual reporting periods
beginning on or after December 15, 2010.
ASU No. 2010-20 will have an impact on the Company’s disclosures,
but not its financial position or results of operations.
(3)
Goodwill
and Other Intangible Assets
The
Company recorded amortization expense related to the core deposit intangible of
$210 thousand for the successor period from July 24, 2009 through December 31,
2009. There was no amortization expense
for the predecessor periods.
At
December 31, 2009, the changes in the carrying amounts of goodwill and
identifiable intangible assets are presented in the table below
(in thousands)
:
|
Goodwill
|
|
$
|
9,217
|
|
|
Core deposit intangible
|
|
3,327
|
|
|
Less accumulated amortization
|
|
210
|
|
|
|
|
3,117
|
|
|
Total intangible assets
|
|
$
|
12,334
|
|
Amortization
expense for the core deposit intangible for the next five years is as follows
(in thousands)
:
|
2010
|
|
$
|
832
|
|
|
2011
|
|
832
|
|
|
2012
|
|
832
|
|
|
2013
|
|
621
|
|
|
2014
|
|
—
|
|
|
Thereafter
|
|
—
|
|
|
|
|
$
|
3,117
|
|
(4)
Federally
Assisted Acquisition of Security Bank
On
July 24, 2009, the Bank acquired substantially all of the assets and
assumed substantially all the deposits and certain other liabilities of the six
bank subsidiaries of Security Bank Corporation (“Security Bank”) from the FDIC,
as receiver. Security Bank Corporation’s
six commercial banking charters operated primarily within the middle Georgia
and metropolitan Atlanta areas. The FDIC
took Security Bank under receivership upon its closure by the Georgia
Department of Banking and Finance. The
Bank’s bid to purchase Security Bank included the purchase of substantially all
Security Bank’s assets at a discount of $316.5 million in exchange for assuming
substantially all of Security Bank’s deposits and certain other
liabilities. No cash, deposit premium or
other consideration was paid by the Bank.
The Bank and the FDIC entered into a purchase and assumption agreement
in connection with the acquisition which included loss sharing agreements
regarding future losses incurred on acquired loans and other real estate
acquired through foreclosure existing at the acquisition date, collectively
referred to as the covered assets. Under
the terms of the loss sharing agreements, the FDIC will reimburse the Bank for
80 percent of net losses incurred on the covered assets up to $563 million, and
95 percent of net losses exceeding $563 million. The term for loss sharing on residential real
estate loans is ten years, while the term for loss sharing on non-residential
real estate loans is five years in respect to losses and eight years in respect
to loss recoveries. As a result of the
loss sharing agreements with the FDIC, the Company recorded a receivable of
$403.6 million at the time of acquisition.
The Company has submitted $51.8 million
F-18
Table
of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
in
net losses to the FDIC under the loss sharing agreements during the period from
the acquisition date through December 31, 2009, and has received $40.5
million in reimbursements from the FDIC during that same period. Subsequent to December 31, 2009, the
Company has submitted additional net losses to the FDIC under such agreements
and through the report date has received approximately $159.0 million in
reimbursements. The reimbursements were
recorded as a reduction of the FDIC receivable for loss sharing agreements.
The
acquisition of Security Bank was accounted for under the acquisition method of
accounting. A summary of net assets
acquired and the resulting gain is presented in the following table. As explained in the explanatory notes that
accompany the following table, the purchased assets and assumed liabilities
were recorded at their acquisition date fair values. Fair values are preliminary and subject to
refinement for up to one year after the closing date of the acquisition as
additional information regarding the closing date fair values become available.
|
(Dollars in thousands)
|
|
As Recorded
by Security
|
|
Fair Value
Adjustments
|
|
As Recorded
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
171,168
|
|
$
|
480,457
|
(a)
|
$
|
651,625
|
|
|
Securities
|
|
208,173
|
|
—
|
|
208,173
|
|
|
FHLB stock
|
|
13,745
|
|
(3,472
|
)(i)
|
10,273
|
|
|
Loans, net of unearned income
|
|
1,520,191
|
|
(655,289
|
)(b)
|
864,902
|
|
|
Other real estate owned
|
|
115,174
|
|
(57,587
|
)(c)
|
57,587
|
|
|
FDIC receivable for loss sharing agreements
|
|
-
|
|
403,636
|
(d)
|
403,636
|
|
|
Other assets
|
|
4,518
|
|
2,504
|
(h)
|
7,022
|
|
|
Total assets acquired
|
|
$
|
2,032,969
|
|
$
|
170,249
|
|
$
|
2,203,218
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,013,924
|
|
$
|
2,966
|
(e)
|
$
|
2,016,890
|
|
|
FHLB advances and other borrowings
|
|
168,507
|
|
2,829
|
(f)
|
171,336
|
|
|
Other liabilities
|
|
14,495
|
|
—
|
|
14,495
|
|
|
Total liabilities assumed
|
|
2,196,926
|
|
5,795
|
|
2,202,721
|
|
|
Excess of liabilities assumed over assets acquired
|
|
$
|
163,957
|
(g)
|
|
|
|
|
|
Aggregate fair value adjustments
|
|
|
|
$
|
164,454
|
|
|
|
|
Gain on Acquisition
|
|
|
|
|
|
$
|
497
|
|
Explanation of fair value adjustments
(a) —
Adjustment reflects the
initial wire received from the FDIC on the acquisition date net of equity
adjustments if applicable.
(b) —
Adjustment reflects fair
value adjustments based on the Company’s evaluation of the acquired loan
portfolio. The fair value adjustment
includes adjustments for estimated credit losses, liquidity, market yield and
servicing costs.
(c) —
Adjustment reflects the
estimated other real estate owned losses based on the Company’s evaluation of
the acquired other real estate owned portfolio.
(d) —
Adjustment reflects the
present value of estimated fair value of payments the Company will receive from
the FDIC under loss sharing agreements.
(e) —
Adjustment reflects fair
value adjustments based on the Company’s evaluation of the acquired time
deposit portfolio.
(f) —
Adjustment arises since the
rates on acquired FHLB advances are higher than rates available on similar
borrowings as of the acquisition date.
F-19
Table of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(g) —
Amount represents the excess
of liabilities assumed over assets acquired and was a cash settlement from the
FDIC.
(h) —
Adjustment reflects fair
value adjustments to record the estimated core deposit intangible.
(i) —
Adjustment reflects the
estimated fair value of FHLB stock.
Results
of operations for Security Bank prior to the acquisition date are not included
in the income statement for the period ended December 31, 2009. Due to the significant amount of fair value
adjustments, the resulting accretion of those fair value adjustments and the
protection resulting from the FDIC loss sharing agreements, historical results
of Security Bank are not relevant to the Company’s results of operations. Therefore, no pro forma information is
presented.
Accounting
standards prohibit carrying over an allowance for loan losses for impaired
loans purchased in the Security Bank FDIC-assisted acquisition. On the
acquisition date, the preliminary estimate of the contractually required
payments receivable for all impaired loans acquired in the Security Bank acquisition
were $340.9 million and the estimated fair value of the loans were $113.7
million. At July 24, 2009, all of these loans were valued based on
the liquidation value of the underlying collateral because the timing and
amount of the expected cash flows could not be reasonably estimated. As a
result, the Company has no accretable discount on these impaired loans. At such date, the Company estimated that
$181.8 million would ultimately be collected from the FDIC relating to these
impaired loans in accordance with the applicable FDIC loss sharing agreement.
The Company established a non-accretable discount of $227.2 million on
the acquisition date relating to these impaired loans, reflected in the
recorded net fair value.
On
the acquisition date, the preliminary estimate of the contractually required
payments receivable for all non-impaired loans acquired in the acquisition was
$1,179.3 million and the estimated fair value of the loans were $751.2
million. At such date, the Company
estimated that $204 million would ultimately be collected from the FDIC under
loss sharing agreements relating to these non-impaired loans upon their
potential default in the future. The
Company established a non-accretable discount of $255 million on these
loans. In its estimate of cash flows for
such loans, the Company also recorded an accretable discount of $173.1 million
relating to these non-impaired loans which will be recognized on a level yield
basis over the life of the loans, representing periods up to 60 months.
The
Company has also recorded a net FDIC receivable of $403.6 million, representing
FDIC indemnification under loss sharing agreements for Covered Loans and other
real estate. Such receivable has been
discounted by $28.2 million for the expected timing of receipt of these cash
flows. This discount will be accreted
into noninterest income over the estimated period of receipt of cash flows
under these agreements.
(5)
Federally
Assisted Acquisition of The Buckhead
Community Bank
On
December 4, 2009, the Bank acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of The
Buckhead Community Bank (“BCB”) from the FDIC, as receiver. BCB operated seven commercial banking
branches primarily within the Atlanta, Georgia area. The FDIC took BCB under receivership upon its
closure by the Georgia Department of Banking and Finance. The Bank’s bid to purchase BCB included the
purchase of substantially all of BCB’s assets at a discount of $100.3 million in
exchange for assuming substantially all of BCB’s deposits and certain other
liabilities. No cash, deposit premium or
other consideration was paid by the Bank.
The Bank and the FDIC entered into a purchase and assumption agreement
in connection with the acquisition which included loss sharing agreements
regarding future losses incurred on acquired loans and other real estate
acquired through foreclosure existing at the acquisition date, collectively
referred to as the covered assets. Under
the terms of the loss sharing agreements, the FDIC will reimburse the Bank for
80 percent of net losses incurred on the covered assets up to $254 million, and
95 percent of net losses exceeding $254 million. The term for loss sharing on residential real
estate loans is ten years, while the term for loss sharing on non-residential
real estate loans is five years in respect to losses and eight years in respect
to loss recoveries. As a result of the
loss sharing agreements with the FDIC, the Company recorded a receivable of
$213.8 million at the time of acquisition.
The Company did not submit any losses to the FDIC under the loss sharing
agreements during the period from the acquisition date through December 31,
2009. Subsequent to December 31,
2009, the Company has submitted net losses to the FDIC under such agreements
and through the report date has received approximately $45.6 million in
reimbursements. The reimbursements were
recorded as a reduction of the FDIC receivable for loss sharing agreements.
F-20
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
The
purchase and assumption agreement entered into between the Bank and the FDIC
also includes a true-up payment at the end of year ten. On February 14, 2020, the true-up
measurement date, the Bank is required to make a true-up payment to the FDIC
equal to 50 percent of the excess, if any, of (i) 20 percent of the stated
threshold, or $50.8 million, less (ii) the sum of (a) 25 percent of
the asset discount, or $25.1 million, plus (b) 25 percent of the
cumulative loss share payments plus (c) the cumulative servicing
amount. The cumulative servicing amount
is one percent of the average covered assets for each year during the terms of
the loss sharing agreements. Although no
true-up payment is currently projected under the BCB loss share agreements,
those projections are subject to change.
The
acquisition of BCB was accounted for under the acquisition method of
accounting. A summary of net assets
acquired and the resulting acquisition date goodwill is presented in the
following table. As explained in the
explanatory notes that accompany the following table, the purchased assets and
assumed liabilities were recorded at their acquisition date fair values. Fair values are preliminary and subject to
refinement for up to one year after the closing date of the acquisition as
additional information regarding the closing date fair values become available.
|
(Dollars in thousands)
|
|
As Recorded
by BCB
|
|
Fair Value
Adjustments
|
|
As
Recorded
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
74,050
|
|
$
|
28,748
|
(f)
|
$
|
102,798
|
|
|
Securities
|
|
99,421
|
|
—
|
|
99,421
|
|
|
FHLB and FRB stock
|
|
2,811
|
|
(703
|
)(i)
|
2,108
|
|
|
Loans, net of unearned income
|
|
635,385
|
|
(291,787
|
)(a)
|
343,598
|
|
|
Other real estate owned
|
|
62,071
|
|
(27,400
|
)(b)
|
34,671
|
|
|
FDIC receivable for loss sharing agreements
|
|
—
|
|
213,812
|
(c)
|
213,812
|
|
|
Other assets
|
|
6,805
|
|
665
|
(g)
|
7,470
|
|
|
Total assets acquired
|
|
$
|
880,543
|
|
$
|
(76,665
|
)
|
$
|
803,878
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
790,259
|
|
$
|
2,998
|
(d)
|
$
|
793,257
|
|
|
FHLB advances and other borrowings
|
|
16,507
|
|
118
|
(e)
|
16,625
|
|
|
Other liabilities
|
|
3,213
|
|
—
|
|
3,213
|
|
|
Total liabilities assumed
|
|
809,979
|
|
3,116
|
|
813,095
|
|
|
Excess of assets acquired over liabilities assumed
|
|
$
|
70,564
|
(h)
|
|
|
|
|
|
Aggregate fair value adjustments
|
|
|
|
$
|
(79,781
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
$
|
9,217
|
|
Explanation of fair value adjustments
(a) —
Adjustment reflects fair
value adjustments based on the Company’s evaluation of the acquired loan
portfolio. The fair value adjustment
includes adjustments for estimated credit losses, liquidity, market yield and
servicing costs.
F-21
Table of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(b) —
Adjustment reflects the
estimated other real estate owned losses based on the Company’s evaluation of
the acquired other real estate owned portfolio.
(c) —
Adjustment reflects the
estimated fair value of payments the Company will receive from the FDIC under
loss sharing agreements.
(d) —
Adjustment reflects fair
value adjustments based on the Company’s evaluation of the acquired time
deposit portfolio.
(e) —
Adjustment arises since the
rates on acquired FHLB advances are higher than rates available on similar
borrowings as of the acquisition date.
(f) —
Adjustment reflects the
initial wire received from the FDIC on the acquisition date net of equity
adjustments if applicable.
(g) —
Adjustment reflects fair
value adjustment to record the estimated core deposit intangible.
(h) —
Amount represents the excess
assets acquired over liabilities assumed and was a cash settlement from the
FDIC as primarily adjusted by the negative bid amount.
(i) —
Adjustment reflects the
estimated fair value of FHLB stock.
Results
of operations for BCB prior to the acquisition date are not included in the
income statement for the period ended December 31, 2009. Due to the significant amount of fair value
adjustments, the resulting accretion of those fair value adjustments and the
protection resulting from the FDIC loss sharing agreements, historical results
of BCB are not relevant to the Company’s results of operations. Therefore, no pro forma information is
presented.
Accounting
standards prohibit carrying over an allowance for loan losses for impaired
loans purchased in the BCB FDIC-assisted acquisition. On the acquisition
date, the preliminary estimate of the contractually required payments
receivable for all impaired loans acquired in the BCB acquisition were $184.9
million and the estimated fair value of the loans were $68.7 million. At December 4,
2009, all of these loans were valued based on the liquidation value of the
underlying collateral because the timing and amount of the expected cash flows
could not be reasonably estimated. As a result, the Company has no accretable
discount on these impaired loans. At
such date, the Company estimated that $92.9 million would ultimately be
collected from the FDIC relating to these impaired loans in accordance with the
applicable FDIC loss sharing agreements. The Company established a
non-accretable discount of $116.2 million on the acquisition date relating to
these impaired loans, reflected in the recorded net fair value.
On
the acquisition date, the preliminary estimate of the contractually required
payments receivable for all non-impaired loans acquired in the acquisition was
$450.4 million and the estimated fair value of the loans were $274.9
million. At such date, the Company
estimated that $112.6 million would ultimately be collected from the FDIC under
loss sharing agreements relating to these non-impaired loans upon their
potential default in the future. The
Company established a non-accretable discount of $140.6 million on these
loans. In its estimate of cash flows for
such loans, the Company also recorded an accretable discount of $35.4 million
relating to these non-impaired loans which will be recognized on a level yield
basis over the life of the loans, representing periods up to 60 months.
The
Company has also recorded a net FDIC receivable of $213.8 million, representing
FDIC indemnification under loss sharing agreements for Covered Loans and other
real estate. Such receivable has been
discounted by $17.7 million for the expected timing of receipt of these cash
flows. This discount will be accreted
into income over the estimated period of receipt of cash flows under these
agreements.
F-22
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(6)
Federally
Assisted Acquisition of First Security National Bank
On
December 4, 2009, the Bank acquired substantially all of the assets and
assumed substantially all the deposits and certain other liabilities of First
Security National Bank (“FSNB”) from the FDIC, as receiver. FSNB operated four commercial banking
branches primarily within the Norcross, Georgia area. The FDIC took FSNB under receivership upon
its closure by the Office of the Comptroller of the Currency. The Bank’s bid to purchase FSNB included the
purchase of substantially all of FSNB’s assets at a discount of $10.7 million
in exchange for assuming substantially all of FSNB’s deposits and certain other
liabilities. No cash, deposit premium or
other consideration was paid by the Bank.
The Bank and the FDIC entered into a purchase and assumption agreement
in connection with the acquisition which included loss sharing agreements
regarding future losses incurred on acquired loans and other real estate
acquired through foreclosure existing at the acquisition date, collectively
referred to as the covered assets. Under
the terms of the loss sharing agreements, the FDIC will reimburse the Bank for
80 percent of net losses incurred on the covered assets up to $27 million and
95 percent of net losses exceeding $27 million.
The term for loss sharing on residential real estate loans is ten years,
while the term of for loss sharing on non-residential real estate loans is five
years in respect to losses and eight years in respect to loss recoveries. As a result of the loss sharing agreements
with the FDIC, the Company recorded a receivable of $19.8 million at the time
of acquisition. The Company did not
submit any losses to the FDIC under the loss sharing agreements during the
period from the acquisition date through December 31, 2009. Subsequent to December 31, 2009, the
Company has submitted net losses to the FDIC under such agreements and through
the report date has received approximately $8.0 million in reimbursements. The reimbursements were recorded as a
reduction of the FDIC receivable for loss sharing agreements.
The
purchase and assumption agreement entered into between the Bank and the FDIC
also includes a true-up payment at the end of year ten. On February 14, 2020, the true-up
measurement date, the Bank is required to make a true-up payment to the FDIC
equal to 50 percent of the excess, if any, of (i) 20 percent of the stated
threshold or $5.4 million, less (ii) the sum of (a) 25 percent of the
asset discount, or $2.7 million, plus (b) 25 percent of the cumulative
loss share payments plus (c) the cumulative servicing amount. The cumulative servicing amount is one
percent of the average covered assets for each year during the terms of the
loss sharing agreements. Although no
true-up payment is currently projected under the FSNB loss share agreements,
those projections are subject to change.
The
acquisition of FSNB was accounted for under the acquisition method of
accounting. A summary of net assets
acquired and the resulting acquisition date goodwill is presented in the
following table. As explained in the
explanatory notes that accompany the following table, the purchased assets and
assumed liabilities were recorded at their acquisition date fair values. Fair values are preliminary and subject to
refinement for up to one year after the closing date of the acquisition as
additional information regarding the closing date fair values become available.
F-23
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
|
(Dollars in thousands)
|
|
As Recorded
by FSNB
|
|
Fair Value
Adjustments
|
|
As
Recorded
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
31,912
|
|
$
|
16,575
|
(e)
|
$
|
48,487
|
|
|
Securities
|
|
285
|
|
—
|
|
285
|
|
|
Loans, net of unearned income
|
|
50,660
|
|
(17,444
|
)(a)
|
33,216
|
|
|
Other real estate owned
|
|
29,402
|
|
(12,000
|
)(b)
|
17,402
|
|
|
FDIC receivable for loss sharing agreements
|
|
—
|
|
19,787
|
(c)
|
19,787
|
|
|
Other assets
|
|
743
|
|
159
|
(f)
|
902
|
|
|
Total assets acquired
|
|
$
|
113,002
|
|
$
|
7,077
|
|
$
|
120,079
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
117,696
|
|
$
|
492
|
(d)
|
$
|
118,188
|
|
|
Other liabilities
|
|
1,203
|
|
—
|
|
1,203
|
|
|
Total liabilities assumed
|
|
118,899
|
|
492
|
|
119,391
|
|
|
Excess of liabilities assumed over assets acquired
|
|
$
|
5,897
|
(g)
|
|
|
|
|
|
Aggregate fair value adjustments
|
|
|
|
$
|
6,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on
acquisition
|
|
|
|
|
|
$
|
688
|
|
Explanation of fair value adjustments
(a) —
Adjustment reflects fair
value adjustments based on the Company’s evaluation of the acquired loan
portfolio. The fair value adjustment
includes adjustments for estimated credit losses, liquidity, market yield and
servicing costs.
(b) —
Adjustment reflects the
estimated other real estate owned losses based on the Company’s evaluation of
the acquired other real estate owned portfolio.
(c) —
Adjustment reflects the
estimated fair value of payments the Company will receive from the FDIC under
loss sharing agreements.
(d) —
Adjustment reflects fair
value adjustments based on the Company’s evaluation of the acquired time
deposit portfolio.
(e) —
Adjustment reflects the
initial wire received from the FDIC on the acquisition date net of equity
adjustments if applicable.
(f) —
Adjustment reflects fair
value adjustment to record the estimated core deposit intangible.
(g) —
Amount represents the excess
of liabilities assumed over assets acquired and was a cash settlement from the
FDIC.
Results
of operations for FSNB prior to the acquisition date are not included in the
income statement for the period ended December 31, 2009. Due to the significant amount of fair value
adjustments, the resulting accretion of those fair value adjustments and the
protection resulting from the FDIC loss sharing agreements, historical results
of FSNB are not relevant to the Company’s results of operations. Therefore, no pro forma information is
presented.
Accounting
standards prohibit carrying over an allowance for loan losses for impaired
loans purchased in the FSNB FDIC-assisted acquisition. On the acquisition
date, the preliminary estimate of the contractually required payments
receivable for all impaired loans acquired in the FSNB acquisition were $4.3
million and the estimated fair value of the loans were $1.9 million. At December 4,
2009, all of these loans were valued based on the liquidation value of the
underlying collateral because the timing and amount of the expected cash flows
could not be reasonably estimated. As a result, the Company has no
accretable discount on these impaired loans.
At such date, the Company estimated that $1.9 million would ultimately
be collected from the FDIC relating to these impaired loans in accordance with
the applicable FDIC loss sharing agreements.
F-24
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
The
Company established a non-accretable discount of $2.4 million on the
acquisition date relating to these impaired loans, reflected in the recorded
net fair value.
On
the acquisition date, the preliminary estimate of the contractually required
payments receivable for all non-impaired loans acquired in the acquisition was
$46.4 million and the estimated fair value of the loans were $31.3
million. At such date, the Company
estimated that $9.8 million would ultimately be collected from the FDIC under
loss sharing agreements relating to these non-impaired loans upon their
potential default in the future. The
Company established a non-accretable discount of $12.3 million on these
loans. In its estimate of cash flows for
such loans, the Company also recorded an accretable discount of $2.8 million
relating to these non-impaired loans which will be recognized on a level yield
basis over the life of the loans, representing periods up to 60 months.
The
Company has also recorded a net FDIC receivable of $19.8 million, representing
FDIC indemnification under loss sharing agreements for Covered Loans and other
real estate. Such receivable has been
discounted by $1.5 million for the expected timing of receipt of these cash
flows. This discount will be accreted
into income over the estimated period of receipt of cash flows under these
agreements.
(7)
Investment
Securities
The
cost basis, unrealized gains and losses, and fair value of securities available
for sale at December 31, 2009 and 2008 are listed below
(in thousands)
:
|
|
|
December 31, 2009
|
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
unrealized
|
|
unrealized
|
|
Estimated
|
|
|
|
|
cost
|
|
gains
|
|
losses
|
|
fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
85,227
|
|
$
|
69
|
|
$
|
580
|
|
$
|
84,716
|
|
|
State and political subdivisions
|
|
3,176
|
|
92
|
|
56
|
|
3,212
|
|
|
Collateralized-mortgage Obligations (CMO)
|
|
172,002
|
|
1,374
|
|
96
|
|
173,280
|
|
|
FNMA, GNMA and FHLMC mortgage-backed securities
|
|
56,647
|
|
116
|
|
501
|
|
56,262
|
|
|
Corporate securities
|
|
325
|
|
193
|
|
—
|
|
518
|
|
|
Total
|
|
$
|
317,377
|
|
$
|
1,844
|
|
$
|
1,233
|
|
$
|
317,988
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
unrealized
|
|
unrealized
|
|
Estimated
|
|
|
|
|
cost
|
|
gains
|
|
losses
|
|
fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
2,000
|
|
$
|
115
|
|
$
|
—
|
|
$
|
2,115
|
|
|
FNMA, GNMA and FHLMC mortgage-backed securities
|
|
867
|
|
26
|
|
—
|
|
893
|
|
|
Total
|
|
$
|
2,867
|
|
$
|
141
|
|
$
|
—
|
|
$
|
3,008
|
|
F-25
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial
Statements
The
amortized cost and estimated fair value of the investment securities at
December 31, 2009, by contractual maturity, are presented in the following
table
(in thousands)
:
|
|
|
Amortized
|
|
Estimated
|
|
|
|
|
cost
|
|
fair value
|
|
|
|
|
|
|
|
|
|
Less than 1 year
|
|
$
|
6,250
|
|
$
|
6,277
|
|
|
1-5 years
|
|
55,416
|
|
55,260
|
|
|
5-10 years
|
|
27,062
|
|
26,909
|
|
|
FNMA, GNMA, FHLMC and CMO mortgage-backed
securities
|
|
228,649
|
|
229,542
|
|
|
|
|
$
|
317,377
|
|
$
|
317,988
|
|
The
Company’s investment in FHLB stock was $12.6 million and $131,000 at December 31,
2009 and 2008, respectively.
There
were no sales of investment securities resulting in gains and/or losses during
the periods ended December 31,
2009, July 23, 2009, December 31, 2008 and 2007.
The
composition of investment securities reflects the strategy used by management
in an effort to maintain an appropriate level of liquidity while providing a
relatively stable source of revenue. The
securities portfolio may at times provide a balance over interest rate risk
associated with other areas of the balance sheet while also providing a means
for the investment of available funds, providing liquidity and supplying
investment securities that are required to be pledged as collateral against
specific deposits. Management is
monitoring the investment portfolio and periodically evaluates investments for
other-than-temporary impairment or more often when economic or market concerns
support more frequent evaluations.
Consideration during the evaluation is placed on (1) the length of
time and the extent to which the fair value has been less than cost, (2) the
financial condition and near-term prospects of the issuer, and (3) the
positive intent and ability of the Company to retain its investment in the
issuer for a period of time sufficient to allow for anticipated recovery in
fair value. As of December 31,
2009, there was no intent to sell any of the securities available for
sale. Furthermore, it is not likely that
the Company will have to sell such securities before a recovery of the
amortized cost basis.
At
December 31, 2009, unrealized losses in the investment portfolio related
to debt securities. The unrealized
losses on the debt securities arose due to changing interest rates and market
conditions and are considered to be temporary because of acceptable investment
grades where the repayment sources of principal and interest are backed by the
U.S. Government, Government sponsored organizations and other reputable
entities. In total, there were 52 investment
securities with a carrying value of $127.5 million and unrealized losses of
$1.2 million as of December 31, 2009 that were in a continuous unrealized
loss position for less than twelve months.
There were no unrealized losses on investment securities at December 31,
2008.
Investment
securities with an aggregate carrying amount of $175.6 million and 3.0 million
at December 31, 2009 and 2008, respectively, were pledged to secure public
deposits and FHLB advances.
F-26
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(8)
Loans
Receivable
Loans
not covered by loss sharing agreements are summarized as follows
(in thousands)
:
|
|
|
December 31,
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Loans not covered by loss sharing agreements:
|
|
|
|
|
|
|
|
1-4 family residential real estate mortgage
|
|
$
|
8,219
|
|
|
$
|
1,374
|
|
|
Commercial real estate
|
|
14,487
|
|
|
9,611
|
|
|
Commercial
|
|
5,552
|
|
|
3,960
|
|
|
Real estate construction
|
|
8,019
|
|
|
3,810
|
|
|
Consumer and other
|
|
11,172
|
|
|
3,783
|
|
|
Loans receivable, net of undisbursed proceeds of
loans in process
|
|
47,389
|
|
|
22,539
|
|
|
Less:
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
2,524
|
|
|
445
|
|
|
|
|
$
|
44,865
|
|
|
$
|
22,094
|
|
The carrying amount of the covered loans at December 31, 2009,
consisted of impaired loans and non-impaired loans and are presented in the
following tables
(in thousands)
:
|
|
|
December 31, 2009
|
|
|
|
|
Impaired at
|
|
All
|
|
Total
|
|
|
|
|
acquisition
|
|
other acquired
|
|
Covered
|
|
|
|
|
date
|
|
loans
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by loss sharing
agreements:
|
|
|
|
|
|
|
|
|
1-4 family residential real estate mortgage
|
|
$
|
26,591
|
|
$
|
294,735
|
|
$
|
321,326
|
|
|
Commercial real estate
|
|
57,998
|
|
510,247
|
|
568,245
|
|
|
Commercial
|
|
11,625
|
|
175,763
|
|
187,388
|
|
|
Real estate construction and development
|
|
292,662
|
|
517,395
|
|
810,057
|
|
|
Consumer and other
|
|
4,548
|
|
81,095
|
|
85,643
|
|
|
Loans receivable, gross
|
|
393,424
|
|
1,579,235
|
|
1,972,659
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Non-accretable discount
|
|
272,459
|
|
381,861
|
|
654,320
|
|
|
Accretable discount
|
|
—
|
|
183,840
|
|
183,840
|
|
|
Total loans covered, net
|
|
$
|
120,965
|
|
$
|
1,013,534
|
|
$
|
1,134,499
|
|
Loans covered under loss sharing agreements with the FDIC (Covered
Loans) are reported in loans exclusive of the expected reimbursement from the
FDIC. Covered Loans are initially
recorded at fair value at the acquisition date.
Prospective losses incurred on Covered Loans are eligible for partial
reimbursement by the FDIC under loss sharing agreements. Subsequent decreases in the amount expected
to be collected result in a provision for loan losses, an increase in the
allowance for loan losses, and a proportional adjustment to the FDIC receivable
for the estimated amount to be reimbursed.
Subsequent increases in the amount expected to be collected result in
the reversal of any previously-recorded provision for loan losses and related
allowance for loan losses and adjustments to the FDIC receivable, or
prospective adjustment to the accretable yield if no provision for credit
losses had been recorded. Interest is
accrued daily on the outstanding principal balances of non-impaired loans. Accretable discounts related to certain fair
value adjustments are accreted into income over the estimated lives of the
loans on a level yield basis.
F-27
Table of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
Covered
Loans which are more than 90 days past due with respect to interest or
principal, unless they are well secured and in the process of collection, and
other Covered Loans on which full recovery of principal or interest is in
doubt, are placed on nonaccrual status.
Interest previously accrued on Covered Loans placed on nonaccrual status
is charged against interest income and the FDIC receivable would be adjusted by
the amount of any estimated reimbursement.
Payments received are applied against the principal balance of the loans
until such time as full collection of the remaining recorded balance is
expected. Additional interest payments
received after that time is recorded as interest income on a cash basis.
Contractual
loan payments receivable, estimates of amounts not expected to be collected,
other fair value adjustments and the resulting fair values of acquired impaired
loans and other acquired loans as of the acquisition dates are provided in the
following table
(in thousands)
:
|
|
|
Impaired at
|
|
All
|
|
Total
|
|
|
|
|
acquisition
|
|
other acquired
|
|
covered
|
|
|
|
|
date
|
|
loans
|
|
loans
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by loss sharing
agreements:
|
|
|
|
|
|
|
|
|
Contractual principal payments receivable
|
|
$
|
508,332
|
|
$
|
1,697,904
|
|
$
|
2,206,236
|
|
|
Estimate of contractual principal expected to be
collected only from FDIC loss sharing agreements (non-accretable discount)
|
|
(276,703
|
)
|
(325,898
|
)
|
(602,601
|
)
|
|
Non-accretable discount
|
|
(69,176
|
)
|
(81,474
|
)
|
(150,650
|
)
|
|
Accretable discount
|
|
—
|
|
(211,269
|
)
|
(211,269
|
)
|
|
Fair value of loans acquired
|
|
$
|
162,453
|
|
$
|
1,079,263
|
|
$
|
1,241,716
|
|
The following table documents changes in the carrying value of acquired
impaired loans during the period from July 24, 2009 through December 31,
2009 (
in thousands
):
|
Fair value of acquired impaired loans covered
under loss sharing agreements
|
|
$
|
162,453
|
|
|
Reductions since acquisition date resulting from
repayments, write-offs and foreclosures
|
|
41,488
|
|
|
Balance, December 31, 2009
|
|
$
|
120,965
|
|
The following table documents changes in the value of the
non-accretable discount during the period from July 24, 2009 through December 31,
2009 (
in thousands
):
|
Non-accretable discount at acquisition
|
|
$
|
753,251
|
|
|
Recoveries on loans previously charged off
|
|
—
|
|
|
Reductions since acquisition date resulting from
charge-offs
|
|
(98,931
|
)
|
|
Balance, December 31, 2009
|
|
$
|
654,320
|
|
F-28
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
The following table documents changes in the carrying value of the FDIC
receivable for loss sharing agreements relating to covered loans and other real
estate during the period from July 24, 2009 through December 31, 2009
(
in thousands
):
|
|
|
Security Bank
|
|
All other
acquired banks
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of FDIC receivable for loss sharing
agreements at acquisition
|
|
$
|
403,636
|
|
$
|
233,599
|
|
$
|
637,235
|
|
|
Reductions resulting from:
|
|
|
|
|
|
|
|
|
Wires received
|
|
(40,474
|
)
|
—
|
|
(40,474
|
)
|
|
Recovery of previous loss reimbursements
|
|
—
|
|
—
|
|
—
|
|
|
Additions resulting from:
|
|
|
|
|
|
|
|
|
Charge-offs, write-downs and other losses
|
|
—
|
|
—
|
|
—
|
|
|
Discount accretion
|
|
4,186
|
|
562
|
|
4,748
|
|
|
External expenses qualifying under loss sharing
agreements
|
|
3,993
|
|
—
|
|
3,993
|
|
|
Balance, December 31, 2009
|
|
$
|
371,341
|
|
$
|
234,161
|
|
$
|
605,502
|
|
Acquired
impaired covered loans had unpaid principal balance (less prior charge-offs) of
$121.0 million at December 31, 2009.
Loans
to certain executive officers, directors, and their associates totaled $48,519
at December 31, 2009, which consisted of one loan to a director with a
balance at origination of $57,254 and $8,735 of repayments on such loan. In addition, as of December 31, 2008,
loans to related parties totaled $1.5 million which consisted of $1.4 million
in advances and $791,000 in repayments.
The borrowers were no longer considered related parties at December 31,
2009. Management believes that such
loans were made in the ordinary course of business on substantially the same
terms, including interest rate and collateral, as those prevailing at the time
for comparable transactions with other persons, and did not involve more than
the normal credit risk nor present other unfavorable features.
At
December 31, 2009, the Company had loans not covered by loss sharing
agreements of approximately $47.4 million, of which $3.3 million were impaired
with specific allowances totaling $1.4 million.
At December 31, 2009 the Company did not have any commitments to
debtors whose loans were nonperforming.
At December 31, 2009, the Company did not have any loans past due
90 days and more still accruing interest.
Interest income on impaired loans for the successor period was
$783,000. Interest income on impaired
loans for the predecessor periods as well as for the years ended December 31,
2008 and 2007 were insignificant.
At
December 31, 2008, the Company had loans not covered by loss sharing
agreements of approximately $22.5 million, of which $4.4 million were impaired
with specific allowances totaling $245,000.
At December 31, 2008, the Company had loans totaling $27,000 past
due 90 days or more and still accruing interest.
F-29
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
The
following is a summary of transactions in the allowance for loan losses on
loans not covered by loss sharing
(in thousands)
:
|
|
|
Successor
|
|
|
Predecessor
|
|
Predecessor
|
|
Predecessor
|
|
|
|
|
Period
|
|
|
Period
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
—
|
|
|
$
|
445
|
|
$
|
316
|
|
$
|
139
|
|
|
Loans charged off
|
|
(459
|
)
|
|
—
|
|
(188
|
)
|
(24
|
)
|
|
Recoveries on loans previously charged off
|
|
294
|
|
|
—
|
|
5
|
|
5
|
|
|
Provision for loan losses charged to operations
|
|
2,689
|
|
|
261
|
|
312
|
|
196
|
|
|
Balance, end of period
|
|
$
|
2,524
|
|
|
$
|
706
|
|
$
|
445
|
|
$
|
316
|
|
(9)
Other Real
Estate Owned
The
following is a summary of transactions in the other real estate owned
(in thousands)
:
|
|
|
December 31,
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Non-covered other real estate
owned
|
|
|
|
|
|
|
|
Other real estate acquired at reorganization
|
|
$
|
73
|
|
|
$
|
—
|
|
|
Other real estate acquired through foreclosure of
loans receivable
|
|
75
|
|
|
73
|
|
|
Other real estate sold
|
|
—
|
|
|
—
|
|
|
Write down of other real estate owned
|
|
(28
|
)
|
|
—
|
|
|
Loss on sale of other real estate owned
|
|
—
|
|
|
—
|
|
|
Balance, end of year
|
|
$
|
120
|
|
|
$
|
73
|
|
|
|
|
December 31,
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Covered other real estate owned
|
|
|
|
|
|
|
|
Balance, acquired and subject to FDIC loss sharing
agreement at fair value
|
|
$
|
109,660
|
|
|
$
|
—
|
|
|
Other real estate acquired through foreclosure of
loans receivable
|
|
55,812
|
|
|
—
|
|
|
Other real estate sold
|
|
(20,626
|
)
|
|
—
|
|
|
Other real estate write-downs
|
|
(3,220
|
)
|
|
—
|
|
|
Other real estate capitalized costs
|
|
64
|
|
|
—
|
|
|
Total covered OREO
|
|
$
|
141,690
|
|
|
$
|
—
|
|
F-30
Table
of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(10)
Premises
and Equipment
Premises
and equipment are summarized as follows
(in thousands)
:
|
|
|
December 31,
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
107
|
|
|
$
|
107
|
|
|
Buildings and improvements
|
|
607
|
|
|
631
|
|
|
Furniture, fixtures, and equipment
|
|
1,037
|
|
|
586
|
|
|
Construction in progress
|
|
634
|
|
|
—
|
|
|
|
|
2,385
|
|
|
1,324
|
|
|
Less accumulated depreciation
|
|
90
|
|
|
394
|
|
|
|
|
$
|
2,295
|
|
|
$
|
930
|
|
Depreciation expense for premises and equipment for the successor and
predecessor periods was $90,000 and $30,000, respectively for the year ended December 31,
2009. In addition, for the years ended December 31,
2008 and 2007, depreciation expense was $118,000 and $130,000, respectively.
Leases
The
Company has various operating leases on banking locations. Generally, these leases have terms of less
than ten years with renewal options. All
leases at the year ended December 31, 2008 were immaterial and associated
with computer equipment and thus were not included in the minimum lease payment
schedule.
Future
minimum lease commitments under all non-cancellable operating leases with terms
of one year or more are as follows (
in thousands)
:
|
Year
|
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
1,591
|
|
|
2011
|
|
1,109
|
|
|
2012
|
|
1,082
|
|
|
2013
|
|
964
|
|
|
2014
|
|
492
|
|
|
Thereafter
|
|
740
|
|
|
Total
|
|
$
|
5,978
|
|
Rent
expense for the period from July 24, 2009 through December 31, 2009
was $445,000, and was included in occupancy expense in the consolidated
statement of income. Rent expense at December 31,
2008, December 31, 2007 and for the period January 1, 2009 through July 23,
2009 was insignificant.
F-31
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(11)
Deposits
Deposits
are summarized as follows
(in thousands)
:
|
|
|
December 31,
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
$
|
187,746
|
|
|
$
|
2,652
|
|
|
Interest-bearing demand
|
|
760,114
|
|
|
7,201
|
|
|
Savings
|
|
15,461
|
|
|
488
|
|
|
Time
|
|
1,190,470
|
|
|
15,720
|
|
|
Total deposits
|
|
$
|
2,153,791
|
|
|
$
|
26,061
|
|
The
aggregate amount of time deposits in denominations of $100,000 or more at December 31,
2009 and 2008 were $545.4 million and $8.4 million, respectively. The scheduled maturities of time deposits at December 31,
2009 are as follows (
in thousands)
:
|
Year ending December 31:
|
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
931,058
|
|
|
2011
|
|
211,774
|
|
|
2012
|
|
33,000
|
|
|
2013
|
|
4,377
|
|
|
2014 and thereafter
|
|
10,261
|
|
|
|
|
$
|
1,190,470
|
|
The Company had brokered deposits of $29.4 million and $1.8 million at December 31,
2009 and 2008. The scheduled maturities
of brokered deposits at December 31, 2009 and their weighted average costs
are as follows
(in thousands)
:
|
Year ending December 31:
|
|
Balance
|
|
Average Cost
|
|
|
2010
|
|
$
|
14,210
|
|
0.54
|
%
|
|
2011
|
|
3,186
|
|
1.33
|
%
|
|
2012 and thereafter
|
|
12,000
|
|
2.00
|
%
|
|
|
|
$
|
29,396
|
|
1.22
|
%
|
Deposits
of certain officers, directors, and their associates totaled $2.4 million and
$3.7 million at December 31, 2009 and 2008. Management believes that such deposits have
substantially the same terms as those for comparable transactions with other
unrelated parties.
(12)
Borrowings
At December 31, 2009, the Company had advances from the FHLB of
$5.0 million with adjustable interest of 0.28% maturing January 2011. In addition, advances from the FHLB totaling
$1.8 million were held as of December 31, 2008 with an adjustable daily
rate. The FHLB advances are
collateralized by commercial (secured by real estate) and residential mortgage loans,
investment securities and FHLB stock.
F-32
Table
of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(13)
Income
Taxes
There
was no income tax expense for the period
ended July 23, 2009. The components of income tax expense for
the period ended December 31, 2009
and years ended December 31, 2008 and 2007 are as follows (
in thousands
):
|
|
|
December 31,
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax provision:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
7,504
|
|
|
$
|
—
|
|
$
|
—
|
|
|
State
|
|
658
|
|
|
—
|
|
—
|
|
|
|
|
8,162
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax provision:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
1,781
|
|
|
(195
|
)
|
(121
|
)
|
|
State
|
|
396
|
|
|
(47
|
)
|
(49
|
)
|
|
|
|
2,177
|
|
|
(242
|
)
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax
expense before adjustment to deferred tax asset valuation allowance
|
|
10,339
|
|
|
(242
|
)
|
(170
|
)
|
|
Increase in deferred tax
valuation allowance
|
|
—
|
|
|
242
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
10,339
|
|
|
$
|
—
|
|
$
|
—
|
|
Income tax expense (benefit) for the successor and predecessor periods
differ from the income taxes computed by applying the Federal statutory rate of
35% to income (loss) before income taxes.
The reasons for the difference are as follows (
in thousands
):
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Predecessor
|
|
Predecessor
|
|
|
|
|
Period
|
|
|
Period
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Federal income taxes
|
|
$
|
9,926
|
|
|
$
|
(86
|
)
|
$
|
(183
|
)
|
$
|
(107
|
)
|
|
Charitable contribution credit
|
|
(217
|
)
|
|
—
|
|
(30
|
)
|
(33
|
)
|
|
State taxes, net of federal benefit
|
|
685
|
|
|
—
|
|
(31
|
)
|
(32
|
)
|
|
Tax-exempt interest
|
|
(19
|
)
|
|
—
|
|
—
|
|
—
|
|
|
Increase in valuation
allowance for deferred tax asset
|
|
—
|
|
|
86
|
|
242
|
|
170
|
|
|
Other
|
|
(36
|
)
|
|
—
|
|
2
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual income taxes
|
|
$
|
10,339
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
F-33
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
The components of the net deferred tax liability included in other
liabilities in the accompanying consolidated statement of financial condition
as of December 31 are as follows (
in thousands
):
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
943
|
|
|
$
|
130
|
|
|
Net operating loss carryforward
|
|
547
|
|
|
609
|
|
|
Estimated loss on
acquired assets
|
|
396,761
|
|
|
—
|
|
|
Other real estate owned
|
|
9
|
|
|
—
|
|
|
Other
|
|
—
|
|
|
130
|
|
|
Start up expenses
|
|
100
|
|
|
110
|
|
|
Total deferred tax assets
|
|
398,360
|
|
|
979
|
|
|
Less: deferred tax allowance
|
|
—
|
|
|
(928
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
398,360
|
|
|
$
|
51
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
Premises and equipment
|
|
(51
|
)
|
|
(51
|
)
|
|
Prepaid expenses
|
|
(365
|
)
|
|
—
|
|
|
Section 597
deferred gain
|
|
(63,038
|
)
|
|
—
|
|
|
Loan basis differences
|
|
(102,083
|
)
|
|
—
|
|
|
FDIC loss share receivable
|
|
(234,217
|
)
|
|
—
|
|
|
Unrealized gains on securities available for sale
|
|
(214
|
)
|
|
(54
|
)
|
|
Other
|
|
(784
|
)
|
|
—
|
|
|
|
|
(400,752
|
)
|
|
(105
|
)
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Liability
|
|
$
|
(2,392
|
)
|
|
$
|
(54
|
)
|
In
assessing the realization of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies by jurisdiction and entity in making this
assessment.
Based
upon the level of projections for future taxable income over the periods which
the temporary differences resulting in the deferred tax assets are deductible,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences at December 31, 2009.
The Company adopted the accounting standard relating to accounting for
uncertainty in income taxes during 2009.
The Company classifies interest and penalties related to income tax
assessments, if any, in income tax expense in the consolidated statement of
income. Tax years 2006 through 2009 are
subject to examination by the Internal Revenue Service and state taxing
authorities in Georgia. A reconciliation
of the beginning and ending balance of unrecognized tax benefit for uncertain
tax positions is insignificant to the consolidated financial statements at December 31,
2009.
At December 31, 2009, the Company had Federal and State tax net
operating loss carry-forwards of approximately $1.4 million and $1.7 million,
respectively, available to offset future taxable income. These loss carry-forwards can be deducted
against taxable income during the carry-forward period. These loss carry-forwards expire at the
beginning of 2027.
F-34
Table
of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
(14)
Stock
Warrants
In connection with the Bank’s
recapitalization on July 24, 2009, certain of the Company’s executive
officers, a member of the Bank’s senior management and one of the Company’s
directors purchased 700,000 shares of common stock and 2,102,605 warrants to
purchase one share of the Company’s common stock at a strike price of $10. In addition, certain non-employee “legacy”
directors purchased 100,000 shares of common stock and 100,000 warrants to
purchase one share of stock at a $5 strike price.
Also
during the successor period ended December 31, 2010, certain members of
senior management purchased individual warrants at fair value which resulted in
the issuance of 458,029 warrants with a strike price of $10. The Company utilized the Black-Scholes
valuation model to determine the fair value of the warrants, which at the date
of issuance was $494,671 based on a $1.08 warrant value. The assumptions used when calculating the
value per the Black-Scholes model included a risk-free rate of 1.98%,
volatility of 13.50% and dividend yield of 2.50%. The warrants were fully exercisable as of the
grant date.
The
warrants issued to our executive officers, directors and senior management are
subject to repurchase agreements should they leave their employment or their
role as director, as applicable, or in some cases should other executive
officers leave their respective roles.
The repurchase is at the Company’s option at $2 per warrant ($12 per
share for exercised warrants) for the first three years from issue. The repurchase applies to all warrants from
the first twelve months of grant, two-thirds for the next twelve months and
one-third for the third twelve months.
After three years, the holders’ warrants are not subject to
repurchase. If the warrant holder
employee has exercised the warrant for shares within the repurchase period, the
common stock issued will be subject to the repurchase agreement until the
agreement expires. If there is a change
in control during the repurchase period, the repurchase option expires. As of December 31, 2009, the Company has
issued 2,660,634 warrants as of the effective date, all of which remain
outstanding as of this date.
(15)
Securities Sold Under Repurchase
Agreements
Securities
sold under repurchase agreements, which are secured borrowings, generally
mature within one to four days from the transaction date. Securities sold under repurchase agreements
are reflected at the amount of cash received in connection with the
transaction. The Company may be required
to provide additional collateral based on the fair value of the underlying
securities. The Company monitors the
fair value of the underlying securities on a daily basis. Securities sold under repurchase agreements
were $9.6 million as of December 31, 2009.
(16)
Commitments and Contingent
Liabilities
In
order to meet the financing needs of its customers, the Company maintains
financial instruments with off-balance-sheet risk in the normal course of
business. These financial instruments
include commitments to extend credit and standby letters of credit. These instruments involve, to varying
degrees, elements of credit, interest rate and/or liquidity risk.
Commitments
to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed maturity
dates or other termination clause with required fee payment. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future liquidity requirements. The amount of collateral obtained, if deemed
necessary upon extension of credit, is determined on a case by case basis by
management through credit evaluation of the customer. At December 31, 2009 and 2008, the
Company had commitments to extend credit totaling $109.5 million and $3.3
million, respectively.
Standby
letters of credit are commitments guaranteeing performance of a customer to a
third party. Those guarantees are issued
primarily to support public and private borrowing arrangements. In order to minimize its exposure, the
Company’s credit policies govern the issuance of standby letters
F-35
Table of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
of
credit. At December 31, 2009 and
2008, the Company had standby letters of credit amounting to $5.9 million and
$230,000, respectively.
In
the normal course of business, the Company is involved in various legal
proceedings. In the opinion of
management, any liability resulting from such proceedings would not have a
material effect on the Company’s financial statements.
(17)
Fair Value
Fair value measurements are determined based on the
assumptions that market participants would use in pricing the asset or
liability. As a basis for considering
market participant assumptions in fair value measurements, the Financial
Accounting Standards Board’s Accounting Standards Codification Topic 820 (“ASC
820”)
Fair Value Measurements and Disclosures
establishes a fair value hierarchy that distinguishes between market
participant assumptions based on market data obtained from sources independent
of the reporting entity (observable inputs that are classified within Levels 1
and 2 of the hierarchy) and the reporting entity’s own assumptions about market
participant assumptions developed based
on the best information available in the circumstances (unobservable inputs
classified within Level 3 of the hierarchy).
Fair Value Hierarchy
Level 1
Valuation is based on inputs that are quoted prices
(unadjusted) in active markets for identical assets or liabilities that the
Company has the ability to access at the measurement date.
Level 2
Valuation is based on inputs other than quoted
prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly, such as interest rates, yield curves observable
at commonly quoted intervals, and other market-corroborated inputs.
Level 3
Valuation inputs are unobservable inputs for the
asset or liability which shall be used to measure fair value to the extent that
observable inputs are not available. The
inputs shall reflect the Company’s own assumptions about the assumptions that
market participants would use in pricing the asset or liability.
The following methods and assumptions were used by
the Company in estimating the fair value of its financial instruments and other
accounts recorded based on their fair value:
(a)
Cash and Cash Equivalents:
The
carrying amount approximates fair value because of the short maturity of these
instruments.
(b)
Securities Available for Sale:
The
fair value of most securities available for sale are determined by obtaining
quoted prices on nationally recognized securities exchanges (Level 1). If quoted market prices are not available,
then fair values are estimated by using pricing models, quoted prices of
securities with similar characteristics, or discounted cash flows (Level 2). In certain cases where Level 1 or Level 2
inputs are not available, securities are classified within Level 3 hierarchy.
(c)
Loans Receivable
Fair
values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by
type. The fair value of performing loans
is calculated by discounting
F-36
Table of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
scheduled
cash flows through the estimated maturity using estimated market discount rates
that reflect the credit, liquidity, yield, and other risks inherent in the
loan. The estimate of maturity is based
on the Company’s historical experience with repayments for each loan
classification, modified, as required, by an estimate of the effect of the
current economic and lending conditions.
Fair
value for significant nonperforming loans is based on recent external
appraisals. If appraisals are not
available, estimated cash flows are discounted using a rate commensurate with
the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash
flows, and discount rates are judgmentally determined using available market
information and specific borrower information.
(d)
FDIC Receivable for Loss Sharing Agreements
The
Company’s FDIC receivable for loss sharing agreements approximates fair value.
(e)
Deposits
The
fair value of deposits with no stated maturity, such as noninterest—bearing
demand deposits, savings, NOW accounts, and money market and checking accounts,
is equal to the amount payable on demand.
The fair value of time deposits is based on the discounted value of
contractual cash flows. The discount
rate is estimated using the rates currently offered for deposits of similar
remaining maturities.
(f)
Borrowings
The
fair value of the Company’s Federal Home Loan Bank advances is estimated based
on the discounted value of contractual cash flows. The fair value of securities sold under
agreements to repurchase approximates the carrying amount because of the short
maturity of these borrowings. The
discount rate is estimated using rates quoted for the same or similar issues or
the current rates offered to the Company for debt of the same remaining
maturities.
(g)
Commitments and Contingencies
The
carrying amount of commitments to extend credit and standby letters of credit
approximates fair value. The carrying
amount of the off-balance sheet financial instruments is based on fees charged
to enter into such agreements.
(h)
Other real estate owned
The
fair value of other real estate owned (“OREO”) is determined when the asset is
transferred to foreclosed assets. The
assets are carried at the lower of the carrying value or fair value. Fair value is based on appraised values of
the collateral or management’s estimation of the value of the collateral. When the value is based on observable market
prices such as an appraisal, the asset is recorded in Level 2 hierarchy. When an appraised value is not available or
management determines the fair value of the collateral is further impaired, the
asset is recorded as a nonrecurring Level 3 hierarchy.
Loans
considered impaired are loans for which, based on current information and
events, it is probable that the creditor will be unable to collect all amounts
due according to the contractual terms of the loan agreement. Impaired loans are subject to nonrecurring
fair value adjustments to reflect write-downs that are based on the market
price or current appraised value of the collateral, adjusted to reflect local
market conditions or other economic factors.
After evaluating the underlying collateral, the fair value of the
impaired loans is determined by allocating specific reserves from the allowance
for loan and lease losses to the loans. Thus, the fair value reflects the
loan balance less the specifically allocated reserve. Impaired loans for
which no reserve has been specifically allocated are not included in the table
on the next page.
F-37
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
Other
real estate owned is initially accounted for at fair value, less estimated
costs to dispose of the property. Any
excess of the recorded investment over fair value, less costs to dispose, is
charged to the allowance for loan and lease losses at the time of
foreclosure. A provision is charged to
earnings for subsequent losses on other real estate owned when market
conditions indicate such losses have occurred.
The ability of the Company to recover the carrying value of other real estate
owned is based upon future sales of the real estate. The ability to affect such sales is subject
to market conditions and other factors beyond our control, and future declines
in the value of the real estate would result in a charge to earnings. The recognition of sales and sales gains is
dependent upon whether the nature and terms of the sales, including possible
future involvement of the Company, if any, meet certain defined
requirements. If those requirements are
not met, sale and gain recognition is deferred.
Assets and Liabilities Measured on a Recurring Basis
|
December 31, 2009
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
—
|
|
$
|
84,716
|
|
$
|
—
|
|
|
State and political subdivisions
|
|
—
|
|
3,212
|
|
—
|
|
|
Collateralized-mortgage obligations
|
|
|
|
173,280
|
|
|
|
|
FNMA, GNMA, and FHLMC mortgage-backed securities
|
|
—
|
|
56,262
|
|
—
|
|
|
Corporate securities
|
|
$
|
—
|
|
518
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total recurring assets at fair value
|
|
$
|
—
|
|
$
|
317,988
|
|
$
|
—
|
|
Assets and Liabilities Measured on a Nonrecurring Basis:
|
December 31, 2009
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
|
|
|
|
|
|
|
Covered by loss sharing agreement
|
|
$
|
—
|
|
$
|
—
|
|
$
|
120,965
|
|
|
Not covered by loss sharing agreement
|
|
—
|
|
—
|
|
1,900
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans
|
|
—
|
|
—
|
|
122,865
|
|
|
|
|
|
|
|
|
|
|
|
Other Real Estate
|
|
|
|
|
|
|
|
|
Covered by loss sharing agreement
|
|
—
|
|
—
|
|
141,690
|
|
|
Not covered by loss sharing agreement
|
|
—
|
|
—
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Real Estate
|
|
$
|
—
|
|
$
|
—
|
|
$
|
141,810
|
|
Assets and Liabilities Measured on a Recurring Basis
|
December 31, 2008
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
—
|
|
$
|
2,115
|
|
$
|
—
|
|
|
FNMA, GNMA, and FHLMC mortgage-backed securities
|
|
—
|
|
893
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total recurring assets at fair value
|
|
$
|
—
|
|
$
|
3,008
|
|
$
|
—
|
|
F-38
Table of
Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
Assets and Liabilities Measured on a Nonrecurring Basis:
|
December 31, 2008
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
|
|
|
|
|
|
|
Not covered by loss sharing agreement
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4,182
|
|
|
|
|
|
|
|
|
|
|
|
Other Real Estate
|
|
|
|
|
|
|
|
|
Not covered by loss sharing agreement
|
|
$
|
—
|
|
$
|
—
|
|
$
|
73
|
|
The
fair carrying amount and estimated fair value of the Company’s financial
instruments, not shown elsewhere in these financial statements, were as follows
(
in thousands
):
|
|
|
December 31, 2009
|
|
|
|
|
Carrying
|
|
Estimated
|
|
|
|
|
Amount
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
200,166
|
|
$
|
200,166
|
|
|
Investment securities available for sale
|
|
317,988
|
|
317,988
|
|
|
Federal Home Loan Bank of Atlanta stock
|
|
12,559
|
|
12,559
|
|
|
Loans, net
|
|
1,179,364
|
|
1,193,024
|
|
|
FDIC receivable for loss sharing agreements
|
|
605,502
|
|
605,502
|
|
|
Accrued interest receivable
|
|
12,498
|
|
12,498
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Deposits
|
|
2,153,791
|
|
2,117,177
|
|
|
Borrowed Money
|
|
5,000
|
|
5,000
|
|
|
Short-term borrowings
|
|
9,606
|
|
9,606
|
|
|
Accrued interest payable
|
|
10,266
|
|
10,266
|
|
|
|
|
|
|
|
|
|
|
(18)
Regulatory
Matters
At
December 31, 2009 and 2008, the Company and the Bank did not have a
required reserve balance at the Federal Reserve Bank.
The
Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory, and possibly additional discretionary, actions by regulators that,
if undertaken, could have a direct material effect on the financial
statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company and the Bank must meet specific capital guidelines that involve
quantitative measures of their assets, liabilities and certain off-balance
sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Qualitative
measures established by regulation ensure capital adequacy require the Company
and the Bank to maintain minimum amounts and ratios of total and Tier I
capital, as defined by the regulations, to risk-weighted assets, as defined,
and of Tier I capital to average assets, as defined. Failure to meet various capital requirements
can initiate regulatory action that could have a direct material effect on the
financial statements.
At
December 31, 2009 and 2008, the Company and the Bank were categorized as
well capitalized under the regulatory framework for prompt corrective
action. To be well-capitalized, the
Company and the Bank must maintain total risk-based, Tier I risk-based and Tier
I leverage ratios as set forth in the table below. There are no conditions or events that have
occurred subsequent to year-end that would change the Company and the Bank’s
classification from well-capitalized.
The Company’s and the Bank’s actual ratios as of December 31, 2009
and 2008 are as follows:
F-39
Table of Contents
STATE BANK FINANCIAL
CORPORATION AND SUBSIDIARY
Notes to Consolidated
Financial Statements
|
|
|
|
|
|
|
|
|
|
|
To Be Well
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized Under
|
|
|
|
|
|
|
|
|
For Capital
|
|
Prompt Corrective
|
|
|
|
|
Actual
|
|
Adequacy Purposes
|
|
Action Provisions
|
|
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
|
|
|
(In Thousands)
|
|
|
As of December 31, 2009
(Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to Risk-Weighted Assets
|
|
$
|
305,393
|
|
30.85
|
%
|
$
|
79,182
|
|
8.00
|
%
|
$
|
98,978
|
|
10.00
|
%
|
|
Tier I Capital to Risk-Weighted Assets
|
|
302,869
|
|
30.60
|
%
|
39,591
|
|
4.00
|
%
|
59,387
|
|
6.00
|
%
|
|
Tier I Capital to Average Assets
|
|
302,869
|
|
14.57
|
%
|
83,169
|
|
4.00
|
%
|
103,962
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008
(Predecessor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to Risk-Weighted Assets
|
|
$
|
6,005
|
|
22.67
|
%
|
$
|
2,119
|
|
8.00
|
%
|
$
|
2,649
|
|
10.00
|
%
|
|
Tier I Capital to Risk-Weighted Assets
|
|
5,721
|
|
21.60
|
%
|
1,060
|
|
4.00
|
%
|
1,589
|
|
6.00
|
%
|
|
Tier I Capital to Average Assets
|
|
5,721
|
|
18.05
|
%
|
1,268
|
|
4.00
|
%
|
1,585
|
|
5.00
|
%
|
As
a condition to the FDIC’s approval of the Interagency Change in Control
Application filed in connection with the July 2009 recapitalization and
acquisition of Security Bank, the Bank was required to execute a Capital
Maintenance Agreement with the FDIC.
Under the terms of that agreement, the Bank must at all times maintain a
leverage ratio of at least 10% and a total risk-based capital ratio of at least
12%. The agreement terminates on July 23,
2012.
In
addition, under the Georgia Department of Banking and Finance’s letter dated July 24,
2009, issuing its approval of the Interagency Notice of Change in Control
filing with respect to the Bank, for a period of three years after consummation
of the change in control transaction, the Bank must also obtain approval from
the Georgia Department of Banking and Finance before paying any dividends,
including dividend payments to the Company.
The Bank received approval from the Georgia Department of Banking and
Finance to make a $718,000 dividend payment to the Company to fund its expected
operating expenses for 2010.
F-40
Table
of Contents
STATE BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Financial Statements — Unaudited
For the Period Ended June 30, 2010
Unaudited Consolidated Financial Statement for the
Period Ended June 30, 2010
F-41
Table
of Contents
STATE BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
(in thousands, except per share and share
amounts)
|
|
|
June 30, 2010
(Unaudited)
|
|
December 31,
2009
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
29,208
|
|
$
|
48,681
|
|
|
Interest-bearing
deposits with other banks
|
|
275,021
|
|
151,485
|
|
|
Investment securities
|
|
422,654
|
|
317,988
|
|
|
Federal Home Loan Bank
stock
|
|
12,559
|
|
12,559
|
|
|
Loans receivable:
|
|
|
|
|
|
|
Not covered under FDIC
loss sharing agreements
|
|
153,618
|
|
47,389
|
|
|
Covered under FDIC loss
sharing agreements
|
|
979,428
|
|
1,134,499
|
|
|
Allowance for loan
losses (non-covered loans)
|
|
(3,645
|
)
|
(2,524
|
)
|
|
Mortgage loans held for
sale
|
|
1,379
|
|
—
|
|
|
Other real estate:
|
|
|
|
|
|
|
Not covered under FDIC
loss sharing agreements
|
|
75
|
|
120
|
|
|
Covered under FDIC loss
sharing agreements
|
|
166,424
|
|
141,690
|
|
|
Premises and equipment
|
|
9,659
|
|
2,295
|
|
|
Goodwill and other
intangibles
|
|
10,343
|
|
12,334
|
|
|
FDIC receivable for loss
sharing agreements, net
|
|
482,928
|
|
605,502
|
|
|
Other assets
|
|
53,846
|
|
25,940
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,593,497
|
|
$
|
2,497,958
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Non-interest bearing
deposits
|
|
$
|
205,951
|
|
$
|
187
,746
|
|
|
Interest-bearing
deposits
|
|
2,030,125
|
|
1,966,045
|
|
|
FHLB advances
|
|
—
|
|
5,000
|
|
|
Securities sold under
agreements to repurchase
|
|
7,415
|
|
9,606
|
|
|
Other liabilities
|
|
15,001
|
|
18
,797
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
2,258,492
|
|
2,187,194
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
Preferred stock, $1 par value; 2,000,000 shares
authorized, zero shares issued and outstanding in 2010 and 2009, respectively
|
|
—
|
|
—
|
|
|
Common stock, $0.01 par value; 100,000,000 shares
authorized, 31,540,977 shares issued and outstanding in 2010 and 2009,
respectively
|
|
315
|
|
315
|
|
|
Additional paid-in-capital
|
|
292,030
|
|
292,030
|
|
|
Retained earnings
|
|
39,315
|
|
18,022
|
|
|
Accumulated other comprehensive income, net of tax
|
|
3,345
|
|
397
|
|
|
|
|
|
|
|
|
|
Total shareholders’
equity
|
|
335,005
|
|
310,764
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders’ equity
|
|
$
|
2,593,497
|
|
$
|
2,497,958
|
|
The accompanying notes are an integral part of these financial
statements.
F-42
Table of
Contents
STATE BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated
Statements of Income (Unaudited)
(in thousands, except per share and share
amounts)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
2010
|
|
|
2009
|
|
2010
|
|
|
2009
|
|
|
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees
|
|
$
|
37,472
|
|
|
$
|
422
|
|
$
|
76,487
|
|
|
$
|
829
|
|
|
Investment securities
|
|
2,130
|
|
|
41
|
|
4,044
|
|
|
85
|
|
|
Deposits with other banks and other
|
|
183
|
|
|
12
|
|
291
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,785
|
|
|
475
|
|
80,822
|
|
|
953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
10,070
|
|
|
191
|
|
18,738
|
|
|
388
|
|
|
FHLB advances
|
|
—
|
|
|
13
|
|
—
|
|
|
27
|
|
|
Federal funds purchased and repurchase agreements
|
|
9
|
|
|
—
|
|
22
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,079
|
|
|
204
|
|
18,760
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
|
|
29,706
|
|
|
271
|
|
62,062
|
|
|
537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
|
|
695
|
|
|
131
|
|
1,192
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income After
Provision for Loan Losses
|
|
29,011
|
|
|
140
|
|
60,870
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of FDIC receivable for loss sharing
agreements
|
|
2,798
|
|
|
—
|
|
6,907
|
|
|
—
|
|
|
Service charges on deposits
|
|
2,344
|
|
|
45
|
|
4,618
|
|
|
82
|
|
|
Mortgage banking income
|
|
127
|
|
|
—
|
|
145
|
|
|
—
|
|
|
Gain on investment securities
|
|
44
|
|
|
—
|
|
51
|
|
|
—
|
|
|
Other
|
|
209
|
|
|
17
|
|
530
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,522
|
|
|
62
|
|
12,251
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
9,788
|
|
|
160
|
|
20,776
|
|
|
324
|
|
|
Occupancy and equipment
|
|
1,974
|
|
|
48
|
|
4,105
|
|
|
101
|
|
|
Legal and professional fees
|
|
1,006
|
|
|
7
|
|
1,586
|
|
|
21
|
|
|
Marketing
|
|
834
|
|
|
7
|
|
1,491
|
|
|
10
|
|
|
Federal insurance premiums and other regulatory
fees
|
|
1,361
|
|
|
7
|
|
2,485
|
|
|
13
|
|
|
Net cost of operations of other real estate owned
|
|
2,219
|
|
|
—
|
|
4,769
|
|
|
—
|
|
|
Data processing
|
|
839
|
|
|
8
|
|
1,717
|
|
|
55
|
|
|
Core deposit intangible amortization expense
|
|
160
|
|
|
—
|
|
325
|
|
|
—
|
|
|
Other
|
|
939
|
|
|
71
|
|
1,853
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,120
|
|
|
308
|
|
39,107
|
|
|
619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
15,413
|
|
|
(106
|
)
|
34,014
|
|
|
(240
|
)
|
|
Income Tax Expense
|
|
5,839
|
|
|
—
|
|
12,721
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
9,574
|
|
|
$
|
(106
|
)
|
$
|
21,293
|
|
|
$
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings (Loss) Per Share
|
|
$
|
0.30
|
|
|
$
|
(0.14
|
)
|
$
|
0.68
|
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings (Loss) Per Share
|
|
$
|
0.30
|
|
|
$
|
(0.14
|
)
|
$
|
0.67
|
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares
Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
31,540,977
|
|
|
767
|
|
31,540,977
|
|
|
767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
31,828,164
|
|
|
767
|
|
31,828,164
|
|
|
767
|
|
The accompanying notes are an integral part of these financial
statements.
F-43
Table
of Contents
STATE BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated
Statements of Comprehensive Income (Unaudited)
(in thousands)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
2010
|
|
|
2009
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
9,574
|
|
|
$
|
(106
|
)
|
$
|
21,293
|
|
|
$
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income, Net
of Income Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for gains included in
net income, net of tax
|
|
(27
|
)
|
|
—
|
|
(32
|
)
|
|
—
|
|
|
Unrealized gains on securities
|
|
1,383
|
|
|
30
|
|
2,980
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
(loss)
|
|
1,356
|
|
|
30
|
|
2,948
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
(Loss)
|
|
$
|
10,930
|
|
|
$
|
(76
|
)
|
$
|
24,241
|
|
|
$
|
(204
|
)
|
The accompanying notes are an integral part of these financial statements.
F-44
Table
of Contents
STATE BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated
Statement of Changes in Shareholders’ Equity (Unaudited)
For the Six Months Ended June 30, 2010
(in thousands)
|
|
|
Warrants
|
|
Common
Shares
|
|
Common
Stock
|
|
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
2,660,634
|
|
31,540,977
|
|
$
|
315
|
|
$
|
292,030
|
|
$
|
18,022
|
|
$
|
397
|
|
$
|
310,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in accumulated other comprehensive income
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,948
|
|
2,948
|
|
|
Net income
|
|
—
|
|
—
|
|
—
|
|
—
|
|
21,293
|
|
—
|
|
21,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2010
|
|
$
|
2,660,634
|
|
31,540,977
|
|
$
|
315
|
|
$
|
292,030
|
|
$
|
39,315
|
|
$
|
3,345
|
|
$
|
335,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-45
Table
of Contents
STATE BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated
Statement of Cash Flows (Unaudited)
(in thousands)
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
Successor
2010
|
|
|
Predecessor
2009
|
|
|
Cash Flows from Operating
Activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
21,293
|
|
|
$
|
(240
|
)
|
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion on
premises and equipment and investments
|
|
2,250
|
|
|
34
|
|
|
Amortization of intangible assets
|
|
325
|
|
|
—
|
|
|
Provision for loan losses
|
|
1,192
|
|
|
261
|
|
|
Amortization of premiums and discounts on
acquisitions, net
|
|
(48,425
|
)
|
|
—
|
|
|
Loss on sale of other real estate owned
|
|
2,466
|
|
|
—
|
|
|
Write-downs of other real estate owned
|
|
5,923
|
|
|
—
|
|
|
Increase in FDIC receivable for covered losses
|
|
(20,262
|
)
|
|
—
|
|
|
Funds collected from FDIC receivable
|
|
149,949
|
|
|
—
|
|
|
Proceeds from sales of mortgage loans held for
sale
|
|
3,327
|
|
|
—
|
|
|
Originations of mortgage loans held for sale
|
|
(4,706
|
)
|
|
—
|
|
|
Gain on available for sale securities
|
|
(51
|
)
|
|
—
|
|
|
Gain on sale of premises and equipment
|
|
(6
|
)
|
|
—
|
|
|
Net change in cash surrender value
|
|
(102
|
)
|
|
—
|
|
|
Change in other liabilities, net
|
|
(2,641
|
)
|
|
52
|
|
|
Other operating activities, net
|
|
818
|
|
|
49
|
|
|
Net cash provided by operating activities
|
|
111,350
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities
|
|
|
|
|
|
|
|
Purchase of investment securities available for
sale
|
|
(172,520
|
)
|
|
(1,088
|
)
|
|
Proceeds from sales, calls, maturities and
pay-downs: available for sale
|
|
69,334
|
|
|
217
|
|
|
Loans to customers, net of repayments
|
|
2,495
|
|
|
(3,094
|
)
|
|
Purchase of bank owned life insurance
|
|
(30,416
|
)
|
|
—
|
|
|
Purchase of FHLB stock
|
|
—
|
|
|
(11
|
)
|
|
Purchases of premises and equipment
|
|
(7,730
|
)
|
|
—
|
|
|
Disposal of premises and equipment
|
|
73
|
|
|
—
|
|
|
Proceeds from sales of other real estate
|
|
51,866
|
|
|
—
|
|
|
Net cash used by investing activities
|
|
(86,898
|
)
|
|
(3,976
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities
|
|
|
|
|
|
|
|
Interest-bearing customer deposits
|
|
68,596
|
|
|
1,189
|
|
|
Noninterest-bearing customer deposits
|
|
18,206
|
|
|
(186
|
)
|
|
Federal funds purchases and securities sold under
repurchase agreements
|
|
(2,191
|
)
|
|
—
|
|
|
Repayments of borrowed money
|
|
(5,000
|
)
|
|
—
|
|
|
Net cash provided by operating activities
|
|
79,611
|
|
|
1,003
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
and Cash Equivalents
|
|
104,063
|
|
|
(2,817
|
)
|
|
Cash and Cash Equivalents,
Beginning
|
|
200,166
|
|
|
6,999
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Ending
|
|
$
|
304,229
|
|
|
$
|
4,182
|
|
|
|
|
|
|
|
|
|
|
Cash Payments for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
21,633
|
|
|
$
|
552
|
|
|
Income taxes
|
|
17,502
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures on
non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Goodwill and fair value acquisition adjustment
|
|
$
|
(1,665
|
)
|
|
$
|
—
|
|
|
Unrealized gains on securities, net of taxes
|
|
(2,948
|
)
|
|
(80
|
)
|
|
Transfer of loans to other real estate
|
|
85,214
|
|
|
—
|
|
The
accompanying notes are an integral part of these financial statements.
F-46
Table
of Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
State
Bank Financial Corporation (the “Company”) is a bank holding company whose
business is primarily conducted through its wholly-owned banking subsidiary,
State Bank and Trust Company (the “Bank”).
Through the Company, the Bank operates a full service banking business
and offers a broad range of commercial and retail banking products to its
customers, which range from Metro Atlanta to middle Georgia.
The
accompanying unaudited consolidated financial statements for the Company have
been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and Regulation
S-X. Accordingly, the financial
statements do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statement presentation.
The interim consolidated financial statements included herein are
unaudited, but reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of the consolidated financial position and
results of operations for the interim periods presented. All significant intercompany accounts and
transactions have been eliminated in consolidation. The results of operations for the period
ended June 30, 2010 are not necessarily indicative of the results to be
expected for the full year. These
financial statements should be read in conjunction with the financial
statements and notes thereto and the report of our registered independent
public accounting firm included in this Registration Statement on Form 10.
Certain
amounts have been reclassified to conform to current period presentation. The reclassifications had no effect on net
income or shareholders’ equity as previously reported.
Subsequent
Events
On
July 30, 2010, the Company entered into a Purchase and Assumption
Agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase
substantially all the assets and assume a majority of the liabilities of
Northwest Bank and Trust (NWBT) of Acworth, Georgia. Immediately prior to the effectiveness of the
NWBT Agreement, the FDIC had seized NWBT.
In
its call report dated June 30, 2010, NWBT reported:
|
Total assets
|
|
$
|
160,763
|
|
|
|
|
|
|
|
Loans and leases
|
|
92,475
|
|
|
|
|
|
|
|
Deposits (includes $37,725 of brokered deposits)
|
|
155,531
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
21,145
|
|
|
|
|
|
|
|
Other real estate
|
|
5,398
|
|
During
the third quarter of 2010, the Company recorded the purchased assets and
assumed liabilities at fair value. Under
the terms of the NWBT Agreement, the Company also had the option to purchase
any owned bank premises or to assume the leases on any or all of the banking
offices. The Company decided during the
third quarter of 2010 to close one of the two branches and purchase the other
branch from the FDIC in connection with the final settlement with the FDIC.
Loans,
other real estate owned by NWBT and purchased by the Company, and reimbursable
expenses incurred by the Company are subject to loss sharing agreements that
allocate prospective losses between the Company and the FDIC. The Company entered into two loss sharing
agreements with the FDIC which will absorb 80% of losses incurred.
The
Company has not completed the acquisition accounting for the assets acquired
and liabilities assumed in the transaction.
This acquisition accounting will be completed in the third quarter 2010.
Recently Adopted Accounting Pronouncements
In
April 2010, the Financial Accounting Standards Board (the “FASB”) issued
Accounting Standards Update No. 2010-18,
Effect
of a Loan Modification When the Loan Is Part of a Pool That Is Accounted
for as a Single Asset
(“ASU No. 2010-18”). ASU No. 2010-18 provides guidance on the
accounting for loan modifications when the
F-47
Table of Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
loan
is part of a pool of loans accounted for as a single asset such as acquired
loans that have evidence of credit deterioration upon acquisition that are
accounted for under the guidance in ASC 310-30,
Loans and Debt Securities Acquired with Deterioration of Credit Quality
(“ASC 310-30”). ASU No. 2010-18
addresses diversity in practice on whether a loan that is part of a pool of
loans accounted for as a single asset should be removed from that pool upon a
modification that would constitute a troubled debt restructuring (“TDR”) or
remain in the pool after modification.
ASU No. 2010-18 clarifies that modifications of loans that are
accounted for within a pool under ASC 310-30 do not result in the removal of
these loans from the pool even if the modification of these loans would
otherwise be considered a TDR. An entity
will continue to be required to consider whether the pool of assets in which
the loan is included is impaired if the expected cash flows for the pool
change. The amendments in this update
are effective for modifications of loans accounted for within pools under ASC
310-30 occurring in the first interim or annual period ending on or after
July 15, 2010. ASU 2010-18 will
have an impact on the Company’s disclosures, but not its financial position or
results of operations.
In
July 2010, the FASB issued Accounting Standards Update No. 2010-20,
Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses
(“ASU
No. 2010-20”). ASU No. 2010-20
requires disclosures regarding loans and the allowance for loan losses that are
disaggregated by portfolio segment and class of financing receivable. Existing disclosures were amended to require
a roll-forward of the allowance for loan losses by portfolio segment, with the
ending balance broken out by basis of impairment method, as well as the
recorded investment in the respective loans.
Nonaccrual and impaired loans by class must also be shown. ASU No. 2010-20 also requires
disclosures regarding: (1) credit quality indicators by class, (2) aging
of past due loans by class, 3) troubled debt restructurings (“TDRs”) by class
and their effect on the allowance for loan losses, (4) defaults on TDRs by
class and their effect on the allowance for loan losses, and (5) significant
purchases and sales of loans disaggregated by portfolio segment. This guidance is effective for interim and
annual reporting periods ending on or after December 15, 2010, for end of
period type disclosures. Activity related disclosures are effective for interim
and annual reporting periods beginning on or after December 15, 2010. ASU No. 2010-20 will have an impact on
the Company’s disclosures, but not its financial position or results of
operations.
(2) Investment Securities
Investment
securities as of June 30, 2010 are summarized as follows
(in thousands)
:
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
216,456
|
|
$
|
940
|
|
$
|
48
|
|
$
|
217,348
|
|
|
State and political subdivisions
|
|
2,913
|
|
131
|
|
35
|
|
3,009
|
|
|
Collateralize mortgage obligations (CMO)
|
|
149,286
|
|
3,051
|
|
158
|
|
152,179
|
|
|
FNMA, GNMA, FHLMNC mortgage-backed Securities
|
|
48,516
|
|
1,099
|
|
2
|
|
49,613
|
|
|
Corporate securities
|
|
337
|
|
168
|
|
—
|
|
505
|
|
|
|
|
$
|
417,508
|
|
$
|
5,389
|
|
$
|
243
|
|
$
|
422,654
|
|
Investment
securities as of December 31, 2009 are summarized as follows
(in thousands)
:
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
85,227
|
|
$
|
69
|
|
$
|
580
|
|
$
|
84,716
|
|
|
State and political subdivisions
|
|
3,176
|
|
92
|
|
56
|
|
3,212
|
|
|
Collateralized mortgage obligations (CMO)
|
|
172,002
|
|
1,374
|
|
96
|
|
173,280
|
|
|
FNMA, GNMA, FHLMC mortgage-backed securities
|
|
56,647
|
|
116
|
|
501
|
|
56,262
|
|
|
Corporate securities
|
|
325
|
|
193
|
|
—
|
|
518
|
|
|
|
|
$
|
317,377
|
|
$
|
1,844
|
|
$
|
1,233
|
|
$
|
317,988
|
|
F-48
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
The
amortized cost and estimated fair value available-for-sale securities at June 30,
2010 by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed
securities may differ from contractual maturities because in certain cases
borrowers prepay obligations without prepayment penalties. Therefore, these securities are not included
in the following maturity summary
(in thousands)
:
|
|
|
Amortized Cost
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
56,381
|
|
$
|
56,421
|
|
|
Due from one year to five years
|
|
148,025
|
|
148,271
|
|
|
Due from five years to ten years
|
|
9,071
|
|
9,644
|
|
|
Due after ten years
|
|
6,229
|
|
6,526
|
|
|
FNMA, GNMA, FHLMC and CMO mortgage-backed
securities
|
|
197,802
|
|
201,792
|
|
|
|
|
$
|
417,508
|
|
$
|
422,654
|
|
Investment
securities with an aggregate carrying amount of $75.1 million at June 30,
2010 were pledged to secure public deposits.
At
June 30, 2010, all unrealized losses in the investment portfolio related
to debt securities. The unrealized losses
on the debt securities arose due to changing interest rates and market
conditions and are considered to be temporary because of acceptable investment
grades where the repayment sources of principal and interest are backed by the
U.S. Government, Government sponsored organizations and other reputable
entities. In total, there were 15
investment securities with a total fair value of $63.3 million with unrealized
losses of $243,245 as of June 30, 2010 and have been in a continuous
unrealized loss position for less than twelve months.
At
December 31, 2009, unrealized losses in the investment portfolio related
to debt securities. The unrealized
losses on the debt securities arose due to changing interest rates and market
conditions and are considered to be temporary because of acceptable investment
grades where the repayment sources of principal and interest are backed by the
U.S. Government, Government sponsored organizations and other reputable
entities. In total, there were 52
investment securities with a total fair value of $127.5 million with unrealized
losses of $1.2 million as of December 31, 2009 and in a continuous
unrealized loss position for less than twelve months.
For
the three months and six months ended June 30, 2010, called mortgage-backed
securities resulted in recognized gains of $44,000 and $50,511, respectively.
(3) Loans Receivable
Loans
not covered by loss sharing agreements are summarized as follows
(in thousands)
:
|
|
|
June 30,
2010
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
Loans not covered by loss sharing agreements:
|
|
|
|
|
|
|
1-4 family residential real estate
|
|
$
|
20,821
|
|
$
|
8,219
|
|
|
Commercial real estate
|
|
63,238
|
|
14,487
|
|
|
Commercial and industrial
|
|
18,132
|
|
5,552
|
|
|
Real estate construction and development
|
|
35,735
|
|
8,019
|
|
|
Consumer and other
|
|
16,545
|
|
11,172
|
|
|
|
|
154,471
|
|
47,449
|
|
|
Allowance for loan losses
|
|
(3,645
|
)
|
(2,524
|
)
|
|
Unamortized loan origination fees, net
|
|
(853
|
)
|
(60
|
)
|
|
|
|
$
|
149,973
|
|
$
|
44,865
|
|
F-49
Table of Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
The carrying amount of the covered loans at June 30,
2010, consisted of impaired loans and non-impaired loans and are presented in
the following tables
(in thousands)
:
|
|
|
Impaired at
|
|
All Other
|
|
Total Covered
|
|
|
|
|
Acquisition Date
|
|
Acquired Loans
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by loss sharing agreements:
|
|
|
|
|
|
|
|
|
1-4 family residential real estate
|
|
$
|
19,236
|
|
$
|
274,644
|
|
$
|
293,880
|
|
|
Commercial real estate
|
|
39,950
|
|
487,203
|
|
527,153
|
|
|
Commercial and industrial
|
|
10,951
|
|
150,748
|
|
161,699
|
|
|
Real estate construction and development
|
|
168,556
|
|
402,406
|
|
570,962
|
|
|
Consumer and other
|
|
4,364
|
|
68,311
|
|
72,675
|
|
|
|
|
243,057
|
|
1,383,312
|
|
1,626,369
|
|
|
Non-accretable discount
|
|
140,237
|
|
361,532
|
|
501,769
|
|
|
Accretable discount
|
|
—
|
|
145,172
|
|
145,172
|
|
|
|
|
|
|
|
|
|
|
|
Total loans covered, net
|
|
$
|
102,820
|
|
$
|
876,608
|
|
$
|
979,428
|
|
The carrying amount of the covered loans at December 31,
2009, consisted of impaired loans and non-impaired loans and are presented in
the following tables
(in thousands)
:
|
|
|
Impaired at
|
|
All Other
|
|
Total Covered
|
|
|
|
|
Acquisition Date
|
|
Acquired Loans
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by loss sharing agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential real estate mortgage
|
|
$
|
26,591
|
|
$
|
294,735
|
|
$
|
321,326
|
|
|
Commercial real estate
|
|
57,998
|
|
510,247
|
|
568,245
|
|
|
Commercial and Industrial
|
|
11,625
|
|
175,763
|
|
187,388
|
|
|
Real estate construction
|
|
292,662
|
|
517,395
|
|
810,057
|
|
|
Consumer
|
|
4,548
|
|
81,095
|
|
85,643
|
|
|
|
|
393,424
|
|
1,579,235
|
|
1,972,659
|
|
|
Non-accretable discount
|
|
272,459
|
|
381,861
|
|
654,320
|
|
|
Accretable discount
|
|
—
|
|
183,840
|
|
183,840
|
|
|
|
|
|
|
|
|
|
|
|
Total loans covered, net
|
|
$
|
120,965
|
|
$
|
1,013,534
|
|
$
|
1,134,499
|
|
The following table documents changes in the
carrying value of acquired impaired loans during the period from December 31,
2009 through June 30, 2010
(in thousands)
:
|
Balance, December 31, 2009
|
|
$
|
120,965
|
|
|
Reductions resulting from Repayments, write-offs
and foreclosures
|
|
(18,145
|
)
|
|
|
|
|
|
|
Balance, June 30, 2010
|
|
$
|
102,820
|
|
F-50
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
The following table documents changes in the value
of the non-accretable discount during the period from December 31, 2009
through June 30, 2010
(in thousands)
:
|
Balance, December 31, 2009
|
|
$
|
654,320
|
|
|
Recoveries of loan previously charged off
|
|
—
|
|
|
Reductions resulting from charge-offs
|
|
(152,551
|
)
|
|
|
|
|
|
|
Balance, June 30, 2010
|
|
$
|
501,769
|
|
The following table documents changes in the carrying
value of the FDIC receivable for loss sharing agreements relating to covered
loans and other real estate during the period from December 31, 2009
through June 30, 2010
(in thousands)
:
|
|
|
Security
Banks
|
|
All other
acquired
banks
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
$
|
371,341
|
|
$
|
234,161
|
|
$
|
605,502
|
|
|
Reductions resulting from:
|
|
|
|
|
|
|
|
|
Wires received
|
|
119,187
|
|
30,762
|
|
149,949
|
|
|
Recovery of previous loss reimbursements
|
|
—
|
|
—
|
|
—
|
|
|
Additions resulting from:
|
|
|
|
|
|
|
|
|
Charge-offs, write-downs and other losses
|
|
7,341
|
|
3,433
|
|
10,774
|
|
|
Discount accretion
|
|
4,504
|
|
2,403
|
|
6,907
|
|
|
External expenses qualifying under loss sharing
agreements
|
|
7,314
|
|
2,380
|
|
9,694
|
|
|
Balance, June 30, 2010
|
|
$
|
271,313
|
|
$
|
211,615
|
|
$
|
482,928
|
|
At June 30, 2010, the Company had loans not
covered by loss sharing of approximately $154.5 million, of which $5.3 million
were impaired with specific allowances totaling $1.6 million. Impaired loans covered by loss sharing
agreements totaled $562.8 million as of June 30, 2010. At June 30, 2010, the Company did not
have any commitments to debtors whose loans were nonperforming and did not have
any loans past due 90 days or more still accruing interest. Interest income on impaired loans for the
period ended June 30, 2010 was $3.0 million.
At
December 31, 2009, the Company had loans not covered by loss sharing of
approximately $47.4 million, of which $3.3 million were impaired with specific
allowances totaling $1.4 million.
Impaired loans covered by loss sharing agreements totaled $524.9 million
as of December 31, 2009. At
December 31, 2009, the Company did not have any commitments to debtors
whose loans were nonperforming and did not have any loans past due 90 days or
more still accruing interest.
F-51
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
(4) Allowance for Loan Losses
The
following table presents the Company’s loan loss experience on all non-covered
loans for the six months ended June 30, 2010 and the period from July 24,
2009 through December 31, 2009 as follows
(in
thousands)
:
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
Balance beginning of
period
|
|
$
|
2,524
|
|
$
|
—
|
|
|
Charge-offs
|
|
71
|
|
459
|
|
|
Recoveries
|
|
—
|
|
294
|
|
|
Provision for loan
losses
|
|
1,192
|
|
2,689
|
|
|
Balance end of period
|
|
$
|
3,645
|
|
$
|
2,524
|
|
(5) Other Real Estate Owned
The following is a summary of transactions in the
other real estate owned
(in thousands):
|
|
|
June 30, 2010
|
|
|
Non-covered other real estate
owned
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
$
|
120
|
|
|
Other real estate acquired through foreclosure of
loans receivable
|
|
—
|
|
|
Other real estate sold
|
|
(45
|
)
|
|
Write down of other real estate
|
|
—
|
|
|
|
|
|
|
|
Balance, June 30, 2010
|
|
$
|
75
|
|
|
|
|
June 30, 2010
|
|
|
Covered other real estate owned
|
|
|
|
|
|
|
|
|
|
Total covered other real estate owned at
December 31, 2009
|
|
$
|
141,690
|
|
|
Other real estate acquired through foreclosure of
loans receivable
|
|
84,889
|
|
|
Other real estate sold
|
|
(54,232
|
)
|
|
Write down of other real estate
|
|
(5,923
|
)
|
|
Other real estate capitalized costs
|
|
—
|
|
|
|
|
|
|
|
Balance, June 30, 2010
|
|
$
|
166,424
|
|
F-52
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
(6) Earnings Per Share
Earnings per share have been computed based on the
following weighted average number of common shares outstanding for the three
and six months ended June 30, 2010
(in thousands)
:
|
|
|
Three Months Ended
June 30,
2010
|
|
Six Months Ended
June 30, 2010
|
|
|
Basic Earnings Per Share
|
|
|
|
|
|
|
Net income per common share
|
|
$
|
0.30
|
|
$
|
0.68
|
|
|
Weighted average common shares
|
|
31,541
|
|
31,541
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share
|
|
|
|
|
|
|
Net income per common and common equivalent share
|
|
$
|
0.30
|
|
$
|
0.67
|
|
|
Weighted average common shares and common stock
equivalents
|
|
31,828
|
|
31,828
|
|
For the three and six months ended period, June 30,
2009, there were no options or warrants granted or outstanding.
(7) Fair Value
Fair value measurements are determined based on the
assumptions that market participants would use in pricing the asset or
liability. As a basis for considering
market participant assumptions in fair value measurements, the Financial
Accounting Standards Board’s Accounting Standards Codification Topic 820 (“ASC
820”)
Fair Value Measurements and Disclosures
establishes a fair value hierarchy that distinguishes between market
participant assumptions based on market data obtained from sources independent
of the reporting entity (observable inputs that are classified within Levels 1
and 2 of the hierarchy) and the reporting entity’s own assumptions about market
participant assumptions developed based
on the best information available in the circumstances (unobservable inputs
classified within Level 3 of the hierarchy).
Fair Value Hierarchy
Level 1
Valuation is based on inputs that are quoted prices
(unadjusted) in active markets for identical assets or liabilities that the
Company has the ability to access at the measurement date.
Level 2
Valuation is based on inputs other than quoted
prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly, such as interest rates, yield curves observable
at commonly quoted intervals, and other market-corroborated inputs.
Level 3
Valuation inputs are unobservable inputs for the
asset or liability which shall be used to measure fair value to the extent that
observable inputs are not available. The
inputs shall reflect the Company’s
own
assumptions about the assumptions that market participants would use in pricing
the asset or liability.
The following methods and assumptions were used by
the Company in estimating the fair value of its financial instruments and other
accounts recorded based on their fair value:
F-53
Table of Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
(a) Cash
and Cash Equivalents:
The carrying amount
approximates fair value because of the short maturity of these instruments.
(b) Securities
Available for Sale:
The fair value of most
securities available for sale are determined by obtaining quoted prices on
nationally recognized securities exchanges (Level 1). If quoted market prices are not available,
then fair values are estimated by using pricing models, quoted prices of
securities with similar characteristics, or discounted cash flows (Level 2). In certain cases where Level 1 or Level 2
inputs are not available, securities are classified within Level 3 hierarchy.
(c) Loans
Receivable
Fair values are estimated
for portfolios of loans with similar financial characteristics. Loans are
segregated by type. The fair value of performing loans is calculated by
discounting scheduled cash flows through the estimated maturity using estimated
market discount rates that reflect the credit risk inherent in the loan. The
estimate of maturity is based on the Company’s historical experience with
repayments for each loan classification, modified, as required, by an estimate
of the effect of the current economic and lending conditions.
Fair value for significant
nonperforming loans is based on recent external appraisals. If appraisals are
not available, estimated cash flows are discounted using a rate commensurate
with the risk associated with the estimated cash flows. Assumptions regarding
credit risk, cash flows, and discount rates are judgmentally determined using
available market information and specific borrower information.
Loans considered impaired
are loans for which, based on current information and events, it is probable
that the creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement.
Impaired loans are subject to nonrecurring fair value adjustments to
reflect write-downs that are based on the market price or current appraised
value of the collateral, adjusted to reflect local market conditions or other
economic factors. After evaluating the underlying collateral, the fair value of
the impaired loans is determined by allocating specific reserves from the
allowance for loan and lease losses to the loans. Thus, the fair value
reflects the loan balance less the specifically allocated reserve.
(d) Loans
Held for Sale
Loans
held for sale are originated at market value and the holding period for these
loans is typically five to seven business days, therefore the carrying value
approximates the fair value in the aggregate of the portfolio given this short
time frame.
(e) FDIC
Receivable for Loss Sharing Agreements
The Company’s FDIC
receivable for loss sharing agreements approximates fair value.
(f) Deposits
The fair value of deposits
with no stated maturity, such as noninterest—bearing demand deposits, savings,
NOW accounts, and money market and checking accounts, is equal to the amount
payable on demand as of December 31, 2009. The fair value of time deposits
is based on the discounted value of contractual cash flows. The discount rate
is estimated using the rates currently offered for deposits of similar
remaining maturities.
(g) Borrowings
The fair value of the
Company’s Federal Home Loan Bank advances is estimated based on the discounted
value of contractual cash flows. The fair value of securities sold under
agreements to repurchase approximates the carrying amount because of the short
maturity of these borrowings. The discount rate is estimated using rates quoted
for the same or similar issues or the current rates offered to the Company for
debt of the same remaining maturities.
F-54
Table of Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
(h) Commitments
and Contingencies
The carrying amount of
commitments to extend credit and standby letters of credit approximates fair
value. The carrying amount of the off-balance sheet financial instruments is
based on fees charged to enter into such agreements.
(i) Other
Real Estate Owned
The fair value of other real
estate owned (“OREO”) is determined when the asset is transferred to foreclosed
assets. The assets are carried at the
lower of the carrying value or fair value.
Fair value is based on appraised values of the collateral or management’s
estimation of the value of the collateral.
When the value is based on observable market prices such as an
appraisal, the asset is recorded in Level 2 hierarchy. When an appraised value is not available or
management determines the fair value of the collateral is further impaired, the
asset is recorded as a nonrecurring Level 3 hierarchy.
Other real estate owned is
initially accounted for at fair value, less estimated costs to dispose of the
property. Any excess of the recorded investment over fair value, less costs to
dispose, is charged to the allowance for loan and lease losses at the time of
foreclosure. A provision is charged to earnings for subsequent losses on other
real estate owned when market conditions indicate such losses have occurred.
The ability of the Company to recover the carrying value of other real estate
owned is based upon future sales of the real estate. The ability to affect such
sales is subject to market conditions and other factors beyond our control, and
future declines in the value of the real estate would result in a charge to
earnings. The recognition of sales and sales gains is dependent upon whether
the nature and terms of the sales, including possible future involvement of the
Company, if any, meet certain defined requirements. If those requirements are
not met, sale and gain recognition is deferred.
Assets
Measured at Fair Value on a Recurring Basis
The
following table presents the fair value measurements of assets measured at fair
value on a recurring basis as of June 30, 2010, aggregated by the level in
the fair value hierarchy within which those measurements fall.
|
|
|
|
|
Significant
|
|
|
|
|
|
|
Quoted Market
|
|
Other
|
|
Significant
|
|
|
|
|
Prices in Active
|
|
Observable
|
|
Unobservable
|
|
|
|
|
Markets
|
|
Inputs
|
|
Inputs
|
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
—
|
|
$
|
217,348
|
|
$
|
—
|
|
|
State and political subdivisions
|
|
—
|
|
3,009
|
|
—
|
|
|
FNMA, GNMA, and FHLMC mortgage- backed securities
|
|
—
|
|
49,613
|
|
—
|
|
|
Collateralized-mortgage obligations
|
|
—
|
|
152,179
|
|
—
|
|
|
Corporate securities
|
|
—
|
|
505
|
|
—
|
|
|
Total recurring assets at fair value
|
|
$
|
—
|
|
$
|
422,654
|
|
$
|
—
|
|
F-55
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
The
following table presents the fair value measurements of assets measured at fair
value on a recurring basis as of December 31, 2009, aggregated by the
level in the fair value hierarchy within which those measurements fall.
|
|
|
|
|
Significant
|
|
|
|
|
|
|
Quoted Market
|
|
Other
|
|
Significant
|
|
|
|
|
Prices in Active
|
|
Observable
|
|
Unobservable
|
|
|
|
|
Markets
|
|
Inputs
|
|
Inputs
|
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
U.S. Government agencies
|
|
$
|
—
|
|
$
|
84,716
|
|
$
|
—
|
|
|
State and political subdivisions
|
|
—
|
|
3,212
|
|
—
|
|
|
FNMA, GNMA, and FHLMC mortgage-
|
|
|
|
|
|
|
|
|
backed securities
|
|
—
|
|
56,262
|
|
—
|
|
|
Collateralized-mortgage obligations
|
|
—
|
|
173,280
|
|
—
|
|
|
Corporate securities
|
|
—
|
|
518
|
|
—
|
|
|
Total recurring assets at fair value
|
|
$
|
—
|
|
$
|
317,988
|
|
$
|
—
|
|
Assets
and Liabilities Measured at Fair Value on a Nonrecurring Basis
The
following table presents the fair value measurements of assets and liabilities
measured at fair value on a nonrecurring basis as of June 30, aggregated
by the level in the fair value hierarchy within which those measurements fall.
|
|
|
|
|
Significant
|
|
|
|
|
|
|
Quoted Market
|
|
Other
|
|
Significant
|
|
|
|
|
Prices in Active
|
|
Observable
|
|
Unobservable
|
|
|
|
|
Markets
|
|
Inputs
|
|
Inputs
|
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
|
|
|
|
|
|
|
Covered by loss sharing agreements
|
|
$
|
—
|
|
—
|
|
102,820
|
|
|
Not covered by loss sharing agreements
|
|
—
|
|
—
|
|
3,704
|
|
|
Total impaired loans
|
|
—
|
|
—
|
|
106,524
|
|
|
Other real estate
|
|
|
|
|
|
|
|
|
Covered by loss sharing agreements
|
|
—
|
|
—
|
|
166,424
|
|
|
Not covered by loss sharing agreements
|
|
—
|
|
—
|
|
75
|
|
|
Total other real estate
|
|
$
|
—
|
|
$
|
—
|
|
$
|
166,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-56
Table of Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
The
following table presents the fair value measurements of assets and liabilities
measured at fair value on a nonrecurring basis as of December 31, 2009,
aggregated by the level in the fair value hierarchy within which those
measurements fall.
|
|
|
|
|
Significant
|
|
|
|
|
|
|
Quoted Market
|
|
Other
|
|
Significant
|
|
|
|
|
Prices in Active
|
|
Observable
|
|
Unobservable
|
|
|
|
|
Markets
|
|
Inputs
|
|
Inputs
|
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
|
|
|
|
|
|
|
Covered by loss sharing agreements
|
|
—
|
|
—
|
|
120,965
|
|
|
Not covered by loss sharing agreements
|
|
—
|
|
—
|
|
1,900
|
|
|
Total impaired loans
|
|
—
|
|
—
|
|
122,865
|
|
|
Other real estate
|
|
|
|
|
|
|
|
|
Covered by loss sharing agreements
|
|
—
|
|
—
|
|
141,690
|
|
|
Not covered by loss sharing agreements
|
|
—
|
|
—
|
|
120
|
|
|
Total other real estate
|
|
$
|
—
|
|
$
|
—
|
|
$
|
141,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
fair carrying amount and estimated fair value of the Company’s financial
instruments, not shown elsewhere in these financial statements, were as follows
(in thousands)
:
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
|
|
|
Carrying
|
|
Estimated
|
|
Carrying
|
|
Estimated
|
|
|
|
|
Amount
|
|
Fair Value
|
|
Amount
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
304,229
|
|
$
|
304,229
|
|
$
|
200,166
|
|
$
|
200,166
|
|
|
Investment
securities available for sale
|
|
422,654
|
|
422,654
|
|
317,988
|
|
317,988
|
|
|
Federal
Home Loan Bank of Atlanta stock
|
|
12,559
|
|
12,559
|
|
12,559
|
|
12,559
|
|
|
Mortgage
loans held for sale
|
|
1,379
|
|
1,379
|
|
—
|
|
—
|
|
|
Loans,
net
|
|
1,129,401
|
|
1,133,798
|
|
1,179,364
|
|
1,193,024
|
|
|
FDIC
receivable for loss sharing agreements
|
|
482,928
|
|
482,928
|
|
605,502
|
|
605,502
|
|
|
Cash
surrender value of life insurance
|
|
30,518
|
|
30,518
|
|
—
|
|
—
|
|
|
Accrued
interest receivable
|
|
9,684
|
|
9,684
|
|
12,498
|
|
12,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
2,236,076
|
|
2,239,786
|
|
2,153,791
|
|
2,117,177
|
|
|
Borrowed
money
|
|
—
|
|
—
|
|
5,000
|
|
5,000
|
|
|
Short-term
borrowings
|
|
7,415
|
|
7,415
|
|
9,606
|
|
9,606
|
|
|
Accrued
interest payable
|
|
7,393
|
|
7,393
|
|
10,266
|
|
10,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) Goodwill
At
June 30, 2010, the change in the carrying amount of goodwill is presented
in the table below
(in thousands)
:
|
Balance, December 31, 2009
|
|
$
|
9,217
|
|
|
|
|
|
|
|
Less fair value adjustment
|
|
1,665
|
|
|
|
|
|
|
|
Balance, June 30, 2010
|
|
$
|
7,552
|
|
F-57
Table of
Contents
STATE BANK
FINANCIAL CORPORATION AND SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
The
Company adjusted goodwill during the first half of 2010 related to the
acquisition of The Buckhead Community Bank on December 4, 2009. At the time of the acquisition, the Company
made certain assumptions related to the fair values of the acquired
certificates of deposits. A subsequent
review of those assumptions resulted in changes that resulted in a lower fair
value on the acquired certificates. Therefore, the Company reduced the
remaining amount of the discount through an adjustment to goodwill and the
certificate of deposit fair value discount of $1.7 million.
F-58
Table of
Contents
SIGNATURES
Pursuant to the
requirements of Section 12 of the securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
|
STATE BANK FINANCIAL
CORPORATION
|
|
|
|
|
|
|
|
|
|
Date:
October 29, 2010
|
By:
|
/s/
J. Daniel Speight
|
|
|
|
J. Daniel
Speight
|
|
|
|
Chief Financial
Officer
|
Table of Contents
EXHIBIT INDEX
|
Exhibit
No.
|
|
Document
|
|
|
|
|
|
2.1
|
|
Purchase
and Assumption Agreement dated as of July 24, 2009 among the Federal
Deposit Insurance Corporation, Receiver of Security Bank of Bibb County,
Macon Georgia; Security Bank of Gwinnett County, Suwannee, Georgia; Security
Bank of Houston County, Perry, Georgia; Security Bank of Jones County, Gray,
Georgia; Security Bank of North Fulton, Alpharetta, Georgia; Security Bank of
North Metro, Woodstock, Georgia, State Bank and Trust Company and the Federal
Deposit Insurance Corporation acting in its corporate capacity
|
|
|
|
|
|
2.2
|
|
Purchase
and Assumption Agreement dated as of December 4, 2009 among the Federal
Deposit Insurance Corporation, Receiver of The Buckhead Community Bank,
Atlanta, Georgia, State Bank and Trust Company and the Federal Deposit
Insurance Corporation acting in its corporate capacity
|
|
|
|
|
|
2.3
|
|
Purchase
and Assumption Agreement dated as of December 4, 2009 among the Federal
Deposit Insurance Corporation, Receiver of First Security National Bank,
Norcross, Georgia, State Bank and Trust Company and the Federal Deposit
Insurance Corporation acting in its corporate capacity
|
|
|
|
|
|
2.4
|
|
Plan
of Reorganization and Share Exchange dated January 27, 2010
|
|
|
|
|
|
2.5
|
|
Purchase
and Assumption Agreement dated as of July 30, 2010 among the Federal
Deposit Insurance Corporation, Receiver of NorthWest Bank and Trust, Acworth,
Georgia, State Bank and Trust Company and the Federal Deposit Insurance
Corporation acting in its corporate capacity
|
|
|
|
|
|
3.1
|
|
Amended
and Restated Articles of Incorporation of State Bank Financial Corporation
|
|
|
|
|
|
3.2
|
|
Bylaws
of State Bank Financial Corporation
|
|
|
|
|
|
4.1
|
|
See
Exhibits 3.1 and 3.2 for provisions in State Bank Financial Corporation’s
Articles of Incorporation and Bylaws defining the rights of holders of common
stock
|
|
|
|
|
|
4.2
|
|
Form of
certificate of common stock
|
|
|
|
|
|
10.1
|
|
Employment
Agreement dated July 24, 2009 by and among of Joseph W. Evans and State
Bank and Trust Company
|
|
|
|
|
|
10.2
|
|
Employment
Agreement dated July 24, 2009 by and among of Kim M. Childers and State
Bank and Trust Company
|
|
|
|
|
|
10.3
|
|
Employment
Agreement dated July 24, 2009 by and among of J. Daniel Speight and
State Bank and Trust Company
|
|
|
|
|
|
10.4
|
|
Employment
Agreement dated July 19, 2010 by and among of Stephen W. Doughty and
State Bank and Trust Company
|
|
|
|
|
|
10.5
|
|
First
Amendment to Employment Agreement dated May 11, 2010 by and among Joseph
W. Evans and S State Bank and Trust Company
|
|
|
|
|
|
10.6
|
|
First
Amendment to Employment Agreement dated May 11, 2010 by and among Kim M.
Childers and State Bank and Trust Company
|
|
|
|
|
|
10.7
|
|
First
Amendment to Employment Agreement dated May 11, 2010 by and among J.
Daniel Speight and
|
Table of Contents
|
Exhibit
No.
|
|
Document
|
|
|
|
|
|
|
|
State
Bank and Trust Company
|
|
|
|
|
|
10.8
|
|
Stock
Purchase Agreement dated July 14, 2009
|
|
|
|
|
|
10.9
|
|
Form of
Warrant Agreement (Pursuant to Instruction 2 of Item 601, one form of Warrant
Agreement has been filed which has been executed by each of the following
executive officers and the following director: Kim M. Childers, Stephen W.
Doughty, Joseph W. Evans, J. Daniel Speight and John Thomas Wiley, Jr.)
|
|
|
|
|
|
10.10
|
|
Form of
Purchase Agreement (Pursuant to Instruction 2 of Item 601, one form of
Purchase Agreement has been filed which has been executed by Kim M. Childers,
Joseph W. Evans, and J. Daniel Speight)
|
|
|
|
|
|
10.11
|
|
Form of
Purchase Agreement (Pursuant to Instruction 2 of Item 601, one form of
Purchase Agreement has been filed which has been executed by Stephen W.
Doughty and John Thomas Wiley, Jr.)
|
|
|
|
|
|
21.1
|
|
Subsidiaries
of State Bank Financial Corporation
|
EXHIBIT 2.1
PURCHASE
AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL
DEPOSITS
AMONG
FEDERAL DEPOSIT INSURANCE CORPORATION,
RECEIVER OF: SECURITY BANK OF BIBB COUNTY, MACON, GA.;
SECURITY
BANK OF GWINNETT COUNTY, SUWANNEE, GA.; SECURITY BANK
OF
HOUSTON COUNTY, PERRY, GA.; SECURITY BANK OF JONES
COUNTY, GRAY,
GA.; SECURITY BANK OF NORTH FULTON, ALPHARETTA, GA.;
SECURITY
BANK OF NORTH METRO, WOODSTOCK, GA.
FEDERAL DEPOSIT INSURANCE CORPORATION
and
STATE BANK AND TRUST COMPANY
DATED AS OF
JULY 24, 2009
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
TABLE OF CONTENTS
|
ARTICLE I
|
DEFINITIONS
|
2
|
|
|
|
|
|
ARTICLE II
|
ASSUMPTION OF LIABILITIES
|
8
|
|
|
|
|
|
2.1
|
Liabilities Assumed by Assuming Bank
|
8
|
|
2.2
|
Interest on Deposit Liabilities
|
10
|
|
2.3
|
Unclaimed Deposits
|
10
|
|
2.4
|
Employee Plans
|
11
|
|
|
|
|
|
ARTICLE III
|
PURCHASE OF ASSETS
|
11
|
|
|
|
|
|
3.1
|
Assets Purchased by Assuming Bank
|
11
|
|
3.2
|
Asset Purchase Price
|
11
|
|
3.3
|
Manner of Conveyance; Limited Warranty; Nonrecourse; Etc.
|
12
|
|
3.4
|
Puts of Assets to the Receiver
|
12
|
|
3.5
|
Assets Not Purchased by Assuming Bank
|
14
|
|
3.6
|
Assets Essential to Receiver
|
15
|
|
|
|
|
|
ARTICLE IV
|
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS
|
16
|
|
|
|
|
|
4.1
|
Continuation of Banking Business
|
16
|
|
4.2
|
Agreement with Respect to Credit Card Business
|
16
|
|
4.3
|
Agreement with Respect to Safe Deposit Business
|
16
|
|
4.4
|
Agreement with Respect to Safekeeping Business
|
17
|
|
4.5
|
Agreement with Respect to Trust Business
|
17
|
|
4.6
|
Agreement with Respect to Bank Premises
|
18
|
|
4.7
|
Agreement with Respect to Leased Data Processing Equipment
|
20
|
|
4.8
|
Agreement with Respect to Certain Existing Agreements
|
21
|
|
4.9
|
Informational Tax Reporting
|
22
|
|
4.10
|
Insurance
|
22
|
|
4.11
|
Office Space for Receiver and Corporation
|
22
|
|
4.12
|
Agreement with Respect to Continuation of Group Health Plan Coverage
for Former Employees
|
22
|
|
4.13
|
Agreement with Respect to Interim Asset Servicing
|
23
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
ii
|
ARTICLE V
|
DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK
|
24
|
|
|
|
|
|
5.1
|
Payment of Checks, Drafts and Orders
|
24
|
|
5.2
|
Certain Agreements Related to Deposits
|
24
|
|
5.3
|
Notice to Depositors
|
24
|
|
|
|
|
|
ARTICLE VI
|
RECORDS
|
25
|
|
|
|
|
|
6.1
|
Transfer of Records
|
25
|
|
6.2
|
Delivery of Assigned Records
|
26
|
|
6.3
|
Preservation of Records
|
26
|
|
6.4
|
Access to Records; Copies
|
26
|
|
|
|
|
|
ARTICLE VII
|
FIRST LOSS TRANCHE
|
26
|
|
|
|
|
|
ARTICLE VIII
|
ADJUSTMENTS
|
27
|
|
|
|
|
|
8.1
|
Pro Forma Statement
|
27
|
|
8.2
|
Correction of Errors and Omissions; Other Liabilities
|
|
|
8.3
|
Payments
|
28
|
|
8.4
|
Interest
|
28
|
|
8.5
|
Subsequent Adjustments
|
28
|
|
|
|
|
|
ARTICLE IX
|
CONTINUING COOPERATION
|
28
|
|
|
|
|
|
9.1
|
General Matters
|
28
|
|
9.2
|
Additional Title Documents
|
28
|
|
9.3
|
Claims and Suits
|
29
|
|
9.4
|
Payment of Deposits
|
29
|
|
9.5
|
Withheld Payments
|
29
|
|
9.6
|
Proceedings with Respect to Certain Assets and Liabilities
|
30
|
|
9.7
|
Information
|
30
|
|
|
|
|
|
ARTICLE X
|
CONDITION PRECEDENT
|
30
|
|
|
|
|
|
ARTICLE XI
|
REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK
|
31
|
|
|
|
|
|
ARTICLE XII
|
INDEMNIFICATION
|
32
|
|
|
|
|
|
12.1
|
Indemnification of Indemnitees
|
32
|
|
12.2
|
Conditions Precedent to Indemnification
|
35
|
|
12.3
|
No Additional Warranty
|
36
|
|
12.4
|
Indemnification of Corporation and Receiver
|
36
|
|
12.5
|
Obligations Supplemental
|
36
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
iii
|
12.6
|
Criminal Claims
|
36
|
|
12.7
|
Limited Guaranty of the Corporation
|
37
|
|
12.8
|
Subrogation
|
37
|
|
|
|
|
|
ARTICLE XIII
|
MISCELLANEOUS
|
37
|
|
|
|
|
|
13.1
|
Entire Agreement
|
37
|
|
13.2
|
Headings
|
37
|
|
13.3
|
Counterparts
|
37
|
|
13.4
|
Governing Law
|
37
|
|
13.5
|
Successors
|
38
|
|
13.6
|
Modification; Assignment
|
38
|
|
13.7
|
Notice
|
38
|
|
13.8
|
Manner of Payment
|
39
|
|
13.9
|
Costs, Fees and Expenses
|
39
|
|
13.10
|
Waiver
|
39
|
|
13.11
|
Severability
|
39
|
|
13.12
|
Term of Agreement
|
39
|
|
13.13
|
Survival of Covenants, Etc.
|
40
|
|
|
|
|
|
SCHEDULES
|
|
|
|
|
|
|
|
2.1
|
Certain Liabilities Assumed
|
42
|
|
2.1(a)
|
Excluded Deposit Liability Accounts
|
43
|
|
3.1
|
Certain Assets Purchased
|
44
|
|
3.2
|
Purchase Price of Assets or Assets
|
45
|
|
3.5(l)
|
Excluded Private Label Assets-Backed Securities
|
47
|
|
4.15A
|
Single Family Loss Share Loans
|
55
|
|
4.15B
|
Non-Single Family Loss Share Loans
|
49
|
|
7
|
Calculation of Deposit Premium
|
50
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
|
|
4.13
|
Interim Asset Servicing Arrangement
|
53
|
|
4.15A
|
Single Family Loss Share Agreement
|
55
|
|
4.15B
|
Commercial Loss Share Agreement
|
91
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
iv
PURCHASE
AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL
DEPOSITS
THIS AGREEMENT
, made and entered into as
of the 24th day of July, 2009, by and among the
FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER of: SECURITY BANK OF BIBB
COUNTY, MACON, GA.; SECURITY BANK OF GWINNETT COUNTY, SUWANNEE, GA.; SECURITY
BANK OF HOUSTON COUNTY, PERRY, GA.; SECURITY BANK OF JONES COUNTY, GRAY, GA.;
SECURITY BANK OF NORTH FULTON, ALPHARETTA, GA.; SECURITY BANK OF NORTH METRO,
WOODSTOCK, GA.
(the “Receiver,” for each respective bank),
STATE BANK AND TRUSTCOMPANY
organized under
the laws of the State of Georgia, and having its principal place of business in
Pinehurst, Georgia (the “Assuming Bank”), and the
FEDERAL DEPOSIT INSURANCE CORPORATION
, organized under the
laws of the United States of America and having its principal office in
Washington, D.C., acting in its corporate capacity (the “Corporation”).
WITNESSETH
:
WHEREAS
, on Bank Closing, the Chartering Authority
closed
SECURITY BANK OF BIBB COUNTY; SECURITY
BANK OF GWINNETT COUNTY; SECURITY BANK OF HOUSTON COUNTY; SECURITY BANK OF
JONES COUNTY; SECURITY BANK OF NORTH FULTON;
and
SECURITY BANK OF NORTH METRO
(each,
respectively, the “Failed Bank”) pursuant to applicable law and the Corporation
was appointed Receiver thereof; and
WHEREAS
, the Assuming Bank desires to purchase
certain assets and assume certain deposit and other liabilities of the Failed
Bank on the terms and conditions set forth in this Agreement; and
WHEREAS
, pursuant to 12 U.S.C.
Section 1823(c)(2)(A), the Corporation may provide assistance to the
Assuming Bank to facilitate the transactions contemplated by this Agreement,
which assistance may include indemnification pursuant to Article XII; and
WHEREAS
, the Board of Directors of the Corporation
(the “Board”) has determined to provide assistance to the Assuming Bank on the
terms and subject to the conditions set forth in this Agreement; and
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
1
WHEREAS
, the Board has
determined pursuant to 12 U.S.C. Section 1823 (c)(4)(A) that such
assistance is necessary to meet the obligation of the Corporation to provide
insurance coverage for the insured deposits in the Failed Bank.
NOW THEREFORE
, in
consideration of the mutual promises herein set forth and other valuable
consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in
this Agreement shall have the meanings set forth in this Article I, or
elsewhere in this Agreement. As used herein, words imparting the singular
include the plural and vice versa.
“
Accounting Records
”
means the
general ledger and subsidiary ledgers and supporting schedules which support
the general ledger balances.
“
Acquired Subsidiaries
”
means
Subsidiaries of the Failed Bank acquired pursuant to Section 3.1.
“
Affiliate
”
of any Person
means any director, officer, or employee of that Person and any other Person
(i) who is directly or indirectly controlling, or controlled by, or under
direct or indirect common control with, such Person, or (ii) who is an
affiliate of such Person as the term “affiliate” is defined in Section 2
of the Bank Holding Company Act of 1956, as amended, 12 U.S.C.
Section 1841.
“
Agreement
”
means this
Purchase and Assumption Agreement by and among the Assuming Bank, the
Corporation and the Receiver, as amended or otherwise modified from time to
time.
“
Assets
”
means all
assets of the Failed Bank purchased pursuant to Section 3.1. Assets owned
by Subsidiaries of the Failed Bank are not “Assets” within the meaning of this
definition.
“
Assumed Deposits
”
means
Deposits.
“
Bank Closing
”
means the
close of business of the Failed Bank on the date on which the Chartering
Authority closed such institution.
“
Bank Premises
”
means the
banking houses, drive-in banking facilities, and teller facilities (staffed or
automated) together with appurtenant parking, storage and service facilities
and structures connecting remote facilities to banking houses, and land on
which the foregoing are located, that are owned or leased by the Failed Bank
and that have formerly been utilized, are currently utilized, or are intended
to be utilized in the future by the Failed Bank as shown on the Accounting
Record of the Failed Bank as of Bank Closing.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
2
“
Book Value
”
means, with
respect to any Asset and any Liability Assumed, the dollar amount thereof
stated on the Accounting Records of the Failed Bank. The Book Value of any item
shall be determined as of Bank Closing after adjustments made by the Receiver
for differences in accounts, suspense items, unposted debits and credits, and
other similar adjustments or corrections and for setoffs, whether voluntary or
involuntary. The Book Value of a Subsidiary of the Failed Bank acquired by the
Assuming Bank shall be determined from the investment in subsidiary and related
accounts on the “bank only” (unconsolidated) balance sheet of the Failed Bank
based on the equity method of accounting. Without limiting the generality of
the foregoing, (i) the Book Value of a Liability Assumed shall include all
accrued and unpaid interest thereon as of Bank Closing, and (ii) the Book
Value of a Loan shall reflect adjustments for earned interest, or unearned
interest (as it relates to the “rule of 78s” or add-on-interest loans, as
applicable), if any, as of Bank Closing, adjustments for the portion of earned
or unearned loan-related credit life and/or disability insurance premiums, if
any, attributable to the Failed Bank as of Bank Closing, and adjustments for
Failed Bank Advances, if any, in each case as determined for financial
reporting purposes. The Book Value of an Asset shall not include any adjustment
for loan premiums, discounts or any related deferred income, fees or expenses,
or general or specific reserves on the Accounting Records of the Failed Bank.
“
Business Day
”
means a day
other than a Saturday, Sunday, Federal legal holiday or legal holiday under the
laws of the State where the Failed Bank is located, or a day on which the
principal office of the Corporation is closed.
“
Chartering Authority
”
means
(i) with respect to a national bank, the Office of the Comptroller of the
Currency, (ii) with respect to a Federal savings association or savings
bank, the Office of Thrift Supervision, (iii) with respect to a bank or
savings institution chartered by a State, the agency of such State charged with
primary responsibility for regulating and/or closing banks or savings
institutions, as the case may be, (iv) the Corporation in accordance with
12 U.S.C. Section 1821(c), with regard to self appointment, or
(v) the appropriate Federal banking agency in accordance with 12 U.S.C.
1821(c)(9).
“
Commitment
”
means the
unfunded portion of a line of credit or other commitment reflected on the books
and records of the Failed Bank to make an extension of credit (or additional
advances with respect to a Loan) that was legally binding on the Failed Bank as
of Bank Closing, other than extensions of credit pursuant to the credit card
business and overdraft protection plans of the Failed Bank, if any.
“
Credit Documents
”
mean the
agreements, instruments, certificates or other documents at any time evidencing
or otherwise relating to, governing or executed in connection with or as
security for, a Loan, including without limitation notes, bonds, loan
agreements, letter of credit applications, lease financing contracts, banker’s
acceptances, drafts, interest protection agreements, currency exchange
agreements, repurchase agreements, reverse repurchase agreements, guarantees,
deeds of trust, mortgages, assignments, security agreements, pledges,
subordination or priority agreements, lien priority agreements, undertakings,
security instruments, certificates, documents, legal opinions, participation
agreements and intercreditor
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
3
agreements, and all amendments, modifications, renewals, extensions,
rearrangements, and substitutions with respect to any of the foregoing.
“
Credit File
”
means all
Credit Documents and all other credit, collateral, or insurance documents in
the possession or custody of the Assuming Bank, or any of its Subsidiaries or
Affiliates, relating to an Asset or a Loan included in a Put Notice, or copies
of any thereof.
“
Data Processing Lease
”
means any
lease or licensing agreement, binding on the Failed Bank as of Bank Closing,
the subject of which is data processing equipment or computer hardware or
software used in connection with data processing activities. A lease or
licensing agreement for computer software used in connection with data
processing activities shall constitute a Data Processing Lease regardless of
whether such lease or licensing agreement also covers data processing
equipment.
“
Deposit
”
means a
deposit as defined in 12 U.S.C. Section 1813(l), including without
limitation, outstanding cashier’s checks and other official checks and all
uncollected items included in the depositors’ balances and credited on the
books and records of the Failed Bank;
provided,
that
the term “Deposit”
shall not include all or any portion of those deposit balances which, in the
discretion of the Receiver or the Corporation, (i) may be required to
satisfy it for any liquidated or contingent liability of any depositor arising
from an unauthorized or unlawful transaction, or (ii) may be needed to
provide payment of any liability of any depositor to the Failed Bank or the
Receiver, including the liability of any depositor as a director or officer of
the Failed Bank, whether or not the amount of the liability is or can be determined
as of Bank Closing.
“
Equity Adjustment
”
means the
dollar amount resulting by subtracting the Book Value, as of Bank Closing, of
all Liabilities Assumed under this Agreement by the Assuming Bank from the
purchase price, as determined in accordance with this Agreement, as of Bank
Closing, of all Assets acquired under this Agreement by the Assuming Bank,
which may be a positive or a negative number.
“
Failed Bank
”
means each of
these banks, individually and not jointly: Security Bank of Bibb County; Security
Bank of Gwinnett County; Security Bank of Houston County; Security Bank of
Jones County; Security Bank of North Fulton; and, Security Bank of North Metro.
This Purchase and Assumption Agreement is to be read and construed as one
document representing six separate transactions arising from the failure of
each of the above-referenced banks, resulting in a separate resulting
receivership entity for each failed bank.
“
Failed Bank Advances
”
means the
total sums paid by the Failed Bank to (i) protect its lien position,
(ii) pay ad valorem taxes and hazard insurance, and (iii) pay credit
life insurance, accident and health insurance, and vendor’s single interest
insurance.
“
Fair Market Value
”
means (i)(a) “Market
Value” as defined in the regulation prescribing the standards for real estate
appraisals used in federally related transactions, 12 C.F.R. § 323.2(g), and
accordingly shall mean the most probable price which a property should
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
4
bring in a competitive and open market under
all conditions requisite to a fair sale, the buyer and seller each acting
prudently and knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of a sale as of a
specified date and the passing of title from seller to buyer under conditions
whereby:
(1)
Buyer and seller are
typically motivated;
(2)
Both parties are well informed
or well advised, and acting in what they consider their own best interests;
(3)
A reasonable time is allowed
for exposure in the open market;
(4)
Payment is made in terms of
cash in U.S. dollars or in terms of financial arrangements comparable thereto;
and
(5)
The price represents the
normal consideration for the property sold unaffected by special or creative
financing or sales concessions granted by anyone associated with the sale;
as determined as of Bank Closing by an
appraiser chosen by the Assuming Bank from a list of acceptable appraisers
provided by the Receiver; any costs and fees associated with such determination
shall be shared equally by the Receiver and the Assuming Bank, and
(b) which, with respect to Bank Premises (to the extent, if any, that Bank
Premises are purchased utilizing this valuation method), shall be determined
not later than sixty (60) days after Bank Closing by an appraiser selected by
the Receiver and the Assuming Bank within seven (7) days after Bank
Closing; or (ii) with respect to property other than Bank Premises
purchased utilizing this valuation method, the price therefore as established
by the Receiver and agreed to by the Assuming Bank, or in the absence of such
agreement, as determined in accordance with clause (i)(a) above.
“
First Loss
Tranche
” means the dollar amount of liability that the Assuming
Bank will incur prior to the commencement of loss sharing, which is the sum of
(i) the Assuming Bank’s asset premium (discount) bid, as reflected on the
Assuming Bank’s bid form, plus (ii) the Assuming Bank’s Deposit premium
bid, as reflected on the Assuming Bank’s bid form, plus (iii) the Equity
Adjustment. The First Loss Tranche may be a positive or negative number.
“
Fixtures
”
means those leasehold improvements, additions, alterations and installations
constituting all or a part of Bank Premises and which were acquired, added,
built, installed or purchased at the expense of the Failed Bank, regardless of
the holder of legal title thereto as of Bank Closing.
“
Furniture and Equipment
”
means the
furniture and equipment, other than motor vehicles, leased or owned by the
Failed Bank and reflected on the books of the Failed Bank as of Bank Closing,
including without limitation automated teller machines, carpeting, furniture,
office machinery (including personal computers), shelving, office supplies,
telephone, surveillance and security systems. Motor vehicles shall be
considered other assets and pass at Book Value.
[
“
Guaranteed Transaction Accounts
”
means those transaction
accounts
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
5
covered by the Transaction Account Guarantee
Program as described in 73 Federal Register 210 (29 October 2008), pp.
64179-64191.]
“
Indemnitees
”
means, except as provided
in paragraph (k) of Section 12.1, (i) the Assuming Bank,
(ii) the Subsidiaries and Affiliates of the Assuming Bank
other
than
any Subsidiaries or Affiliates of the Failed Bank that are or become
Subsidiaries or Affiliates of the Assuming Bank, and (iii) the directors,
officers, employees and agents of the Assuming Bank and its Subsidiaries and
Affiliates who are
not
also present or former directors, officers,
employees or agents of the Failed Bank or of any Subsidiary or Affiliate of the
Failed Bank.
“
Information Package
”
means the most recent
compilation of financial and other data with respect to the Failed Bank,
including any amendments or supplements thereto, provided to the Assuming Bank
by the Corporation on the web site used by the Corporation to market the Failed
Bank to potential acquirers.
“
Legal Balance
”
means the amount of
indebtedness legally owed by an Obligor with respect to a Loan, including
principal and accrued and unpaid interest, late fees, attorneys’ fees and
expenses, taxes, insurance premiums, and similar charges, if any.
“
Liabilities Assumed
”
has the meaning provided in
Section 2.1.
“
Lien
”
means any mortgage, lien,
pledge, charge, assignment for security purposes, security interest, or
encumbrance of any kind with respect to an Asset, including any conditional
sale agreement or capital lease or other title retention agreement relating to
such Asset.
“
Loans
”
means all of the following
owed to or held by the Failed Bank as of Bank Closing:
(i) loans (including loans which have been charged off
the Accounting Records of the Failed Bank in whole or in part prior to
April 24, 2009), participation agreements, interests in participations,
overdrafts of customers (including but not limited to overdrafts made pursuant
to an overdraft protection plan or similar extensions of credit in connection
with a deposit account), revolving commercial lines of credit, home equity
lines of credit, Commitments, United States and/or State-guaranteed student
loans, and lease financing contracts;
(ii) all Liens, rights (including rights of set-off),
remedies, powers, privileges, demands, claims, priorities, equities and
benefits owned or held by, or accruing or to accrue to or for the benefit of,
the holder of the obligations or instruments referred to in clause
(i) above, including but not limited to those arising under or based upon
Credit Documents, casualty insurance policies and binders, standby letters of
credit, mortgagee title insurance policies and binders, payment bonds and
performance bonds at any time and from time to time existing with respect to
any of the obligations or instruments referred to in clause (i) above; and
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
6
(iii) all amendments, modifications, renewals, extensions,
refinancings, and refundings of or for any of the foregoing.
“
Obligor
”
means each Person liable
for the full or partial payment or performance of any Loan, whether such Person
is obligated directly, indirectly, primarily, secondarily, jointly, or
severally.
“
Other Real Estate
”
means all interests in real
estate (other than Bank Premises and Fixtures) and loans on “in substance
foreclosure” status as of Bank Closing as recorded on the Accounting Records of
the Failed Bank, including but not limited to mineral rights, leasehold rights,
condominium and cooperative interests, air rights and development rights that
are owned by the Failed Bank.
“
Person
”
means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, or government or any agency or political
subdivision thereof, excluding the Corporation.
“
Primary Indemnitor
”
means any Person (other
than the Assuming Bank or any of its Affiliates) who is obligated to indemnify
or insure, or otherwise make payments (including payments on account of claims
made against) to or on behalf of any Person in connection with the claims
covered under Article XII, including without limitation any insurer
issuing any directors and officers liability policy or any Person issuing a
financial institution bond or banker’s blanket bond.
“
Proforma
”
means producing a balance
sheet that reflects a reasonably accurate financial statement of the Failed
bank through the date of closing. The Proforma financial statements serve as a
basis for the opening entries of both the Assuming Bank and the Receiver.
“
Put Date
”
has the meaning provided in
Section 3.4.
“
Put Notice
”
has the meaning provided in
Section 3.4.
“
Qualified Financial Contract
”
means a
qualified financial contract as defined in 12 U.S.C.
Section 1821(e)(8)(D).
“
Record
”
means any document, microfiche,
microfilm and computer records (including but not limited to magnetic tape,
disc storage, card forms and printed copy) of the Failed Bank generated or
maintained by the Failed Bank that is owned by or in the possession of the
Receiver at Bank Closing.
“
Related Liability
”
with respect to any Asset
means any liability existing and reflected on the Accounting Records of the
Failed Bank as of Bank Closing for (i) indebtedness secured by mortgages,
deeds of trust, chattel mortgages, security interests or other liens on or
affecting such Asset, (ii) ad valorem taxes applicable to such Asset, and
(iii) any other obligation determined by the Receiver to be directly
related to such Asset.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
7
“
Related Liability Amount
”
with respect
to any Related Liability on the books of the Assuming Bank, means the amount of
such Related Liability as stated on the Accounting Records of the Assuming Bank
(as maintained in accordance with generally accepted accounting principles) as
of the date as of which the Related Liability Amount is being determined. With
respect to a liability that relates to more than one asset, the amount of such
Related Liability shall be allocated among such assets for the purpose of
determining the Related Liability Amount with respect to any one of such
assets. Such allocation shall be made by specific allocation, where
determinable, and otherwise shall be pro rata based upon the dollar amount of
such assets stated on the Accounting Records of the entity that owns such
asset.
“
Repurchase Price
”
means, with
respect to any Loan the Book Value, adjusted to reflect changes to Book Value
after Bank Closing, plus (ii) any advances and interest on such Loan after
Bank Closing, minus (iii) the total of amounts received by the Assuming
Bank for such Loan, regardless of how applied, after Bank Closing, plus
(iv) advances made by Assuming Bank, plus (v) total disbursements of
principal made by Receiver that are not included in the Book Value.
“
Safe Deposit Boxes
”
means the safe
deposit boxes of the Failed Bank, if any, including the removable safe deposit
boxes and safe deposit stacks in the Failed Bank’s vault(s), all rights and
benefits under rental agreements with respect to such safe deposit boxes, and
all keys and combinations thereto.
“
Settlement Date
”
means the
first Business Day immediately prior to the day which is one hundred eighty
(180) days after Bank Closing, or such other date prior thereto as may be
agreed upon by the Receiver and the Assuming Bank. The Receiver, in its
discretion, may extend the Settlement Date.
“
Settlement Interest Rate
”
means, for the
first calendar quarter or portion thereof during which interest accrues, the
rate determined by the Receiver to be equal to the equivalent coupon issue
yield on twenty-six (26)-week United States Treasury Bills in effect as of Bank
Closing as published in
The Wall Street Journal; provided,
that
if no such equivalent coupon issue yield is available as of Bank Closing, the
equivalent coupon issue yield for such Treasury Bills most recently published
in
The Wall Street Journal
prior to Bank Closing shall be used.
Thereafter, the rate shall be adjusted to the rate determined by the Receiver
to be equal to the equivalent coupon issue yield on such Treasury Bills in
effect as of the first day of each succeeding calendar quarter during which
interest accrues as published in
The Wall Street Journal
.
“
Subsidiary
”
has the
meaning set forth in Section 3(w)(4) of the Federal Deposit Insurance
Act, 12 U.S.C. Section 1813(w)(4), as amended.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1
Liabilities Assumed by Assuming
Bank
.
The Assuming
Bank expressly assumes at Book Value (subject to adjustment pursuant to
Article VIII) and agrees to pay,
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
8
perform, and discharge all of the following
liabilities of the Failed Bank as of Bank Closing, except as otherwise provided
in this Agreement (such liabilities referred to as “Liabilities Assumed”):
(a) Assumed Deposits, except those Deposits specifically
listed on Schedule 2.1(a);
provided
,
that
as to any Deposits of
public money which are Assumed Deposits, the Assuming Bank agrees to properly
secure such Deposits with such of the Assets as appropriate which, prior to
Bank Closing, were pledged as security therefor by the Failed Bank, or with
assets of the Assuming Bank, if such securing Assets, if any, are insufficient
to properly secure such Deposits;
(b) liabilities for indebtedness secured by mortgages,
deeds of trust, chattel mortgages, security interests or other liens on or
affecting any Assets, if any;
provided
,
that
the assumption of
any liability pursuant to this paragraph shall be limited to the market value
of the Assets securing such liability as determined by the Receiver;
(c) borrowings from Federal Reserve Banks and Federal
Home Loan Banks, if any,
provided
,
that
the assumption of any
liability pursuant to this paragraph shall be limited to the market value of
the assets securing such liability as determined by the Receiver; and
overdrafts, debit balances, service charges, reclamations, and adjustments to
accounts with the Federal Reserve Banks as reflected on the books and records
of any such Federal Reserve Bank within ninety (90) days after Bank Closing, if
any;
(d) ad valorem taxes applicable to any Asset, if any;
provided
,
that
the assumption of any ad valorem taxes pursuant to this paragraph
shall be limited to an amount equal to the market value of the Asset to which
such taxes apply as determined by the Receiver;
(e) liabilities, if any, for federal funds purchased,
repurchase agreements and overdrafts in accounts maintained with other
depository institutions (including any accrued and unpaid interest thereon
computed to and including Bank Closing);
provided
,
that
the
assumption of any liability pursuant to this paragraph shall be limited to the
market value of the Assets securing such liability as determined by the
Receiver;
(f) United States Treasury tax and loan note option
accounts, if any;
(g) liabilities for any acceptance or commercial letter
of credit (other than “standby letters of credit” as defined in 12 C.F.R.
Section 337.2(a));
provided
,
that
the assumption of any
liability pursuant to this paragraph shall be limited to the market value of
the Assets securing such liability as determined by the Receiver;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
9
(h) duties and obligations assumed pursuant to this Agreement
including without limitation those relating to the Failed Bank’s credit card
business, overdraft protection plans, safe deposit business, safekeeping
business or trust business, if any;
(i) liabilities, if any, for Commitments;
(j) liabilities, if any, for amounts owed to any Subsidiary
of the Failed Bank acquired under Section 3.1;
(k) liabilities, if any, with respect to Qualified Financial
Contracts;
(l) duties and obligations under any contract pursuant to
which the Failed Bank provides mortgage servicing for others, or mortgage
servicing is provided to the Failed Bank by others; and
(m) all asset-related offensive litigation liabilities and all
asset-related defensive litigation liabilities, but only to the extent such
liabilities relate to assets subject to a loss share agreement, and provided
that all other defensive litigation and any class actions with respect to
credit card business are retained by the Receiver.
Schedule 2.1 attached hereto and incorporated herein
sets forth certain categories of Liabilities Assumed and the aggregate Book
Value of the Liabilities Assumed in such categories. Such schedule is based
upon the best information available to the Receiver and may be adjusted as
provided in Article VIII.
2.2
Interest on Deposit Liabilities
.
The Assuming
Bank agrees that, from and after Bank Closing, it will accrue and pay interest
on Deposit liabilities assumed pursuant to Section 2.1 at a
rate(s) it shall determine;
provided
,
that
for
non-transaction Deposit liabilities such rate(s) shall not be less than
the lowest rate offered by the Assuming Bank to its depositors for
non-transaction deposit accounts. The Assuming Bank shall permit each depositor
to withdraw, without penalty for early withdrawal, all or any portion of such
depositor’s Deposit, whether or not the Assuming Bank elects to pay interest in
accordance with any deposit agreement formerly existing between the Failed Bank
and such depositor;
and
further
provided
,
that
if
such Deposit has been pledged to secure an obligation of the depositor or other
party, any withdrawal thereof shall be subject to the terms of the agreement
governing such pledge. The Assuming Bank shall give notice to such depositors
as provided in Section 5.3 of the rate(s) of interest which it has
determined to pay and of such withdrawal rights.
2.3
Unclaimed Deposits
.
Fifteen (15) months
following the Bank Closing Date, the Assuming Bank will provide the Receiver a
listing of all deposit accounts, including the type of account, not claimed by
the depositor. The Receiver will review the list and authorize the Assuming
Bank to act on behalf of the Receiver to send a “Final Legal Notice” to the
owner(s) of the unclaimed deposits reminding them of the need to claim or
arrange to continue their account(s) with the Assuming Bank. The Assuming
Bank will send the “Final Legal Notice” to
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
10
the depositors within thirty (30) days
following notification of the Receiver’s authorization. The Assuming Bank will
prepare an Affidavit of Mailing and will forward the Affidavit of Mailing to
the Receiver after mailing out the “Final Legal Notice” to the owner(s) of
unclaimed deposit accounts.
If, within eighteen (18) months
after Bank Closing, any depositor of the Failed Bank does not claim or arrange
to continue such depositor’s Deposit assumed pursuant to Section 2.1 at
the Assuming Bank, the Assuming Bank shall, within fifteen (15) Business Days
after the end of such eighteen (18) month period, (i) refund to the
Receiver the full amount of each such deposit (without reduction for service
charges), (ii) provide to the Receiver a schedule of all such refunded
Deposits in such form as may be prescribed by the Receiver, and
(iii) assign, transfer, convey, and deliver to the Receiver, all right,
title, and interest of the Assuming Bank in and to the Records previously
transferred to the Assuming Bank and other records generated or maintained by
the Assuming Bank pertaining to such Deposits. During such eighteen (18) month
period, at the request of the Receiver, the Assuming Bank promptly shall
provide to the Receiver schedules of unclaimed deposits in such form as may be
prescribed by the Receiver.
2.4
Employee Plans
. Except as provided in
Section 4.12, the Assuming Bank shall have no liabilities, obligations or
responsibilities under the Failed Bank’s health care, bonus, vacation, pension,
profit sharing, deferred compensation, 401K or stock purchase plans or similar
plans, if any, unless the Receiver and the Assuming Bank agree otherwise
subsequent to the date of this Agreement.
ARTICLE III
PURCHASE OF ASSETS
3.1
Assets Purchased by Assuming Bank
. With the
exception of certain assets expressly excluded in Sections 3.5 and 3.6, the
Assuming Bank hereby purchases from the Receiver, and the Receiver hereby
sells, assigns, transfers, conveys, and delivers to the Assuming Bank, all
right, title, and interest of the Receiver in and to all of the assets (real,
personal and mixed, wherever located and however acquired) including all
subsidiaries, joint ventures, partnerships, and any and all other business
combinations or arrangements, whether active, inactive, dissolved or
terminated, of the Failed Bank whether or not reflected on the books of the
Failed Bank as of Bank Closing, except as excepted in Section 3.5(m).
Schedule 3.1 attached hereto and incorporated herein sets forth certain
categories of Assets purchased hereunder. Such schedule is based upon the best
information available to the Receiver and may be adjusted as provided in
Article VIII. Assets are purchased hereunder by the Assuming Bank subject
to all liabilities for indebtedness collateralized by Liens affecting such
Assets to the extent provided in Section 2.1. Notwithstanding
Section 4.8, the Assuming Bank specifically purchases all mortgage
servicing rights and obligations of the Failed Bank.
3.2
Asset Purchase Price
.
(a) All Assets and assets of the Failed Bank subject to an
option to purchase by the Assuming Bank shall be purchased for the amount, or
the amount resulting from the method
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
11
specified for determining the amount, as
specified on Schedule 3.2, except as otherwise may be provided herein. Any
Asset, asset of the Failed Bank subject to an option to purchase or other asset
purchased for which no purchase price is specified on Schedule 3.2 or otherwise
herein shall be purchased at its Book Value. Loans or other assets charged off
the Accounting Records of the Failed Bank prior to April 24, 2009 shall be
purchased at a price of zero.
(b) The purchase price for securities (other than the capital
stock of any Acquired Subsidiary) purchased under Section 3.1 by the
Assuming Bank shall be the market value thereof as of Bank Closing, which
market value shall be (i) the market price for each such security quoted
at the close of the trading day effective on Bank Closing as published
electronically by Bloomberg, L.P., or alternatively, at the discretion of the
Receiver, IDC/Financial Times (FT) Interactive Data; (ii)
provided,
that
if such market price is not available for any such security, the
Assuming Bank will submit a bid for each such security within three days of
notification/bid request by the Receiver (unless a different time period is
agreed to by the Assuming Bank and the Receiver) and the Receiver, in its sole
discretion will accept or reject each such bid; and (iii)
further
provided
in the absence of an acceptable bid from the Assuming Bank, each
such security shall not pass to the Assuming Bank and shall be deemed to be an
excluded asset hereunder.
(c) Qualified
Financial Contracts shall be purchased at market value determined in accordance
with the terms of Exhibit 3.2(c). Any costs associated with such valuation
shall be shared equally by the Receiver and the Assuming Bank.
3.3
Manner of Conveyance; Limited Warranty; Nonrecourse; Etc
.
THE CONVEYANCE OF ALL ASSETS, INCLUDING REAL AND PERSONAL PROPERTY
INTERESTS, PURCHASED BY THE ASSUMING BANK UNDER THIS AGREEMENT SHALL BE MADE,
AS NECESSARY, BY RECEIVER’S DEED OR RECEIVER’S BILL OF SALE, “AS IS”, “WHERE IS”,
WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS
AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH RESPECT TO SUCH ASSETS,
EXPRESS OR IMPLIED, WITH RESPECT TO TITLE, ENFORCEABILITY, COLLECTIBILITY,
DOCUMENTATION OR FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN PART), OR
ANY OTHER MATTERS.
3.4
Puts of Assets to the Receiver
.
(a)
Puts Prior to the Settlement Date
.
(i) During the period from Bank Closing to and
including the Business Day immediately preceding the Settlement Date, the
Assuming Bank shall be entitled to require the Receiver to purchase any Asset
which the Assuming Bank can establish is evidenced by forged or stolen
instruments as of Bank Closing;
provided
,
that
, the Assuming Bank
shall
not
have the right to require the Receiver to purchase any such
Asset with respect to which the Assuming Bank has taken any action referred to
in Section 3 .4(a)(ii) with respect to such Asset.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
12
(ii) At the end of the
thirty (30)-day period following Bank Closing and at that time only, in
accordance with this Section 3.4, the Assuming Bank shall be entitled to
require the Receiver to purchase any remaining overdraft transferred to the Assuming
Bank pursuant to 3.1 which both was made after April 24. 2009 and was not
made pursuant to an overdraft protection plan or similar extension of credit.
The Assuming Bank shall transfer all such Assets to
the Receiver without recourse, and shall indemnify the Receiver against any and
all claims of any Person claiming by, through or under the Assuming Bank with
respect to any such Asset, as provided in Section 12.4.
(b)
Notices to the Receiver
. In the event
that the Assuming Bank elects to require the Receiver to purchase one or more
Assets, the Assuming Bank shall deliver to the Receiver a notice (a “Put Notice”)
which shall include:
(i)
a list of all
Assets that the Assuming Bank requires the Receiver to purchase;
(ii)
a list of all
Related Liabilities with respect to the Assets identified pursuant to
(i) above; and
(iii)
a statement of
the estimated Repurchase Price of each Asset identified pursuant to
(i) above as of the applicable Put Date.
Such notice shall be in the form prescribed
by the Receiver or such other form to which the Receiver shall consent. As
provided in Section 9.6, the Assuming Bank shall deliver to the Receiver
such documents, Credit Files and such additional information relating to the
subject matter of the Put Notice as the Receiver may request and shall provide
to the Receiver full access to all other relevant books and records.
(c)
Purchase by Receiver
. The Receiver
shall purchase Assets that are specified in the Put Notice and shall assume
Related Liabilities with respect to such Assets, and the transfer of such
Assets and Related Liabilities shall be effective as of a date determined by
the Receiver which date shall not be later than thirty (30) days after receipt
by the Receiver of the Put Notice (the “Put Date”).
(d)
Purchase Price and Payment Date
.
Each Asset purchased by the Receiver pursuant to this Section 3.4 shall be
purchased at a price equal to the Repurchase Price of such Asset less the
Related Liability Amount applicable to such Asset, in each case determined as
of the applicable Put Date. If the difference between such Repurchase Price and
such Related Liability Amount is positive, then the Receiver shall pay to the
Assuming Bank the amount of such difference; if the difference between such
amounts is negative, then the Assuming Bank shall pay to the Receiver the
amount of such difference. The Assuming Bank or the Receiver, as the case may
be, shall pay the purchase price determined pursuant to this
Section 3.4(d) not later than the twentieth (20th) Business Day
following the applicable Put Date, together with interest on such amount at the
Settlement Interest Rate for the period from and including such Put Date to and
including the day preceding the date upon which payment is made.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
13
(e)
Servicing
. The Assuming Bank shall
administer and manage any Asset subject to purchase by the Receiver in
accordance with usual and prudent banking standards and business practices
until such time as such Asset is purchased by the Receiver.
(f)
Reversals
. In the event that the
Receiver purchases an Asset (and assumes the Related Liability) that it is not
required to purchase pursuant to this Section 3.4, the Assuming Bank shall
repurchase such Asset (and assume such Related Liability) from the Receiver at
a price computed so as to achieve the same economic result as would apply if
the Receiver had never purchased such Asset pursuant to this Section 3.4.
3.5
Assets Not Purchased by Assuming Bank
. The Assuming
Bank does not purchase, acquire or assume, or (except as otherwise expressly
provided in this Agreement) obtain an option to purchase, acquire or assume
under this Agreement:
(a) any
financial institution bonds, banker’s blanket bonds, or public liability, fire,
or extended coverage insurance policy or any other insurance policy of the
Failed Bank, or premium refund, unearned premium derived from cancellation, or
any proceeds payable with respect to any of the foregoing;
(b) any
interest, right, action, claim, or judgment against (i) any officer,
director, employee, accountant, attorney, or any other Person employed or
retained by the Failed Bank or any Subsidiary of the Failed Bank on or prior to
Bank Closing arising out of any act or omission of such Person in such
capacity, (ii) any underwriter of financial institution bonds, banker’s
blanket bonds or any other insurance policy of the Failed Bank, (iii) any
shareholder or holding company of the Failed Bank, or (iv) any other
Person whose action or inaction may be related to any loss (exclusive of any
loss resulting from such Person’s failure to pay on a Loan made by the Failed
Bank) incurred by the Failed Bank;
provided
,
that
for the
purposes hereof, the acts, omissions or other events giving rise to any such
claim shall have occurred on or before Bank Closing, regardless of when any
such claim is discovered and regardless of whether any such claim is made with
respect to a financial institution bond, banker’s blanket bond, or any other
insurance policy of the Failed Bank in force as of Bank Closing;
(c) prepaid
regulatory assessments of the Failed Bank, if any;
(d) legal
or equitable interests in tax receivables of the Failed Bank, if any, including
any claims arising as a result of the Failed Bank having entered into any
agreement or otherwise being joined with another Person with respect to the
filing of tax returns or the payment of taxes;
(e) amounts
reflected on the Accounting Records of the Failed Bank as of Bank Closing as a
general or specific loss reserve or contingency account, if any;
(f) leased
or owned Bank Premises and leased or owned Furniture and Equipment and Fixtures
and data processing equipment (including hardware and software) located on
leased or owned Bank Premises, if any;
provided
,
that
the
Assuming Bank does obtain an option under Section 4.6, Section 4.7 or
Section 4.8, as the case may be, with respect thereto;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
14
(g) owned
Bank Premises which the Receiver, in its discretion, determines may contain
environmentally hazardous substances;
(h) any
“goodwill,” as such term is defined in the instructions to the report of
condition prepared by banks examined by the Corporation in accordance with 12
C.F.R. Section 304.4, and other intangibles;
(i) any
criminal restitution or forfeiture orders issued in favor of the Failed Bank;
(j) reserved;
(k) assets
essential to the Receiver in accordance with Section 3.6;
(l) all
private label asset-backed securities, including, but not limited to, those
listed on the attached Schedule 3.5(l); and,
(m) from
the Failed Bank Security Bank of Bibb County, its subsidiary Security Real
Estate Services, Inc.
3.6
Retention or Repurchase of Assets Essential to Receiver
.
(a) The
Receiver may refuse to sell to the Assuming Bank, or the Assuming Bank agrees,
at the request of the Receiver set forth in a written notice to the Assuming
Bank, to assign, transfer, convey, and deliver to the Receiver all of the
Assuming Bank’s right, title and interest in and to, any Asset or asset
essential to the Receiver as determined by the Receiver in its discretion
(together with all Credit Documents evidencing or pertaining thereto), which
may include any Asset or asset that the Receiver determines to be:
(i)
made to an
officer, director, or other Person engaging in the affairs of the Failed Bank,
its Subsidiaries or Affiliates or any related entities of any of the foregoing;
(ii)
the subject of
any investigation relating to any claim with respect to any item described in
Section 3.5(a) or (b), or the subject of, or potentially the subject
of, any legal proceedings;
(iii)
made to a
Person who is an Obligor on a loan owned by the Receiver or the Corporation in
its corporate capacity or its capacity as receiver of any institution;
(iv)
secured by
collateral which also secures any asset owned by the Receiver; or
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
15
(v)
related to any
asset of the Failed Bank not purchased by the Assuming Bank under this Article III
or any liability of the Failed Bank not assumed by the Assuming Bank under
Article II.
(b) Each
such Asset or asset purchased by the Receiver shall be purchased at a price equal
to the Repurchase Price thereof less the Related Liability Amount with respect
to any Related Liabilities related to such Asset or asset, in each case
determined as of the date of the notice provided by the Receiver pursuant to
Section 3.6(a). The Receiver shall pay the Assuming Bank not later than
the twentieth (20th) Business Day following receipt of related Credit Documents
and Credit Files together with interest on such amount at the Settlement
Interest Rate for the period from and including the date of receipt of such
documents to and including the day preceding the day on which payment is made.
The Assuming Bank agrees to administer and manage each such Asset or asset in
accordance with usual and prudent banking standards and business practices
until each such Asset or asset is purchased by the Receiver. All transfers with
respect to Asset or assets under this Section 3.6 shall be made as
provided in Section 9.6. The Assuming Bank shall transfer all such Asset
or assets and Related Liabilities to the Receiver without recourse, and shall
indemnify the Receiver against any and all claims of any Person claiming by,
through or under the Assuming Bank with respect to any such Asset or asset, as
provided in Section 12.4.
ARTICLE IV
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS
The Assuming Bank agrees
with the Receiver and the Corporation as follows:
4.1
Continuation of Banking Business
.
For the period
commencing the first banking Business Day after Bank Closing and ending no
earlier than the first anniversary of Bank Closing, the Assuming Bank will
provide full service banking in the trade area of the Failed Bank. Thereafter,
the Assuming Bank may cease providing such banking services in the trade area
of the Failed Bank, provided the Assuming Bank has received all necessary
regulatory approvals. At the option of the Assuming Bank, such banking services
may be provided at any or all of the Bank Premises, or at other premises within
such trade area. The trade area shall be determined by the Receiver.
4.2
Agreement with Respect to Credit Card Business
. The Assuming
Bank agrees to honor and perform, from and after Bank Closing, all duties and
obligations with respect to the Failed Bank’s credit card business, and/or
processing related to credit cards, if any, and assumes all outstanding
extensions of credit with respect thereto.
4.3
Agreement with Respect to Safe Deposit Business
.
The Assuming
Bank assumes and agrees to discharge, from and after Bank Closing, in the usual
course of conducting a banking business, the duties and obligations of the
Failed Bank with respect to all Safe Deposit Boxes, if any, of the Failed Bank
and to maintain all of the necessary facilities for the use of such boxes by
the renters thereof during the period for which such boxes have been rented and
the rent therefore paid to the Failed Bank, subject to the provisions of the
rental agreements between the Failed Bank and the respective renters of such
boxes;
provided,
that
the Assuming Bank may
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
16
relocate the Safe Deposit Boxes of the Failed
Bank to any office of the Assuming Bank located in the trade area of the Failed
Bank. The Safe Deposit Boxes shall be located and maintained in the trade area
of the Failed Bank for a minimum of one year from Bank Closing. The trade area
shall be determined by the Receiver. Fees related to the safe deposit business
earned prior to the Bank Closing Date shall be for the benefit of the Receiver
and fees earned after the Bank Closing Date shall be for the benefit of the
Assuming Bank.
4.4
Agreement with Respect to Safekeeping Business
. The Receiver
transfers, conveys and delivers to the Assuming Bank and the Assuming Bank
accepts all securities and other items, if any, held by the Failed Bank in
safekeeping for its customers as of Bank Closing. The Assuming Bank assumes and
agrees to honor and discharge, from and after Bank Closing, the duties and
obligations of the Failed Bank with respect to such securities and items held in
safekeeping. The Assuming Bank shall be entitled to all rights and benefits
heretofore accrued or hereafter accruing with respect thereto. The Assuming
Bank shall provide to the Receiver written verification of all assets held by
the Failed Bank for safekeeping within sixty (60) days after Bank Closing. The
assets held for safekeeping by the Failed Bank shall be held and maintained by
the Assuming Bank in the trade area of the Failed Bank for a minimum of one
year from Bank Closing. At the option of the Assuming Bank, the safekeeping
business may be provided at any or all of the Bank Premises, or at other
premises within such trade area. The trade area shall be determined by the
Receiver. Fees related to the safekeeping business earned prior to the Bank Closing
Date shall be for the benefit of the Receiver and fees earned after the Bank
Closing Date shall be for the benefit of the Assuming Bank.
4.5
Agreement with Respect to Trust Business
.
(a) The
Assuming Bank shall, without further transfer, substitution, act or deed, to
the full extent permitted by law, succeed to the rights, obligations,
properties, assets, investments, deposits, agreements, and trusts of the Failed
Bank under trusts, executorships, administrations, guardianships, and agencies,
and other fiduciary or representative capacities, all to the same extent as
though the Assuming Bank had assumed the same from the Failed Bank prior to
Bank Closing;
provided,
that
any liability based on the
misfeasance, malfeasance or nonfeasance of the Failed Bank, its directors,
officers, employees or agents with respect to the trust business is not assumed
hereunder.
(b) The
Assuming Bank shall, to the full extent permitted by law, succeed to, and be
entitled to take and execute, the appointment to all executorships,
trusteeships, guardianships and other fiduciary or representative capacities to
which the Failed Bank is or may be named in wills, whenever probated, or to
which the Failed Bank is or may be named or appointed by any other instrument.
(c) In
the event additional proceedings of any kind are necessary to accomplish the
transfer of such trust business, the Assuming Bank agrees that, at its own
expense, it will take whatever action is necessary to accomplish such transfer.
The Receiver agrees to use reasonable efforts to assist the Assuming Bank in
accomplishing such transfer.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
17
(d) The
Assuming Bank shall provide to the Receiver written verification of the assets
held in connection with the Failed Bank’s trust business within sixty (60) days
after Bank Closing.
4.6
Agreement with Respect to Bank Premises
.
(a)
Option to Purchase
.
Subject to
Section 3.5, the Receiver hereby grants to the Assuming Bank an exclusive
option for the period of ninety (90) days commencing the day after Bank Closing
to purchase any or all owned Bank Premises, including all Furniture, Fixtures
and Equipment located on the Bank Premises. The Assuming Bank shall give
written notice to the Receiver within the option period of its election to
purchase or not to purchase any of the owned Bank Premises. Any purchase of
such premises shall be effective as of the date of Bank Closing and such
purchase shall be consummated as soon as practicable thereafter, and in no
event later than the Settlement Date.
(b)
Option
to Lease
.
The Receiver hereby grants to the Assuming Bank an
exclusive option for the period of ninety (90) days commencing the day after
Bank Closing to cause the Receiver to assign to the Assuming Bank any or all
leases for leased Bank Premises, if any, which have been continuously occupied
by the Assuming Bank from Bank Closing to the date it elects to accept an
assignment of the leases with respect thereto to the extent such leases can be
assigned;
provided
,
that
the exercise of this option with respect
to any lease must be as to all premises or other property subject to the lease.
If an assignment cannot be made of any such leases, the Receiver may, in its
discretion, enter into subleases with the Assuming Bank containing the same
terms and conditions provided under such existing leases for such leased Bank
Premises or other property. The Assuming Bank shall give notice to the Receiver
within the option period of its election to accept or not to accept an
assignment of any or all leases (or enter into subleases or new leases in lieu
thereof). The Assuming Bank agrees to assume all leases assigned (or enter into
subleases or new leases in lieu thereof) pursuant to this Section 4.6.
(c)
Facilitation
.
The Receiver
agrees to facilitate the assumption, assignment or sublease of leases or the
negotiation of new leases by the Assuming Bank;
provided
,
that
neither the Receiver nor the Corporation shall be obligated to engage in
litigation, make payments to the Assuming Bank or to any third party in
connection with facilitating any such assumption, assignment, sublease or
negotiation or commit to any other obligations to third parties.
(d)
Occupancy
.
The Assuming
Bank shall give the Receiver fifteen (15) days’ prior written notice of its
intention to vacate prior to vacating any leased Bank Premises with respect to
which the Assuming Bank has not exercised the option provided in Section 4.6(b).
Any such notice shall be deemed to terminate the Assuming Bank’s option with
respect to such leased Bank Premises.
(e)
Occupancy Costs
.
(i) The
Assuming Bank agrees to pay to the Receiver, or to appropriate third parties at
the direction of the Receiver, during and for the period of any occupancy by it
of (x) owned Bank Premises the market rental value, as determined by the
appraiser selected in
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
18
accordance with the definition of Fair Market
Value, and all operating costs, and (y) leased Bank Premises, all
operating costs with respect thereto and to comply with all relevant terms of
applicable leases entered into by the Failed Bank, including without limitation
the timely payment of all rent. Operating costs include, without limitation all
taxes, fees, charges, utilities, insurance and assessments, to the extent not
included in the rental value or rent. If the Assuming Bank elects to purchase
any owned Bank Premises in accordance with Section 4.6(a), the amount of
any rent paid (and taxes paid to the Receiver which have not been paid to the
taxing authority and for which the Assuming Bank assumes liability) by the
Assuming Bank with respect thereto shall be applied as an offset against the
purchase price thereof.
(ii) The
Assuming Bank agrees during the period of occupancy by it of owned or leased
Bank Premises, to pay to the Receiver rent for the use of all owned or leased
Furniture and Equipment and all owned or leased Fixtures located on such Bank
Premises for the period of such occupancy. Rent for such property owned by the
Failed Bank shall be the market rental value thereof, as determined by the
Receiver within sixty (60) days after Bank Closing. Rent for such leased
property shall be an amount equal to any and all rent and other amounts which
the Receiver incurs or accrues as an obligation or is obligated to pay for such
period of occupancy pursuant to all leases and contracts with respect to such
property. If the Assuming Bank purchases any owned Furniture and Equipment or
owned Fixtures in accordance with Section 4.6(f) or 4.6(h), the
amount of any rents paid by the Assuming Bank with respect thereto shall be
applied as an offset against the purchase price thereof.
(f)
Certain
Requirements as to Furniture, Equipment and Fixtures
.
If the
Assuming Bank purchases owned Bank Premises or accepts an assignment of the
lease (or enters into a sublease or a new lease in lieu thereof) for leased
Bank Premises as provided in Section 4.6(a) or 4.6(b), or if the
Assuming Bank does not exercise such option but within twelve (12) months
following Bank Closing obtains the right to occupy such premises (whether by
assignment, lease, sublease, purchase or otherwise), other than in accordance
with Section 4.6(a) or (b), the Assuming Bank shall
(i) effective as of the date of Bank Closing, purchase from the Receiver
all Furniture and Equipment and Fixtures owned by the Failed Bank at Fair
Market Value and located thereon as of Bank Closing, (ii) accept an
assignment or a sublease of the leases or negotiate new leases for all
Furniture and Equipment and Fixtures leased by the Failed Bank and located
thereon, and (iii) if applicable, accept an assignment or a sublease of
any ground lease or negotiate a new ground lease with respect to any land on
which such Bank Premises are located;
provided
,
that
the Receiver
shall not have disposed of such Furniture and Equipment and Fixtures or
repudiated the leases specified in clause (ii) or (iii).
(g)
Vacating
Premises
.
(i) If
the Assuming Bank elects not to purchase any owned Bank Premises, the notice of
such election in accordance with Section 4.6(a) shall specify the
date upon which the Assuming Bank’s occupancy of such premises shall terminate,
which date shall not be later than ninety (90) days after the date of the
Assuming Bank’s notice not to exercise such option. The Assuming Bank promptly
shall relinquish and release to the Receiver such premises and the Furniture
and Equipment and Fixtures located thereon in the same condition as at Bank
Closing,
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
19
normal wear and tear excepted. By occupying
any such premises after the expiration of such ninety (90)-day period, the
Assuming Bank shall, at the Receiver’s option, (x) be deemed to have
agreed to purchase such Bank Premises, and to assume all leases, obligations
and liabilities with respect to leased Furniture and Equipment and leased
Fixtures located thereon and any ground lease with respect to the land on which
such premises are located, and (y) be required to purchase all Furniture
and Equipment and Fixtures owned by the Failed Bank and located on such
premises as of Bank Closing.
(ii) If the Assuming Bank elects not to accept an assignment of
the lease or sublease any leased Bank Premises, the notice of such election in
accordance with Section 4.6(b) shall specify the date upon which the
Assuming Bank’s occupancy of such leased Bank Premises shall terminate, which
date shall not be later than the date which is one hundred eighty (180) days
after Bank Closing. Upon vacating such premises, the Assuming Bank shall
relinquish and release to the Receiver such premises and the Fixtures and the
Furniture and Equipment located thereon in the same condition as at Bank
Closing, normal wear and tear excepted. By failing to provide notice of its
intention to vacate such premises prior to the expiration of the option period
specified in Section 4.6(b), or by occupying such premises after the one
hundred eighty (180)-day period specified above in this paragraph (ii), the
Assuming Bank shall, at the Receiver’s option, (x) be deemed to have
assumed all leases, obligations and liabilities with respect to such premises
(including any ground lease with respect to the land on which premises are
located), and leased Furniture and Equipment and leased Fixtures located
thereon in accordance with this Section 4.6 (unless the Receiver
previously repudiated any such lease), and (y) be required to purchase all
Furniture and Equipment and Fixtures owned by the Failed Bank at Fair Market
Value and located on such premises as of Bank Closing.
(h)
Furniture and Equipment and Certain Other Equipment
.
The Receiver hereby grants to the Assuming Bank an option to purchase
all
Furniture and Equipment or any telecommunications, data processing equipment
(including hardware and software) and check processing and similar operating
equipment owned by the Failed Bank at Fair Market Value and located at any
leased Bank Premises that the Assuming Bank elects to vacate or which it could
have, but did not occupy, pursuant to this Section 4.6;
provided
,
that
,
the Assuming Bank shall give the Receiver notice of its election to purchase
such property at the time it gives notice of its intention to vacate such Bank
Premises or within ten (10) days after Bank Closing for Bank Premises it
could have, but did not, occupy.
4.7
Agreement with Respect to Leased Data Processing
Equipment
(a) The
Receiver hereby grants to the Assuming Bank an exclusive option for the period
of ninety (90) days commencing the day after Bank Closing to accept an
assignment from the Receiver of any or all Data Processing Leases to the extent
that such Data Processing Leases can be assigned.
(b) The
Assuming Bank shall (i) give written notice to the Receiver within the
option period specified in Section 4.7(a) of its intent to accept or
decline an assignment or sublease of any or all Data Processing Leases and
promptly accept an assignment or sublease of such Data
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
20
Processing Leases, and (ii) give written
notice to the appropriate lessor(s) that it has accepted an assignment or
sublease of any such Data Processing Leases.
(c) The
Receiver agrees to facilitate the assignment or sublease of Data Processing
Leases or the negotiation of new leases or license agreements by the Assuming
Bank;
provided
,
that
neither the Receiver nor the Corporation
shall be obligated to engage in litigation or make payments to the Assuming
Bank or to any third party in connection with facilitating any such assumption,
assignment, sublease or negotiation.
(d) The
Assuming Bank agrees, during its period of use of any property subject to a
Data Processing Lease, to pay to the Receiver or to appropriate third parties
at the direction of the Receiver all operating costs with respect thereto and
to comply with all relevant terms of the applicable Data Processing Leases
entered into by the Failed Bank, including without limitation the timely
payment of all rent, taxes, fees, charges, utilities, insurance and
assessments.
(e) The
Assuming Bank shall, not later than fifty (50) days after giving the notice
provided in Section 4.7(b), (i) relinquish and release to the
Receiver all property subject to the relevant Data Processing Lease, in the
same condition as at Bank Closing, normal wear and tear excepted, or
(ii) accept an assignment or a sublease thereof or negotiate a new lease
or license agreement under this Section 4.7.
4.8
Agreement with Respect to Certain Existing Agreements
.
(a) Subject
to the provisions of Section 4.8(b), with respect to agreements existing
as of Bank Closing which provide for the rendering of services by or to the
Failed Bank, within thirty (90) days after Bank Closing, the Assuming Bank
shall give the Receiver written notice specifying whether it elects to assume
or not to assume each such agreement. Except as may be otherwise provided in
this Article IV, the Assuming Bank agrees to comply with the terms of each
such agreement for a period commencing on the day after Bank Closing and ending
on: (i) in the case of an agreement that provides for the rendering of
services by the Failed Bank, the date which is ninety (90) days after Bank
Closing, and (ii) in the case of an agreement that provides for the
rendering of services to the Failed Bank, the date which is thirty (30) days
after the Assuming Bank has given notice to the Receiver of its election not to
assume such agreement;
provided
,
that
the Receiver can reasonably
make such service agreements available to the Assuming Bank. The Assuming Bank
shall be deemed by the Receiver to have assumed agreements for which no
notification is timely given. The Receiver agrees to assign, transfer, convey,
and deliver to the Assuming Bank all right, title and interest of the Receiver,
if any, in and to agreements the Assuming Bank assumes hereunder. In the event
the Assuming Bank elects not to accept an assignment of any lease (or sublease)
or negotiate a new lease for leased Bank Premises under Section 4.6 and
does not otherwise occupy such premises, the provisions of this
Section 4.8(a) shall not apply to service agreements related to such
premises. The Assuming Bank agrees, during the period it has the use or benefit
of any such agreement, promptly to pay to the Receiver or to appropriate third
parties at the direction of the Receiver all operating costs with respect
thereto and to comply with all relevant terms of such agreement.
(b) The
provisions of Section 4.8(a) regarding the Assuming Bank’s election
to
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
21
assume or not assume certain agreements shall
not apply to (i) agreements pursuant to which the Failed Bank provides
mortgage servicing for others or mortgage servicing is provided to the Failed
Bank by others, (ii) agreements that are subject to Sections 4.1 through
4.7 and any insurance policy or bond referred to in Section 3.5(a) or
other agreement specified in Section 3.5, and (iii) consulting,
management or employment agreements, if any, between the Failed Bank and its
employees or other Persons. Except as otherwise expressly set forth elsewhere
in this Agreement, the Assuming Bank does not assume any liabilities or acquire
any rights under any of the agreements described in this Section 4.8(b).
4.9
Informational Tax Reporting
. The Assuming
Bank agrees to perform all obligations of the Failed Bank with respect to
Federal and State income tax informational reporting related to (i) the
Assets and the Liabilities Assumed, (ii) deposit accounts that were closed
and loans that were paid off or collateral obtained with respect thereto prior
to Bank Closing, (iii) miscellaneous payments made to vendors of the
Failed Bank, and (iv) any other asset or liability of the Failed Bank,
including, without limitation, loans not purchased and Deposits not assumed by
the Assuming Bank, as may be required by the Receiver.
4.10
Insurance
. The Assuming Bank agrees
to obtain insurance coverage effective from and after Bank Closing, including
public liability, fire and extended coverage insurance acceptable to the
Receiver with respect to owned or leased Bank Premises that it occupies, and
all owned or leased Furniture and Equipment and Fixtures and leased data
processing equipment (including hardware and software) located thereon, in the
event such insurance coverage is not already in force and effect with respect
to the Assuming Bank as the insured as of Bank Closing. All such insurance
shall, where appropriate (as determined by the Receiver), name the Receiver as
an additional insured.
4.11
Office Space for Receiver and Corporation
. For the
period commencing on the day following Bank Closing and ending on the one
hundred eightieth (180th) day thereafter, the Assuming Bank agrees to provide
to the Receiver and the Corporation, without charge, adequate and suitable
office space (including parking facilities and vault space), furniture,
equipment (including photocopying and telecopying machines), email accounts,
network access and technology resources (such as shared drive) and utilities
(including local telephone service and fax machines) at the Bank Premises
occupied by the Assuming Bank for their use in the discharge of their
respective functions with respect to the Failed Bank. In the event the Receiver
and the Corporation determine that the space provided is inadequate or
unsuitable, the Receiver and the Corporation may relocate to other quarters
having adequate and suitable space and the costs of relocation and any rental
and utility costs for the balance of the period of occupancy by the Receiver
and the Corporation shall be borne by the Assuming Bank. Additionally, the
Assuming Bank agrees to pay such bills and invoices on behalf of the Receiver
and Corporation as the Receiver or Corporation may direct for the period
beginning on the date of Bank Closing and ending on Settlement Date. Assuming
Bank shall submit it requests for reimbursement of such expenditures pursuant
to Article VIII of this Agreement.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
22
4.12
Agreement with Respect to Continuation of Group Health
Plan Coverage for Former Employees of the Failed Bank
.
(a) The
Assuming Bank agrees to assist the Receiver, as provided in this
Section 4.12, in offering individuals who were employees or former
employees of the Failed Bank, or any of its Subsidiaries, and who, immediately
prior to Bank Closing, were receiving, or were eligible to receive, health
insurance coverage or health insurance continuation coverage from the Failed
Bank (“Eligible Individuals”), the opportunity to obtain health insurance
coverage in the Corporation’s FIA Continuation Coverage Plan which provides for
health insurance continuation coverage to such Eligible Individuals who are
qualified beneficiaries of the Failed Bank as defined in Section 607 of
the Employee Retirement Income Security Act of 1974, as amended (respectively, “qualified
beneficiaries” and “ERISA”). The Assuming Bank shall consult with the Receiver
and not later than five (5) Business Days after Bank Closing shall provide
written notice to the Receiver of the number (if available), identity (if
available) and addresses (if available) of the Eligible Individuals who are
qualified beneficiaries of the Failed Bank and for whom a “qualifying event”
(as defined in Section 603 of ERISA) has occurred and with respect to whom
the Failed Bank’s obligations under Part 6 of Subtitle B of Title I of
ERISA have not been satisfied in full, and such other information as the
Receiver may reasonably require. The Receiver shall cooperate with the Assuming
Bank in order to permit it to prepare such notice and shall provide to the
Assuming Bank such data in its possession as may be reasonably required for
purposes of preparing such notice.
(b) The
Assuming Bank shall take such further action to assist the Receiver in offering
the Eligible Individuals who are qualified beneficiaries of the Failed Bank the
opportunity to obtain health insurance coverage in the Corporation’s FIA
Continuation Coverage Plan as the Receiver may direct. All expenses incurred
and paid by the Assuming Bank (i) in connection with the obligations of
the Assuming Bank under this Section 4.12, and (ii) in providing
health insurance continuation coverage to any Eligible Individuals who are
hired by the Assuming Bank and such employees’ qualified beneficiaries shall be
borne by the Assuming Bank.
(c) This
Section 4.12 is for the sole and exclusive benefit of the parties to this Agreement,
and for the benefit of no other Person (including any former employee of the
Failed Bank or any Subsidiary thereof or qualified beneficiary of such former
employee). Nothing in this Section 4.12 is intended by the parties, or
shall be construed, to give any Person (including any former employee of the
Failed Bank or any Subsidiary thereof or qualified beneficiary of such former
employee) other than the Corporation, the Receiver and the Assuming Bank any legal
or equitable right, remedy or claim under or with respect to the provisions of
this Section.
4.13
Agreement with Respect to Interim Asset Servicing
.
At any time
after Bank Closing, the Receiver may establish on its books an asset
pool(s) and may transfer to such asset pool(s) (by means of
accounting entries on the books of the Receiver) all or any assets and
liabilities of the Failed Bank which are not acquired by the Assuming Bank,
including, without limitation, wholly unfunded Commitments and assets and
liabilities which may be acquired, funded or originated by the Receiver
subsequent to Bank Closing. The Receiver may remove assets (and liabilities)
from or add assets (and liabilities) to such pool(s) at any time in its
discretion. At the option of the Receiver, the Assuming Bank agrees to service,
administer, and
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
23
collect such pool assets in accordance with
and for the term set forth in Exhibit 4.13 “Interim Asset Servicing
Arrangement”.
4.14
Reserved.
4.15
Agreement with Respect to Loss Sharing
.
The Assuming
Bank shall be entitled to require reimbursement from the Receiver for loss
sharing on certain loans in accordance with the Single Family Shared-Loss
Agreement attached hereto as Exhibit 4.15A and the Non-SF Shared-Loss
Agreement attached hereto as Exhibit 4.15B, collectively, the “Shared-Loss
Agreements.” The Loans that shall be subject to the Shared-Loss Agreements are
identified on the Schedule of Loans 4.15A and 4.15B attached hereto.
ARTICLE V
DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK
5.1
Payment of Checks, Drafts and Orders
.
Subject to
Section 9.5, the Assuming Bank agrees to pay all properly drawn checks,
drafts and withdrawal orders of depositors of the Failed Bank presented for
payment, whether drawn on the check or draft forms provided by the Failed Bank
or by the Assuming Bank, to the extent that the Deposit balances to the credit
of the respective makers or drawers assumed by the Assuming Bank under this
Agreement are sufficient to permit the payment thereof, and in all other
respects to discharge, in the usual course of conducting a banking business,
the duties and obligations of the Failed Bank with respect to the Deposit
balances due and owing to the depositors of the Failed Bank assumed by the
Assuming Bank under this Agreement.
5.2
Certain Agreements Related to Deposits
.
Subject to
Section 2.2, the Assuming Bank agrees to honor the terms and conditions of
any written escrow or mortgage servicing agreement or other similar agreement
relating to a Deposit liability assumed by the Assuming Bank pursuant to this
Agreement.
5.3
Notice to Depositors
.
(a) Within
seven (7) days after Bank Closing, the Assuming Bank shall give
(i) notice to depositors of the Failed Bank of its assumption of the
Deposit liabilities of the Failed Bank, and (ii) any notice required under
Section 2.2, by mailing to each such depositor a notice with respect to
such assumption and by advertising in a newspaper of general circulation in the
county or counties in which the Failed Bank was located. The Assuming Bank agrees
that it will obtain prior approval of all such notices and advertisements from
counsel for the Receiver and that such notices and advertisements shall not be
mailed or published until such approval is received.
(b) The
Assuming Bank shall give notice by mail to depositors of the Failed Bank
concerning the procedures to claim their deposits, which notice shall be
provided to the Assuming Bank by the Receiver or the Corporation. Such notice
shall be included with the notice to depositors to be mailed by the Assuming
Bank pursuant to Section 5.3(a).
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
24
(c) If
the Assuming Bank proposes to charge fees different from those charged by the Failed
Bank before it establishes new deposit account relationships with the
depositors of the Failed Bank, the Assuming Bank shall give notice by mail of
such changed fees to such depositors.
ARTICLE VI
RECORDS
6.1
Transfer of Records
.
(a) In
accordance with Section 3.1, the Receiver assigns, transfers, conveys and delivers
to the Assuming Bank the following Records pertaining to the Deposit
liabilities of the Failed Bank assumed by the Assuming Bank under this
Agreement, except as provided in Section 6.4:
(i)
signature
cards, orders, contracts between the Failed Bank and its depositors and Records
of similar character;
(ii)
passbooks of
depositors held by the Failed Bank, deposit slips, cancelled checks and
withdrawal orders representing charges to accounts of depositors;
and the following Records pertaining to the
Assets:
(iii)
records of
deposit balances carried with other banks, bankers or trust companies;
(iv)
Loan and
collateral records and Credit Files and other documents;
(v)
deeds,
mortgages, abstracts, surveys, and other instruments or records of title
pertaining to real estate or real estate mortgages;
(vi)
signature
cards, agreements and records pertaining to Safe Deposit Boxes, if any; and
(vii)
records
pertaining to the credit card business, trust business or safekeeping business
of the Failed Bank, if any.
(b) The
Receiver, at its option, may assign and transfer to the Assuming Bank by a single
blanket assignment or otherwise, as soon as practicable after Bank Closing, any
other Records not assigned and transferred to the Assuming Bank as provided in
this Agreement, including but not limited to loan disbursement checks, general
ledger tickets, official bank checks, proof transactions (including proof
tapes) and paid out loan files.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
25
6.2
Delivery of Assigned Records
. The Receiver
shall deliver to the Assuming Bank all Records described in
(i) Section 6.1(a) as soon as practicable on or after the date
of this Agreement, and (ii) Section 6.1(b) as soon as
practicable after making any assignment described therein.
6.3
Preservation of Records
. The Assuming
Bank agrees that it will preserve and maintain for the joint benefit of the
Receiver, the Corporation and the Assuming Bank, all Records of which it has
custody for such period as either the Receiver or the Corporation in its
discretion may require, until directed otherwise,
in writing,
by the
Receiver or Corporation. The Assuming Bank shall have the primary
responsibility to respond to subpoenas, discovery requests, and other similar
official inquiries with respect to the Records of which it has custody.
6.4
Access to Records; Copies
.
The Assuming
Bank agrees to permit the Receiver and the Corporation access to all Records of
which the Assuming Bank has custody, and to use, inspect, make extracts from or
request copies of any such Records in the manner and to the extent requested,
and to duplicate, in the discretion of the Receiver or the Corporation, any
Record in the form of microfilm or microfiche pertaining to Deposit account
relationships;
provided
,
that
in the event that the Failed Bank
maintained one or more duplicate copies of such microfilm or microfiche
Records, the Assuming Bank hereby assigns, transfers, and conveys to the
Corporation one such duplicate copy of each such Record without cost to the
Corporation, and agrees to deliver to the Corporation all Records assigned and
transferred to the Corporation under this Article VI as soon as
practicable on or after the date of this Agreement. The party requesting a copy
of any Record shall bear the cost (based on standard accepted industry charges
to the extent applicable, as determined by the Receiver) for providing such
duplicate Records. A copy of each Record requested shall be provided as soon as
practicable by the party having custody thereof.
ARTICLE VII
FIRST LOSS TRANCHE
The Assuming Bank has submitted to the
Receiver of Security Bank of Bibb County
an
asset premium (discount) bid of $(130,500,000.00) and a Deposit premium bid of
zero%. The Assuming Bank has submitted to the
Receiver
of Security Bank of Gwinnett County
an asset premium (discount) bid
of $(70,000,000.00) and a Deposit premium bid of zero%. The Assuming Bank has
submitted to the
Receiver of Security Bank of
Houston County
an asset premium (discount) bid of $(28,000,000.00)
and a Deposit premium bid of zero%. The Assuming Bank has submitted to the
Receiver of Security Bank of Jones County
an asset premium (discount) bid of $(36,000,000.00) and a Deposit premium bid
of zero%. The Assuming Bank has submitted to the Receiver of
Security Bank of North Fulton
an asset
premium (discount) bid of $(17,000,000.00) and a Deposit premium bid of zero%.
The Assuming Bank has submitted to the Receiver of
Security Bank of North Metro
an asset premium (discount) bid
of $(35,000,000.00) and a Deposit premium bid of zero%.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
26
The Deposit premium bid will be applied to
the total of all Assumed Deposits except for brokered, CDARS, and any market
place or similar subscription services Deposits. The First Loss Tranche shall
be determined by adding (i) the asset premium (discount) bid,
(ii) the Deposit premium bid, and (iii) the Equity Adjustment. If the
First Loss Tranche is a positive number, then this is the Losses on Single
Family Shared-Loss Loans and Net Charge-offs on Shared Loss Assets that the
Assuming Bank will incur before loss-sharing commences under Exhibits 4.15A and
4.15B. If the First Loss Tranche is a negative number, the Corporation shall
pay such amount by wire transfer to the Assuming Bank by the end of the first
business day following Bank Closing and loss sharing shall commence
immediately.
ARTICLE VIII
ADJUSTMENTS
8.1
Pro Forma Statement
. The Receiver, as soon as
practicable after Bank Closing, in accordance with the best information then
available, shall provide to the Assuming Bank a pro forma statement reflecting
any adjustments of such liabilities and assets as may be necessary. Such pro
forma statement shall take into account, to the extent possible,
(i) liabilities and assets of a nature similar to those contemplated by
Section 2.1 or Section 3.1, respectively, which at Bank Closing were
carried in the Failed Bank’s suspense accounts, (ii) accruals as of Bank
Closing for all income related to the assets and business of the Failed Bank
acquired by the Assuming Bank hereunder, whether or not such accruals were
reflected on the Accounting Records of the Failed Bank in the normal course of
its operations, and (iii) adjustments to determine the Book Value of any
investment in an Acquired Subsidiary and related accounts on the “bank only”
(unconsolidated) balance sheet of the Failed Bank based on the equity method of
accounting, whether or not the Failed Bank used the equity method of accounting
for investments in subsidiaries, except that the resulting amount cannot be
less than the Acquired Subsidiary’s recorded equity as of Bank Closing as
reflected on the Accounting Records of the Acquired Subsidiary. Any Loan
purchased by the Assuming Bank pursuant to Section 3.1 which the Failed
Bank charged off during the period from April 24, 2009 to Bank Closing
shall be deemed not to be charged off for the purposes of the pro forma statement,
and the purchase price shall be determined pursuant to Section 3.2.
8.2
Correction of Errors and Omissions;
Other
Liabilities
.
(a) In
the event any bookkeeping omissions or errors are discovered in preparing any pro
forma statement or in completing the transfers and assumptions contemplated
hereby, the parties hereto agree to correct such errors and omissions, it being
understood that, as far as practicable, all adjustments will be made consistent
with the judgments, methods, policies or accounting principles utilized by the
Failed Bank in preparing and maintaining Accounting Records, except that
adjustments made pursuant to this Section 8.2(a) are not intended to
bring the Accounting Records of the Failed Bank into accordance with generally
accepted accounting principles.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
27
(b) If
the Receiver discovers at any time subsequent to the date of this Agreement
that any claim exists against the Failed Bank which is of such a nature that it
would have been included in the liabilities assumed under Article II had
the existence of such claim or the facts giving rise thereto been known as of
Bank Closing, the Receiver may, in its discretion, at any time, require that
such claim be assumed by the Assuming Bank in a manner consistent with the
intent of this Agreement. The Receiver will make appropriate adjustments to the
pro forma statement provided by the Receiver to the Assuming Bank pursuant to
Section 8.1 as may be necessary.
8.3
Payments
. The Receiver agrees to
cause to be paid to the Assuming Bank, or the Assuming Bank agrees to pay to
the Receiver, as the case may be, on the Settlement Date, a payment in an
amount which reflects net adjustments (including any costs, expenses and fees
associated with determinations of value as provided in this Agreement) made
pursuant to Section 8.1 or Section 8.2, plus interest as provided in
Section 8.4. The Receiver and the Assuming Bank agree to effect on the
Settlement Date any further transfer of assets to or assumption of liabilities
or claims by the Assuming Bank as may be necessary in accordance with
Section 8.1 or Section 8.2.
8.4
Interest
. Any amounts paid under
Section 8.3 or Section 8.5, shall bear interest for the period from
and including the day following Bank Closing to and including the day preceding
the payment at the Settlement Interest Rate.
8.5
Subsequent Adjustments
.
In the event
that the Assuming Bank or the Receiver discovers any errors or omissions as
contemplated by Section 8.2 or any error with respect to the payment made
under Section 8.3 after the Settlement Date, the Assuming Bank and the
Receiver agree to promptly correct any such errors or omissions, make any
payments and effect any transfers or assumptions as may be necessary to reflect
any such correction plus interest as provided in Section 8.4.
ARTICLE IX
CONTINUING COOPERATION
9.1
General Matters
. The parties hereto agree
that they will, in good faith and with their best efforts, cooperate with each
other to carry out the transactions contemplated by this Agreement and to
effect the purposes hereof.
9.2
Additional Title Documents
. The Receiver,
the Corporation and the Assuming Bank each agree, at any time, and from time to
time, upon the request of any party hereto, to execute and deliver such
additional instruments and documents of conveyance as shall be reasonably
necessary to vest in the appropriate party its full legal or equitable title in
and to the property transferred pursuant to this Agreement or to be transferred
in accordance herewith. The Assuming Bank shall prepare such instruments and
documents of conveyance (in form and substance satisfactory to the Receiver) as
shall be necessary to vest title to the Assets in the Assuming Bank. The
Assuming Bank shall be responsible for recording such instruments and documents
of conveyance at its own expense.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
28
9.3
Claims and Suits
.
(a) The
Receiver shall have the right, in its discretion, to (i) defend or settle
any claim or suit against the Assuming Bank with respect to which the Receiver
has indemnified the Assuming Bank in the same manner and to the same extent as
provided in Article XII, and (ii) defend or settle any claim or suit
against the Assuming Bank with respect to any Liability Assumed, which claim or
suit may result in a loss to the Receiver arising out of or related to this
Agreement, or which existed against the Failed Bank on or before Bank Closing.
The exercise by the Receiver of any rights under this
Section 9.3(a) shall not release the Assuming Bank with respect to
any of its obligations under this Agreement.
(b) In
the event any action at law or in equity shall be instituted by any Person
against the Receiver and the Corporation as codefendants with respect to any
asset of the Failed Bank retained or acquired pursuant to this Agreement by the
Receiver, the Receiver agrees, at the request of the Corporation, to join with
the Corporation in a petition to remove the action to the United States
District Court for the proper district. The Receiver agrees to institute, with
or without joinder of the Corporation as coplaintiff, any action with respect
to any such retained or acquired asset or any matter connected therewith
whenever notice requiring such action shall be given by the Corporation to the
Receiver.
9.4
Payment of Deposits
.
In the event any depositor
does not accept the obligation of the Assuming Bank to pay any Deposit
liability of the Failed Bank assumed by the Assuming Bank pursuant to this
Agreement and asserts a claim against the Receiver for all or any portion of
any such Deposit liability, the Assuming Bank agrees on demand to provide to
the Receiver funds sufficient to pay such claim in an amount not in excess of
the Deposit liability reflected on the books of the Assuming Bank at the time
such claim is made. Upon payment by the Assuming Bank to the Receiver of such
amount, the Assuming Bank shall be discharged from any further obligation under
this Agreement to pay to any such depositor the amount of such Deposit
liability paid to the Receiver.
9.5
Withheld Payments
.
At any time, the Receiver
or the Corporation may, in its discretion, determine that all or any portion of
any deposit balance assumed by the Assuming Bank pursuant to this Agreement
does not constitute a “Deposit” (or otherwise, in its discretion, determine
that it is the best interest of the Receiver or Corporation to withhold all or
any portion of any deposit), and may direct the Assuming Bank to withhold
payment of all or any portion of any such deposit balance. Upon such direction,
the Assuming Bank agrees to hold such deposit and not to make any payment of
such deposit balance to or on behalf of the depositor, or to itself, whether by
way of transfer, set-off, or otherwise. The Assuming Bank agrees to maintain
the “withheld payment” status of any such deposit balance until directed in
writing by the Receiver or the Corporation as to its disposition. At the
direction of the Receiver or the Corporation, the Assuming Bank shall return
all or any portion of such deposit balance to the Receiver or the Corporation,
as appropriate, and thereupon the Assuming Bank shall be discharged from any
further liability to such depositor with respect to such returned deposit
balance. If such deposit balance has been paid to the depositor prior to a
demand for return by the Corporation or the Receiver, and payment of such
deposit balance had not been previously withheld pursuant to this
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
29
Section, the Assuming Bank shall not be
obligated to return such deposit balance to the Receiver or the Corporation.
The Assuming Bank shall be obligated to reimburse the Corporation or the
Receiver, as the case may be, for the amount of any deposit balance or portion
thereof paid by the Assuming Bank in contravention of any previous direction to
withhold payment of such deposit balance or return such deposit balance the
payment of which was withheld pursuant to this Section.
9.6
Proceedings with Respect to Certain Assets and
Liabilities
.
(a) In
connection with any investigation, proceeding or other matter with respect to
any asset or liability of the Failed Bank retained by the Receiver, or any
asset of the Failed Bank acquired by the Receiver pursuant to this Agreement,
the Assuming Bank shall cooperate to the extent reasonably required by the
Receiver.
(b) In
addition to its obligations under Section 6.4, the Assuming Bank shall
provide representatives of the Receiver access at reasonable times and
locations without other limitation or qualification to (i) its directors,
officers, employees and agents and those of the Subsidiaries acquired by the
Assuming Bank, and (ii) its books and records, the books and records of
such Subsidiaries and all Credit Files, and copies thereof. Copies of books,
records and Credit Files shall be provided by the Assuming Bank as requested by
the Receiver and the costs of duplication thereof shall be borne by the
Receiver.
(c) Not
later than ten (10) days after the Put Notice pursuant to Section 3.4
or the date of the notice of transfer of any Loan by the Assuming Bank to the
Receiver pursuant to Section 3.6, the Assuming Bank shall deliver to the
Receiver such documents with respect to such Loan as the Receiver may request,
including without limitation the following: (i) all related Credit
Documents (other than certificates, notices and other ancillary documents),
(ii) a certificate setting forth the principal amount on the date of the
transfer and the amount of interest, fees and other charges then accrued and
unpaid thereon, and any restrictions on transfer to which any such Loan is
subject, and (iii) all Credit Files, and all documents, microfiche,
microfilm and computer records (including but not limited to magnetic tape,
disc storage, card forms and printed copy) maintained by, owned by, or in the
possession of the Assuming Bank or any Affiliate of the Assuming Bank relating
to the transferred Loan.
9.7
Information
.
The Assuming Bank promptly
shall provide to the Corporation such other information, including financial
statements and computations, relating to the performance of the provisions of
this Agreement as the Corporation or the Receiver may request from time to
time, and, at the request of the Receiver, make available employees of the
Failed Bank employed or retained by the Assuming Bank to assist in preparation
of the pro forma statement pursuant to Section 8.1.
ARTICLE X
CONDITION PRECEDENT
The obligations of the parties to this Agreement are
subject to the Receiver and the Corporation having received at or before Bank
Closing evidence reasonably satisfactory to each
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
30
of any necessary approval, waiver, or other
action by any governmental authority, the board of directors of the Assuming
Bank, or other third party, with respect to this Agreement and the transactions
contemplated hereby, the closing of the Failed Bank and the appointment of the
Receiver, the chartering of the Assuming Bank, and any agreements, documents,
matters or proceedings contemplated hereby or thereby.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK
The Assuming Bank represents and warrants to the
Corporation and the Receiver as follows:
(a)
Corporate Existence and Authority
.
The
Assuming Bank (i) is duly organized, validly existing and in good standing
under the laws of its Chartering Authority and has full power and authority to
own and operate its properties and to conduct its business as now conducted by
it, and (ii) has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The Assuming Bank has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement and the performance of the transactions
contemplated hereby.
(b)
Third Party Consents
.
No
governmental authority or other third party consents (including but not limited
to approvals, licenses, registrations or declarations) are required in
connection with the execution, delivery or performance by the Assuming Bank of
this Agreement, other than such consents as have been duly obtained and are in
full force and effect.
(c)
Execution and Enforceability
.
This
Agreement has been duly executed and delivered by the Assuming Bank and when
this Agreement has been duly authorized, executed and delivered by the
Corporation and the Receiver, this Agreement will constitute the legal, valid
and binding obligation of the Assuming Bank, enforceable in accordance with its
terms.
(d)
Compliance with Law
.
(i) Neither
the Assuming Bank nor any of its Subsidiaries is in violation of any statute,
regulation, order, decision, judgment or decree of, or any restriction imposed
by, the United States of America, any State, municipality or other political
subdivision or any agency of any of the foregoing, or any court or other
tribunal having jurisdiction over the Assuming Bank or any of its Subsidiaries
or any assets of any such Person, or any foreign government or agency thereof
having such jurisdiction, with respect to the conduct of the business of the
Assuming Bank or of any of its Subsidiaries, or the ownership of the properties
of the Assuming Bank or any of its Subsidiaries, which, either individually or
in the aggregate with all other such violations, would materially and adversely
affect the business, operations or condition (financial or otherwise) of the
Assuming Bank or the ability of the Assuming Bank to perform, satisfy or
observe any obligation or condition under this Agreement.
(ii) Neither
the execution and delivery nor the performance by the Assuming Bank of this
Agreement will result in any violation by the Assuming Bank of, or be in conflict
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
31
with, any provision of any applicable law or
regulation, or any order, writ or decree of any court or governmental
authority.
e)
Representations Remain True
. The
Assuming Bank represents and warrants that it has executed and delivered to the
Corporation a Purchaser Eligibility Certification and Confidentiality Agreement
and that all information provided and representations made by or on behalf of
the Assuming Bank in connection with this Agreement and the transactions
contemplated hereby, including, but not limited to, the Purchaser Eligibility
Certification and Confidentiality Agreement (which are affirmed and ratified
hereby) are and remain true and correct in all material respects and do not
fail to state any fact required to make the information contained therein not
misleading.
ARTICLE XII
INDEMNIFICATION
12.1
Indemnification of Indemnitees
.
From and after
Bank Closing and subject to the limitations set forth in this Section and
Section 12.6 and compliance by the Indemnitees with Section 12.2, the
Receiver agrees to indemnify and hold harmless the Indemnitees against any and
all costs, losses, liabilities, expenses (including attorneys’ fees) incurred
prior to the assumption of defense by the Receiver pursuant to paragraph
(d) of Section 12.2, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with claims against any
Indemnitee based on liabilities of the Failed Bank that are not assumed by the
Assuming Bank pursuant to this Agreement or subsequent to the execution hereof
by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank for which
indemnification is provided hereunder in (a) of this Section 12.1,
subject to certain exclusions as provided in (b) of this
Section 12.1:
(a)
(1) claims
based on the rights of any shareholder or former shareholder as such of
(x) the Failed Bank, or (y) any Subsidiary or Affiliate of the Failed
Bank;
(2) claims
based on the rights of any creditor as such of the Failed Bank, or any creditor
as such of any director, officer, employee or agent of the Failed Bank, with
respect to any indebtedness or other obligation of the Failed Bank arising
prior to Bank Closing;
(3) claims
based on the rights of any present or former director, officer, employee or
agent as such of the Failed Bank or of any Subsidiary or Affiliate of the
Failed Bank;
(4) claims
based on any action or inaction prior to Bank Closing of the Failed Bank, its
directors, officers, employees or agents as such, or any Subsidiary or
Affiliate of the Failed Bank, or the directors, officers, employees or agents
as such of such Subsidiary or Affiliate;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
32
(5) claims
based on any malfeasance, misfeasance or nonfeasance of the Failed Bank, its
directors, officers, employees or agents with respect to the trust business of
the Failed Bank, if any;
(6) claims
based on any failure or alleged failure (not in violation of law) by the
Assuming Bank to continue to perform any service or activity previously performed
by the Failed Bank which the Assuming Bank is not required to perform pursuant
to this Agreement or which arise under any contract to which the Failed Bank
was a party which the Assuming Bank elected not to assume in accordance with
this Agreement and which neither the Assuming Bank nor any Subsidiary or
Affiliate of the Assuming Bank has assumed subsequent to the execution hereof;
(7) claims
arising from any action or inaction of any Indemnitee, including for purposes
of this Section 12.1(a)(7) the former officers or employees of the
Failed Bank or of any Subsidiary or Affiliate of the Failed Bank that is taken
upon the specific written direction of the Corporation or the Receiver,
other
than
any action or inaction taken in a manner constituting bad faith,
gross negligence or willful misconduct; and
(8) claims
based on the rights of any depositor of the Failed Bank whose deposit has been
accorded “withheld payment” status and/or returned to the Receiver or
Corporation in accordance with Section 9.5 and/or has become an “unclaimed
deposit” or has been returned to the Corporation or the Receiver in accordance
with Section 2.3;
(b)
provided
,
that
, with respect to this Agreement, except for paragraphs (7) and
(8) of Section 12.1(a), no indemnification will be provided under this
Agreement for any:
(1) judgment
or fine against, or any amount paid in settlement (without the written approval
of the Receiver) by, any Indemnitee in connection with any action that seeks
damages against any Indemnitee (a “counterclaim”) arising with respect to any
Asset and based on any action or inaction of either the Failed Bank, its
directors, officers, employees or agents as such prior to Bank Closing, unless
any such judgment, fine or amount paid in settlement exceeds the greater of
(i) the Repurchase Price of such Asset, or (ii) the monetary recovery
sought on such Asset by the Assuming Bank in the cause of action from which the
counterclaim arises; and in such event the Receiver will provide
indemnification only in the amount of such excess; and no indemnification will
be provided for any costs or expenses other than any costs or expenses
(including attorneys’ fees) which, in the determination of the Receiver, have
been actually and reasonably incurred by such Indemnitee in connection with the
defense of any such counterclaim; and it is expressly agreed that the Receiver
reserves the right to intervene, in its discretion, on its behalf and/or on
behalf of the Receiver, in the defense of any such counterclaim;
(2) claims
with respect to any liability or obligation of the Failed Bank that is
expressly assumed by the Assuming Bank pursuant to this Agreement or subsequent
to the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of
the Assuming Bank;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
33
(3) claims
with respect to any liability of the Failed Bank to any present or former
employee as such of the Failed Bank or of any Subsidiary or Affiliate of the
Failed Bank, which liability is expressly assumed by the Assuming Bank pursuant
to this Agreement or subsequent to the execution hereof by the Assuming Bank or
any Subsidiary or Affiliate of the Assuming Bank;
(4) claims
based on the failure of any Indemnitee to seek recovery of damages from the
Receiver for any claims based upon any action or inaction of the Failed Bank,
its directors, officers, employees or agents as fiduciary, agent or custodian
prior to Bank Closing;
(5) claims
based on any violation or alleged violation by any Indemnitee of the antitrust,
branching, banking or bank holding company or securities laws of the United
States of America or any State thereof;
(6) claims
based on the rights of any present or former creditor, customer, or supplier as
such of the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank;
(7) claims
based on the rights of any present or former shareholder as such of the
Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank regardless of
whether any such present or former shareholder is also a present or former
shareholder of the Failed Bank;
(8) claims,
if the Receiver determines that the effect of providing such indemnification
would be to (i) expand or alter the provisions of any warranty or
disclaimer thereof provided in Section 3.3 or any other provision of this
Agreement, or (ii) create any warranty not expressly provided under this
Agreement;
(9) claims
which could have been enforced against any Indemnitee had the Assuming Bank not
entered into this Agreement;
(10) claims
based on any liability for taxes or fees assessed with respect to the
consummation of the transactions contemplated by this Agreement, including
without limitation any subsequent transfer of any Assets or Liabilities Assumed
to any Subsidiary or Affiliate of the Assuming Bank;
(11) except
as expressly provided in this Article XII, claims based on any action or
inaction of any Indemnitee, and nothing in this Agreement shall be construed to
provide indemnification for (i) the Failed Bank, (ii) any Subsidiary
or Affiliate of the Failed Bank, or (iii) any present or former director,
officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates;
provided
,
that
the Receiver, in its discretion, may provide
indemnification hereunder for any present or former director, officer, employee
or agent of the Failed Bank or its Subsidiaries or Affiliates who is also or
becomes a director, officer, employee or agent of the Assuming Bank or its
Subsidiaries or Affiliates;
(12) claims
or actions which constitute a breach by the Assuming Bank of the
representations and warranties contained in Article XI;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
34
(13) claims
arising out of or relating to the condition of or generated by an Asset arising
from or relating to the presence, storage or release of any hazardous or toxic
substance, or any pollutant or contaminant, or condition of such Asset which
violate any applicable Federal, State or local law or regulation concerning
environmental protection; and
(14) claims
based on, related to or arising from any asset, including a loan, acquired or
liability assumed by the Assuming Bank, other than pursuant to this Agreement.
12.2
Conditions Precedent to Indemnification
.
It shall be a
condition precedent to the obligation of the Receiver to indemnify any Person
pursuant to this Article XII that such Person shall, with respect to any
claim made or threatened against such Person for which such Person is or may be
entitled to indemnification hereunder:
(a) give
written notice to the Regional Counsel (Litigation Branch) of the Corporation
in the manner and at the address provided in Section 13.7 of such claim as
soon as practicable after such claim is made or threatened;
provided
,
that
notice must be given on or before the date which is six (6) years from the
date of this Agreement;
(b) provide
to the Receiver such information and cooperation with respect to such claim as
the Receiver may reasonably require;
(c) cooperate
and take all steps, as the Receiver may reasonably require, to preserve and
protect any defense to such claim;
(d) in
the event suit is brought with respect to such claim, upon reasonable prior notice,
afford to the Receiver the right, which the Receiver may exercise in its sole
discretion, to conduct the investigation, control the defense and effect
settlement of such claim, including without limitation the right to designate
counsel and to control all negotiations, litigation, arbitration, settlements,
compromises and appeals of any such claim, all of which shall be at the expense
of the Receiver;
provided
,
that
the Receiver shall have notified
the Person claiming indemnification in writing that such claim is a claim with
respect to which the Person claiming indemnification is entitled to
indemnification under this Article XII;
(e) not
incur any costs or expenses in connection with any response or suit with respect
to such claim, unless such costs or expenses were incurred upon the written
direction of the Receiver;
provided
,
that
the Receiver shall not
be obligated to reimburse the amount of any such costs or expenses unless such
costs or expenses were incurred upon the written direction of the Receiver;
(f) not
release or settle such claim or make any payment or admission with respect thereto,
unless the Receiver consents in writing thereto, which consent shall not be
unreasonably withheld;
provided
,
that
the Receiver shall not be
obligated to reimburse the amount of any such settlement or payment unless such
settlement or payment was effected upon the written direction of the Receiver;
and
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
35
(g) take
reasonable action as the Receiver may request in writing as necessary to preserve,
protect or enforce the rights of the indemnified Person against any Primary
Indemnitor.
12.3
No Additional Warranty
.
Nothing in this
Article XII shall be construed or deemed to (i) expand or otherwise
alter any warranty or disclaimer thereof provided under Section 3.3 or any
other provision of this Agreement with respect to, among other matters, the title,
value, collectibility, genuineness, enforceability or condition of any
(x) Asset, or (y) asset of the Failed Bank purchased by the Assuming
Bank subsequent to the execution of this Agreement by the Assuming Bank or any
Subsidiary or Affiliate of the Assuming Bank, or (ii) create any warranty
not expressly provided under this Agreement with respect thereto.
12.4
Indemnification of
Receiver and Corporation
.
From and after Bank Closing, the
Assuming Bank agrees to indemnify and hold harmless the Corporation and the
Receiver and their respective directors, officers, employees and agents from
and against any and all costs, losses, liabilities, expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any of the following:
(a) claims
based on any and all liabilities or obligations of the Failed Bank assumed by
the Assuming Bank pursuant to this Agreement or subsequent to the execution
hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming
Bank, whether or not any such liabilities subsequently are sold and/or
transferred, other than any claim based upon any action or inaction of any
Indemnitee as provided in paragraph (7) or (8) of
Section 12.1(a); and
(b) claims
based on any act or omission of any Indemnitee (including but not limited to
claims of any Person claiming any right or title by or through the Assuming
Bank with respect to Assets transferred to the Receiver pursuant to
Section 3.4 or 3.6), other than any action or inaction of any Indemnitee
as provided in paragraph (7) or (8) of Section 12.1(a).
12.5
Obligations Supplemental
.
The
obligations of the Receiver, and the Corporation as guarantor in accordance
with Section 12.7, to provide indemnification under this Article XII
are to supplement any amount payable by any Primary Indemnitor to the Person
indemnified under this Article XII. Consistent with that intent, the
Receiver agrees only to make payments pursuant to such indemnification to the
extent not payable by a Primary Indemnitor. If the aggregate amount of payments
by the Receiver, or the Corporation as guarantor in accordance with
Section 12.7, and all Primary Indemnitors with respect to any item of
indemnification under this Article XII exceeds the amount payable with
respect to such item, such Person being indemnified shall notify the Receiver
thereof and, upon the request of the Receiver, shall promptly pay to the
Receiver, or the Corporation as appropriate, the amount of the Receiver’s (or
Corporation’s) payments to the extent of such excess.
12.6
Criminal Claims
.
Notwithstanding any
provision of this Article XII to the contrary, in the event that any
Person being indemnified under this Article XII shall become involved in
any criminal action, suit or proceeding, whether judicial, administrative or
investigative, the Receiver shall have no obligation hereunder to indemnify
such Person for liability with respect to any criminal act or to the extent any
costs or expenses are attributable to the defense against the allegation of any
criminal act, unless (i) the Person is successful on the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
36
merits or otherwise in the defense against
any such action, suit or proceeding, or (ii) such action, suit or
proceeding is terminated without the imposition of liability on such Person.
12.7
Limited Guaranty of the Corporation
.
The
Corporation hereby guarantees performance of the Receiver’s obligation to
indemnify the Assuming Bank as set forth in this Article XII. It is a
condition to the Corporation’s obligation hereunder that the Assuming Bank
shall comply in all respects with the applicable provisions of this
Article XII. The Corporation shall be liable hereunder only for such
amounts, if any, as the Receiver is obligated to pay under the terms of this
Article XII but shall fail to pay. Except as otherwise provided above in
this Section 12.7, nothing in this Article XII is intended or shall
be construed to create any liability or obligation on the part of the
Corporation, the United States of America or any department or agency thereof
under or with respect to this Article XII, or any provision hereof, it
being the intention of the parties hereto that the obligations undertaken by
the Receiver under this Article XII are the sole and exclusive
responsibility of the Receiver and no other Person or entity.
12.8
Subrogation
.
Upon payment by the
Receiver, or the Corporation as guarantor in accordance with Section 12.7,
to any Indemnitee for any claims indemnified by the Receiver under this
Article XII, the Receiver, or the Corporation as appropriate, shall become
subrogated to all rights of the Indemnitee against any other Person to the extent
of such payment.
ARTICLE XIII
MISCELLANEOUS
13.1
Entire Agreement
.
This Agreement embodies the
entire agreement of the parties hereto in relation to the subject matter herein
and supersedes all prior understandings or agreements, oral or written, between
the parties.
13.2
Headings
.
The headings and subheadings
of the Table of Contents, Articles and Sections contained in this Agreement,
except the terms identified for definition in Article I and elsewhere in
this Agreement, are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or any provision hereof.
13.3
Counterparts
.
This Agreement may be
executed in any number of counterparts and by the duly authorized
representative of a different party hereto on separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same Agreement.
13.4
GOVERNING LAW
.
THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED STATES OF AMERICA, AND IN THE
ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE
STATE IN WHICH THE MAIN OFFICE OF THE FAILED BANK IS LOCATED.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
37
13.5
Successors
.
All terms and conditions of
this Agreement shall be binding on the successors and assigns of the Receiver,
the Corporation and the Assuming Bank. Except as otherwise specifically
provided in this Agreement, nothing expressed or referred to in this Agreement
is intended or shall be construed to give any Person other than the Receiver,
the Corporation and the Assuming Bank any legal or equitable right, remedy or
claim under or with respect to this Agreement or any provisions contained
herein, it being the intention of the parties hereto that this Agreement, the
obligations and statements of responsibilities hereunder, and all other
conditions and provisions hereof are for the sole and exclusive benefit of the
Receiver, the Corporation and the Assuming Bank and for the benefit of no other
Person.
13.6
Modification; Assignment
.
No amendment or
other modification, rescission, release, or assignment of any part of this
Agreement shall be effective except pursuant to a written agreement subscribed
by the duly authorized representatives of the parties hereto.
13.7
Notice
.
Any notice, request, demand,
consent, approval or other communication to any party hereto shall be effective
when received and shall be given
in
writing
, and delivered in
person against receipt therefore, or sent by certified mail, postage prepaid,
courier service, telex, facsimile transmission or email to such party (with
copies as indicated below) at its address set forth below or at such other
address as it shall hereafter furnish in writing to the other parties. All such
notices and other communications shall be deemed given on the date received by
the addressee.
Assuming Bank
State Bank and Trust Company
3399 Peachtree Road N.E.
Suite 2040
Atlanta, GA 30326
Attention: Dan Speight
Telephone: 404-328-8633
Facsimile: 404-745-0314
Receiver and Corporation
Federal Deposit Insurance Corporation,
Receiver of
[insert name
of Failed Bank]
1601 Bryan Street, Suite 1700
Dallas, Texas 75201
Attention: Settlement Manager
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
38
with copy to: Regional Counsel (Litigation
Branch)
and with respect to notice under
Article XII:
Federal Deposit Insurance Corporation
Receiver of
[insert name
Failed Bank]
1601 Bryan Street, Suite 1700
Dallas, Texas 75201
Attention: Regional Counsel (Litigation
Branch)
13.8
Manner of Payment
.
All payments due under this
Agreement shall be in lawful money of the United States of America in
immediately available funds as each party hereto may specify to the other
parties;
provided
,
that
in the event the Receiver or the
Corporation is obligated to make any payment hereunder in the amount of
$25,000.00 or less, such payment may be made by check.
13.9
Costs, Fees and Expenses
.
Except as
otherwise specifically provided herein, each party hereto agrees to pay all
costs, fees and expenses which it has incurred in connection with or incidental
to the matters contained in this Agreement, including without limitation any
fees and disbursements to its accountants and counsel;
provided
,
that
the Assuming Bank shall pay all fees, costs and expenses (other than attorneys’
fees incurred by the Receiver) incurred in connection with the transfer to it
of any Assets or Liabilities Assumed hereunder or in accordance herewith.
13.10
Waiver
.
Each of the Receiver, the
Corporation and the Assuming Bank may waive its respective rights, powers or
privileges under this Agreement;
provided
,
that
such waiver shall
be in writing;
and
further
provided
,
that
no
failure or delay on the part of the Receiver, the Corporation or the Assuming
Bank to exercise any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor will any single or partial exercise of any
right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or privilege by the
Receiver, the Corporation, or the Assuming Bank under this Agreement, nor will
any such waiver operate or be construed as a future waiver of such right, power
or privilege under this Agreement.
13.11
Severability
.
If any provision of this
Agreement is declared invalid or unenforceable, then, to the extent possible,
all of the remaining provisions of this Agreement shall remain in full force
and effect and shall be binding upon the parties hereto.
13.12
Term of Agreement
.
This Agreement shall
continue in full force and effect until the sixth (6th) anniversary of Bank
Closing;
provided
,
that
the provisions of Section 6.3 and
6.4 shall survive the expiration of the term of this Agreement. Provided,
however, the receivership of the Failed Bank may be terminated prior to the
expiration of the term of this Agreement; in such event, the guaranty of the
Corporation, as provided in and in accordance with the provisions of
Section 12.7 shall be in effect for the remainder of the term. Expiration
of the term of this Agreement shall not affect any claim or liability of any
party with respect to any (i) amount which is owing at the time of such
expiration, regardless of when such amount becomes payable,
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
39
and (ii) breach of this Agreement
occurring prior to such expiration, regardless of when such breach is
discovered.
13.13
Survival of Covenants, Etc
.
The covenants,
representations, and warranties in this Agreement shall survive the execution
of this Agreement and the consummation of the transactions contemplated
hereunder.
[Signature
Page Follows]
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
40
IN WITNESS WHEREOF
, the parties
hereto have caused this Agreement to be executed by their duly authorized
representatives as of the date first above written.
|
|
FEDERAL DEPOSIT INSURANCE
CORPORATION, RECEIVER OF:SECURITY BANK OF BIBB COUNTY, MACON, GA.; SECURITY
BANK OF GWINNETT COUNTY, SUWANNEE, GA.; SECURITY BANK OF HOUSTON COUNTY,
PERRY, GA.; SECURITY BANK OF JONES COUNTY, GRAY, GA.; SECURITY BANK OF NORTH
FULTON, ALPHARETTA, GA.; SECURITY BANK OF NORTH METRO, WOODSTOCK, GA.
|
|
|
|
|
|
|
|
|
BY:
|
/s/ Steven A. Carr
|
|
|
|
NAME: Steven A. Carr
|
|
|
|
TITLE: Attorney-In-Fact
|
|
Attest:
|
|
|
|
|
|
|
|
/s/
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FEDERAL DEPOSIT INSURANCE
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/ Steven A. Carr
|
|
|
|
NAME: Steven A. Carr
|
|
|
|
TITLE: Attorney-In-Fact
|
|
Attest:
|
|
|
|
|
|
|
|
/s/
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATE BANK AND TRUST COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/ J. Daniel Speight
|
|
|
|
NAME:
|
J. Daniel Speight
|
|
|
|
TITLE:
|
Vice Chairman / CFO
|
|
Attest:
|
|
|
|
|
|
|
|
|
|
/s/
Kim M. Childers
|
|
|
|
|
|
|
|
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
41
SCHEDULE
2.1 - Certain Liabilities Assumed by the Assuming Bank
(SEPARATE SCHEDULE TO BE SUPPLIED FOR EACH FAILED BANK)
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
42
SCHEDULE
2.1(a) — Excluded Deposit Liability Accounts
OMITTED FOR
EACH FAILED BANK
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
43
SCHEDULE
3.1 - Certain Assets Purchased
(SEPARATE SCHEDULE TO BE SUPPLIED FOR EACH FAILED BANK)
SEE
ATTACHED LIST
THE LIST(S) ATTACHED TO THIS SCHEDULE (OR
SUBSCHEDULE(S)) AND THE INFORMATION THEREIN, IS AS OF THE DATE OF THE MOST
RECENT PERTINENT DATA MADE AVAILABLE TO THE ASSUMING BANK AS PART OF THE
INFORMATION PACKAGE. IT WILL BE ADJUSTED TO REFLECT THE COMPOSITION AND BOOK
VALUE OF THE LOANS AND ASSETS AS OF THE DATE OF BANK CLOSING. THE
LIST(S) MAY NOT INCLUDE ALL LOANS AND ASSETS (E.G., CHARGED OFF
LOANS). THE LIST(S) MAY BE REPLACED WITH A MORE ACCURATE LIST POST
CLOSING.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
44
SCHEDULE
3.2 - Purchase Price of Assets or assets
|
(a)
|
|
cash and receivables from depository institutions, including cash
items in the process of collection, plus interest thereon:
|
|
Book Value
|
|
|
|
|
|
|
|
(b)
|
|
securities (exclusive of the capital stock of Acquired Subsidiaries),
plus interest thereon:
|
|
As provided in Section 3.2(b)
|
|
|
|
|
|
|
|
(c)
|
|
federal funds sold and repurchase agreements, if any, including
interest thereon:
|
|
Book Value
|
|
|
|
|
|
|
|
(d)
|
|
Loans:
|
|
Book Value
|
|
|
|
|
|
|
|
(e)
|
|
credit card business, if any, including all
outstanding extensions of credit and offensive litigation, but excluding any
class action lawsuits related to the credit card business:
|
|
Book Value
|
|
|
|
|
|
|
|
(f)
|
|
Safe Deposit Boxes and related business, safekeeping business and
trust business, if any:
|
|
Book Value
|
|
|
|
|
|
|
|
(g)
|
|
Records and other documents:
|
|
Book Value
|
|
|
|
|
|
|
|
(h)
|
|
capital stock of any Acquired Subsidiaries:
|
|
Book Value
|
|
|
|
|
|
|
|
(i)
|
|
amounts owed to the Failed Bank by any Acquired Subsidiary:
|
|
Book Value
|
|
|
|
|
|
|
|
(j)
|
|
assets securing Deposits of public money, to the extent not otherwise
purchased hereunder:
|
|
Book Value
|
|
|
|
|
|
|
|
(k)
|
|
Overdrafts of customers:
|
|
Book Value
|
|
|
|
|
|
|
|
(l)
|
|
rights, if any, with respect to Qualified Financial Contracts.
|
|
As provided in Section 3.2(c)
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
45
|
(m)
|
|
rights of the Failed Bank to provide mortgage servicing for others
and to have mortgage servicing provided to the Failed Bank by others and
related contracts.
|
|
Book Value
|
|
|
|
|
|
|
|
assets subject to an option to purchase:
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Bank Premises:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(b)
|
|
Furniture and Equipment:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(c)
|
|
Fixtures:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(d)
|
|
Other Equipment:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
46
SCHEDULE
3.5(l) — Excluded Private Label Asset-Backed Securities
(SEPARATE SCHEDULE TO BE SUPPLIED FOR EACH FAILED BANK)
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
47
SCHEDULE 4.15A
LOANS
SUBJECT TO LOSS SHARING UNDER THE
SINGLE FAMILY SHARED-LOSS AGREEMENT
(SEPARATE
SCHEDULE TO BE SUPPLIED FOR EACH FAILED BANK)
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
48
SCHEDULE 4.15B
LOANS
SUBJECT TO LOSS SHARING UNDER THE
NON-SINGLE FAMILY SHARED-LOSS AGREEMENT
(SEPARATE
SCHEDULE TO BE SUPPLIED FOR EACH FAILED BANK)
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
49
SCHEDULE 7
-Accounts Excluded from Calculation of Deposit Franchise Bid Premium
OMITTED FOR
EACH FAILED BANK
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
50
EXHIBIT 3.2(c) —
VALUATION OF CERTAIN
QUALIFIED FINANCIAL CONTRACTS
A.
Scope
Interest Rate Contracts - All interest rate swaps, forward
rate agreements, interest rate futures, caps, collars and floors, whether
purchased or written.
Option Contracts - All put and call option
contracts, whether purchased or written, on marketable securities, financial
futures, foreign currencies, foreign exchange or foreign exchange futures
contracts.
Foreign Exchange Contracts - All contracts for
future purchase or sale of foreign currencies, foreign currency or cross
currency swap contracts, or foreign exchange futures contracts.
B.
Exclusions
All financial contracts used to hedge assets and
liabilities that are acquired by the Assuming Bank but are not subject to
adjustment from Book Value.
C.
Adjustment
The difference between the Book Value and market
value as of Bank Closing.
D.
Methodology
1.
The price at
which the Assuming Bank sells or disposes of Qualified Financial Contracts will
be deemed to be the fair market value of such contracts, if such sale or
disposition occurs at prevailing market rates within a predefined timetable as
agreed upon by the Assuming Bank and the Receiver.
2.
In valuing all
other Qualified Financial Contracts, the following principles will apply:
(i)
All known cash
flows under swaps or forward exchange contracts shall be present valued to the
swap zero coupon interest rate curve.
(ii)
All valuations
shall employ prices and interest rates based on the actual frequency of rate
reset or payment.
(iii)
Each tranche of
amortizing contracts shall be separately valued. The total value of such
amortizing contract shall be the sum of the values of its component tranches.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
51
(iv)
For regularly
traded contracts, valuations shall be at the midpoint of the bid and ask prices
quoted by customary sources (e.g.,
The Wall Street Journal
, Telerate,
Reuters or other similar source) or regularly traded exchanges.
(v)
For all other
Qualified Financial Contracts where published market quotes are unavailable,
the adjusted price shall be the average of the bid and ask price quotes from
three (3) securities dealers acceptable to the Receiver and Assuming Bank
as of Bank Closing. If quotes from securities dealers cannot be obtained, an appraiser
acceptable to the Receiver and the Assuming Bank will perform a valuation based
on modeling, correlation analysis, interpolation or other techniques, as
appropriate.]
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
52
EXHIBIT 4.13
INTERIM ASSET SERVICING ARRANGEMENT
(a)
With respect to each asset
(or liability) designated from time to time by the Receiver to be serviced by
the Assuming Bank pursuant to this Arrangement (such being designated as “Pool
Assets”), during the term of this Arrangement, the Assuming Bank shall:
(i)
Promptly apply payments
received with respect to any Pool Assets;
(ii)
Reverse and return
insufficient funds checks;
(iii)
Pay (A) participation
payments to participants in Loans, as and when received; and (B) tax and
insurance bills on Pool Assets as they come due, out of escrow funds maintained
for purposes;
(iv)
Maintain accurate records
reflecting (A) the payment history of Pool Assets, with updated
information received concerning changes in the address or identity of the
obligors and (B) usage of data processing equipment and employee services
with respect to servicing duties;
(v)
Send billing statements to
obligors on Pool Assets to the extent that such statements were sent by the
Failed Bank;
(vi)
Send notices to obligors who
are in default on Loans (in the same manner as the Failed Bank);
(vii)
Send to the Receiver, Attn:
Managing Liquidator, at the address provided in Section 13.7 of the
Agreement,
via
overnight
delivery
: (A) on a weekly
basis, weekly reports for the Pool Assets, including, without limitation,
reports reflecting collections and the trial balances, transaction journals and
loan histories for Pool Assets having activity, together with copies of
(1) checks received, (2) insufficient funds checks returned,
(3) checks for payment to participants or for taxes and insurance,
(4) pay-off requests, (5) notices to defaulted obligors, and
(6) data processing and employee logs and (B) any other reports,
copies or information as may be periodically or from time to time requested;
(viii)
Remit on a weekly basis to
the Receiver, Attn: Division of Finance, Cashier Unit, Operations, at the
address in (vii),
via
wire
transfer
to the account
designated by the Receiver, all payments received on Pool Assets managed by the
Assuming Bank or at such time and place and in such manner as may be directed
by the Receiver;
(ix)
prepare and timely file all
information reports with appropriate tax authorities, and, if required by the
Receiver, prepare and file tax returns and pay taxes due on or before the due
date, relating to the Pool Assets; and
(x)
provide and
furnish such other services, operations or functions as may be required with
regard to Pool Assets, including, without limitation, as may be required with
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
53
regard to any business, enterprise or agreement which is a Pool Asset,
all as may be required by the Receiver.
Notwithstanding anything to the contrary in this Section, the Assuming
Bank shall not be required to initiate litigation or other collection
proceedings against any obligor or any collateral with respect to any defaulted
Loan. The Assuming Bank shall promptly notify the Receiver, at the address
provided above in subparagraph (a)(vii), of any claims or legal actions
regarding any Pool Asset.
(b)
The Receiver agrees to
reimburse the Assuming Bank for actual, reasonable and necessary expenses
incurred in connection with the performance of duties pursuant to this
Arrangement, including expenses of photocopying, postage and express mail, and
data processing and employee services (based upon the number of hours spent
performing servicing duties).
(c)
The Assuming Bank shall
provide the services described herein for an initial period of ninety (90) days
after Bank Closing. At the option of the Receiver, exercisable by notice given
not later than ten (10) days prior to the end of such initial period or a
renewal period, the Assuming Bank shall continue to provide such services for
such renewal period(s) as designated by the Receiver, up to the Settlement
Date.
(d)
At any time during the term
of this Arrangement, the Receiver may, upon written notice to the Assuming
Bank, remove one or more Pool Assets from the Pool, at which time the Assuming
Bank’s responsibility with respect thereto shall terminate.
(e)
At the expiration of this
Agreement or upon the termination of the Assuming Bank’s responsibility with
respect to any Pool Asset pursuant to paragraph (d) hereof, the Assuming
Bank shall:
(i)
deliver to the Receiver (or
its designee) all of the Credit Documents and Pool Records relating to the Pool
Assets; and
(ii)
cooperate with the Receiver
to facilitate the orderly transition of managing the Pool Assets to the
Receiver (or its designee).
(f) At the request of the Receiver, the Assuming
Bank shall perform such transitional services with regard to the Pool Assets as
the Receiver may request. Transitional services may include, without
limitation, assisting in any due diligence process deemed necessary by the
Receiver and providing to the Receiver or its designee(s) (x) information
and data regarding the Pool Assets, including, without limitation, system
reports and data downloads sufficient to transfer the Pool Assets to another
system or systems, and (y) access to employees of the Assuming Bank
involved in the management of, or otherwise familiar with, the Pool Assets.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
54
EXHIBIT 4.15A
SINGLE
FAMILY SHARED-LOSS AGREEMENT
This agreement for the reimbursement of loss sharing
on certain single family residential mortgage loans (the “Single Family
Shared-Loss Agreement”) shall apply when the Assuming Bank purchases Single
Family Shared-Loss Loans as that term is defined herein. The terms hereof shall
modify and supplement, as necessary, the terms of the Purchase and Assumption
Agreement to which this Single Family Shared-Loss Agreement is attached as
Exhibit 4.15A and incorporated therein. To the extent any inconsistencies
may arise between the terms of the Purchase and Assumption Agreement and this
Single Family Shared-Loss Agreement with respect to the subject matter of this
Single Family Shared-Loss Agreement, the terms of this Single Family
Shared-Loss Agreement shall control. References in this Single Family Shared-
Loss Agreement to a particular Section shall be deemed to refer to a
Section in this Single Family Shared-Loss Agreement, unless the context
indicates that it is intended to be a reference to a Section of the Purchase
and Assumption Agreement.
ARTICLE I
— DEFINITIONS
The capitalized terms used in this Single Family Shared-Loss Agreement
that are not defined in this Single Family Shared-Loss Agreement are defined in
the Purchase and Assumption Agreement. In addition to the terms defined above,
defined below are certain additional terms relating to loss-sharing, as used in
this Single Family Shared-Loss Agreement.
“
Accounting
Records
” means the subsidiary system of record on which the loan
history and balance of each Single Family Shared-Loss Loan is maintained;
individual loan files containing either an original or copies of documents that
are customary and reasonable with respect to loan servicing, including
management and disposition of Other Real Estate; the records documenting
alternatives considered with respect to loans in default or for which a default
is reasonably foreseeable; records of loss calculations and supporting
documentation with respect to line items on the loss calculations; and, monthly
delinquency reports and other performance reports customarily utilized by the
Assuming Bank in management of loan portfolios.
“
Accrued
Interest
” means, with respect to Single Family Shared-Loss
Loans, the amount of earned and unpaid interest at the note rate specified in
the applicable loan documents, limited to 90 days.
“
Affiliate
”
shall have the
meaning set forth in the Purchase and Assumption Agreement;
provided,
that
,
for purposes of this Single Family Shared-Loss Agreement, no Third Party
Servicer shall be deemed to be an Affiliate of the Assuming Bank.
“
Commencement
Date
” means the first calendar day following the Bank Closing.
“
Commercial Shared-Loss
Agreement
” means the Commercial and Other Assets Shared-Loss
Agreement attached to the Purchase and Assumption Agreement as Exhibit
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
55
4.15B.
“
Cumulative
Loss Amount
” means the sum of the Monthly Loss Amounts less the
sum of all Recovery Amounts.
“
Cumulative
Shared-Loss Amount
” means the excess, if any, of the Cumulative
Loss Amount over the First Loss Tranche.
“
Customary
Servicing Procedures
” means procedures (including collection
procedures) that the Assuming Bank (or, to the extent a Third Party Servicer is
engaged, the Third Party Servicer) customarily employs and exercises in
servicing and administering mortgage loans for its own accounts and the
servicing procedures established by FNMA or FHLMC (as in effect from time to
time), which are in accordance with accepted mortgage servicing practices of
prudent lending institutions.
“
Deficient
Valuation
”
means the determination by a court in a bankruptcy
proceeding that the value of the collateral is less than the amount of the loan
in which case the loss will be the difference between the then unpaid principal
balance (or the NPV of a modified loan that defaults) and the value of the
collateral so established.
“
Examination Criteria
”
means the loan
classification criteria employed by, or any applicable regulations of, the
Assuming Bank’s Chartering Authority at the time such action is taken, as such
criteria may be amended from time to time.
“
Home Equity
Loans
” means loans or funded portions of lines of credit secured
by mortgages on one-to four-family residences or stock of cooperative housing
associations, where the Failed Bank did not have a first lien on the same
property as collateral.
“
Final
Shared-Loss Month
” means the calendar month in which the tenth anniversary
of the Commencement Date occurs.
“
Final
Shared-Loss Recovery Month
” means the calendar month in which
the tenth anniversary of the Commencement Date occurs.
“
Foreclosure
Loss
” means the loss realized when the Assuming Bank has
completed the foreclosure on a Single Family Shared-Loss Loan and realized
final recovery on the collateral through liquidation and recovery of all
insurance proceeds. Each Foreclosure Loss shall be calculated in accordance
with the form and methodology specified in Exhibit 2a or
Exhibit 2a(1).
“
Investor-Owned
Residential Loans
” means Loans, excluding advances made pursuant
to Home Equity Loans, that are secured by mortgages on one- to four family
residences or stock of cooperative housing associations that are not owner-occupied.
These loans can be treated as Restructured Loans on a commercially reasonable
basis and can be a restructured under terms separate from the Exhibit 5
standards. Please refer to Exhibit 2b for guidance in Calculation of Loss
for Restructured Loans.
“
Loss
”
means a Foreclosure Loss, Restructuring Loss, Short Sale Loss, Portfolio
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
56
Loss, Modification Default Loss or Deficient Valuation.
“
Loss Amount
”
means the dollar amount of loss incurred and reported on the Monthly
Certificate for a Single Family Shared-Loss Loan.
“
Modification
Default Loss
” means the loss calculated in Exhibits
2a(1) and 2c(1) for single family loans modified under this part of
the agreement that default and result in a foreclosure or short sale.
“
Modification
Guidelines
”
has the meaning provided in
Section 2.1(a) of this Single Family Shared-Loss Agreement.
“
Monthly
Certificate
” has the meaning provided in
Section 2.1(b) of this Single Family Shared-Loss Agreement.
“
Monthly Loss
Amount
” means the sum of all Foreclosure Losses, Restructuring
Losses, Short Sale Losses, Portfolio Losses, Modification Default Losses and
losses in connection with Deficient Valuations realized by the Assuming Bank
for any Shared Loss Month.
“
Monthly
Shared-Loss Amount
” means the change in the Cumulative Shared-
Loss Amount from the beginning of each month to the end of each month.
“
Neutral Member
”
has the meaning provided in Section 2. 1(f)(ii) of this Single Family
Shared-Loss Agreement.
“
Portfolio Loss
”
means the loss realized on either (i) a portfolio sale of Single Family
Shared-Loss Loans in accordance with the terms of Article IV or
(ii) the sale of a loan with the consent of the Receiver as provided in
Section 2.7.
“
Recovery
Amount
” means, with respect to any period prior to the
Termination Date, the amount of collected funds received by the Assuming Bank
that (i) are applicable against a Foreclosure Loss which has previously
been paid to the Assuming Bank by the Receiver or (ii) gains realized from
a Section 4.1 sale of Single Family Shared-Loss Loans for which the
Assuming Bank has previously received a Restructuring Loss payment from the Receiver
(iii) or any incentive payments from national programs paid to an investor
or borrower on loans that have been modified or otherwise treated (short sale
or foreclosure) in accordance with Exhibit 5.
“
Restructuring
Loss
” means the loss on a modified or restructured loan measured
by the difference between (a) the principal, Accrued Interest, tax and
insurance advances, third party or other fees due on a loan prior to the
modification or restructuring, and (b) the net present value of estimated
cash flows on the modified or restructured loan, discounted at the Then-Current
Interest Rate. Each Restructuring Loss shall be calculated in accordance with
the form and methodology attached as Exhibit 2b, as applicable.
“
Restructured
Loan
” means a Single Family Shared-Loss Loan for which the
Assuming Bank has received a Restructuring Loss payment from the Receiver. This
applies to
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
57
owner
occupied and investor owned residences.
“
Servicing
Officer
” has the meaning provided in Section 2.1(b) of
this Single Family Shared-Loss Agreement.
“
Shared Loss
Payment Trigger
” means when the sum of the Cumulative Loss
Amount under this Single Family Shared-Loss Agreement and the Shared-Loss
Amount under the Commercial and Other Assets Shared-Loss Agreement, exceeds the
First Loss Tranche. If the First Loss Tranche is zero or a negative number, the
Shared Loss Payment Trigger shall be deemed to have been reached upon Bank
Closing.
“
Shared-Loss
Month
” means each calendar month between the Commencement Date
and the last day of the month in which the tenth anniversary of the
Commencement Date occurs, provided that, the first Shared-Loss Month shall
begin on the Commencement Date and end on the last day of that month.
“
Short-Sale
Loss
” means the loss resulting from the Assuming Bank’s
agreement with the mortgagor to accept a payoff in an amount less than the
balance due on the loan (including the costs of any cash incentives to borrower
to agree to such sale or to maintain the property pending such sale), further
provided,
that
each Short-Sale Loss shall be calculated in accordance with the
form and methodology specified in Exhibit 2c or Exhibit 2c(1).
“
Single Family
Shared-Loss Loans
” means the single family one-to-four
residential mortgage loans (whether owned by the Assuming Bank or any
Subsidiary) identified on Schedule 4.15A of the Purchase and Assumption
Agreement.
“
Stated Threshold
”
means total losses under the shared loss agreements for: Security Bank of Bibb
County in the amount of $33,500,000.00; Security Bank of Gwinnett County in the
amount of $31,800,000.00; Security Bank of Houston County in the amount of
$13,200,000.00; Security Bank of Jones County in the amount of $18,200,000.00;
Security Bank of North Fulton in the amount of $6,700,000.00; and, Security
Bank of North Metro in the amount of $9,300,000.00.
“
Termination
Date
” means the last day of the Final Shared-Loss Recovery
Month.
“
Then-Current
Interest Rate
” means the most recently published Freddie Mac
survey rate for 30-year fixed-rate loans.
“
Third Party
Servicer
” means any servicer appointed from time to time by the
Assuming Bank or any Affiliate of the Assuming Bank to service the Shared-Loss
Loans on behalf of the Assuming Bank, the identity of which shall be given to
the Receiver prior to or concurrent with the appointment thereof.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
58
ARTICLE II — SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss
Arrangement
.
(a)
Loss Mitigation and Consideration of Alternatives
. For each
Single Family Shared-Loss Loan in default or for which a default is reasonably
foreseeable, the Assuming Bank shall undertake reasonable and customary loss
mitigation efforts, in accordance with any of the following programs selected
by Assuming Bank in its sole discretion, Exhibit 5 (FDIC Mortgage Loan
Modification Program), the United States Treasury’s Home Affordable
Modification Program Guidelines or any other modification program approved by
the United States Treasury Department, the Corporation, the Board of Governors
of the Federal Reserve System or any other governmental agency (it being
understood that the Assuming Bank can select different programs for the various
Single Family Shared-Loss Loans) (such program chosen, the “Modification
Guidelines”). After selecting the applicable Modification Guideline for any
such Single Family Shared-Loss Loan, the Assuming Bank shall document its
consideration of foreclosure, loan restructuring under such Modification
Guideline chosen, and short-sale (if short-sale is a viable option)
alternatives and shall select the alternative the Assuming Bank believes, based
on its estimated calculations, will result in the least Loss. Losses on Home
Equity Loans shall be shared under the charge-off policies of the Assuming Bank’s
Examination Criteria as if they were Single Family Shared-Loss Loans with
respect to the calculation of the Stated Threshold. Assuming Bank shall retain
its calculations of the estimated loss under each alternative, such
calculations to be provided to the Receiver upon request. For the avoidance of
doubt and notwithstanding anything herein to the contrary, (i) the
Assuming Bank is not required to modify or restructure any Single Family
Shared-Loss Loan on more than one occasion and (ii) the Assuming Bank is
not required to consider any alternatives with respect to any Shared-Loss Loan
in the process of foreclosure as of the Bank Closing and shall be entitled to
continue such foreclosure measures and recover the Foreclosure Loss as provided
herein, and (iii) the Assuming Bank shall have a transition period of up
to 90 days after Bank Closing to implement the Modification Guidelines, during
which time, the Assuming Bank may submit claims under such guidelines as may be
in place at the Failed Bank.
(b)
Monthly Certificates
.
Not later than fifteen (15) days after the end of
each Shared-Loss Month, beginning with the month in which the Commencement Date
occurs and ending in the month in which the tenth anniversary of the
Commencement Date occurs, the Assuming Bank shall deliver to the Receiver a
certificate, signed by an officer of the Assuming Bank involved in, or
responsible for, the administration and servicing of the Single Family
Shared-Loss Loans whose name appears on a list of servicing officers furnished
by the Assuming Bank to the Receiver, (a “Servicing Officer”) setting forth in
such form and detail as the Receiver may reasonably specify (a “Monthly
Certificate”):
(i)
(A)
a schedule
substantially in the form of Exhibit 1 listing:
(i) each Single Family
Shared-Loss Loan for which a Loss Amount (calculated in accordance with the
applicable Exhibit) is being claimed, the related Loss Amount for each Single
Family Shared- Loss Loan, and the total Monthly Loss Amount for all Single
Family Shared-Loss Loans;
(ii) each Single Family
Shared-Loss Loan for which a Recovery
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
59
Amount was received, the
Recovery Amount for each Single Family Shared-Loss Loan, and the total Recovery
Amount for all Single Family Shared-Loss Loans;
(iii) the total Monthly
Loss Amount for all Single Family Shared- Loss Loans minus the total monthly
Recovery Amount for all Single Family Shared-Loss Loans;
(iv) the Cumulative
Shared-Loss Amount as of the beginning and end of the month;
(v) the Monthly Shared
Loss Amount;
(vi) the result
obtained in (v) times 80%, or times 95% if the Stated Threshold has been
reached, which in either case is the amount to be paid under Section 2.1(d) of
this Single Family Shared-Loss Agreement by the Receiver to the Assuming Bank
if the amount is a positive number, or by the Assuming Bank to the Receiver if
the amount is a negative number;
(ii)
(B)
for each of the
Single Family Shared-Loss Loans for which a Loss is claimed for that
Shared-Loss Month, a schedule showing the calculation of the Loss Amount using
the form and methodology shown in Exhibit 2a, Exhibit 2b, or
Exhibit 2c, as applicable.
(iii)
(C)
For each of the
Restructured Loans where a gain or loss is realized in a sale under
Section 4.1 or 4.2, a schedule showing the calculation using the form and
methodology shown in Exhibit 2d.
(iv)
(D)
a portfolio
performance and summary schedule substantially in the form shown in
Exhibit 3.
(c)
Monthly
Data Download
. Not later than fifteen (15) days after the end of
each month, beginning with the month in which the Commencement Date occurs and
ending with the Final Shared-Loss Recovery Month, Assuming Bank shall provide
Receiver:
(v)
(i)
the servicing
file in machine-readable format including but not limited to the following
fields for each outstanding Single Family Shared-Loss Loan, as applicable:
(A)
Loan number
(B)
FICO score
(C)
Origination date
(D)
Original principal amount
(E)
Maturity date
(F)
Paid-to date
(G)
Last payment date
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
60
(H)
Loan status (bankruptcy, in
foreclosure, etc.)
(I)
Delinquency counters
(J)
Current principal balance
(K)
Current escrow account balance
(L)
Current Appraisal/BPO value
(M)
Current Appraisal/BPO date
(N)
Interest rate
(O)
Monthly principal and interest payment amount
(P)
Monthly escrow payment for taxes and insurance
(Q)
Interest rate type (fixed or adjustable)
(R)
If adjustable: index, margin, next interest
rate reset date
(S)
Payment/Interest rate cap and/or floor
(T)
Underwriting type (Full doc, Alt Doc, No Doc)
(U)
Lien type (1
st
, 2
nd
)
(V)
Amortization type (amortizing or I/O)
(W)
Property address, including city, state, zip code
(X)
A code indicating whether the Mortgaged
Property is owner occupied
(Y)
Property type (single-family detached,
condominium, duplex, etc.)
(vi)
(ii)
An Excel file
for ORE held as a result of foreclosure on a Single Family Shared-Loss Loan
listing:
(A)
Foreclosure date
(B)
Unpaid loan principal balance
(C)
Appraised value or BPO value, as applicable
(D)
Projected liquidation date
Notwithstanding the foregoing, the Assuming Bank
shall not be required to provide any of the foregoing information to the extent
it is unable to do so as a result of the Failed Bank’s or Receiver’s failure to
provide information required to produce the information set forth in this
Section 2.1(c);
provided,
that the Assuming Bank shall, consistent
with Customary Servicing Procedures seek to produce any such missing
information or improve any inaccurate information previously provided to it.
(d)
Payments
With Respect to Shared-Loss Assets
.
(i)
Losses Under the Stated Threshold
. After the Shared Loss
Payment Trigger is reached, not later than fifteen (15) days after the date on
which the Receiver receives the Monthly Certificate, the Receiver shall pay to
the Assuming Bank, in immediately available funds, an amount equal to eighty
percent (80%) of the Monthly Shared-Loss Amount reported on the Monthly
Certificate. If the total Monthly Shared-Loss Amount reported on the Monthly
Certificate is a negative number, the Assuming Bank shall pay to the Receiver
in immediately available funds eighty percent (80%) of that amount.
(ii)
Losses in Excess of the Stated Threshold
. In the event
that the sum of the Cumulative Loss Amount under this Single Family Shared-Loss
Agreement and the Stated
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
61
Loss Amount under the Commercial Shared-Loss Agreement meets or exceeds
the Stated Threshold, the loss/recovery sharing percentages set forth herein
shall change from 80/20 to 95/5 and thereafter the Receiver shall pay to the
Assuming Bank, in immediately available funds, an amount equal to ninety-five
percent (95%) of the Monthly Shared-Loss Amount reported on the Monthly
Certificate. If the Monthly Shared-Loss Amount reported on the Monthly
Certificate is a negative number, the Assuming Bank shall pay to the Receiver
in immediately available funds ninety-five percent (95%) of that amount.
(e)
Limitations on Shared-Loss Payment
. The Receiver shall not be
required to make any payments pursuant to Section 2.1(d) with respect
to any Foreclosure Loss, Restructuring Loss, Short Sale Loss or Portfolio Loss
that the Receiver determines, based upon the criteria set forth in this Single
Family Shared-Loss Agreement (including the analysis and documentation
requirements of Section 2.1(a)) or Customary Servicing Procedures, should
not have been effected by the Assuming Bank; provided, however, (x) the
Receiver must provide notice to the Assuming Bank detailing the grounds for not
making such payment, (y) the Receiver must provide the Assuming Bank with
a reasonable opportunity to cure any such deficiency and (z) (1) to
the extent curable, if cured, the Receiver shall make payment with respect to
the properly effected Loss, and (2) to the extent not curable,
notwithstanding the foregoing, the Receiver shall make a payment as to all
Losses (or portion of Losses) that were effected which would have been payable
as a Loss if the Assuming Bank had properly effected such Loss. In the event
that the Receiver does not make any payment with respect to Losses claimed
pursuant to Section 2.1(d), the Receiver and Assuming Bank shall, upon
final resolution, make the necessary adjustments to the Monthly Shared-Loss
Amount for that Monthly Certificate and the payment pursuant to
Section 2.1(d) above shall be adjusted accordingly.
(f)
Payments by Wire-Transfer
. All payments under this
Single Family Shared-Loss Agreement shall be made by wire-transfer in
accordance with the wire-transfer instructions on Exhibit 4.
2.2
Auditor Report; Right to Audit.
(a)
Within ninety (90) days
after the end of each fiscal year during which the Receiver makes any payment
to the Assuming Bank under this Single Family Shared-Loss Agreement, the
Assuming Bank shall deliver to the Corporation and to the Receiver a report
signed by its independent public accountants stating that they have reviewed
the terms of this Single Family Shared-Loss Agreement and that, in the course
of their annual audit of the Assuming Bank’s books and records, nothing has
come to their attention suggesting that any computations required to be made by
the Assuming Bank during such year pursuant to this Article II were not
made by the Assuming Bank in accordance herewith. In the event that the
Assuming Bank cannot comply with the preceding sentence, it shall promptly
submit to the Receiver corrected computations together with a report signed by
its independent public accountants stating that, after giving effect to such
corrected computations, nothing has come to their attention suggesting that any
computations required to be made by the Assuming Bank during such year pursuant
to this Article II were not made by the Assuming Bank in accordance
herewith. In such event, the Assuming Bank and the Receiver shall make all such
accounting adjustments and payments as may be necessary to give effect to each
correction reflected in such corrected computations, retroactive to the date on
which the corresponding incorrect computation
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
62
was made. It is the intention of this provision to align the timing of
the audit required under this Single-Family Shared-Loss Agreement with the
examination audit required pursuant to 12 CFR Section 363.
(b)
The Receiver or the FDIC in
its corporate capacity (“Corporation”) may perform an audit or audits to
determine the Assuming Bank’s compliance with the provisions of this Single
Family Shared-Loss Agreement, including this Article II, by providing not
less than ten (10) Business Days’ prior written notice. Assuming Bank
shall provide access to pertinent records and proximate working space in
Assuming Bank’s facilities. The scope and duration of any such audit shall be
within the reasonable discretion of the Receiver or the Corporation, but shall
in no event be administered in a manner that unreasonably interferes with the
operation of the Assuming Bank’s business. The Receiver or the Corporation, as
the case may be, shall bear the expense of any such audit. In the event that
any corrections are necessary as a result of such an audit or audits, the
Assuming Bank and the Receiver shall make such accounting adjustments and
payments as may be necessary to give retroactive effect to such corrections.
2.3
Withholdings
. Notwithstanding any other provision in this
Article II, the Receiver, upon the direction of the Director (or designee)
of the Federal Deposit Insurance Corporation’s Division of Resolutions and
Receiverships, may withhold payment for any amounts included in a Monthly
Certificate delivered pursuant to Section 2.1, if in its good faith and
reasonable judgment there is a reasonable basis under the requirements of this
Single Family Shared-Loss Agreement for denying the eligibility of an item for
which reimbursement or payment is sought under such Section. In such event, the
Receiver shall provide a written notice to the Assuming Bank detailing the
grounds for withholding such payment. At such time as the Assuming Bank
demonstrates to the satisfaction of the Receiver, in its reasonable judgment,
that the grounds for such withholding of payment, or portion of payment, no
longer exist or have been cured, then the Receiver shall pay the Assuming Bank
the amount withheld which the Receiver determines is eligible for payment,
within fifteen (15) Business Days.
2.4
Books and Records
. The Assuming Bank shall at
all times during the term of this Single Family Shared-Loss Agreement keep
books and records sufficient to ensure and document compliance with the terms
of this Single Family Shared-Loss Agreement, including but not limited to
(a) documentation of alternatives considered with respect to defaulted loans
or loans for which default is reasonably foreseeable, (b) documentation
showing the calculation of loss for claims submitted to the Receiver,
(c) retention of documents that support each line item on the loss claim
forms, and (d) documentation with respect to the Recovery Amount on loans
for which the Receiver has made a loss-share payment
2.5
Information
. The Assuming Bank shall promptly provide to
the Receiver such other information, including but not limited to, financial
statements, computations, and bank policies and procedures, relating to the
performance of the provisions of this Single Family Shared-Loss Agreement, as
the Receiver may reasonably request from time to time.
2.6
Tax Ruling
. The Assuming Bank shall not at any time, without
the Receiver’s prior written consent, seek a private letter ruling or other
determination from the Internal
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
63
Revenue Service or otherwise seek to qualify for any special tax
treatment or benefits associated with any payments made by the Receiver
pursuant to this Single Family Shared-Loss Agreement.
2.7
Sale of Single Family Shared-Loss Loans
. The Receiver
shall be relieved of its obligations with respect to a Single Family
Shared-Loss Loan upon payment of a Foreclosure Loss amount or a Short Sale Loss
amount with respect to such Single Family Shared-Loss Loan or upon the sale of
a Single Family Shared-Loss Loan by Assuming Bank to a person or entity that is
not an Affiliate; provided, however, that if the Receiver consents to the sale
of any such Single Family Shared-Loss Loan, any loss on such sale shall be a
Portfolio Loss. The Assuming Bank shall provide the Receiver with timely notice
of any such sale. Notwithstanding the foregoing, a sale of the Single Family
Shared-Loss Loan, for purposes of this Section 2.7, shall not be deemed to
have occurred as the result of (i) any change in the ownership or control
of Assuming Bank or the transfer of any or all of the Single Family Shared-Loss
Loan(s) to any Affiliate of Assuming Bank, (ii) a merger by Assuming
Bank with or into any other entity, (iii) a sale by Assuming Bank of all
or substantially all of its assets.
ARTICLE III
- RULES REGARDING THE ADMINISTRATION OF SINGLE FAMILY SHARED-LOSS LOANS
3.1
Agreement with Respect to Administration
. The Assuming
Bank shall (and shall cause any of its Affiliates to which the Assuming Bank
transfers any Single Family Shared-Loss Loans to) manage, administer, and
collect the Single Family Shared-Loss Loans while owned by the Assuming Bank or
any Affiliate thereof during the term of this Single Family Shared-Loss
Agreement in accordance with the rules set forth in this Article III.
The Assuming Bank shall be responsible to the Receiver in the performance of
its duties hereunder and shall provide to the Receiver such reports as the
Receiver reasonably deems advisable, including but not limited to the reports
required by Sections 2.1, 2.2 and 3.3 hereof, and shall permit the Receiver to
monitor the Assuming Bank’s performance of its duties hereunder.
3.2
Duties of the Assuming Bank
. (a) In performance of
its duties under this Article III, the Assuming Bank shall:
(i) manage and administer
each Single Family Shared-Loss Loan in accordance with Assuming Bank’s usual
and prudent business and banking practices and Customary Servicing Procedures;
(ii) exercise its best
business judgment in managing, administering and collecting amounts owed on the
Single Family Shared-Loss Loans;
(iii) use commercially
reasonable efforts to maximize Recoveries with respect to Losses on Single
Family Shared-Loss Loans without regard to the effect of maximizing collections
on assets held by the Assuming Bank or any of its Affiliates that are not
Single Family Shared-Loss Loans;
(iv) retain sufficient
staff (in Assuming Bank’s discretion) to perform its duties hereunder; and
(v) other than as
provided in Section 2.1(a), comply with the terms of the Modification
Guidelines for any Single Family Shared-Loss Loans meeting the requirements set
forth
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
64
therein. For the avoidance of doubt, the Assuming
Bank may propose exceptions to Exhibit 5 (the FDIC Loan Modification
Program) for a group of Loans with similar characteristics, with the objectives
of (1) minimizing the loss to the Assuming Bank and the FDIC and
(2) maximizing the opportunity for qualified homeowners to remain in their
homes with affordable mortgage payments.
(b)
Any transaction with or
between any Affiliate of the Assuming Bank with respect to any Single Family
Shared-Loss Loan including, without limitation, the execution of any contract
pursuant to which any Affiliate of the Assuming Bank will manage, administer or
collect any of the Single Family Shared-Loss Loans will be provided to FDIC for
informational purposes and if such transaction is not entered into on an arm’s
length basis on commercially reasonable terms such transaction shall be subject
to the prior written approval of the Receiver.
3.3
Shared-Loss Asset Records and Reports
. The Assuming Bank shall
establish and maintain such records as may be appropriate to account for the
Single Family Shared-Loss Loans in such form and detail as the Receiver may
reasonably require, and to enable the Assuming Bank to prepare and deliver to
the Receiver such reports as the Receiver may from time to time request
regarding the Single Family Shared-Loss Loans and the Monthly Certificates
required by Section 2.1 of this Single Family Shared-Loss Agreement.
3.4
Related Loans
.
(a)
Assuming Bank shall use its
best efforts to determine which loans are “Related Loans”, as hereinafter
defined. The Assuming Bank shall not manage, administer or collect any “Related
Loan” in any manner that would have the effect of increasing the amount of any
collections with respect to the Related Loan to the detriment of the Single
Family Shared-Loss Loan to which such loan is related. A “Related Loan” means
any loan or extension of credit held by the Assuming Bank at any time on or
prior to the end of the Final Shared-Loss Month that is made to an Obligor of a
Single Family Shared-Loss Loan.
(b)
The Assuming Bank shall
prepare and deliver to the Receiver with the Monthly Certificates for the
calendar months ending June 30 and December 31, a schedule of all
Related Loans on the Accounting Records of the Assuming Bank as of the end of
each such semi-annual period.
3.5
Legal Action; Utilization of Special Receivership Powers
. The Assuming
Bank shall notify the Receiver in writing (such notice to be given in
accordance with Article V below and to include all relevant details) prior
to utilizing in any legal action any special legal power or right which the
Assuming Bank derives as a result of having acquired an asset from the
Receiver, and the Assuming Bank shall not utilize any such power unless the
Receiver shall have consented in writing to the proposed usage. The Receiver
shall have the right to direct such proposed usage by the Assuming Bank and the
Assuming Bank shall comply in all respects with such direction. Upon request of
the Receiver, the Assuming Bank will advise the Receiver as to the status of
any such legal action. The Assuming Bank shall immediately notify the Receiver
of any judgment in litigation involving any of the aforesaid special powers or
rights.
3.6
Third Party Servicer
. The Assuming Bank may
perform any of its obligations and/or exercise any of its rights under this
Single Family Shared-Loss Agreement through or by
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
65
one or more Third Party Servicers, who may take actions and make
expenditures as if any such Third Party Servicer was the Assuming Bank
hereunder (and, for the avoidance of doubt, such expenses incurred by any such
Third Party Servicer on behalf of the Assuming Bank shall be included in
calculating Losses to the extent such expenses would be included in such
calculation if the expenses were incurred by Assuming Bank); provided, however,
that the use thereof by the Assuming Bank shall not release the Assuming Bank
of any obligation or liability hereunder.
ARTICLE IV
— PORTFOLIO SALE
4.1
Assuming Bank Portfolio Sales of Remaining Single Family Shared-Loss
Loans
. The Assuming Bank shall
have the right with the concurrence of the Receiver to liquidate for cash
consideration, from time to time in one or more transactions, all or a portion
of Single Family Shared-Loss Loans held by the Assuming Bank at any time prior
to the Termination Date (“Portfolio Sales”). If the Assuming Bank exercises its
option under this Section 4.1, it must give thirty (30) days notice in
writing to the Receiver setting forth the details and schedule for the
Portfolio Sale which shall be conducted by means of sealed bid sales to third
parties, not including any of the Assuming Bank’s affiliates, contractors, or
any affiliates of the Assuming Bank’s contractors. Sales of Restructured Loans
shall be sold in a separate pool from Single Family Shared-Loss Loans not
restructured. The Receiver’s review of the Assuming Bank’s proposed Portfolio
Sale will be considered in a timely fashion and approval will not be
unreasonably withheld, delayed or conditioned.
4.2
Assuming Bank’s Liquidation of Remaining Single Family Shared-Loss
Loans
. In the event that the
Assuming Bank does not conduct a Portfolio Sale pursuant to Section 4.1,
the Receiver shall have the right, exercisable in its sole and absolute
discretion, to require the Assuming Bank to liquidate for cash consideration,
any Single Family Shared-Loss Loans held by the Assuming Bank at any time after
the date that is six months prior to the Termination Date. If the Receiver
exercises its option under this Section 4.2, it must give notice in
writing to the Assuming Bank, setting forth the time period within which the
Assuming Bank shall be required to liquidate the Single Family Shared-Loss
Loans. The Assuming Bank will comply with the Receiver’s notice and must
liquidate the Single Family Shared-Loss Loans as soon as reasonably practicable
by means of sealed bid sales to third parties, not including any of the
Assuming Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s
contractors. The selection of any financial advisor or other third party broker
or sales agent retained for the liquidation of the remaining Single Family
Shared-Loss Loans pursuant to this Section shall be subject to the prior
approval of the Receiver, such approval not to be unreasonably withheld,
delayed or conditioned.
4.3
Calculation of Sale Gain or Loss
. For Single Family
Shared-Loss Loans that are not Restructured Loans gain or loss on the sales
under Section 4.1 or Section 4.2 will be calculated as the sale price
received by the Assuming Bank less the unpaid principal balance of the
remaining Single Family Shared-Loss Loans. For any Restructured Loan included
in the sale gain or loss on sale will be calculated as (a) the sale price
received by the Assuming Bank less (b) the net present value of estimated
cash flows on the Restructured Loan that was used in the calculation of the
related Restructuring Loss plus (c) Loan principal payments collected by
the Assuming Bank from the date the Loan was restructured to the date of sale.
(See Exhibit 2d for example calculation).
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
66
ARTICLE V
— LOSS-SHARING NOTICES GIVEN TO RECEIVER AND PURCHASER
All notices, demands and other communications
hereunder shall be in writing and shall be delivered by hand, or overnight
courier, receipt requested, addressed to the parties as follows:
|
If to Receiver, to:
|
Federal Deposit Insurance Corporation as Receiver for
(Insert Failed Bank name here)
|
|
|
Division of Resolutions and Receiverships
|
|
|
550 17th Street, N.W.
|
|
|
Washington, D.C. 20429
|
|
|
Attention: Ralph Malami, Manager, Capital Markets
|
|
|
|
|
with a copy to:
|
Federal Deposit Insurance Corporation
|
|
|
as Receiver for
(Insert Failed Bank
name here)
|
|
|
Room E7056
|
|
|
3501 Fairfax Drive, Arlington, VA 2226
|
|
|
Attn: Special Issues Unit
|
|
|
|
|
With respect to a notice under
Section 3.5 of this Single Family Shared-Loss Agreement, copies of such
notice shall be sent to:
|
|
|
|
|
|
Federal Deposit Insurance Corporation
|
|
|
Legal Division 1601 Bryan St.
|
|
|
Dallas, Texas 75201
|
|
|
Attention: Regional Counsel
|
|
|
|
|
If to Assuming Bank, to:
|
|
|
State Bank and Trust Company
|
|
|
3399 Peachtree RD, Suite 2040
|
|
|
Atlanta, GA 30326
|
|
|
|
|
|
Attn: Dan Speight
|
|
Such Persons and addresses may be changed from time
to time by notice given pursuant to the provisions of this Article V. Any
notice, demand or other communication delivered pursuant to the provisions of
this Article IV shall be deemed to have been given on the date actually
received.
ARTICLE VI
— MISCELLANEOUS
6.1.
Expenses
.
Except as
otherwise expressly provided herein, all costs and expenses incurred by or on
behalf of a party hereto in connection with this Single Family Shared-Loss
Agreement shall be borne by such party whether or not the transactions
contemplated herein shall be consummated.
6.2
Successors and Assigns; Specific Performance.
All terms and
provisions of
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
67
this Single Family Shared-Loss Agreement shall be binding upon and
shall inure to the benefit of the parties hereto only;
provided, however,
that, Receiver may assign or otherwise transfer this Single Family Shared-Loss
Agreement (in whole or in part) to the Federal Deposit Insurance Corporation in
its corporate capacity without the consent of Assuming Bank. Notwithstanding
anything to the contrary contained in this Single Family Shared-Loss Agreement,
except as is expressly permitted in this Section 6.2, Assuming Bank may
not assign or otherwise transfer this Single Family Shared-Loss Agreement (in
whole or in part) without the prior written consent of the Receiver, which
consent may be granted or withheld by the Receiver in its sole discretion, and
any attempted assignment or transfer in violation of this provision shall be
void
ab initio.
For the avoidance
of doubt, a merger or consolidation of the Assuming Bank with and into another
financial institution, the sale of all or substantially all of the assets of
the Assuming Bank to another financial institution constitutes the transfer of
this Single Family Shared-Loss Agreement which requires the consent of the
Receive; and for a period of thirty-six (36) months after Bank Closing, a
merger or consolidation shall also include the sale by any individual
shareholder, or shareholders acting in concert, of more than 9% of the
outstanding shares of the Assuming Bank, or of its holding company, or of any
subsidiary holding Shared-Loss Assets, or the sale of shares by the Assuming
Bank or its holding company or any subsidiary holding Shared-Loss Assets, in a
public or private offering, that increases the number of shares outstanding by
more than 9%, constitutes the transfer of this Single Family Shared-Loss
Agreement which requires the consent of the Receiver. However, no Loss shall be
recognized as a result of any accounting adjustments that are made due to any
such merger, consolidation or sale consented to by the FDIC. The FDIC’s consent
shall not be required if the aggregate outstanding principal balance of
Shared-Loss Assets is less than twenty percent (20%) of the initial aggregate
balance of Shared-Loss Assets.
6.3
Governing Law
.
This Single
Family Shared-Loss Agreement shall be construed in accordance with federal law,
or, if there is no applicable federal law, the laws of the State of New York,
without regard to any rule of conflict of law that would result in the
application of the substantive law of any jurisdiction other than the State of
New York.
6.4
WAIVER OF JURY TRIAL
.
EACH PARTY
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING
OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT
OF OR RELATING TO OR IN CONNECTION WITH THIS SINGLE FAMILY SHARED-LOSS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
6.5
Captions
.
All captions
and headings contained in this Single Family Shared-Loss Agreement are for
convenience of reference only and do not form a part of, and shall not affect
the meaning or interpretation of, this Single Family Shared-Loss Agreement.
6.6
Entire Agreement; Amendments
.
This Single
Family Shared-Loss Agreement, along with the Commercial Shared-Loss Agreement
and the Purchase and Assumption Agreement, including the Exhibits and any other
documents delivered pursuant hereto or thereto, embody the entire agreement of
the parties with respect to the subject matter hereof, and supersede all prior
representations, warranties, offers, acceptances, agreements and
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
68
understandings, written or oral, relating to the subject matter herein.
This Single Family Shared-Loss Agreement may be amended or modified or any
provision thereof waived only by a written instrument signed by both parties or
their respective duly authorized agents.
6.7
Severability
.
Whenever
possible, each provision of this Single Family Shared-Loss Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Single Family Shared-Loss Agreement is held to be
prohibited by or invalid, illegal or unenforceable under applicable law, such
provision shall be construed and enforced as if it had been more narrowly drawn
so as not to be prohibited, invalid, illegal or unenforceable, and the
validity, legality and enforceability of the remainder of such provision and
the remaining provisions of this Single Family Shared-Loss Agreement shall not
in any way be affected or impaired thereby.
6.8
No Third Party Beneficiary
.
This Single
Family Shared-Loss Agreement and the Exhibits hereto are for the sole and
exclusive benefit of the parties hereto and their respective permitted
successors and permitted assigns and there shall be no other third party
beneficiaries, and nothing in this Single Family Shared-Loss Agreement or the
Exhibits shall be construed to grant to any other Person any right, remedy or
Claim under or in respect of this Single Family Shared-Loss Agreement or any
provision hereof.
6.9
Counterparts
.
This Single
Family Shared-Loss Agreement may be executed separately by Receiver and
Assuming Bank in any number of counterparts, each of which when executed and
delivered shall be an original, but such counterparts shall together constitute
one and the same instrument.
6.10
Consent
.
Except as
otherwise provided herein, when the consent of a party is required herein, such
consent shall not be unreasonably withheld or delayed.
6.11
Rights Cumulative
.
Except as
otherwise expressly provided herein, the rights of each of the parties under
this Single Family Shared-Loss Agreement are cumulative, may be exercised as
often as any party considers appropriate and are in addition to each such party’s
rights under the Purchase and Sale Agreement and any of the related agreements
or under law. Except as otherwise expressly provided herein, any failure to
exercise or any delay in exercising any of such rights, or any partial or
defective exercise of such rights, shall not operate as a waiver or variation
of that or any other such right.
ARTICLE VII
DISPUTE RESOLUTION
Section 7.1
Dispute Resolution Procedures.
(a) In
the event a dispute arises about the interpretation, application, calculation
of Loss, or calculation of payments or otherwise with respect to this Single
Family Shared-Loss Agreement (“SF Shared-Loss Dispute Item”), then the Receiver
and the Assuming Bank shall make every attempt in good faith to resolve such
items within sixty (60) days following the receipt of a written description of
the SF Shared-Loss Dispute Item, with notification of the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
69
possibility of taking the matter to arbitration (the date on which such
60-day period expires, or any extension of such period as the parties hereto
may mutually agree to in writing, herein called the “Resolution Deadline Date”).
If the Receiver and the Assuming Bank resolve all such items to their mutual
satisfaction by the Resolution Deadline Date, then within thirty (30) days
following such resolution, any payment arising out such resolution shall be
made arising from the settlement of the SF Shared-Loss Dispute.
(b) If
the Receiver and the Assuming Bank fail to resolve any outstanding SF
Shared-Loss Dispute Items by the Resolution Deadline Date, then either party
may notify the other of its intent to submit the SF Shared-Loss Dispute Item to
arbitration pursuant to the provisions of this Article VII. Failure of
either party to notify the other of its intent to submit any unresolved SF
Shared-Loss Dispute Item to arbitration within thirty (30) days following the
Resolution Deadline Date (the date on which such thirty (30) day period expires
is herein called the “Arbitration Deadline Date”) shall be deemed an acceptance
of such SF Shared-Loss Dispute not submitted to arbitration, as well as a
waiver of the submitting party’s right to dispute such non-submitted SF Shared-Loss
Dispute Item but not a waiver of any similar claim which may arise in the
future.
(c) If
a SF Shared-Loss Dispute Item is submitted to arbitration, it shall be governed
by the rules of the American Arbitration Association (the “AAA”), except
as otherwise provided herein. Either party may submit a matter for arbitration
by delivering a notice, prior to the Arbitration Deadline Date, to the other
party in writing setting forth:
(i) A
brief description of each SF Shared-Loss Dispute Item submitted for arbitration;
(ii) A
statement of the moving party’s position with respect to each SF Shared-Loss
Dispute Item submitted for arbitration;
(iii) The
value sought by the moving party, or other relief requested regarding each SF
Shared-Loss Dispute Item submitted for arbitration, to the extent reasonably
calculable; and
(iv) The
name and address of the arbiter selected by the moving party (the “Moving
Arbiter”), who shall be a neutral, as determined by the AAA.
Failure to adequately include any information above
shall not be deemed to be a waiver of the parties right to arbitrate so long as
after notification of such failure the moving party cures such failure as
promptly as reasonably practicable.
(d) The
non-moving party shall, within thirty (30) days following receipt of a notice
of arbitration pursuant to this Section 6.1, deliver a notice to the
moving party setting forth:
(i) The
name and address of the arbiter selected by the non-moving party (the “Respondent
Arbiter”), who shall be a neutral, as determined by the AAA;
(ii) A
statement of the position of the respondent with respect to each Dispute Item;
and
(iii) The
ultimate resolution sought by the respondent or other relief, if any, the
respondent deems is due the moving party with respect to each SF Shared-Loss
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
70
Dispute Item.
Failure to adequately include any information above
shall not be deemed to be a waiver of the non-moving party’s right to defend
such arbitration so long as after notification of such failure the non-moving
party cures such failure as promptly as reasonably practicable
(e) The
Moving Arbiter and Respondent Arbiter shall select a third arbiter from a list
furnished by the American Arbitration Association (the “AAA”). In accordance
with the rules of the AAA, the three (3) arbiters shall constitute
the arbitration panel for resolution of each SF Loss-Share Dispute Item. The
concurrence of any two (2) arbiters shall be deemed to be the decision of
the arbiters for all purposes hereunder. The arbitration shall proceed on such
time schedule and in accordance with the Rules of Commercial Arbitration
of the AAA then in effect, as modified by this Section 7.1. The
arbitration proceedings shall take place at such location as the parties
thereto may mutually agree, but if they cannot agree, then they will take place
at the offices of the Corporation in Washington, DC, or Arlington, Virginia.
(f) The
Receiver and Assuming Bank shall facilitate the resolution of each outstanding
SF Shared-Loss Dispute Item by making available in a prompt and timely manner
to one another and to the arbiters for examination and copying, as appropriate,
all documents, books, and records under their respective control and that would
be discoverable under the Federal Rules of Civil Procedure.
(g) The
arbiters designated pursuant to subsections (c), (d) and (e) hereof
shall select, with respect to each Dispute Item submitted to arbitration
pursuant to this Section 7.1, either (i) the position and relief
submitted by the Assuming Bank with respect to each SF Shared-Loss Dispute
Item, or (ii) the position and relief submitted by the Receiver with respect
to each SF Shared-Loss Dispute Item, in either case as set forth in its
respective notice of arbitration. The arbiters shall have no authority to
select a value for each Dispute Item other than the determination set forth in
Section 7.1(c) and Section 7.1(d). The arbitration shall be
final, binding and conclusive on the parties.
(h) Any
amounts ultimately determined to be payable pursuant to such award shall bear
interest at the Settlement Interest Rate from and including the date specified
for the arbiters decisions specified in this Section 7.1, without regard
to any extension of the finality of such award, to but not including the date
paid. All payments required to be made under this Section 7.1 shall be
made by wire transfer.
(i) For
the avoidance of doubt, to the extent any notice of a SF Shared-Loss Dispute
Item(s) is provided prior to the Termination Date, the terms of this
Single Family Shared-Loss Agreement shall remain in effect with respect to the
Single Family Shared-Loss Loans that are the subject of such SF Shared-Loss
Dispute Item(s) until such time as any such dispute is finally resolved.
Section 7.2
Fees and Expenses of Arbiters.
The aggregate
fees and expenses of the arbiters shall be shall be borne equally by the
parties. The parties shall the aggregate fees and expenses within thirty (30)
days after receipt of the written decision of the arbiters (unless the arbiters
agree in writing on some other payment schedule).
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
71
Exhibit 1
Monthly
Certificate
SEE
FOLLOWING PAGE
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
72
|
|
PART 1 -
CURRENT MONTH NET LOSS MONTH ENDED: [input report month] Losses Loss Loan No.
Loss Type Amount TOTAL XX A Recoveries Recovery Loss Loss Loan No. Amount
Amount Month TOTAL XX B Net Losses (Recoveries) XX C = A - B PART 2 - FIRST
LOSS TEST Col. D Col. E Col. D - Col. E Cumulative Loss Amount First Loss
Tranche Cumulative Shared-Loss Amount Balance, beginning of month XX XX XX F
Current month Net Losses (from Part 1) XX Balance, end of month XX XX XX G
Shared Loss Amount XX G - F Times Loss Share percentage 80% Amount due from
(to) FDIC as Receiver XX Specify loss type as Foreclosure, or Short-Sale.
Loss Amount is the amount of Loss incurred and reported on the loan in a Loss
Month is the reporting month in which the Loss was reported. If Col. D minus
Col. E is less than zero, enter zero. Module 1 - Whole Bank w/ Loss Share -
P&A Security Banks Version 1.07 Georgia July 20, 2009 73
|
Pursuant to Section 2.1 of the Single Family Shared-Loss
Agreement, the undersigned hereby certifies the information on this Certificate
is true, complete and correct.
|
OFFICER SIGNATURE
|
|
|
OFFICER NAME:
|
TITLE
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
74
Exhibit 2a
This exhibit contains three versions of the loss
share calculation for foreclosure, plus explanatory notes.
Exhibit 2a(1)
CALCULATION
OF FORECLOSURE LOSS
Foreclosure Occurred Prior to Loss Share Agreement
|
1
|
Shared-Loss Month
|
May-09
|
|
2
|
Loan no:
|
364574
|
|
3
|
REO #
|
621
|
|
|
|
|
|
4
|
Foreclosure date
|
12/18/08
|
|
5
|
Liquidation date
|
4/12/09
|
|
6
|
Note Interest rate
|
8.100%
|
|
7
|
Most recent BPO
|
228,000
|
|
8
|
Most recent BPO date
|
1/21/09
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
9
|
Book value at date of Loss Share agreement
|
244,900
|
|
|
|
|
|
10
|
Accrued interest, limited to 90 days or days from failure to sale,
whichever is less
|
3,306
|
|
11
|
Costs incurred after Loss Share agreement in place:
|
|
|
12
|
Attorney’s fees
|
0
|
|
13
|
Foreclosure costs, including title search, filing fees,
advertising, etc.
|
0
|
|
14
|
Property protection costs, maint. and repairs
|
6,500
|
|
15
|
Tax and insurance advances
|
0
|
|
|
Other Advances
|
|
|
16
|
Appraisal/Broker’s Price Opinion fees
|
0
|
|
17
|
Inspections
|
0
|
|
18
|
Other
|
0
|
|
|
|
|
|
19
|
Gross balance recoverable by Purchaser
|
254,706
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
20
|
Net liquidation proceeds (from HUD-1 settl stmt)
|
219,400
|
|
21
|
Hazard Insurance proceeds
|
0
|
|
22
|
Mortgage Insurance proceeds
|
0
|
|
23
|
T & I escrow account balances, if positive
|
0
|
|
24
|
Other credits, if any (itemize)
|
0
|
|
25
|
Total Cash Recovery
|
219,400
|
|
|
|
|
|
26
|
Loss Amount
|
35,306
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
75
Exhibit 2a(2)
CALCULATION
OF FORECLOSURE LOSS
No
Preceeding Loan Mod under Loss Share
|
1
|
Shared-Loss Month
|
May-09
|
|
2
|
Loan no:
|
292334
|
|
3
|
REO #
|
477
|
|
|
|
|
|
4
|
Interest paid-to-date
|
4/30/08
|
|
5
|
Foreclosure date
|
1/15/09
|
|
6
|
Liquidation date
|
4/12/09
|
|
7
|
Note Interest rate
|
8.000%
|
|
8
|
Owner occupied?
|
Yes
|
|
9
|
If owner-occupied:
|
|
|
10
|
Borrower current gross annual income
|
42,000
|
|
11
|
Estimated NPV of loan mod
|
195,000
|
|
12
|
Most recent BPO
|
235,000
|
|
13
|
Most recent BPO date
|
1/21/09
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
16
|
Loan Principal balance after last paid installment
|
300,000
|
|
|
|
|
|
17
|
Accrued interest, limited to 90 days
|
6,000
|
|
18
|
Attorney’s fees
|
0
|
|
|
|
|
|
19
|
Foreclosure costs, including title search, filing fees,
advertising, etc.
|
4,000
|
|
20
|
Property protection costs, maint. and repairs
|
5,500
|
|
21
|
Tax and insurance advances
|
1,500
|
|
|
Other Advances
|
|
|
22
|
Appraisal/Broker’s Price Opinion fees
|
0
|
|
23
|
Inspections
|
50
|
|
24
|
Other
|
0
|
|
|
|
|
|
25
|
Gross balance recoverable by Purchaser
|
317,050
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
26
|
Net liquidation proceeds (from HUD-1 settl stmt)
|
205,000
|
|
27
|
Hazard Insurance proceeds
|
0
|
|
28
|
Mortgage Insurance proceeds
|
0
|
|
29
|
T & I escrow account balances, if positive
|
0
|
|
30
|
Other credits, if any (itemize)
|
0
|
|
31
|
Total Cash Recovery
|
205,000
|
|
|
|
|
|
32
|
Loss Amount
|
112,050
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
76
Exhibit 2a(3)
CALCULATION
OF FORECLOSURE LOSS
Foreclosure after a Covered Loan Mod
|
1
|
Shared-Loss Month
|
May-09
|
|
2
|
Loan no:
|
138554
|
|
3
|
REO #
|
843
|
|
|
|
|
|
4
|
Loan mod date
|
1/17/08
|
|
5
|
Interest paid-to-date
|
4/30/08
|
|
6
|
Foreclosure date
|
1/15/09
|
|
7
|
Liquidation date
|
4/12/09
|
|
8
|
Note Interest rate
|
4.000%
|
|
9
|
Most recent BPO
|
210,000
|
|
10
|
Most recent BPO date
|
1/20/09
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
11
|
NPV of projected cash flows at loan mod
|
285,000
|
|
12
|
Less: Principal payments between loan mod and deliquency
|
2,500
|
|
13
|
Plus:
|
|
|
14
|
Attorney’s fees
|
0
|
|
15
|
Foreclosure costs, including title search, filing fees, advertising, etc.
|
4,000
|
|
16
|
Property protection costs, maint. and repairs
|
7,000
|
|
17
|
Tax and insurance advances
|
2,000
|
|
18
|
Other Advances
|
|
|
19
|
Appraisal/Broker’s Price Opinion fees
|
0
|
|
20
|
Inspections
|
0
|
|
21
|
Other
|
0
|
|
|
|
|
|
22
|
Gross balance recoverable by Purchaser
|
295,500
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
23
|
Net liquidation proceeds (from HUD-1 settl stmt)
|
201,000
|
|
24
|
Hazard Insurance proceeds
|
0
|
|
25
|
Mortgage Insurance proceeds
|
0
|
|
26
|
T & I escrow account balances, if positive
|
0
|
|
27
|
Other credits, if any (itemize)
|
0
|
|
28
|
Total Cash Recovery
|
201,000
|
|
|
|
|
|
29
|
Loss Amount
|
94,500
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
77
Notes to Exhibit 2a (foreclosure)
1.
The data shown are for
illustrative purpose. The figures will vary for actual restructurings.
2.
The covered loss is the
difference between the gross balance recoverable by Purchaser and the total
cash recovery. There are three methods of calculation for covered losses from
foreclosures, depending upon the circumstances. They are shown below:
a.
If foreclosure occurred
prior to the beginning of the Loss Share agreement, use Exhibit 2a(1).
This version uses the book value of the REO as the starting point for the
covered loss.
b.
If foreclosure occurred
after the Loss Share agreement was in place, and if the loan was not
restructured when the Loss Share agreement was in place, use
Exhibit 2a(2). This version uses the unpaid balance of the loan as of the
last payment as the starting point for the covered loss.
c.
If the loan was restructured
when the Loss Share agreement was in place, and then foreclosure occurred, use
Exhibit 2a(3). This version uses the Net Present Value (NPV) of the
modified loan as the starting point for the covered loss.
3.
For Exhibit 2a(1), the
gross balance recoverable by the purchaser is calculated as the sum of lines 9
— 18; it is shown in line 19. For Exhibit 2a(2), the gross balance
recoverable by the purchaser is calculated as the sum of lines 16 — 24; it is
shown in line 25. For Exhibit 2a(3), the gross balance recoverable by the
purchaser is calculated as line 11 minus line 12 plus lines 13 — 21; it is
shown in line 22.
4.
For Exhibit 2a(1), the
total cash recovery is calculated as the sum of lines 20 — 24; it is shown in
line 25. For Exhibit 2a(2), the total cash recovery is calculated as the
sum of lines 26 — 30; it is shown in line 31. For Exhibit 2a(3), the total
cash recovery is calculated as the sum of lines 23 — 27; it is shown in line
28.
5.
Reasonable and customary
third party attorney’s fees and expenses incurred by or on behalf of Assuming
Bank in connection with any enforcement procedures, or otherwise with respect
to such loan, are reported under Attorney’s fees.
6.
Assuming Bank’s (or Third
Party Servicer’s) reasonable and customary out-of-pocket costs paid to either a
third party or an affiliate (if affiliate is pre-approved by the FDIC) for
foreclosure, property protection and maintenance costs, repairs, assessments,
taxes, insurance and similar items are treated as part of the gross recoverable
balance, to the extent they are not paid from funds in the borrower’s escrow
account. Allowable costs are limited to amounts per Freddie Mac and Fannie Mae
guidelines (as in effect from time to time), where applicable, provided that
this limitation shall not apply to costs or expenses relating to environmental
conditions.
7.
Do not include late fees,
prepayment penalties, or any similar lender fees or charges by the Failed Bank
or Assuming Bank to the loan account, any allocation of Assuming Bank’s
servicing costs, or any allocations of Assuming Bank’s general and
administrative (G&A) or other operating costs.
8.
If
Exhibit 2a(3) is used, then no accrued interest may be included as a
covered loss. Otherwise, the amount of accrued interest that may be included as
a covered loss is limited to the minimum of:
a.
90 days
b.
The number of days that the
loan is delinquent when the property was sold
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
78
c.
The number of days between
the resolution date and the date when the property was sold
To calculate accrued interest, apply the note
interest rate that would have been in effect if the loan were performing to the
principal balance after application of the last payment made by the borrower.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
79
Exhibit 2b
This exhibit contains the loss share calculation for restructuring
(loan mod), plus explanatory notes.
Exhibit 2b
CALCULATION
OF RESTRUCTURING LOSS
|
1
|
Shared-Loss Month
|
May-09
|
|
2
|
Loan no:
|
123456
|
|
|
|
|
|
|
Loan before Restructuring
|
|
|
3
|
Original loan amount
|
500,000
|
|
4
|
Current unpaid principal balance
|
450,000
|
|
5
|
Remaining term
|
298
|
|
6
|
Interest rate
|
7.500%
|
|
7
|
Interest Paid-To-Date
|
2/29/08
|
|
8
|
Monthly payment - P&I
|
3,333
|
|
9
|
Monthly payment - T&I
|
1,000
|
|
10
|
Total monthly payment
|
4,333
|
|
11
|
Loan type (fixed-rate, ARM, I/O, Option ARM, etc.)
|
Option ARM
|
|
12
|
Borrower current annual income
|
82,000
|
|
|
|
|
|
|
Terms of Modified/Restructured Loan
|
|
|
13
|
Closing date on modified/restructured loan
|
4/19/09
|
|
14
|
New Principal balance
|
461,438
|
|
15
|
Remaining term
|
313
|
|
16
|
Interest rate
|
3.500%
|
|
17
|
Monthly payment - P&I
|
1,346
|
|
18
|
Monthly payment - T&I
|
800
|
|
19
|
Total monthly payment
|
2,146
|
|
20
|
Loan type (fixed-rate, ARM, I/O, Option ARM, etc.)
|
IO Hybrid
|
|
21
|
Lien type (1st, 2nd)
|
1st
|
|
|
If adjustable:
|
|
|
22
|
Initial interest rate
|
3.500%
|
|
23
|
Term - initial interest rate
|
60 Months
|
|
24
|
Initial payment amount
|
2,146
|
|
25
|
Term-initial payment amount
|
60 Months
|
|
26
|
Negative amortization?
|
No
|
|
27
|
Rate reset frequency after first adjustment
|
6 Months
|
|
28
|
Next reset date
|
5/1/14
|
|
29
|
Index
|
LIBOR
|
|
30
|
Margin
|
2.750%
|
|
31
|
Cap per adjustment
|
2.000%
|
|
32
|
Lifetime Cap
|
9.500%
|
|
33
|
Floor
|
2.750%
|
|
34
|
Front end DTI
|
31%
|
|
35
|
Back end DTI
|
45%
|
|
|
|
|
|
|
Restructuring Loss Calculation
|
|
|
36
|
Loan Principal balance before restructuring
|
450,000
|
|
37
|
Accrued interest, limited to 90 days
|
8,438
|
|
38
|
Tax and insurance advances
|
3,000
|
|
39
|
3rd party fees due
|
—
|
|
40
|
Total loan balance due before restructuring
|
461,438
|
|
|
|
|
|
|
Assumptions for NPV Calculation, Restructured Loan:
|
|
|
41
|
Discount rate for projected cash flows
|
5.530%
|
|
42
|
Loan prepayment in full
|
120 Months
|
|
43
|
NPV of projected cash flows
|
403,000
|
|
|
|
|
|
44
|
Loss Amount
|
58,438
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
80
Notes to Exhibit 2b (restructuring)
1. The data
shown are for illustrative purpose. The figures will vary for actual
restructurings.
2. For
purposes of loss sharing, losses on restructured loans are calculated as the
difference between:
a.
The principal, accrued
interest, advances due on the loan, and allowable 3
rd
party fees
prior to restructuring (lines 36-39), and
b.
The Net Present Value (NPV)
of the estimated cash flows (line 43). The cash flows should assume no default
or prepayment for 10 years, followed by prepayment in full at the end of 10
years (120 months).
3.
For owner-occupied residential
loans, the NPV is calculated using the most recently published Freddie Mac
survey rate on 30-year fixed rate loans as of the restructure date.
4.
For investor owned or
non-owner occupied residential loans, the NPV is calculated using commercially
reasonable rate on 30-year fixed rate loans as of the restructure date.
5.
If the new loan is an
adjustable-rate loan, interest rate resets and related cash flows should be
projected based on the index rate in effect at the date of the loan
restructuring. If the restructured loan otherwise provides for specific charges
in monthly P&I payments over the term of the loan, those changes should be
reflected in the projected cash flows. Assuming Bank must retain supporting
schedule of projected cash flows as required by Section 2.1 of the Single
Family Shared-Loss Agreement and provide it to the FDIC if requested for a
sample audit.
6.
Do not include late fees,
prepayment penalties, or any similar lender fees or charges by the Failed Bank
or Assuming Bank to the loan account, any allocation of Assuming Bank’s
servicing costs, or any allocations of Assuming Bank’s general and
administrative (G&A) or other operating costs.
7.
The amount of accrued
interest that may be added to the balance of the loan is limited to the minimum
of:
a.
90 days
b.
The number of days that the
loan is delinquent at the time of restructuring
c.
The number of days between
the resolution date and the restructuring
To calculate accrued interest, apply the note
interest rate that would have been in effect if the loan were performing to the
principal balance after application of the last payment made by the borrower.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
81
Exhibit 2c
This exhibit contains two versions of the loss share calculation for
short sales, plus explanatory notes.
Exhibit 2c(1)
CALCULATION
OF LOSS FOR SHORT SALE LOANS
No
Preceeding Loan Mod under Loss Share
|
1
|
Shared-Loss Month:
|
May-09
|
|
2
|
Loan #
|
58776
|
|
3
|
RO #
|
542
|
|
|
|
|
|
4
|
Interest paid-to-date
|
7/31/08
|
|
5
|
Short Payoff Date
|
4/17/09
|
|
6
|
Note Interest rate
|
7.750%
|
|
7
|
Owner occupied?
|
Yes
|
|
|
If so:
|
|
|
8
|
Borrower current gross annual income
|
38,500
|
|
9
|
Estimated NPV of loan mod
|
200,000
|
|
10
|
Most recent BPO
|
380,000
|
|
11
|
Most recent BPO date
|
1/31/06
|
|
|
|
|
|
|
Short-Sale Loss calculation
|
|
|
12
|
Loan Principal balance
|
375,000
|
|
|
|
|
|
13
|
Accrued interest, limited to 90 days
|
7,266
|
|
14
|
Attorney’s fees
|
0
|
|
15
|
Tax and insurance advances
|
0
|
|
16
|
3rd party fees due
|
2,800
|
|
17
|
Incentive to borrower
|
2,000
|
|
18
|
Gross balance recoverable by Purchaser
|
387,066
|
|
|
|
|
|
19
|
Amount accepted in Short-Sale
|
255,000
|
|
20
|
Hazard Insurance
|
0
|
|
21
|
Mortgage Insurance
|
0
|
|
|
|
|
|
22
|
Total Cash Recovery
|
255,000
|
|
|
|
|
|
23
|
Loss Amount
|
132,066
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
82
Exhibit 2c(2)
CALCULATION
OF LOSS FOR SHORT SALE LOANS
Short Sale after a Covered Loan Mod
|
1
|
Shared-Loss Month:
|
May-09
|
|
2
|
Loan #
|
20076
|
|
3
|
REO #
|
345
|
|
|
|
|
|
4
|
Loan mod date
|
5/12/08
|
|
5
|
Interest paid-to-date
|
9/30/08
|
|
6
|
Short Payoff Date
|
4/2/09
|
|
7
|
Note Interest rate
|
7.500%
|
|
8
|
Most recent BPO
|
230,000
|
|
9
|
Most recent BPO date
|
1/21/09
|
|
|
|
|
|
|
Short-Sale Loss calculation
|
|
|
11
|
NPV of projected cash flows at loan mod
|
311,000
|
|
12
|
Less: Principal payments between loan mod and deliquency Plus:
|
1,000
|
|
13
|
Attorney’s fees
|
0
|
|
14
|
Tax and insurance advances
|
1,500
|
|
15
|
3rd party fees due
|
2,600
|
|
16
|
Incentive to borrower
|
3,500
|
|
17
|
Gross balance recoverable by Purchaser
|
317,600
|
|
|
|
|
|
18
|
Amount accepted in Short-Sale
|
234,000
|
|
19
|
Hazard Insurance
|
0
|
|
20
|
Mortgage Insurance
|
0
|
|
|
|
|
|
21
|
Total Cash Recovery
|
234,000
|
|
|
|
|
|
22
|
Loss Amount
|
83,600
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
83
Notes to Exhibit 2c (short sale)
1.
The data shown are for
illustrative purpose. The figures will vary for actual short sales.
2.
The covered loss is the
difference between the gross balance recoverable by Purchaser and the total
cash recovery. There are two methods of calculation for covered losses from
short sales, depending upon the circumstances. They are shown below:
a.
If the loan was restructured
when the Loss Share agreement was in place, and then the short sale occurred,
use Exhibit 2c(2). This version uses the Net Present Value (NPV) of the
modified loan as the starting point for the covered loss.
b.
Otherwise, use
Exhibit 2c(1). This version uses the unpaid balance of the loan as of the
last payment as the starting point for the covered loss.
3.
For Exhibit 2c(1), the
gross balance recoverable by the purchaser is calculated as the sum of lines 12
— 17; it is shown in line 18. For Exhibit 2a(2), the gross balance
recoverable by the purchaser is calculated as line 11 minus line 12 plus lines
13 — 16; it is shown in line 17.
4.
For Exhibit 2c(1), the
total cash recovery is calculated as the sum of lines 19 — 21; it is shown in
line 22. For Exhibit 2c(2), the total cash recovery is calculated as the
sum of lines 18 — 20; it is shown in line 21.
5.
Reasonable and customary
third party attorney’s fees and expenses incurred by or on behalf of Assuming
Bank in connection with any enforcement procedures, or otherwise with respect
to such loan, are reported under Attorney’s fees.
6.
Do not include late fees,
prepayment penalties, or any similar lender fees or charges by the Failed Bank
or Assuming Bank to the loan account, any allocation of Assuming Bank’s servicing
costs, or any allocations of Assuming Bank’s general and administrative
(G&A) or other operating costs.
7.
If
Exhibit 2c(2) is used, then no accrued interest may be included as a
covered loss. Otherwise, the amount of accrued interest that may be included as
a covered loss is limited to the minimum of:
d.
90 days
e.
The number of days that the
loan is delinquent when the property was sold
f.
The number of days between
the resolution date and the date when the property was sold
To calculate accrued interest, apply the note
interest rate that would have been in effect if the loan were performing to the
principal balance after application of the last payment made by the borrower.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
84
Exhibit 2d
|
Shared-Loss Month:
|
|
[input month]
|
|
|
Loan no.:
|
|
[input loan no.)
|
|
NOTE
The calculation of recovery on a loan for which a
Restructuring Loss has been paid will only apply if the loan is sold.
|
EXAMPLE CALCULATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Loss Information
|
|
|
|
|
|
|
Loan principal balance before restructuring
|
|
$
|
200,000
|
|
A
|
|
|
NPV, restructured loan
|
|
165,000
|
|
B
|
|
|
Loss on restructured loan
|
|
$
|
35,000
|
|
A — B
|
|
|
Times FDIC applicable loss share % (80% or 95%)
|
|
80
|
%
|
|
|
|
Loss share payment to purchaser
|
|
$
|
28,000
|
|
C
|
|
|
|
|
|
|
|
|
|
Calculation — Recovery amount due
to Receiver
|
|
|
|
|
|
|
Loan sales price
|
|
$
|
190,000
|
|
|
|
|
NPV of restructured loan at mod date
|
|
165,000
|
|
|
|
|
Gain - step 1
|
|
25,000
|
|
D
|
|
|
PLUS
|
|
|
|
|
|
|
Loan UPB after restructuring
|
(1)
|
|
200,000
|
|
|
|
|
Loan UPB at liquidation date
|
|
192,000
|
|
|
|
|
Gain - step 2 (principal collections after restructuring)
|
|
8,000
|
|
E
|
|
|
Recovery amount
|
|
33,000
|
|
D+ E
|
|
|
Times FDIC loss share %
|
|
80
|
%
|
|
|
|
Recovery due to FDIC
|
|
$
|
26,400
|
|
F
|
|
|
|
|
|
|
|
|
|
Net loss share paid to purchaser (C — F)
|
|
$
|
1,600
|
|
|
|
|
|
|
|
|
|
|
|
Proof Calculation
|
(2)
|
|
|
|
|
|
|
Loan principal balance
|
|
$
|
200,000
|
|
G
|
|
|
|
|
|
|
|
|
|
Principal collections on loan
|
|
8,000
|
|
|
|
|
Sales price for loan
|
|
190,000
|
|
|
|
|
Total collections on loan
|
|
198,000
|
|
H
|
|
|
Net loss on loan
|
|
$
|
2,000
|
|
G — H
|
|
|
Times FDIC applicable loss share % (80% or 95%)
|
|
80
|
%
|
|
|
|
Loss share payment to purchaser
|
|
$
|
1,600
|
|
|
|
|
(1)
|
This example assumes that the FDIC loan modification program as shown
in Exhibit 5 is applied and the loan restructuring does not result in a
reduction in the loan principal balance due from the borrower.
|
|
(2)
|
This proof calculation is
provided to illustrate the concept and the Assuming Bank is not required to
provide this with its Recovery calculations.
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
85
Exhibit 3
Portfolio Performance and Summary Schedule
SHARED-LOSS
LOANS
PORTFOLIO
PERFORMANCE AND SUMMARY SCHEDULE
|
MONTH ENDED:
|
|
[input report month]
|
|
|
POOL SUMMARY
|
|
|
|
|
|
|
|
|
|
|
#
|
|
$
|
|
|
|
|
Loans at Sale Date
|
|
xx
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans as of this month-end
|
|
xx
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATED THRESHOLD TRACKING
|
|
#
|
|
$
|
|
|
|
|
Stated Threshold amount
|
|
****
|
|
|
|
A
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative loss payments, prior month
|
|
|
|
|
|
|
|
|
Loss payment for current month
|
|
|
|
|
|
|
|
|
Cumulative loss payment, this month
|
|
|
|
|
|
|
|
|
Cumulative Commercial & Other Loans Net Charge-Offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
|
Remaining to Stated Threshold
|
|
****
|
|
|
|
A - B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Total
|
|
|
PORTFOLIO PERFORMANCE STATUS
|
|
#
|
|
$
|
|
#
|
|
|
Current
|
|
|
|
|
|
|
|
|
30 — 59 days past due
|
|
|
|
|
|
|
|
|
60 — 89 days past due
|
|
|
|
|
|
|
|
|
90 — 119 days past due
|
|
|
|
|
|
|
|
|
120 and over days past due
|
|
|
|
|
|
|
|
|
In foreclosure
|
|
|
|
|
|
|
|
|
ORE
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo Item:
|
|
|
|
|
|
|
|
|
Loans in process of restructuring — total
|
|
|
|
|
|
****
|
|
|
Loans in bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans in process of restructuring by delinquency status
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
30 - 59 days past due
|
|
|
|
|
|
|
|
|
60 - 89 days past due
|
|
|
|
|
|
|
|
|
90 - 119 days past due
|
|
|
|
|
|
|
|
|
120 and over days past due In foreclosure
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
86
List of
Loans Paid Off During Month
List of
Loans Sold During Month
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
87
Exhibit 4
Wire Transfer Instructions
PURCHASER
WIRING INSTRUCTIONS
|
BANK RECEIVING WIRE
|
|
|
|
|
|
9 DIGIT ABA ROUTING NUMBER
|
|
|
|
|
|
ACCOUNT NUMBER
|
|
|
|
|
|
NAME OF ACCOUNT
|
|
|
|
|
|
ATTENTION TO WHOM
|
|
|
|
|
|
PURPOSE OF WIRE
|
|
|
|
|
|
FDIC
RECEIVER WIRING INSTRUCTIONS
|
|
|
|
|
BANK RECEIVING WIRE
|
|
|
|
|
|
SHORT NAME
|
|
|
|
|
|
ADDRESS OF BANK RECEIVING WIRE
|
|
|
|
|
|
9 DIGIT ABA ROUTING NUMBER
|
|
|
|
|
|
ACCOUNT NUMBER
|
|
|
|
|
|
NAME OF ACCOUNT
|
|
|
|
|
|
ATTENTION TO WHOM
|
|
|
|
|
|
PURPOSE OF WIRE
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
88
EXHIBIT 5
FDIC
MORTGAGE LOAN MODIFICATION PROGRAM
Objective
The objective of this FDIC Mortgage Loan Modification Program (“Program”)
is to modify the terms of certain residential mortgage loans so as to improve
affordability, increase the probability of performance, allow borrowers to
remain in their homes and increase the value of the loans to the FDIC and
assignees. The Program provides for the modification of Qualifying Loans (as
defined below) by reducing the borrower’s monthly housing debt to income ratio
(“DTI Ratio”) to no more than 31% at the time of the modification and
eliminating adjustable interest rate and negative amortization features.
Qualifying Mortgage Loans
In order for a mortgage loan to be a Qualifying Loan it must meet all
of the following criteria, which must be confirmed by the lender:
·
The collateral
securing the mortgage loan is owner-occupied and the owner’s primary residence;
and
·
The mortgagor
has a first priority lien on the collateral; and
·
Either the
borrower is at least 60 days delinquent or a default is reasonably foreseeable.
Modification Process
The lender shall undertake a review of its mortgage loan portfolio to
identify Qualifying Loans. For each Qualifying Loan, the lender shall determine
the net present value of the modified loan and, if it will exceed the net
present value of the foreclosed collateral upon disposition, then the
Qualifying Loan shall be modified so as to reduce the borrower’s monthly DTI
Ratio to no more than 31% at the time of the modification. To achieve this, the
lender shall use a combination of interest rate reduction, term extension and
principal forbearance, as necessary.
The borrower’s monthly DTI Ratio shall be a percentage calculated by
dividing the borrower’s monthly income by the borrower’s monthly housing
payment (including principal, interest, taxes and insurance). For these
purposes, (1) the borrower’s monthly income shall be the amount of the
borrower’s (along with any co-borrowers’) documented and verified gross monthly
income, and (2) the borrower’s monthly housing payment shall be the amount
required to pay monthly principal and interest plus one-twelfth of the then
current annual amount required to pay real property taxes and homeowner’s
insurance with respect to the collateral.
In order to calculate the monthly principal payment, the lender shall
capitalize to the outstanding principal balance of the Qualifying Loan the
amount of all delinquent interest, delinquent taxes, past due insurance
premiums, third party fees and (without duplication) escrow advances (such
amount, the “Capitalized Balance”).
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
89
In order to achieve the goal of reducing the DTI Ratio to 31%, the
lender shall take the following steps in the following order of priority with
respect to each Qualifying Loan:
1.
Reduce the interest rate to
the then current Freddie Mac Survey Rate for 30-year fixed rate mortgage loans,
and adjust the term to 30 years.
2.
If the DTI Ratio is still in
excess of 31%, reduce the interest rate further, but no lower than 3%, until
the DTI ratio of 31% is achieved.
3.
If the DTI Ratio is still in
excess of 31% after adjusting the interest rate to 3%, extend the remaining
term of the loan by 10 years.
4.
If the DTI Ratio is still in
excess of 31%, calculate a new monthly payment (the “Adjusted Payment Amount”)
that will result in the borrower’s monthly DTI Ratio not exceeding 31%. After
calculating the Adjusted Payment Amount, the lender shall bifurcate the
Capitalized Balance into two portions — the amortizing portion and the
non-amortizing portion. The amortizing portion of the Capitalized Balance shall
be the mortgage amount that will fully amortize over a 40-year term at an
annual interest rate of 3% and monthly payments equal to the Adjusted Payment
Amount. The non- amortizing portion of the Capitalized Balance shall be the
difference between the Capitalized Balance and the amortizing portion of the
Capitalized Balance. If the amortizing portion of the Capitalized Balance is
less than 75% of the current estimated value of the collateral, then the lender
may choose not to restructure the loan. If the lender chooses to restructure
the loan, then the lender shall forbear on collecting the non-amortizing
portion of the Capitalized Balance, and such amount shall be due and payable
only upon the earlier of (i) maturity of the modified loan, (ii) a
sale of the property or (iii) a pay-off or refinancing of the loan. No
interest shall be charged on the non-amortizing portion of the Capitalized
Balance, but repayment shall be secured by a first lien on the collateral.
Special Note:
The net present value calculation used to determine whether a loan
should be modified based on the modification process above is distinct and
different from the net present value calculation used to determine the covered
loss if the loan is modified. Please refer only to the net present value
calculation described in this exhibit for the modification process, with its
separate assumptions, when determining whether to provide a modification to a
borrower. Separate assumptions may include, without limitation, Assuming Bank’s
determination of a probability of default without modification, a probability
of default with modification, home price forecasts, prepayment speeds, and
event timing. These assumptions are applied to different projected cash flows
over the term of the loan, such as the projected cash flow of the loan
performing or defaulting without modification and the projected cash flow of
the loan performing or defaulting with modification.
By contrast, the net present value for determining the covered loss is
based on a 10 year period. While the
assumptions in the net present value calculation used in the modification process
may change, the net present value calculation for determining the covered loss
remains constant.
|
Module 1 — Whole
Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20,
2009
|
|
|
90
EXHIBIT 4.15B
COMMERCIAL
AND OTHER ASSETS SHARED-LOSS AGREEMENT
This agreement for reimbursement of loss sharing
expenses on certain loans and other assets (the “Commercial Shared-Loss
Agreement”) shall apply when the Assuming Bank purchases Shared-Loss Assets as
that term is defined herein. The terms hereof shall modify and supplement, as
necessary, the terms of the Purchase and Assumption Agreement to which this
Commercial Shared-Loss Agreement is attached as Exhibit 4.15B and
incorporated therein. To the extent any inconsistencies may arise between the
terms of the Purchase and Assumption Agreement and this Commercial Shared-Loss
Agreement with respect to the subject matter of this Commercial Shared-Loss
Agreement, the terms of this Commercial Shared-Loss Agreement shall control.
References in this Commercial Shared-Loss Agreement to a particular Section shall
be deemed to refer to a Section in this Commercial Shared-Loss Agreement
unless the context indicates that a Section of the Purchase and Assumption
Agreement is intended.
ARTICLE I
— DEFINITIONS
Capitalized terms used in this Commercial
Shared-Loss Agreement that are not defined in this Commercial Shared-Loss
Agreement are defined in the Purchase and Assumption Agreement In addition to
the terms defined above, defined below are certain additional terms relating to
loss-sharing, as used in this Commercial Shared-Loss Agreement.
“
AAA
”
means the
American Arbitration Association as provided in
Section 2.1(f)(iii) of this Commercial Shared-Loss Agreement.
“
Accrued Interest
”
means, with
respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan
Commitment Advance at any time, the amount of earned and unpaid interest,
taxes, credit life and/or disability insurance premiums (if any) payable by the
Obligor accrued on or with respect to such Shared-Loss Loan, Permitted Advance
or Shared- Loss Loan Commitment Advance, all as reflected on the Accounting
Records of the Failed Bank or the Assuming Bank (as applicable);
provided,
that
Accrued Interest shall not include any amount that accrues on or
with respect to any Shared-Loss Loan, Permitted Advance or Shared- Loss Loan
Commitment Advance after that Asset has been placed on non-accrual or
nonperforming status by either the Failed Bank or the Assuming Bank (as
applicable).
“
Additional ORE
”
means
Shared-Loss Loans that become Other Real Estate after Bank Closing Date.
“
Affiliate
”
shall have the
meaning set forth in the Purchase and Assumption Agreement;
provided,
that
,
for purposes of this Commercial Shared-Loss Agreement, no Third Party Servicer
shall be deemed to be an Affiliate of the Assuming Bank.
“
Applicable Anniversary
of the Commencement Date
”
means the fifth (5th)
anniversary of the Commencement Date.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
91
“Calendar Quarter”
means a
quarterly period (a) for the first such period, beginning on the
Commencement Date and ending on the last calendar day of either March, June,
September or December, whichever is the first to occur after the
Commencement Date, and (b) for quarterly periods thereafter, beginning on
the first calendar day of the calendar month immediately after the month that
ended the prior period and ending on the last calendar day of each successive
three-calendar-month period thereafter (i.e., each March, June,
September and December, starting in the applicable order depending on the
ending date of first such period) of any year.
“Capitalized Expenditures”
means those
expenditures that (i) would be capitalized under generally accepted
accounting principles, and (ii) are incurred with respect to Shared-Loss
Loans, Other Real Estate, Additional ORE or Subsidiary ORE. Capitalized Expenditures
shall not include expenses related to environmental conditions including, but
not limited to, remediation, storage or disposal of any hazardous or toxic
substances or any pollutant or contaminant.
“Charge-Offs”
means, with
respect to any Shared-Loss Assets for any period, an amount equal to the
aggregate amount of loans or portions of loans classified as “Loss” under the
Examination Criteria, including (a) charge-offs of (i) the principal
amount of such assets net of unearned interest (including write-downs
associated with Other Real Estate, Additional ORE, Subsidiary ORE or loan
modification(s)) (ii) Accrued Interest, and (iii) Capitalized
Expenditures plus (b) Pre-Charge-Off Expenses incurred on the respective
Shared-Loss Loans, all as effected by the Assuming Bank during such period and
reflected on the Accounting Records of the Assuming Bank;
provided,
that
:
(i) the aggregate amount of Accrued Interest (including any reversals
thereof) for the period after Bank Closing that shall be included in
determining the amount of Charge-Offs for any Shared-Loss Loan shall not exceed
ninety (90) days’ Accrued Interest; (ii) no Charge-Off shall be taken with
respect to any anticipated expenditure by the Assuming Bank until such
expenditure is actually incurred; (iii) any financial statement
adjustments made in connection with the purchase of any Assets pursuant to this
Purchase and Assumption Agreement or any future purchase, merger, consolidation
or other acquisition of the Assuming Bank shall not constitute “Charge-Offs”;
and (iv) except for Portfolio Sales or any other sales or dispositions
consented to by the Receiver, losses incurred on the sale or other disposition
of Shared-Loss Assets to any Person (other than the sale or other disposition
of Other Real Estate, Additional ORE or Subsidiary ORE to a Person other than
an Affiliate of the Assuming Bank which is conducted in a commercially
reasonable and prudent manner) shall not constitute Charge-Offs.
“Commencement Date”
means the
first calendar day following Bank Closing.
“Consumer Loans”
means Loans to
individuals for household, family and other personal expenditures (including
United States and/or State-guaranteed student loans and extensions of credit
pursuant to a credit card plan or debit card plan).
“Environmental Assessment”
means an
assessment of the presence, storage or release of any hazardous or toxic
substance, pollutant or contaminant with respect to the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
92
collateral securing a Shared-Loss Loan that has been fully or partially
charged off.
“Examination Criteria”
means the loan
classification criteria employed by, or any applicable regulations of, the
Assuming Bank’s Chartering Authority at the time such action is taken, as such
criteria may be amended from time to time.
“Failed Bank
Charge-Offs/Write-Downs”
means, with respect to any
Shared- Loss Asset, an amount equal to the aggregate amount of reversals or
charge-offs of Accrued Interest and charge-offs and write-downs of principal
effected by the Failed Bank with respect to that Shared-Loss Asset as reflected
on the Accounting Records of the Failed Bank.
“Fair Value”
means the fair
value of a Shared Loss MTM Asset as determined in accordance with FAS 157 as in
effect on Bank Closing.
“FDIC Party”
has the
meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss
Agreement.
“Net Charge-Offs”
means, with
respect to any period, an amount equal to the aggregate amount of Charge-Offs
for such period less the amount of Recoveries for such period.
“Neutral Member”
has the
meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss
Agreement.
“New Shared-Loss Loans”
means loans
that would otherwise be subject to loss sharing under this Commercial
Shared-Loss Agreement that were originated after April 24, 2009 and before
Bank Closing.
“Notice of Dispute”
has the
meaning provided in Section 2.1(f)(iii) of this Commercial Shared-Loss
Agreement.
“ORE Subsidiary”
means any
Subsidiary of the Assuming Bank that engages solely in holding, servicing,
managing or liquidating interests of a type described in clause (A) of the
definition of “Other Real Estate,” which interests have arisen from the
collection or settlement of a Shared-Loss Loan.
“Other Real Estate”
means all of
the following (including any of the following fully or partially charged off
the books and records of the Failed Bank or the Assuming Bank) that
(i) are owned by the Failed Bank as of Bank Closing and are purchased
pursuant to the Purchase and Assumption Agreement or (ii) have arisen
subsequent to Bank Closing from the collection or settlement by the Assuming
Bank of a Shared-Loss Loan:
(A)
all interests in real estate
(other than Bank Premises and Fixtures), including but not limited to mineral
rights, leasehold rights, condominium and cooperative interests, air rights and
development rights; and
(B)
all other assets (whether
real or personal property) acquired by foreclosure
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
93
or in full or partial satisfaction of judgments or
indebtedness.
“Permitted Advance”
means an
advance of funds by the Assuming Bank with respect to a Shared-Loss Loan, or
the making of a legally binding commitment by the Assuming Bank to advance
funds with respect to a Shared-Loss Loan, that (i) in the case of such an
advance, is actually made, and, in the case of such a commitment, is made and
all of the proceeds thereof actually advanced, within one (1) year after
the Commencement Date, (ii) does not cause the sum of (A) the book
value of such Shared-Loss Loan as reflected on the Accounting Records of the
Assuming Bank after any such advance has been made by the Assuming Bank
plus
(B) the unfunded amount of any such commitment made by the Assuming Bank
related thereto, to exceed 110% of the Book Value of such Shared-Loss Loan,
(iii) is not made with respect to a Shared-Loss Loan with respect to which
(A) there exists a related Shared-Loss Loan Commitment or (B) the
Assuming Bank has taken a Charge-Off and (iv) is made in good faith, is
supported at the time it is made by documentation in the Credit Files and
conforms to and is in accordance with the applicable requirements set forth in
Article III of this Commercial Shared- Loss Agreement and with the then
effective written internal credit policy guidelines of the Assuming Bank;
provided,
that
the limitations in subparagraphs (i), (ii) and (iii) of
this definition shall not apply to any such action (other than to an advance or
commitment related to the remediation, storage or final disposal of any
hazardous or toxic substance, pollutant or contaminant) that is taken by
Assuming Bank in its reasonable discretion to preserve or secure the value of
the collateral for such Shared-Loss Loan.
“Permitted Amendment”
means, with
respect to any Shared-Loss Loan Commitment or Shared-Loss Loan, any amendment,
modification, renewal or extension thereof, or any waiver of any term, right,
or remedy thereunder, made by the Assuming Bank in good faith and otherwise in
accordance with the applicable requirements set forth in Article III of
this Commercial Shared-Loss Agreement and the then effective written internal
credit policy guidelines of the Assuming Bank;
provided,
that
:
(i) with respect to a
Shared-Loss Loan Commitment or a Shared-Loss Loan that is not a revolving line
of credit, no such amendment, modification, renewal, extension, or waiver,
except as allowed under the definition of Permitted Advance, shall operate to
increase the amount of principal (A) then remaining available to be
advanced by the Assuming Bank under the Shared- Loss Loan Commitment or
(B) then outstanding under the Shared-Loss Loan;
(ii) with respect to a
Shared-Loss Loan Commitment or a Shared-Loss Loan that is a revolving line of
credit, no such amendment, modification, renewal, extension, or waiver, except
as allowed under the definition of Permitted Advance, shall operate to increase
the maximum amount of principal authorized as of Bank Closing to be outstanding
at any one time under the underlying revolving line of credit relationship with
the debtor (regardless of the extent to which such revolving line of credit may
have been funded as of Bank Closing or may subsequently have been funded and/or
repaid); and
(iii) no such
amendment, modification, renewal, extension or waiver shall extend the term of
such Shared-Loss Loan Commitment or Shared-Loss Loan beyond the end of the
final Shared-Loss Quarter unless the term of such Shared-Loss Loan Commitment
or Shared-Loss
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
94
Loan as existed on Bank Closing was beyond the end of the final
Shared-Loss Quarter, in which event no such amendment, modification, renewal,
extension or waiver shall extend such term beyond the term as existed as of Bank
Closing.
“
Pre-Charge-Off
Expenses”
means those expenses incurred in the usual and
prudent management of a Shared-Loss Loan that would qualify as a Reimbursable
Expense or Recovery Expense if incurred after a Charge-Off of the related
Shared-Loss Asset had occurred.
“Quarterly Certificate”
has the
meaning provided in Section 2.1(a)(i) of this Commercial Shared-Loss
Agreement.
“Recoveries”
(I)(A) In
addition to any sums to be applied as Recoveries pursuant to subparagraph
(II) below, “Recoveries” means, with respect to any period, the sum of
(without duplication):
(i) the amount of
collections during such period by the Assuming Bank on Charge-Offs of
Shared-Loss Assets effected by the Assuming Bank prior to the end of the final
Shared-Loss Quarter;
plus
(ii) the amount of
collections during such period by the Assuming Bank on Failed Bank
Charge-Offs/Write-Downs;
plus
(iii) the amount of
gain on any sale or other disposition during such period by the Assuming Bank
of Shared Loss Loans, Other Real Estate, Additional ORE or Subsidiary ORE
(provided,
that
the amount of any such gain included in Recoveries shall not exceed
the aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and
Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses);
plus
(iv) the amount of
collections during such period by the Assuming Bank of any Reimbursable
Expenses or Recovery Expenses;
plus
(v) the amount of any
fee or other consideration received by the Assuming Bank during or prior to
such period in connection with any amendment, modification, renewal, extension,
refinance, restructure, commitment or other similar action taken by the
Assuming Bank with respect to a Shared-Loss Asset with respect to which there
exists a Failed Bank Charge-Off/Write-Down or a Shared-Loss Loan as to which a
Charge-Off has been effected by the Assuming Bank during or prior to such
period
(provided,
that
the amount of any such fee or other
consideration included in Recoveries shall not exceed the aggregate amount of
the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken and any
related Reimbursable Expenses and Recovery Expenses).
(I)(B) For the purpose
of determining the amounts to be applied as Recoveries pursuant to subparagraph
(I)(A) above, the Assuming Bank shall apply amounts received on the Assets
that are not otherwise applied to reduce the book value of principal of a
Shared-Loss Loan (or, in the case of Other Real Estate, Additional ORE,
Subsidiary ORE and Capitalized Expenditures, that are not otherwise applied to
reduce the book value thereof) in the following order: first to
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
95
Charge-Offs and Failed Bank Charge-Offs/Write Downs; then to
Reimbursable Expenses and Recovery Expenses; then to interest income; and then
to other expenses incurred by the Assuming Bank.
(II)
If
there occurs an amendment,
modification, renewal, extension, refinance, restructure, commitment, sale or
other similar action with respect to a Shared-Loss Loan as to which there
exists a Failed Bank Charge-Off/Write Down or as to which a Charge-Off has been
effected by the Assuming Bank during or prior to such period,
and
if
,
as a result of such occurrence, the Assuming Bank recognizes any interest
income for financial accounting purposes on that Shared-Loss Loan,
then
“Recoveries”
shall also include the portion of the total amount of any such interest income
recognized by the Assuming Bank which is derived by
multiplying:
(A) the total amount of
any such interest income recognized by the Assuming Bank during such period
with respect to that Shared-Loss Loan as described above,
by
(B) a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or charge-offs
of Accrued Interest) of all such Failed Bank Charge-Offs/WriteDowns and
Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan
plus the principal amount of that Shared-Loss Loan that has not yet been
charged- off but has been placed on nonaccrual status, all of which occurred at
any time prior to or during the period in which the interest income referred to
in subparagraph (II)(A) immediately above was recognized, and the
denominator
of which is the total amount of principal indebtedness (including all such
prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above)
due from the Obligor on that Shared-Loss Loan as of the end of such period;
provided,
however,
that the amount of any interest
income included as Recoveries for a particular Shared-Loss Loan shall not
exceed the aggregate amount of (a) Failed Bank ChargeOffs/Write-Downs,
(b) Charge-Offs effected by the Assuming Bank during or prior to the period
in which the amount of Recoveries is being determined, plus (c) any
Reimbursable Expenses and Recovery Expenses paid to the Assuming Bank pursuant
to this Commercial Shared-Loss Agreement during or prior to the period in which
the amount of Recoveries is being determined, all with respect to that
particular Shared-Loss Loan; and,
provided
,
further
,
that
any collections on any such Shared-Loss Loan that are not applied to reduce
book value of principal or recognized as interest income shall be applied pursuant
to subparagraph (I) above.
(III) Notwithstanding subparagraphs
(I) and (II) above, the term “Recoveries” shall not include:
(a) any amounts paid to the Assuming Bank by the Receiver pursuant to
Section 2.1 of this Commercial Shared-Loss Agreement, (b) amounts
received with respect to Charge-Offs effected by the Assuming Bank after the
final Shared-Loss Quarter, (c) after the final Shared- Loss Quarter,
income received by the Assuming Bank from the operation of, and any gains
recognized by the Assuming Bank on the disposition of, Other Real Estate,
Additional ORE or Subsidiary ORE (such income and gains being hereinafter
together referred to as “ORE Income”),
except
to the extent that
aggregate ORE Income exceeds the aggregate expenses paid to third parties by or
on behalf of the Assuming Bank after the final Shared-Loss Quarter to manage,
operate and maintain Other Real Estate, Additional ORE or Subsidiary ORE (such
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
96
expenses being hereinafter referred to as “ORE Expenses”). In
determining the extent aggregate ORE Income exceeds aggregate ORE Expenses for
any Recovery Quarter as set forth immediately above in subparagraph (c), the
Assuming Bank will subtract (i) ORE Expenses paid to third parties during
such Recovery Quarter (provided, that, in the case of the final Recovery
Quarter only, the Assuming Bank will subtract ORE Expenses paid to third parties
from the beginning of the final Recovery Quarter up to the date the Assuming
Bank is required to deliver the final Quarterly Certificate pursuant to this
Commercial Shared-Loss Agreement)
from
(ii) ORE Income received
during such Recovery Quarter, to calculate net ORE income (“Net ORE Income”)
for that Recovery Quarter. If the amount of Net ORE Income so calculated for a
Recovery Quarter is positive, such amount shall be reported as Recoveries on
the Quarterly Certificate for such Recovery Quarter. If the amount of Net ORE
Income so calculated for a Recovery Quarter is negative (“Net ORE Loss
Carryforward”), such amount shall be added to any ORE Expenses paid to third
parties in the next succeeding Recovery Quarter, which sum shall then be
subtracted from ORE Income for that next succeeding Recovery Quarter, for the
purpose of determining the amount of Net ORE Income (or, if applicable, Net ORE
Loss Carryforward) for that next succeeding Recovery Quarter. If, as of the end
of the final Recovery Quarter, a Net ORE Loss Carryforward exists, then the
amount of the Net ORE Loss Carryforward that does
not
exceed the
aggregate amount of Net ORE Income reported as Recoveries on Quarterly
Certificates for
all
Recovery Quarters may be included as a Recovery
Expense on the Quarterly Certificate for the final Recovery Quarter.
“Recovery Amount”
has the
meaning provided in Section 2.1(b)(ii) of this Commercial Shared-Loss
Agreement.
“Recovery Expenses”
means, for any
Recovery Quarter, the amount of actual, reasonable and necessary out-of-pocket
expenses (other than Capitalized Expenditures) paid to third parties (other
than Affiliates of the Assuming Bank) by or on behalf of the Assuming Bank, as
limited by Sections 3.2(c) and (d) of Article III to this
Commercial Shared-Loss Agreement, to recover amounts owed with respect to
(i) any Shared-Loss Asset as to which a Charge-Off was effected prior to
the end of the final Shared-Loss Quarter (provided that such amounts were
incurred no earlier than the date the first Charge-Off on such Shared-Loss
Asset could have been reflected on the Accounting Records of the Assuming
Bank), and (ii) Failed Bank ChargeOffs/Write-Downs (including, in each
case, all costs and expenses related to an Environmental Assessment and any other
costs or expenses related to any environmental conditions with respect to the
Shared-Loss Assets (it being understood that any remediation expenses for any
such pollutant or contaminant are not recoverable if in excess of $200,000 per
Shared-Loss Asset, without the Assuming Bank having obtained the prior consent
of the Receiver for such expenses);
provided
,
that
, so long as
income with respect to a Shared-Loss Loan is being prorated pursuant to the
arithmetical formula in subsection (II) of the definition of “Recoveries”,
the term “Recovery Expenses” shall not include that portion of any such
expenses paid during such Recovery Quarter to recover any amounts owed on that
Shared-Loss Loan that is derived by:
subtracting
(1) the product
derived by
multiplying:
(A) the total amount of any such expenses paid
by or on behalf of the Assuming
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
97
Bank during such Recovery Quarter with respect to
that Shared-Loss Loan,
by
(B) a fraction, the
numerator
of which
is the aggregate principal amount (excluding reversals or charge-offs of
Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and
Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan
plus the principal amount of that Shared-Loss Loan that has not yet been
charged-off but has been placed on nonaccrual status, all of which occurred at
any time prior to or during the period in which the interest income referred to
in subparagraph (II)(A) of the definition of “Recoveries” was recognized,
and the
denominator
of which is the total amount of principal
indebtedness (including all such prior Failed Bank ChargeOffs/Write-Downs and
Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan
as of the end of such period;
from
(2) the total amount
of any such expenses paid during that Recovery Quarter with respect to that
Shared-Loss Loan.
“Recovery Quarter”
has the
meaning provided in Section 2.1(a)(ii) of this Commercial Shared-Loss
Agreement.
“Reimbursable Expenses”
means, for any
Shared-Loss Quarter, the amount of actual, reasonable and necessary
out-of-pocket expenses (other than Capitalized Expenditures), paid to third
parties (other than Affiliates of the Assuming Bank) by or on behalf of the
Assuming Bank, as limited by Sections 3.2(c) and (d) of
Article III of this Commercial Shared- Loss Agreement, to:
(i) recover amounts owed with respect to any
Shared-Loss Asset as to which a Charge-Off has been effected prior to the end
of the final Shared-Loss Quarter (provided that such amounts were incurred no
earlier than the date the first Charge-Off on such Shared-Loss Asset could have
been reflected on the Accounting Records of the Assuming Bank) and recover
amounts owed with respect to Failed Bank Charge-Offs/Write-Downs (including, in
each case, all costs and expenses related to an Environmental Assessment and
any other costs or expenses related to any environmental conditions with
respect to the Shared-Loss Assets (it being understood that any such
remediation expenses for any such pollutant or contaminant are not recoverable
if in excess of $200,000 per Shared-Loss Asset, without the Assuming Bank
having obtained the prior consent of the Receiver for such expenses);
provided,
that
, so long as income with respect to a Shared-Loss Loan is being
pro-rated pursuant to the arithmetical formula in subsection (II) of the
definition of “Recoveries”, the term “Reimbursable Expenses” shall not include
that portion of any such expenses paid during such Shared-Loss Quarter to
recover any amounts owed on that Shared-Loss Loan that is derived by:
subtracting
(1) the product
derived by
multiplying:
(A) the total amount of any such expenses paid
by or on behalf of the Assuming Bank during such Shared-Loss Quarter with
respect to that Shared-Loss Loan,
by
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
98
(B) a fraction, the
numerator
of which
is the aggregate principal amount (excluding reversals or charge-offs of
Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and
Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan
plus the principal amount of that Shared-Loss Loan that has not yet been
charged-off but has been placed on nonaccrual status, all of which occurred at
any time prior to or during the period in which the interest income referred to
in subparagraph (II)(A) of the definition of “Recoveries” was recognized,
and the
denominator
of which is the total amount of principal
indebtedness (including all such prior Failed Bank ChargeOffs/Write-Downs and
Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan
as of the end of such period;
from
(2) the total amount
of any such expenses paid during that Shared-Loss Quarter with respect to that
Shared-Loss Loan; and
(ii) manage, operate or maintain Other Real
Estate, Additional ORE or Subsidiary ORE
less
the amount of any income
received by the Assuming Bank during such Shared-Loss Quarter with respect to
such Other Real Estate, Additional ORE or Subsidiary ORE (which resulting
amount under this clause (ii) may be negative).
“Review Board”
has the
meaning provided in Section 2.1(f)(i) of this Commercial Shared-Loss
Agreement.
“Shared-Loss Amount”
has the
meaning provided in Section 2.1(b)(i) of this Commercial Shared-Loss
Agreement.
“Shared-Loss Asset
Repurchase Price”
means, with respect to any Shared-Loss
Asset, the principal amount thereof plus any other fees or penalties due from
an Obligor (including, subject to the limitations discussed below, the amount
of any Accrued Interest) stated on the Accounting Records of the Assuming Bank,
as of the date as of which the Shared-Loss Asset Repurchase Price is being
determined (regardless, in the case of a Shared-Loss Loan, of the Legal Balance
thereof) plus all Reimbursable Expenses and Recovery Expenses incurred up to
and through the date of consummation of purchase of such Shared-Loss Asset;
provided,
that
(i) in the case of a Shared-Loss Loan there shall be excluded
from such amount the amount of any Accrued Interest accrued on or with respect
to such Shared-Loss Loan prior to the ninety (90)-day period ending on the day
prior to the purchase date determined pursuant to Sections 2.1 (e)(i) or
2.1 (e)(iii) of this Commercial Shared-Loss Agreement, except to the
extent such Accrued Interest was included in the Book Value of such Shared-Loss
Loan, and (ii) any collections on a Shared-Loss Loan received by the
Assuming Bank after the purchase date applicable to such Shared-Loss Loan shall
be applied (without duplication) to reduce the Shared- Loss Asset Repurchase
Price of such Shared-Loss Loan on a dollar-for-dollar basis. For purposes of
determining the amount of unpaid interest which accrued during a given period
with respect to a variable-rate Shared-Loss Loan, all collections of interest
shall be deemed to be applied to unpaid interest in the chronological order in
which such interest accrued.
“Shared-Loss Assets”
means
Shared-Loss Loans, Other Real Estate purchased
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
99
by the Assuming Bank, Additional ORE, Subsidiary ORE and Capitalized
Expenditures, but does not include Shared Loss MTM Assets.
“Shared-Loss Loan Commitment”
means:
(i) any Commitment to
make a further extension of credit or to make a further advance with respect to
an existing Shared-Loss Loan; and
(ii) any Shared-Loss
Loan Commitment (described in subparagraph (i) immediately preceding) with
respect to which the Assuming Bank has made a Permitted Amendment.
“Shared-Loss Loan Commitment
Advance”
means an advance pursuant to a Shared-Loss Loan
Commitment with respect to which the Assuming Bank has not made a Permitted
Advance.
“Shared-Loss Loans”
means:
(i)(A) Loans purchased by the Assuming Bank
pursuant to the Purchase and Assumption Agreement set forth on
Exhibit 4.15(b) to the Purchase and Assumption Agreement,
(B) New Shared-Loss Loans purchased by the Assuming Bank pursuant to the
Purchase and Assumption Agreement, (C) Permitted Advances and
(D) Shared-Loss Loan Commitment Advances, if any;
provided,
that
Shared-Loss Loans shall not include Loans, New Shared-Loss Loans, Permitted
Advances and Shared-Loss Loan Commitment Advances with respect to which an
Acquired Subsidiary, or a constituent Subsidiary thereof, is an Obligor;
(E) Loans owned by any Subsidiary which are not Shared-Loss Loans under
the Single Family Shared-Loss Agreement; and (F) Consumer Loans; and
(ii) any Shared-Loss Loans (described in
subparagraph (i) immediately preceding) with respect to which the Assuming
Bank has made a Permitted Amendment.
“
Shared-Loss
MTM Assets
”
means those securities and other assets listed on
Exhibit 4.15(C).
“Shared-Loss Payment Trigger”
means when the
sum of the Cumulative Loss Amount under the Single Family Shared-Loss Agreement
and the cumulative Net Charge-Offs under this Commercial Shared-Loss Agreement,
exceeds the First Loss Tranche. If the First Loss Tranche is zero or a negative
number, the Shared-Loss Payment Trigger shall be deemed to have been reached upon
Bank Closing.
“Shared-Loss Quarter”
has the
meaning provided in Section 2.1(a)(i) of this Commercial Shared-Loss
Agreement.
“Stated Threshold”
means total
losses under the shared loss agreements for: Security Bank of Bibb County in
the amount of $184,500,000.00; Security Bank of Gwinnett County in the amount
of $88,200,000.00; Security Bank of Houston County in the amount of
$42,800,000.00; Security Bank of Jones County in the amount of $54,800,000.00;
Security Bank
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
100
of North Fulton in the amount of $30,300,000.00; and, Security Bank of
North Metro in the amount of $49,700,000.00.
“Subsidiary ORE”
means all
assets owned by ORE Subsidiaries that would constitute Additional ORE if such
assets were on the books of the Assuming Bank.
“Termination Date”
means the
eighth (8th) anniversary of the Commencement Date.
“Third Party Servicer”
means any
servicer appointed from time to time by the Assuming Bank or any Affiliate of
the Assuming Bank to service the Shared-Loss Assets on behalf of the Assuming
bank, the identity of which shall be given to the Receiver prior to or
concurrent with the appointment thereof.
ARTICLE II
—
SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss
Arrangement.
(a)
Quarterly
Certificates.
(i) Not later than thirty (30) days after the
end of each Calendar Quarter from and including the initial Calendar Quarter to
and including the Calendar Quarter in which the Applicable Anniversary of the
Commencement Date falls (each of such Calendar Quarters being referred to
herein as a “Shared-Loss Quarter”), the Assuming Bank shall deliver to the
Receiver a certificate, signed by the Assuming Bank’s chief executive officer
and its chief financial officer, setting forth in such form and detail as the
Receiver may specify (a “Quarterly Certificate”):
(A)
the amount of Charge-Offs,
the amount of Recoveries and the amount of Net Charge-Offs (which amount may be
negative) during such Shared- Loss Quarter with respect to the Shared-Loss
Assets (and for Recoveries, with respect to the Assets for which a charge-off
was effected by the Failed Bank prior to Bank Closing); and
(B)
the aggregate amount of
Reimbursable Expenses (which amount may be negative) during such Shared-Loss
Quarter; and
(C)
net realized loss on the
Shared Loss MTM Assets determined pursuant to FAS 115, expressed as a positive
number (MTM Net Realized Loss), or net realized gain on the Shared Loss MTM
assets, expressed as a negative number (MTM Net Realized Gain); and
(D)
any other than temporary
impairment of the Shared Loss MTM Assets, determined pursuant to FAS 115,
expressed as a positive number (“OTTI Loss”) or reversals of OTTI Loss, expressed
as a negative number (for the avoidance of doubt, normal and customary
unrealized mark-to-market changes by reason of the application of fair value
accounting do not qualify for loss sharing
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
101
payments).
(ii)
Not later than thirty (30)
days after the end of each Calendar Quarter from and including the first
Calendar Quarter following the final Shared-Loss Quarter to and including the
Calendar Quarter in which the Termination Date falls (each of such Calendar
Quarters being referred to herein as a “Recovery Quarter”), the Assuming Bank
shall deliver to the Receiver a Quarterly Certificate setting forth, in such
form and detail as the Receiver may specify
(A)
the amount of Recoveries and
Recovery Expenses during such Recovery Quarter. On the Quarterly Certificate
for the
first Recovery Quarter only,
the Assuming Bank may report as a
separate item, in such form and detail as the Receiver may specify, the
aggregate amount of any Reimbursable Expenses that: (a) were incurred
prior to or during the final Shared-Loss Quarter,
and
(b) had
not
been included in any Quarterly Certificate for any Shared-Loss Quarter because
they had not been actually paid by or on behalf of the Assuming Bank (in
accordance with the terms of this Commercial Shared-Loss Agreement) during any
Shared-Loss Quarter
and
(c) were actually paid by or on behalf of
the Assuming Bank (in accordance with the terms of this Commercial Shared-Loss
Agreement) during the first Recovery Quarter; and
(B)
net realized gain on the
Shared Loss MTM Assets.
(b)
Payments
With Respect to Shared-Loss Assets.
(i)
For purposes of this
Section 2.1(b), the Assuming Bank shall initially record the Shared-Loss
Assets on its Accounting Records at Book Value, and initially record the Shared
Loss MTM Assets on its Accounting Records at Fair Value, and adjust such
amounts as such values may change after the Bank Closing. If the amount of all
Net Charge-Offs during any Shared-Loss Quarter
plus
Reimbursable
Expenses,
plus
MTM Net Realized Gain or MTM Net Realized Loss,
plus
OTTI Loss during such Shared-Loss Quarter (the “Shared-Loss Amount”) is
positive, then, except as provided in Sections 2.1(c) and (e) below,
and subject to the provisions of Section 2.1(b)(vi) below, not later
than fifteen (15) days after the date on which the Receiver receives the
Quarterly Certificate with respect to such Shared-Loss Quarter, the Receiver
shall pay to the Assuming Bank an amount equal to eighty percent (80%) of the
Shared-Loss Amount for such Shared-Loss Quarter. If the Shared-Loss Amount
during any Shared-Loss Quarter is negative, the Assuming Bank shall pay to the
Receiver an amount equal to eighty percent (80%) of the Shared-Loss Amount for
such Shared-Loss Quarter, which payment shall be delivered to the Receiver
together with the Quarterly Certificate for such Shared-Loss Quarter. When the
cumulative Shared-Loss Amounts for all Shared-Loss Quarters plus the Cumulative
Loss Amount under the Single Family Shared-Loss Agreement equals or exceeds the
Stated Threshold, the Receiver shall pay to the Assuming Bank an amount equal
to ninety-five percent ((95%) of the Shared-Loss Amount for each Shared-Loss
Quarter, until such time as the cumulative Shared-Loss Amount for all
Shared-Loss Quarters is less than the Stated Threshold, when the percentage
shall revert back to eighty percent (80%).
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
102
(ii) If the amount of gross Recoveries during any Recovery
Quarter
less
Recovery Expenses during such Recovery Quarter plus net
realized gains or reversals of OTTI Loss on Shared Loss MTM Assets (the “Recovery
Amount”) is positive, then, simultaneously with its delivery of the Quarterly
Certificate with respect to such Recovery Quarter, the Assuming Bank shall pay
to the Receiver an amount equal to eighty percent (80%) of the Recovery Amount
for such Recovery Quarter. If the Recovery Amount is negative, then such
negative amount shall be subtracted from the amount of gross Recoveries during
the next succeeding Recovery Quarter in determining the Recovery Amount in such
next succeeding Recovery Quarter;
provided,
that
this
Section 2.1(b)(ii) shall operate successively in the event that the
Recovery Amount (after giving effect to this Section 2.1(b)(ii)) in such
next succeeding Recovery Quarter is negative. The Assuming Bank shall specify,
in the Quarterly Certificate for the final Recovery Quarter, the aggregate
amount for all Recovery Quarters only, as of the end of, and including, the
final Recovery Quarter of (A) Recoveries plus net realized gains or
reversals of OTTI Loss on Shared Loss MTM Assets (“Aggregate Recovery Period
Recoveries”), (B) Recovery Expenses (“Aggregate Recovery Expenses”), and
(C)
only
those Recovery Expenses that have been actually “offset”
against Aggregate Recovery Period Recoveries (including those so “offset” in
that final Recovery Quarter) (“Aggregate Offset Recovery Expenses”); as used in
this sentence, the term “offset” means the amount that has been applied to
reduce gross Recoveries in any Recovery Quarter pursuant to the methodology set
forth in this Section 2.1(b)(ii). If, at the end of the final Recovery
Quarter the amount of Aggregate Recovery Expenses exceeds the amount of
Aggregate Recovery Period Recoveries, the Receiver shall have no obligation to
pay to the Assuming Bank all or any portion of such excess. Subsequent to the
Assuming Bank’s calculation of the Recovery Amount (if any) for the final
Recovery Quarter, the Assuming Bank shall also show on the Quarterly
Certificate for the final Recovery Quarter the results of the following three
mathematical calculations: (i) Aggregate Recovery Period Recoveries
minus
Aggregate Offset Recovery Expenses; (ii) Aggregate Recovery Expenses
minus
Aggregate Offset Recovery Expenses; and (iii) the
lesser
of the two
amounts calculated in (i) and (ii) immediately above (“Additional
Recovery Expenses”)
multiplied by
80% (the amount so calculated in
(iii) being defined as the “Additional Recovery Expense Amount”). If the
Additional Recovery Expense Amount is greater than zero, then the Assuming Bank
may request in the Quarterly Certificate for the final Recovery Quarter that
the Receiver reimburse the Assuming Bank the amount of the Additional Recovery
Expense Amount and the Receiver shall pay to the Assuming Bank the Additional
Recovery Expense Amount within fifteen (15) days after the date on which the
Receiver receives that Quarterly Certificate. On the Quarterly Certificate for
the final Recovery Quarter only, the Assuming Bank may include, in addition to
any Recovery Expenses for that Recovery Quarter that were paid by or on behalf
of the Assuming Bank in that Recovery Quarter, those Recovery Expenses that:
(a) were incurred prior to or during the final Recovery Quarter,
and
(b) had
not
been included in any Quarterly Certificate for any
Recovery Quarter because they had not been actually paid by or on behalf of the
Assuming Bank (in accordance with the terms of this Commercial Shared-Loss
Agreement) during any Recovery Quarter,
and
(c) were actually paid
by or on behalf of the Assuming Bank (in accordance with the terms of this
Commercial Shared-Loss Agreement) prior to the date the Assuming Bank is
required to deliver that final Quarterly Certificate to the Receiver under the
terms of Section 2.1(a)(ii).
(iii) With respect to each Shared-Loss Quarter and Recovery
Quarter,
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
103
collections by or on behalf of the Assuming Bank on
any charge-off effected by the Failed Bank prior to Bank Closing on an Asset
other than a Shared-Loss Asset or Shared-Loss MTM Assets shall be reported as
Recoveries under this Section 2.1 only to the extent such collections
exceed the Book Value of such Asset, if any. For any Shared-Loss Quarter or
Recovery Quarter in which collections by or on behalf of the Assuming Bank on
such Asset are applied to both Book Value and to a charge-off effected by the
Failed Bank prior to Bank Closing, the amount of expenditures incurred by or on
behalf of the Assuming Bank attributable to the collection of any such Asset,
that shall be considered a Reimbursable Expense or a Recovery Expense under
this Section 2.1 will be limited to a proportion of such expenditures
which is equal to the proportion derived by dividing (A) the amount of
collections on such Asset applied to a charge-off effected by the Failed Bank
prior to Bank Closing, by (B) the total collections on such Assets.
(iv) If the Assuming Bank has duly specified an amount of
Reimbursable Expenses on the Quarterly Certificate for the first Recovery
Quarter as described above in the last sentence of Section 2.1(a)(ii),
then, not later than fifteen (15) days after the date on which the Receiver
receives that Quarterly Certificate, the Receiver shall pay to the Assuming
Bank an amount equal to eighty percent (80%) (or, if the Cumulative Loss Amount
under the Single Family Shared-Loss Agreement plus the cumulative Shared-Loss
Amount for all Shared-Loss Quarters equals or exceeds the Stated Threshold,
ninety-five percent (95%)) of the amount of such Reimbursable Expenses.
(v) If the First Loss Tranche as determined under the Purchase
and Assumption Agreement is a positive number, Receiver has no obligation to
make payment for any Shared Loss Quarters until the Shared-Loss Payment Trigger
is satisfied.
(c)
Limitation on Shared-Loss Payment.
The Receiver
shall not be required to make any payments pursuant to this Section 2.1
with respect to any Charge-Off of a Shared-Loss Asset that the Receiver or the
Corporation determines, based upon the Examination Criteria, should not have
been effected by the Assuming Bank; provided, (x) the Receiver must
provide notice to the Assuming Bank detailing the grounds for not making such
payment, (y) the Receiver must provide the Assuming Bank with a reasonable
opportunity to cure any such deficiency and (z) (1) to the extent
curable, if cured, the Receiver shall make payment with respect to any properly
effected Charge-Off and (2) to the extent not curable, the Receiver shall
make a payment as to all Charge-Offs (or portion of Charge-Offs) that were effected
which would have been payable as a Charge-Off if the Assuming Bank had properly
effected such Charge-Off. In the event that the Receiver does not make any
payments with respect to any Charge-Off of a Shared-Loss Asset pursuant to this
Section 2.1 or determines that a payment was improperly made, the Assuming
Bank and the Receiver shall, upon final resolution, make such accounting
adjustments and payments as may be necessary to give retroactive effect to such
corrections.
(d)
Sale of, or Additional Advances or
Amendments with Respect to, Shared-Loss Loans and Administration of Related
Loans.
No Shared-Loss Loan shall be treated as a
Shared-Loss Asset pursuant to this Section 2.1 (i) if the Assuming
Bank sells or otherwise transfers such Shared-Loss Loan or any interest therein
(whether with or without recourse) to any Person, (ii) after the Assuming
Bank makes any additional advance,
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
104
commitment or increase in the amount of a commitment with respect to
such Shared-Loss Loan that does not constitute a Permitted Advance or a
Shared-Loss Loan Commitment Advance, (iii) after the Assuming Bank makes
any amendment, modification, renewal or extension to such Shared-Loss Loan that
does not constitute a Permitted Amendment, or (iv) after the Assuming Bank
has managed, administered or collected any “Related Loan” (as such term is
defined in Section 3.4 of Article III of this Commercial Shared-Loss
Agreement) in any manner which would have the effect of increasing the amount
of any collections with respect to the Related Loan to the detriment of such
Shared-Loss Asset to which such loan is related;
provided,
that
any
such Shared-Loss Loan that has been the subject of Charge-Offs prior to the
taking of any action described in clause (i), (ii), or (iii) or
(iv) of this Section 2.1(d) by the Assuming Bank shall be
treated as a Shared-Loss Asset pursuant to this Section 2.1 solely for the
purpose of treatment of Recoveries on such Charge-Offs until such time as the
amount of Recoveries with respect to such Shared-Loss Asset equals such
Charge-Offs.
(e)
Option to Purchase.
(i) In the event that the Assuming Bank determines that there
is a substantial likelihood that continued efforts to collect a Shared-Loss
Asset or an Asset for which a charge-off was effected by the Failed Bank with,
in either case, a Legal Balance of $500,000 or more on the Accounting Records
of the Assuming Bank will result in an expenditure, after Bank Closing, of
funds by on behalf of the Assuming Bank to a third party for a specified
purpose (the expenditure of which, in its best judgment, will maximize
collections), which do not constitute Reimbursable Expenses or Recovery
Expenses, and such expenses will exceed ten percent (10%) of the then book
value thereof as reflected on the Accounting Records of the Assuming Bank, the
Assuming Bank shall (i) promptly so notify the Receiver and (ii) request
that such expenditure be treated as a Reimbursable Expense or Recovery Expense
for purposes of this Section 2.1. (Where the Assuming Bank determines that
there is a substantial likelihood that the previously mentioned situation
exists with respect to continued efforts to collect a Shared-Loss Asset or an
Asset for which a charge-off was effected by the Failed Bank with, in either
case, a Legal Balance of less than $1,000,000 on the Accounting Records of the
Assuming Bank, the Assuming Bank may so notify the Receiver and request that
such expenditure be treated as a Reimbursable Expense or Recovery Expense.)
Within thirty (30) days after its receipt of such a notice, the Receiver will
advise the Assuming Bank of its consent or denial, that such expenditures shall
be treated as a Reimbursable Expense or Recovery Expense, as the case may be.
Notwithstanding the failure of the Receiver to give its consent with respect to
such expenditures, the Assuming Bank shall continue to administer such
Shared-Loss Asset in accordance with Section 2.2, except that the Assuming
Bank shall not be required to make such expenditures. At any time after its
receipt of such a notice and on or prior to the Termination Date the Receiver
shall have the right to purchase such Shared-Loss Asset or Asset as provided in
Section 2.1(e)(iii), notwithstanding any consent by the Receiver with
respect to such expenditure.
(ii) During the period prior to the Termination Date, the
Assuming Bank shall notify the Receiver within fifteen (15) days after any of
the following becomes fully or partially charged-off:
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
105
(A) a
Shared-Loss Loan having a Legal Balance (or, in the case of more than one
(1) Shared-Loss Loan made to the same Obligor, a combined Legal Balance)
of $500,000 or more in circumstances in which the legal claim against the
relevant Obligor survives; or
(B) a
Shared-Loss Loan to a director, an “executive officer” as defined in 12 C.F.R.
215.2(d), a “principal shareholder” as defined in 12 C.F.R. 215.2(l), or an
Affiliate of the Assuming Bank.
(iii) If the Receiver determines in its discretion that the
Assuming Bank is not diligently pursuing collection efforts with respect to any
Shared-Loss Asset which has been fully or partially charged-off or written-down
(including any Shared-Loss Asset which is identified or required to be
identified in a notice pursuant to Section 2.1(e)(ii)) or any Asset for
which there exists a Failed Bank Charge-Off/Write-Down, the Receiver may at its
option, exercisable at any time on or prior to the Termination Date, require
the Assuming Bank to assign, transfer and convey such Shared-Loss Asset or
Asset to and for the sole benefit of the Receiver for a price equal to the
Shared-Loss Asset Repurchase Price thereof less the Related Liability Amount
with respect to any Related Liabilities related to such Shared-Loss Asset or
Asset.
(iv) Not later than ten (10) days after the date upon which
the Assuming Bank receives notice of the Receiver’s intention to purchase or
require the assignment of any Shared-Loss Asset or Asset pursuant to
Section 2.1(e)(i) or (iii), the Assuming Bank shall transfer to the
Receiver such Shared-Loss Asset or Asset and any Credit Files relating thereto
and shall take all such other actions as may be necessary and appropriate to
adequately effect the transfer of such Shared-Loss Asset or Asset from the
Assuming Bank to the Receiver. Not later than fifteen (15) days after the date
upon which the Receiver receives such Shared-Loss Asset or Asset and any Credit
Files relating thereto, the Receiver shall pay to the Assuming Bank an amount
equal to the Shared-Loss Asset Repurchase Price of such Shared-Loss Asset or
Asset less the Related Liability Amount.
(v) The Receiver shall assume all Related Liabilities with
respect to any Shared-Loss Asset or Asset set forth in the notice described in
Section 2.1(e)(iv).
(f)
Dispute Resolution.
(i) (A) Any dispute
as to whether a Charge-Off of a Shared-Loss Asset was made in accordance with
Examination Criteria shall be resolved by the Assuming Bank’s Chartering
Authority. (B) With respect to any other dispute arising under the terms
of this Commercial Shared-Loss Agreement which the parties hereto cannot
resolve after having negotiated such matter, in good faith, for a thirty (30)
day period, other than a dispute the Corporation is not permitted to submit to
arbitration under the Administrative Dispute Resolution Act of 1996 (“ADRA”),
as amended, such other dispute shall be resolved by determination of a review
board (a “Review Board”) established pursuant to Section 2.1(f). Any
Review Board under this Section 2.1(f) shall follow the provisions of
the Federal Arbitration Act and shall follow the provisions of the ADRA.
(C) Any determination by the Assuming Bank’s Chartering Authority or by a
Review Board shall be conclusive and binding on the parties hereto and not
subject to further
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
106
dispute, and judgment may be entered on said determination in
accordance with applicable arbitration law in any court having jurisdiction
thereof.
(ii) A Review Board shall consist of three (3) members,
each of whom shall have such expertise as the Corporation and the Assuming Bank
agree is relevant. As appropriate, the Receiver or the Corporation (the “FDIC
Party”) will select one member, one member will be selected by the Assuming
Bank and the third member (the “Neutral Member”) will be selected by the other
two members. The member of the Review Board selected by a party may be removed
at any time by such party upon two (2) days’ written notice to the other
party of the selection of a replacement member. The Neutral Member may be
removed by unanimous action of the members appointed by the FDIC Party and the
Assuming Bank after two (2) days’ prior written notice to the FDIC Party
and the Assuming Bank of the selection of a replacement Neutral Member. In
addition, if a Neutral Member fails for any reason to serve or continue to
serve on the Review Board, the other remaining members shall so notify the
parties to the dispute and the Neutral Member in writing that such Neutral
Member will be replaced, and the Neutral Member shall thereafter be replaced by
the unanimous action of the other remaining members within twenty (20) business
days of that notification.
(iii) No dispute may be submitted to a Review Board by any of the
parties to this Commercial Shared-Loss Agreement unless such party has provided
to the other party a written notice of dispute (“Notice of Dispute”). During
the forty-five (45)-day period following the providing of a Notice of Dispute,
the parties to the dispute will make every effort in good faith to resolve the
dispute by mutual agreement. As part of these good faith efforts, the parties
should consider the use of less formal dispute resolution techniques, as judged
appropriate by each party in its sole discretion. Such techniques may include,
but are not limited to, mediation, settlement conference, and early neutral
evaluation. If the parties have not agreed to a resolution of the dispute by
the end of such forty-five (45)-day period, then, subject to the discretion of
the Corporation and the written consent of the Assuming Bank as set forth in
Section 2.1(f)(i)(B) above, on the first day following the end of
such period, the FDIC Party and the Assuming Bank shall notify each other of
its selection of its member of the Review Board and such members shall be
instructed to promptly select the Neutral Member of the Review Board. If the
members appointed by the FDIC Party and the Assuming Bank are unable to
promptly agree upon the initial selection of the Neutral Member, or a timely
replacement Neutral Member as set forth in Section 2.1(f)(ii) above, the
two appointed members shall apply to the American Arbitration Association (“AAA”),
and such Neutral Member shall be appointed in accordance with the Commercial
Arbitration Rules of the AAA.
(iv) The resolution of a dispute pursuant to this
Section 2.1(f) shall be governed by the Commercial Arbitration
Rules of the AAA to the extent that such rules are not inconsistent
with this Section 2.1(f). The Review Board may modify the procedures set
forth in such rules from time to time with the prior approval of the FDIC
Party and the Assuming Bank.
(v) Within fifteen (15) days after the last to occur of the
final written submissions of both parties, the presentation of witnesses, if
any, and oral presentations, if any, the Review Board shall adopt the position
of one of the parties and shall present to the parties a written award
regarding the dispute. The determination of any two (2) members of a
Review
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
107
Board will constitute the determination of such
Review Board.
(vi) The FDIC Party and the Assuming Bank will each pay the fees
and expenses of the member of the Review Board selected by it. The FDIC Party
and Assuming Bank will share equally the fees and expenses of the Neutral
Member. No such fees or expenses incurred by or on behalf of the Assuming Bank
shall be subject to reimbursement by the FDIC Party under this Commercial
Shared-Loss Agreement or otherwise.
(vii) Each party will bear all costs and expenses incurred by it
in connection with the submission of any dispute to a Review Board. No such
costs or expenses incurred by or on behalf of the Assuming Bank shall be
subject to reimbursement by the FDIC Party under this Commercial Shared-Loss
Agreement or otherwise. The Review Board shall have no authority to award costs
or expenses incurred by either party to these proceedings.
(viii) Any dispute resolution proceeding held
pursuant to this Section 2.1(f) shall not be public. In addition,
each party and each member of any Review Board shall strictly maintain the
confidentiality of all issues, disputes, arguments, positions and
interpretations of any such proceeding, as well as all information,
attachments, enclosures, exhibits, summaries, compilations, studies, analyses,
notes, documents, statements, schedules and other similar items associated
therewith, except as the parties agree in writing or such disclosure is
required pursuant to law, rule or regulation. Pursuant to ADRA, dispute
resolution communications may not be disclosed either by the parties or by any
member of the Review board unless:
(1) all parties to the dispute resolution proceeding agree in writing;
(2) the communication has already been made public;
(3) the communication is required by statute, rule or regulation
to be made public;
or
(4) a court determines that such testimony or disclosure is necessary
to prevent a manifest injustice, help establish a violation of the law or
prevent harm to the public health or safety, or of sufficient magnitude in the
particular case to outweigh the integrity of dispute resolution proceedings in
general by reducing the confidence of parties in future cases that their
communications will remain confidential.
(ix) Any dispute resolution proceeding pursuant to this
Section 2.1(f) (whether as a matter of good faith negotiations, by
resort to a Review Board, or otherwise) is a compromise negotiation for
purposes of the Federal Rules of Evidence and state rules of
evidence. The parties agree that all proceedings, including any statement made
or document prepared by any party, attorney or other participants are
privileged and shall not be disclosed in any subsequent proceeding or document
or construed for any purpose as an admission against interest. Any document
submitted and any statements made during any dispute resolution proceeding are
for settlement purposes only. The parties further agree not to subpoena any of
the members of the Review Board or any documents submitted to the Review Board.
In no event will the Neutral Member voluntarily testify on behalf of any party.
(x) No decision, interpretation, determination, analysis,
statement, award or
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
108
other pronouncement of any Review Board shall constitute precedent as
regards any subsequent proceeding (whether or not such proceeding involves
dispute resolution under this Commercial Shared-Loss Agreement) nor shall any
Review Board be bound to follow any decision, interpretation, determination,
analysis, statement, award or other pronouncement rendered by any previous
Review Board or any other previous dispute resolution panel which may have
convened in connection with a transaction involving other failed financial
institutions or Federal assistance transactions.
(xi) The parties may extend any period of time in this
Section 2.1(f) by mutual agreement. Notwithstanding anything above to
the contrary, no dispute shall be submitted to a Review Board until each member
of the Review Board, and any substitute member, if applicable, agrees to be
bound by the provisions of this Section 2.1(f) as applicable to
members of a Review Board. Prior to the commencement of the Review Board
proceedings, or, in the case of a substitute Neutral Member, prior to the
re-commencement of such proceedings subsequent to that substitution, the
Neutral Member shall provide a written oath of impartiality.
(xii)
For the
avoidance of doubt, and notwithstanding anything herein to the contrary, in the
event any notice of dispute is provided to a party under this
Section 2.1(g) prior to the Termination Date, the terms of this
Commercial Shared-Loss Agreement shall remain in effect with respect to any
such items set forth in such notice until such time as any such dispute with
respect to such item is finally resolved.
2.2
Administration of Shared-Loss
Assets.
The Assuming Bank shall at all times prior to the
Termination Date comply with the Rules Regarding the Administration of
Shared-Loss Assets as set forth in Article III of this Commercial
Shared-Loss Agreement.
2.3
Auditor
Report
; Right to Audit
.
(a) Within ninety (90) days after the end of each fiscal year
from and including the fiscal year during which Bank Closing falls to and
including the calendar year during which the Termination Date falls, the
Assuming Bank shall deliver to the Corporation and to the Receiver a report
signed by its independent public accountants stating that they have reviewed
the terms of this Commercial Shared-Loss Agreement and that, in the course of
their annual audit of the Assuming Bank’s books and records, nothing has come
to their attention suggesting that any computations required to be made by the
Assuming Bank during such year by this Article II were not made by the
Assuming Bank in accordance herewith. In the event that the Assuming Bank
cannot comply with the preceding sentence, it shall promptly submit to the
Receiver corrected computations together with a report signed by its
independent public accountants stating that, after giving effect to such
corrected computations, nothing has come to their attention suggesting that any
computations required to be made by the Assuming Bank during such year by this
Article II were not made by the Assuming Bank in accordance herewith. In
such event, the Assuming Bank and the Receiver shall make all such accounting
adjustments and payments as may be necessary to give effect to each correction
reflected in such corrected computations, retroactive to the date on which the
corresponding incorrect computation was made. It is the intention of this
provision to align the timing of the audit required under this Commercial
Shared-Loss Agreement with the examination audit required pursuant to 12 CFR
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
109
Section 363.
(b) The Assuming Bank shall perform on an annual basis an
internal audit of its compliance with the provisions of this Article II
and shall provide the Receiver and the Corporation with copies of the internal
audit reports and access to internal audit workpapers related to such internal
audit.
(c) The Receiver or the Corporation may perform an audit to
determine the Assuming Bank’s compliance with the provisions of this Commercial
Shared-Loss Agreement, including this Article II, at any time by providing
not less than ten (10) Business Days prior written notice. The scope and
duration of any such audit shall be within the discretion of the Receiver or
the Corporation, as the case may be, but shall in no event be administered in a
manner that unreasonably interferes with the operation of the Assuming Bank’s
business. The Receiver or the Corporation, as the case may be, shall bear the
expense of any such audit. In the event that any corrections are necessary as a
result of such an audit, the Assuming Bank and the Receiver shall make such
accounting adjustments and payments as may be necessary to give retroactive
effect to such corrections.
2.4
Withholdings.
Notwithstanding any other provision in this Article II, the Receiver, upon
the direction of the Director (or designee) of the Corporation’s Division of
Resolutions and Receiverships, may withhold payment for any amounts included in
a Quarterly Certificate delivered pursuant to Section 2.1, if, in its
judgment, there is a reasonable basis under the terms of this Commercial
Shared-Loss Agreement for denying the eligibility of an item for which
reimbursement or payment is sought under such Section. In such event, the
Receiver shall provide a written notice to the Assuming Bank detailing the
grounds for withholding such payment. At such time as the Assuming Bank
demonstrates to the satisfaction of the Receiver that the grounds for such
withholding of payment, or portion of payment, no longer exist or have been
cured, then the Receiver shall pay the Assuming Bank the amount withheld which
the Receiver determines is eligible for payment, within fifteen (15) Business
Days. In the event the Receiver or the Assuming Bank elects to submit the issue
of the eligibility of the item for reimbursement or payment for determination
under the dispute resolution procedures of Section 2.1(f), then
(i) if the dispute is settled by the mutual agreement of the parties in accordance
with Section 2.1(f)(iii), the Receiver shall pay the amount withheld (to
the extent so agreed) within fifteen (15) Business Days from the date upon
which the dispute is determined by the parties to be resolved by mutual
agreement, and (ii) if the dispute is resolved by the determination of a
Review Board, the Receiver shall pay the amount withheld (to the extent so
determined) within fifteen (15) Business Days from the date upon which the
Receiver is notified of the determination by the Review Board of its obligation
to make such payment. Any payment by the Receiver pursuant to this
Section 2.4 shall be made together with interest on the amount thereof
from the date the payment was agreed or determined otherwise to be due, at the
interest rate per annum determined by the Receiver to be equal to the coupon
equivalent of the three (3)-month U.S. Treasury Bill Rate in effect as of the
first Business Day of each Calendar Quarter during which such interest accrues
as reported in the Federal Reserve Board’s Statistical Release for Selected
Interest Rates H.15 opposite the caption “Auction Average - 3-Month” or, if not
so reported for such day, for the next preceding Business Day for which such
rate was so reported.
2.5
Books and Records
.
The Assuming
Bank shall at all times during the term of
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
110
this Commercial Shared-Loss Agreement keep books and
records which fairly present all dealings and transactions carried out in
connection with its business and affairs. Except as otherwise provided for in
the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement,
all financial books and records shall be kept in accordance with generally
accepted accounting principles, consistently applied for the periods involved
and in a manner such that information necessary to determine compliance with
any requirement of the Purchase and Assumption Agreement or this Commercial
Shared-Loss Agreement will be readily obtainable, and in a manner such that the
purposes of the Purchase and Assumption Agreement or this Commercial
Shared-Loss Agreement may be effectively accomplished. Without the prior
written approval of the Corporation, the Assuming Bank shall not make any
change in its accounting principles adversely affecting the value of the
Shared-Loss Assets except as required by a change in generally accepted
accounting principles. The Assuming Bank shall notify the Corporation of any
change in its accounting principles affecting the Shared-Loss Assets which it
believes are required by a change in generally accepted accounting principles.
2.6
Information
.
The Assuming
Bank shall promptly provide to the Corporation such other information,
including financial statements and computations, relating to the performance of
the provisions of the Purchase and Assumption Agreement or otherwise relating
to its business and affairs or this Commercial Shared-Loss Agreement, as the
Corporation or the Receiver may request from time to time.
2.7
Tax Ruling.
The Assuming
Bank shall not at any time, without the Corporation’s prior written consent,
seek a private letter ruling or other determination from the Internal Revenue
Service or otherwise seek to qualify for any special tax treatment or benefits
associated with any payments made by the Corporation pursuant to the Purchase
and Assumption Agreement or this Commercial Shared-Loss Agreement.
ARTICLE III
- RULES REGARDING THE ADMINISTRATION OF SHARED-LOSS
ASSETS AND SHARED-LOSS MTM ASSETS
3.1
Agreement with Respect to
Administration.
The Assuming Bank shall (and shall cause any of its
Affiliates to which the Assuming Bank transfers any Shared-Loss Assets or
Shared-Loss MTM Assets) to, or a Third Party Servicer to, manage, administer,
and collect the Shared-Loss Assets and Shared-Loss MTM Assets while owned by
the Assuming Bank or any Affiliate thereof during the term of this Commercial
Shared-Loss Agreement in accordance with the rules set forth in this
Article III (“Rules”). The Assuming Bank shall be responsible to the
Receiver and the Corporation in the performance of its duties hereunder and
shall provide to the Receiver and the Corporation such reports as the Receiver
or the Corporation reasonably deems advisable, including but not limited to the
reports required by Section 3.3 hereof, and shall permit the Receiver and
the Corporation at all times to monitor the Assuming Bank’s performance of its
duties hereunder.
3.2
Duties of the Assuming Bank with
Respect to Shared-Loss Assets.
(a) In performance of its duties under these
Rules, the Assuming Bank shall:
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
111
(i) manage, administer,
collect and effect Charge-Offs and Recoveries with respect to each Shared-Loss
Asset in a manner consistent with (A) usual and prudent business and
banking practices; (B) the Assuming Bank’s (or, in the case a Third Party
Servicer is engaged, the Third Party Servicer’s) practices and procedures
including, without limitation, the then-effective written internal credit
policy guidelines of the Assuming Bank, with respect to the management,
administration and collection of and taking of charge-offs and write-downs with
respect to loans, other real estate and repossessed collateral that do not
constitute Shared Loss Assets;
(ii) exercise its best
business judgment in managing, administering, collecting and effecting
Charge-Offs with respect to Shared-Loss Assets;
(iii) use its best
efforts to maximize collections with respect to Shared-Loss Assets and, if
applicable for a particular Shared-Loss Asset, without regard to the effect of
maximizing collections on assets held by the Assuming Bank or any of its
Affiliates that are not Shared-Loss Assets;
(iv) adopt and
implement accounting, reporting, record-keeping and similar systems with
respect to the Shared-Loss Assets, as provided in Section 3.4 hereof;
(v) retain sufficient
staff to perform its duties hereunder;
(vi) provide written
notification in accordance with Article IV of this Commercial Shared-Loss
Agreement immediately after the execution of any contract pursuant to which any
third party (other than an Affiliate of the Assuming Bank) will manage,
administer or collect any of the Shared-Loss Assets, together with a copy of
that contract.
(b) Any transaction with or between any Affiliate of the Assuming Bank
with respect to any Shared-Loss Asset including, without limitation, the
execution of any contract pursuant to which any Affiliate of the Assuming Bank
will manage, administer or collect any of the Shared-Loss Assets, or any other
action involving self-dealing, shall be subject to the prior written approval
of the Receiver or the Corporation.
(c) The following categories of expenses shall not be deemed to be
Reimbursable Expenses or Recovery Expenses:
(i) Federal, State, or local income taxes and expenses related
thereto;
(ii) salaries or other compensation and related benefits of Assuming
Bank employees and the employees of its Affiliates including, without
limitation, any bonus, commission or severance arrangements, training, payroll
taxes, dues, or travel- or relocation- related expenses,;
(iii) the cost of space occupied by the Assuming Bank, any Affiliate
thereof and their staff, the rental of and maintenance of furniture and
equipment, and expenses
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
112
for data processing including the purchase or enhancement of data
processing systems;
(iv) except as otherwise provided herein, fees for accounting and other
independent professional consultants (other than consultants retained to assess
the presence, storage or release of any hazardous or toxic substance, or any
pollutant or contaminant with respect to the collateral securing a Shared-Loss
Loan that has been fully or partially charged-off);
provided,
that
for purposes of this Section 3.2(c)(iv), fees of attorneys and appraisers
engaged as necessary to assist in collections with respect to Shared-Loss
Assets shall not be deemed to be fees of other independent consultants;
(v) allocated portions of any other overhead or general and
administrative expense other than any fees relating to specific assets, such as
appraisal fees or environmental audit fees, for services of a type the Assuming
Bank does not normally perform internally;
(vi) any expense not incurred in good faith and with the same degree of
care that the Assuming Bank normally would exercise in the collection of
troubled assets in which it alone had an interest; and
(vii) any expense incurred for a product, service or activity that is of
an extravagant nature or design.
(d) Subject to
Section 3.7, the Assuming Bank shall not contract with third parties to
provide services the cost of which would be a Reimbursable Expense or Recovery
Expense if the Assuming Bank would have provided such services itself if the
relevant Shared-Loss Assets were not subject to the loss-sharing provisions of
Section 2.1 of this Commercial Shared-Loss Agreement.
3.3
Duties of the Assuming Bank with
Respect to Shared-Loss MTM Assets.
(a) In performance of its duties under these
Rules, the Assuming Bank shall:
(i) manage, administer, collect and each Shared-Loss MTM Asset in a
manner consistent with (A) usual and prudent business and banking
practices; (B) the Assuming Bank’s practices and procedures including, without
limitation, the then-effective written internal credit policy guidelines of the
Assuming Bank, with respect to the management, administration and collection of
similar assets that are not Shared-Loss MTM Assets;
(ii) exercise its best business judgment in managing, administering,
collecting and effecting Charge-Offs with respect to Shared-Loss MTM Assets;
(iii) use its best efforts to maximize collections with respect to
Shared-Loss MTM Assets and, if applicable for a particular Shared-Loss MTM Asset,
without regard to the effect of maximizing collections on assets held by the
Assuming Bank or any of its Affiliates that are not Shared-Loss MTM Assets,
provided that, any sale of a Shared-Loss MTM Asset shall only be made with the
prior approval of the Receiver or the Corporation;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
113
(iv) adopt and implement accounting, reporting, record-keeping and similar
systems with respect to the Shared-Loss MTM Assets, as provided in
Section 3.4 hereof;
(v) retain sufficient staff to perform its duties hereunder;
(vi) provide written notification in accordance with Article IV of
this Commercial Shared-Loss Agreement immediately after the execution of any
contract pursuant to which any third party (other than an Affiliate of the
Assuming Bank) will manage, administer or collect any of the Shared-Loss MTM
Assets, together with a copy of that contract.
(b) Any transaction with or between any Affiliate of the
Assuming Bank with respect to any Shared-Loss MTM Asset including, without
limitation, the execution of any contract pursuant to which any Affiliate of
the Assuming Bank will manage, administer or collect any of the Shared-Loss
Assets, or any other action involving self-dealing, shall be subject to the
prior written approval of the Receiver or the Corporation.
(c) The Assuming Bank shall not contract with third parties to
provide services the cost of which would be a Reimbursable Expense or Recovery
Expense if the Assuming Bank would have provided such services itself if the
relevant Shared-Loss Assets were not subject to the loss-sharing provisions of
Section 2.1 of this Commercial Shared-Loss Agreement.
3.4
Records and Reports
.
The Assuming
Bank shall establish and maintain records on a separate general ledger, and on
such subsidiary ledgers as may be appropriate to account for the Shared-Loss
Assets and the Shared-Loss MTM Assets, in such form and detail as the Receiver
or the Corporation may require, to enable the Assuming Bank to prepare and
deliver to the Receiver or the Corporation such reports as the Receiver or the
Corporation may from time to time request regarding the Shared-Loss Assets, the
Shared-Loss MTM Assets and the Quarterly Certificates required by
Section 2.1 of this Commercial Shared-Loss Agreement.
3.5
Related
Loans
.
(a) The Assuming Bank shall not manage, administer or collect
any “Related Loan” in any manner which would have the effect of increasing the
amount of any collections with respect to the Related Loan to the detriment of
the Shared-Loss Asset to which such loan is related. A “Related Loan” means any
loan or extension of credit held by the Assuming Bank at any time on or prior
to the end of the final Recovery Quarter that is: (i) made to the same
Obligor with respect to a Loan that is a Shared-Loss Asset or with respect to a
Loan from which Other Real Estate, Additional ORE or Subsidiary ORE derived, or
(ii) attributable to the same primary Obligor with respect to any Loan
described in clause (i) under the rules of the Assuming Bank’s
Chartering Authority concerning the legal lending limits of financial
institutions organized under its jurisdiction as in effect on the Commencement
Date, as applied to the Assuming Bank.
(b) The Assuming Bank shall prepare and deliver to the Receiver
with the Quarterly Certificates for the Calendar Quarters ending June 30
and December 31 for all Shared-Loss Quarters and Recovery Quarters, a
schedule of all Related Loans which are commercial loans or commercial real
estate loans with Legal Balances of $500,000 or more on the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
114
Accounting Records of the Assuming Bank as of the end of each such
semi-annual period, and all other commercial loans or commercial real estate
loans attributable to the same Obligor on such loans of $500,000 or more.
3.6
Legal Action; Utilization of
Special Receivership Powers
.
The Assuming
Bank shall notify the Receiver in writing (such notice to be given in
accordance with Article IV below and to include all relevant details)
prior to utilizing in any legal action any special legal power or right which
the Assuming Bank derives as a result of having acquired a Shared-Loss Asset
from the Receiver, and the Assuming Bank shall not utilize any such power
unless the Receiver shall have consented in writing to the proposed usage. The
Receiver shall have the right to direct such proposed usage by the Assuming
Bank and the Assuming Bank shall comply in all respects with such direction.
Upon request of the Receiver, the Assuming Bank will advise the Receiver as to
the status of any such legal action. The Assuming Bank shall immediately notify
the Receiver of any judgment in litigation involving any of the aforesaid
special powers or rights.
3.7
Third Party Servicer
.
The Assuming
Bank may perform any of its obligations and/or exercise any of its rights under
this Commercial Shared-Loss Agreement through or by one or more Third Party
Servicers, who may take actions and make expenditures as if any such Third
Party Servicer was the Assuming Bank hereunder (and, for the avoidance of
doubt, such expenses incurred by any such Third Party Servicer on behalf of the
Assuming Bank shall be Reimbursable Expenses or Recovery Expenses, as the case
may be, to the same extent such expenses would so qualify if incurred by the
Assuming Bank); provided, however, that the use thereof by the Assuming Bank
shall not release the Assuming Bank of any obligation or liability hereunder.
ARTICLE IV
— PORTFOLIO SALE
4.1
Assuming
Bank Portfolio Sales of Remaining Shared-Loss Assets
.
The Assuming
Bank shall have the right with the concurrence of the Receiver, commencing as
of the first day of the third to last Shared-Loss Quarter, to liquidate for
cash consideration, in one or more transactions, all or a portion of
Shared-Loss Assets held by the Assuming Bank (“Portfolio Sales”). If the
Assuming Bank exercises its option under this Section 4.1, it must give
thirty (30) days notice in writing to the Receiver setting forth the details
and schedule for the Portfolio Sale which shall be conducted by means of sealed
bid sales to third parties, not including any of the Assuming Bank’s
affiliates, contractors, or any affiliates of the Assuming Bank’s contractors.
4.2
Calculation of Sale Gain or Loss
.
For
Shared-Loss Assets gain or loss on the sales under Section 4.1 will be
calculated as the sale price received by the Assuming Bank less the book value
of the remaining Shared-Loss Assets.
ARTICLE V
— LOSS-SHARING NOTICES GIVEN TO CORPORATION AND/OR
RECEIVER
As a supplement to the notice provisions contained
in Section 13.7 of the Purchase and Assumption Agreement, any notice,
request, demand, consent, approval, or other communication
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
115
(a “Notice”) given to the Corporation and/or the Receiver in the
loss-sharing context shall be given as follows:
5.1
With respect to a Notice under
Section 2 and Sections 3.1-3.5 of this Commercial Shared-Loss Agreement:
Federal Deposit Insurance Corporation
Division of Resolutions and Receiverships
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Assistant Director, Franchise and Asset
Marketing
5.2
With respect to a Notice under
Section 3.6 of this Commercial Shared-Loss Agreement:
Federal Deposit Insurance Corporation Legal Division
1601 Bryan Street
Dallas, Texas 75201
Attention: Regional Counsel
with a copy to:
Federal Deposit Insurance Corporation Legal Division
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Senior Counsel (Special Issues Group)
ARTICLE VI
— MISCELLANEOUS
6.1
Expenses.
Except as
otherwise expressly provided herein, all costs and expenses incurred by a party
hereto in connection with this Commercial Shared-Loss Agreement shall be borne
by such party whether or not the transactions contemplated herein shall be
consummated.
6.2
Successors
and Assigns; Specific Performance.
All terms and provisions of
this Commercial Shared-Loss Agreement shall be binding upon and shall inure to
the benefit of the parties hereto only;
provided, however,
that,
Receiver may assign or otherwise transfer this Commercial Shared-Loss Agreement
(in whole or in part) to the Federal Deposit Insurance Corporation in its
corporate capacity without the consent of Assuming Bank. Notwithstanding
anything to the contrary contained in this Commercial Shared-Loss Agreement,
except as is expressly permitted in this Section 6.2, Assuming Bank may
not assign or otherwise transfer this Commercial Shared-Loss Agreement (in
whole or in part) without the prior written consent of the Receiver, which
consent may be granted or withheld by the Receiver in its sole discretion, and
any attempted assignment or transfer in violation of this provision shall be
void
ab initio.
For the avoidance
of doubt, a merger or consolidation of the Assuming Bank with and into another
financial institution, the sale of all or substantially all of the assets of
the Assuming Bank to another financial institution constitutes the transfer of
this Commercial Shared-Loss Agreement which requires the consent of the
Receive; and for a period of thirty-six (36) months
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
116
after Bank Closing, a merger or consolidation shall also include the
sale by any individual shareholder, or shareholders acting in concert, of more
than 9% of the outstanding shares of the Assuming Bank, or of its holding
company, or of any subsidiary holding Shared-Loss Assets, or the sale of shares
by the Assuming Bank or its holding company or any subsidiary holding
Shared-Loss Assets, in a public or private offering, that increases the number
of shares outstanding by more than 9%, constitutes the transfer of this Commercial
Shared-Loss Agreement which requires the consent of the Receiver. However, no
Loss shall be recognized as a result of any accounting adjustments that are
made due to any such merger, consolidation or sale consented to by the FDIC.
The FDIC’s consent shall not be required if the aggregate outstanding principal
balance of Shared-Loss Assets is less than twenty percent (20%) of the initial
aggregate balance of Shared-Loss Assets.
6.3
Governing Law
.
This
Commercial Shared-Loss Agreement shall be construed in accordance with federal
law, or, if there is no applicable federal law, the laws of the State of New
York, without regard to any rule of conflict of law that would result in
the application of the substantive law of any jurisdiction other than the State
of New York.
6.4
WAIVER OF JURY TRIAL
.
EACH PARTY
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING
OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT
OF OR RELATING TO OR IN CONNECTION WITH THIS COMMERCIAL SHARED-LOSS AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
6.5
Captions
.
All captions
and headings contained in this Commercial Shared-Loss Agreement are for convenience
of reference only and do not form a part of, and shall not affect the meaning
or interpretation of, this Commercial Shared-Loss Agreement.
6.6
Entire Agreement; Amendments
.
This
Commercial Shared-Loss Agreement, along with the Single Family Shared-Loss
Agreement and the Purchase and Assumption Agreement, including the Exhibits and
any other documents delivered pursuant hereto, embody the entire agreement of
the parties with respect to the subject matter hereof, and supersede all prior
representations, warranties, offers, acceptances, agreements and
understandings, written or oral, relating to the subject matter herein. This
Commercial Shared-Loss Agreement may be amended or modified or any provision
thereof waived only by a written instrument signed by both parties or their
respective duly authorized agents.
6.7
Severability
.
Whenever
possible, each provision of this Commercial Shared-Loss Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Commercial Shared-Loss Agreement is held to be
prohibited by or invalid, illegal or unenforceable under applicable law, such
provision shall be construed and enforced as if it had been more narrowly drawn
so as not to be prohibited, invalid, illegal or unenforceable, and the
validity, legality and enforceability of the remainder of such provision and
the remaining provisions of this Commercial Shared-Loss Agreement shall not in
any way be affected or impaired thereby.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
117
6.8
No
Third
Party Beneficiary.
This Commercial Shared-Loss
Agreement and the Exhibits hereto are for the sole and exclusive benefit of the
parties hereto and their respective permitted successors and permitted assigns
and there shall be no other third party beneficiaries, and nothing in
Commercial Shared-Loss Agreement or the Exhibits shall be construed to grant to
any other Person any right, remedy or claim under or in respect of this
Commercial Shared-Loss Agreement or any provision hereof.
6.9
Consent
.
Except as
otherwise provided herein, when the consent of a party is required herein, such
consent shall not be unreasonably withheld or delayed.
6.10
Rights Cumulative
.
Except as
otherwise expressly provided herein, the rights of each of the parties under
this Commercial Shared-Loss Agreement are cumulative, may be exercised as often
as any party considers appropriate and are in addition to each such party’s
rights under the Purchase and Sale Agreement and any of the related agreements
or under law. Except as otherwise expressly provided herein, any failure to
exercise or any delay in exercising any of such rights, or any partial or
defective exercise of such rights, shall not operate as a waiver or variation
of that or any other such right.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
Security Banks
|
|
Version 1.07
|
|
Georgia
|
|
July 20, 2009
|
|
|
118
EXHIBIT 2.2
PURCHASE
AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL
DEPOSITS
AMONG
FEDERAL
DEPOSIT INSURANCE CORPORATION,
RECEIVER OF THE BUCKHEAD COMMUNITY BANK,
ATLANTA, GEORGIA
FEDERAL
DEPOSIT INSURANCE CORPORATION
and
STATE BANK
AND TRUST COMPANY
DATED AS OF
DECEMBER 4,
2009
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
TABLE OF
CONTENTS
|
ARTICLE I
|
DEFINITIONS
|
2
|
|
|
|
|
|
ARTICLE II
|
ASSUMPTION OF LIABILITIES
|
8
|
|
|
|
|
|
2.1
|
Liabilities Assumed by Assuming Bank
|
8
|
|
2.2
|
Interest on Deposit Liabilities
|
10
|
|
2.3
|
Unclaimed Deposits
|
10
|
|
2.4
|
Employee Plans
|
11
|
|
|
|
|
|
ARTICLE III
|
PURCHASE OF ASSETS
|
11
|
|
|
|
|
|
3.1
|
Assets Purchased by Assuming Bank
|
11
|
|
3.2
|
Asset Purchase Price
|
11
|
|
3.3
|
Manner of Conveyance; Limited Warranty; Nonrecourse; Etc.
|
12
|
|
3.4
|
Puts of Assets to the Receiver
|
12
|
|
3.5
|
Assets Not Purchased by Assuming Bank
|
14
|
|
3.6
|
Assets Essential to Receiver
|
15
|
|
|
|
|
|
ARTICLE IV
|
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS
|
16
|
|
|
|
|
|
4.1
|
Continuation of Banking Business
|
16
|
|
4.2
|
Agreement with Respect to Credit Card Business
|
17
|
|
4.3
|
Agreement with Respect to Safe Deposit Business
|
17
|
|
4.4
|
Agreement with Respect to Safekeeping Business
|
17
|
|
4.5
|
Agreement with Respect to Trust Business
|
17
|
|
4.6
|
Agreement with Respect to Bank Premises
|
18
|
|
4.7
|
Agreement with Respect to Leased Data Processing Equipment
|
21
|
|
4.8
|
Agreement with Respect to Certain Existing Agreements
|
21
|
|
4.9
|
Informational Tax Reporting
|
22
|
|
4.10
|
Insurance
|
22
|
|
4.11
|
Office Space for Receiver and Corporation
|
23
|
|
4.12
|
Agreement with Respect to Continuation of Group Health Plan Coverage
for Former Employees
|
23
|
|
4.13
|
Agreement with Respect to Interim Asset Servicing
|
24
|
|
4.14
|
Reserved
|
24
|
|
4.15
|
Agreement with Respect to Loss Sharing
|
24
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
ii
|
ARTICLE V
|
DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK
|
24
|
|
|
|
|
|
5.1
|
Payment of Checks, Drafts and Orders
|
24
|
|
5.2
|
Certain Agreements Related to Deposits
|
25
|
|
5.3
|
Notice to Depositors
|
25
|
|
|
|
|
|
ARTICLE VI
|
RECORDS
|
25
|
|
|
|
|
|
6.1
|
Transfer of Records
|
25
|
|
6.2
|
Delivery of Assigned Records
|
26
|
|
6.3
|
Preservation of Records
|
26
|
|
6.4
|
Access to Records; Copies
|
26
|
|
|
|
|
|
ARTICLE VII
|
FIRST LOSS TRANCHE
|
27
|
|
|
|
|
|
ARTICLE VIII
|
ADJUSTMENTS
|
27
|
|
|
|
|
|
8.1
|
Pro Forma Statement
|
27
|
|
8.2
|
Correction of Errors and Omissions; Other Liabilities
|
28
|
|
8.3
|
Payments
|
28
|
|
8.4
|
Interest
|
28
|
|
8.5
|
Subsequent Adjustments
|
28
|
|
|
|
|
|
ARTICLE IX
|
CONTINUING COOPERATION
|
29
|
|
|
|
|
|
9.1
|
General Matters
|
29
|
|
9.2
|
Additional Title Documents
|
29
|
|
9.3
|
Claims and Suits
|
29
|
|
9.4
|
Payment of Deposits
|
29
|
|
9.5
|
Withheld Payments
|
30
|
|
9.6
|
Proceedings with Respect to Certain Assets and Liabilities
|
30
|
|
9.7
|
Information
|
31
|
|
|
|
|
|
ARTICLE X
|
CONDITION PRECEDENT
|
31
|
|
|
|
|
|
ARTICLE XI
|
REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK
|
31
|
|
|
|
|
|
ARTICLE XII
|
INDEMNIFICATION
|
32
|
|
|
|
|
|
12.1
|
Indemnification of Indemnitees
|
32
|
|
12.2
|
Conditions Precedent to Indemnification
|
35
|
|
12.3
|
No Additional Warranty
|
36
|
|
12.4
|
Indemnification of Corporation and Receiver
|
36
|
|
12.5
|
Obligations Supplemental
|
36
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
iii
|
12.6
|
Criminal Claims
|
37
|
|
12.7
|
Limited Guaranty of the Corporation
|
37
|
|
12.8
|
Subrogation
|
37
|
|
|
|
|
|
ARTICLE XIII
|
MISCELLANEOUS
|
37
|
|
|
|
|
|
13.1
|
Entire Agreement
|
37
|
|
13.2
|
Headings
|
37
|
|
13.3
|
Counterparts
|
38
|
|
13.4
|
Governing Law
|
38
|
|
13.5
|
Successors
|
38
|
|
13.6
|
Modification; Assignment
|
38
|
|
13.7
|
Notice
|
38
|
|
13.8
|
Manner of Payment
|
39
|
|
13.9
|
Costs, Fees and Expenses
|
39
|
|
13.10
|
Waiver
|
39
|
|
13.11
|
Severability
|
40
|
|
13.12
|
Term of Agreement
|
40
|
|
13.13
|
Survival of Covenants, Etc.
|
40
|
|
|
|
|
|
SCHEDULES
|
|
|
|
|
|
|
|
2.1
|
Certain Liabilities Assumed
|
42
|
|
2.1(a)
|
Excluded Deposit Liability Accounts
|
43
|
|
3.1
|
Certain Assets Purchased
|
44
|
|
3.2
|
Purchase Price of Assets or Assets
|
45
|
|
3.5(l)
|
Excluded Securities
|
47
|
|
4.15A
|
Single Family Loss Share Loans
|
48
|
|
4.15B
|
Non-Single Family Loss Share Loans
|
49
|
|
7
|
Calculation of Deposit Premium
|
50
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
|
|
2.3A
|
Final Notice Letter
|
52
|
|
2.3B
|
Affidavit of Mailing
|
54
|
|
4.13
|
Interim Asset Servicing Arrangement
|
57
|
|
4.15A
|
Single Family Loss Share Agreement
|
59
|
|
4.15B
|
Commercial Loss Share Agreement
|
95
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
iv
PURCHASE
AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL
DEPOSITS
THIS AGREEMENT
, made and
entered into as of the 4
th
day of December, 2009, by and among the
FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER of THE
BUCKHEAD COMMUNITY BANK, ATLANTA, GEORGIA
(the “Receiver”),
STATE BANK AND TRUST COMPANY
, organized
under the laws of the State of Georgia and having its principal place of
business in
MACON, GEORGIA
(the “Assuming
Bank”), and the
FEDERAL DEPOSIT INSURANCE
CORPORATION
, organized under the laws of the United States of
America and having its principal office in Washington, D.C., acting in its
corporate capacity (the “Corporation”).
WITNESSETH
:
WHEREAS
, on Bank
Closing, the Chartering Authority closed
THE
BUCKHEAD COMMUNITY BANK
(the “Failed Bank”) pursuant to applicable
law and the Corporation was appointed Receiver thereof; and
WHEREAS
, the Assuming
Bank desires to purchase certain assets and assume certain deposit and other
liabilities of the Failed Bank on the terms and conditions set forth in this Agreement;
and
WHEREAS
, pursuant to
12 U.S.C. Section 1823(c)(2)(A), the Corporation may provide assistance to
the Assuming Bank to facilitate the transactions contemplated by this
Agreement, which assistance may include indemnification pursuant to Article XII;
and
WHEREAS
, the Board of
Directors of the Corporation (the “Board”) has determined to provide assistance
to the Assuming Bank on the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS
, the Board has
determined pursuant to 12 U.S.C. Section 1823(c)(4)(A) that such
assistance is necessary to meet the obligation of the Corporation to provide
insurance coverage for the insured deposits in the Failed Bank.
NOW THEREFORE
, in
consideration of the mutual promises herein set forth and other valuable
consideration, the parties hereto agree as follows:
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
1
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement shall have
the meanings set forth in this Article I, or elsewhere in this Agreement.
As used herein, words imparting the singular include the plural and vice versa.
“
Accounting Records
”
means the
general ledger and subsidiary ledgers and supporting schedules which support
the general ledger balances.
“
Acquired Subsidiaries
”
means
Subsidiaries of the Failed Bank acquired pursuant to Section 3.1.
“
Affiliate
”
of any Person
means any director, officer, or employee of that Person and any other Person
(i) who is directly or indirectly controlling, or controlled by, or under
direct or indirect common control with, such Person, or (ii) who is an
affiliate of such Person as the term “affiliate” is defined in Section 2
of the Bank Holding Company Act of 1956, as amended, 12 U.S.C.
Section 1841.
“
Agreement
”
means this
Purchase and Assumption Agreement by and among the Assuming Bank, the
Corporation and the Receiver, as amended or otherwise modified from time to
time.
“
Assets
”
means all
assets of the Failed Bank purchased pursuant to Section 3.1. Assets owned
by Subsidiaries of the Failed Bank are not “Assets” within the meaning of this
definition.
“
Assumed Deposits
”
means
Deposits.
“
Bank Closing
”
means the
close of business of the Failed Bank on the date on which the Chartering
Authority closed such institution.
“
Bank Premises
”
means the
banking houses, drive-in banking facilities, and teller facilities (staffed or
automated) together with adjacent parking, storage and service facilities and
structures connecting remote facilities to banking houses, and land on which
the foregoing are located, and unimproved land that are owned or leased by the
Failed Bank and that have formerly been utilized, are currently utilized, or
are intended to be utilized in the future by the Failed Bank as shown on the
Accounting Record of the Failed Bank as of Bank Closing.
“
Bid Valuation Date
”
means
September 10, 2009.
“
Book Value
”
means, with
respect to any Asset and any Liability Assumed, the dollar amount thereof
stated on the Accounting Records of the Failed Bank. The Book Value of any item
shall be determined as of Bank Closing after adjustments made by the Receiver
for differences in accounts, suspense items, unposted debits and credits, and
other similar
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
2
adjustments or corrections and for setoffs, whether voluntary or
involuntary. The Book Value of a Subsidiary of the Failed Bank acquired by the
Assuming Bank shall be determined from the investment in subsidiary and related
accounts on the “bank only” (unconsolidated) balance sheet of the Failed Bank
based on the equity method of accounting. Without limiting the generality of
the foregoing, (i) the Book Value of a Liability Assumed shall include all
accrued and unpaid interest thereon as of Bank Closing, and (ii) the Book
Value of a Loan shall reflect adjustments for earned interest, or unearned
interest (as it relates to the “rule of 78s” or add-on-interest loans, as
applicable), if any, as of Bank Closing, adjustments for the portion of earned
or unearned loan-related credit life and/or disability insurance premiums, if
any, attributable to the Failed Bank as of Bank Closing, and adjustments for
Failed Bank Advances, if any, in each case as determined for financial
reporting purposes. The Book Value of an Asset shall not include any adjustment
for loan premiums, discounts or any related deferred income, fees or expenses,
or general or specific reserves on the Accounting Records of the Failed Bank.
“
Business Day
”
means a day
other than a Saturday, Sunday, Federal legal holiday or legal holiday under the
laws of the State where the Failed Bank is located, or a day on which the
principal office of the Corporation is closed.
“
Chartering Authority
”
means
(i) with respect to a national bank, the Office of the Comptroller of the
Currency, (ii) with respect to a Federal savings association or savings
bank, the Office of Thrift Supervision, (iii) with respect to a bank or
savings institution chartered by a State, the agency of such State charged with
primary responsibility for regulating and/or closing banks or savings institutions,
as the case may be, (iv) the Corporation in accordance with 12 U.S.C.
Section 1821(c), with regard to self appointment, or (v) the
appropriate Federal banking agency in accordance with 12 U.S.C. 1821(c)(9).
“
Commitment
”
means the
unfunded portion of a line of credit or other commitment reflected on the books
and records of the Failed Bank to make an extension of credit (or additional
advances with respect to a Loan) that was legally binding on the Failed Bank as
of Bank Closing, other than extensions of credit pursuant to the credit card
business and overdraft protection plans of the Failed Bank, if any.
“
Credit Documents
”
mean the
agreements, instruments, certificates or other documents at any time evidencing
or otherwise relating to, governing or executed in connection with or as
security for, a Loan, including without limitation notes, bonds, loan
agreements, letter of credit applications, lease financing contracts, banker’s
acceptances, drafts, interest protection agreements, currency exchange agreements,
repurchase agreements, reverse repurchase agreements, guarantees, deeds of
trust, mortgages, assignments, security agreements, pledges, subordination or
priority agreements, lien priority agreements, undertakings, security
instruments, certificates, documents, legal opinions, participation agreements
and intercreditor agreements, and all amendments, modifications, renewals,
extensions, rearrangements, and substitutions with respect to any of the
foregoing.
“
Credit File
”
means all
Credit Documents and all other credit, collateral, or insurance documents in
the possession or custody of the Assuming Bank, or any of its
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
3
Subsidiaries or Affiliates, relating to an Asset or a Loan included in
a Put Notice, or copies of any thereof.
“
Data Processing Lease
”
means any
lease or licensing agreement, binding on the Failed Bank as of Bank Closing,
the subject of which is data processing equipment or computer hardware or
software used in connection with data processing activities. A lease or
licensing agreement for computer software used in connection with data
processing activities shall constitute a Data Processing Lease regardless of
whether such lease or licensing agreement also covers data processing
equipment.
“
Deposit
”
means a
deposit as defined in 12 U.S.C. Section 1813 (l), including without
limitation, outstanding cashier’s checks and other official checks and all
uncollected items included in the depositors’ balances and credited on the
books and records of the Failed Bank;
provided
,
that
the term “Deposit”
shall not include all or any portion of those deposit balances which, in the
discretion of the Receiver or the Corporation, (i) may be required to
satisfy it for any liquidated or contingent liability of any depositor arising
from an unauthorized or unlawful transaction, or (ii) may be needed to
provide payment of any liability of any depositor to the Failed Bank or the
Receiver, including the liability of any depositor as a director or officer of
the Failed Bank, whether or not the amount of the liability is or can be
determined as of Bank Closing.
“
Deposit Secured Loan
”
means a loan
in which the only collateral securing the loan is Assumed Deposits or deposits
at other insured depository institutions
“
Equity Adjustment
”
means the
dollar amount resulting by subtracting the Book Value, as of Bank Closing, of
all Liabilities Assumed under this Agreement by the Assuming Bank from the
purchase price, as determined in accordance with this Agreement, as of Bank
Closing, of all Assets acquired under this Agreement by the Assuming Bank,
which may be a positive or a negative number.
“
Failed Bank Advances
”
means the
total sums paid by the Failed Bank to (i) protect its lien position,
(ii) pay ad valorem taxes and hazard insurance, and (iii) pay credit
life insurance, accident and health insurance, and vendor’s single interest
insurance.
“
Fair Market Value
”
means (i)(a) “Market
Value” as defined in the regulation prescribing the standards for real estate
appraisals used in federally related transactions, 12 C.F.R. § 323.2(g), and
accordingly shall mean the most probable price which a property should bring in
a competitive and open market under all conditions requisite to a fair sale,
the buyer and seller each acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are
typically motivated;
(2) Both parties are well
informed or well advised, and acting in what they consider their own best interests;
(3) A reasonable time is
allowed for exposure in the open market;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
4
(4) Payment is made in terms
of cash in U.S. dollars or in terms of financial arrangements comparable
thereto; and
(5) The price represents the
normal consideration for the property sold unaffected by special or creative
financing or sales concessions granted by anyone associated with the sale;
as determined as of Bank Closing by an appraiser chosen by the Assuming
Bank from a list of acceptable appraisers provided by the Receiver; any costs
and fees associated with such determination shall be shared equally by the Receiver
and the Assuming Bank, and (b) which, with respect to Bank Premises (to
the extent, if any, that Bank Premises are purchased utilizing this valuation
method), shall be determined not later than sixty (60) days after Bank Closing
by an appraiser selected by the Receiver and the Assuming Bank within seven
(7) days after Bank Closing; or (ii) with respect to property other
than Bank Premises purchased utilizing this valuation method, the price
therefore as established by the Receiver and agreed to by the Assuming Bank, or
in the absence of such agreement, as determined in accordance with clause
(i)(a) above.
“
First Loss
Tranche
” means the dollar amount of liability that the Assuming
Bank will incur prior to the commencement of loss sharing, which is the sum of
(i) the Assuming Bank’s asset premium (discount) bid, as reflected on the
Assuming Bank’s bid form, plus (ii) the Assuming Bank’s Deposit premium
bid, as reflected on the Assuming Bank’s bid form, plus (iii) the Equity
Adjustment. The First Loss Tranche may be a positive or negative number.
“
Fixtures
”
means those leasehold improvements, additions, alterations and installations
constituting all or a part of Bank Premises and which were acquired, added,
built, installed or purchased at the expense of the Failed Bank, regardless of
the holder of legal title thereto as of Bank Closing.
“
Furniture and Equipment
”
means the
furniture and equipment, other than motor vehicles, leased or owned by the
Failed Bank and reflected on the books of the Failed Bank as of Bank Closing
and located on or at Bank Premises, including without limitation automated
teller machines, carpeting, furniture, office machinery (including personal
computers), shelving, office supplies, telephone, surveillance, security
systems and artwork. Motor vehicles shall be considered other assets and pass
at Book Value. Furniture and equipment located at a storage facility not
adjacent to a Bank Premises are excluded from this definition.
“
Indemnitees
”
means, except
as provided in paragraph (11) of Section 12.1, (i) the Assuming Bank,
(ii) the Subsidiaries and Affiliates of the Assuming Bank
other
than
any Subsidiaries or Affiliates of the Failed Bank that are or become
Subsidiaries or Affiliates of the Assuming Bank, and (iii) the directors,
officers, employees and agents of the Assuming Bank and its Subsidiaries and
Affiliates who are
not
also present or former directors, officers,
employees or agents of the Failed Bank or of any Subsidiary or Affiliate of the
Failed Bank.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
5
“
Legal Balance
”
means the
amount of indebtedness legally owed by an Obligor with respect to a Loan, including
principal and accrued and unpaid interest, late fees, attorneys’ fees and
expenses, taxes, insurance premiums, and similar charges, if any.
“
Liabilities Assumed
”
has the
meaning provided in Section 2.1.
“
Lien
”
means any
mortgage, lien, pledge, charge, assignment for security purposes, security
interest, or encumbrance of any kind with respect to an Asset, including any
conditional sale agreement or capital lease or other title retention agreement
relating to such Asset.
“
Loans
”
means all of
the following owed to or held by the Failed Bank as of Bank Closing:
(i) loans (including loans which have been charged off the
Accounting Records of the Failed Bank in whole or in part prior to and
including the Bid Valuation Date), participation agreements, interests in
participations, overdrafts of customers (including but not limited to
overdrafts made pursuant to an overdraft protection plan or similar extensions
of credit in connection with a deposit account), revolving commercial lines of
credit, home equity lines of credit, Commitments, United States and/or
State-guaranteed student loans, and lease financing contracts;
(ii) all Liens, rights (including rights of set-off), remedies,
powers, privileges, demands, claims, priorities, equities and benefits owned or
held by, or accruing or to accrue to or for the benefit of, the holder of the
obligations or instruments referred to in clause (i) above, including but
not limited to those arising under or based upon Credit Documents, casualty
insurance policies and binders, standby letters of credit, mortgagee title
insurance policies and binders, payment bonds and performance bonds at any time
and from time to time existing with respect to any of the obligations or
instruments referred to in clause (i) above; and
(iii) all amendments, modifications, renewals, extensions,
refinancings, and refundings of or for any of the foregoing.
“
Obligor
”
means each
Person liable for the full or partial payment or performance of any Loan,
whether such Person is obligated directly, indirectly, primarily, secondarily,
jointly, or severally.
“
Other Real Estate
”
means all
interests in real estate (other than Bank Premises and Fixtures), including but
not limited to mineral rights, leasehold rights, condominium and cooperative
interests, air rights and development rights that are owned by the Failed Bank.
“
Person
”
means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, or government or any agency or
political subdivision thereof, excluding the Corporation.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
6
“
Primary Indemnitor
”
means any Person
(other than the Assuming Bank or any of its Affiliates) who is obligated to
indemnify or insure, or otherwise make payments (including payments on account
of claims made against) to or on behalf of any Person in connection with the
claims covered under Article XII, including without limitation any insurer
issuing any directors and officers liability policy or any Person issuing a
financial institution bond or banker’s blanket bond.
“
Proforma
”
means
producing a balance sheet that reflects a reasonably accurate financial
statement of the Failed bank through the date of closing. The Proforma
financial statements serve as a basis for the opening entries of both the
Assuming Bank and the Receiver.
“
Put Date
”
has the
meaning provided in Section 3.4.
“
Put Notice
”
has the
meaning provided in Section 3.4.
“
Qualified Financial
Contract
”
means a qualified financial contract as defined in
12 U.S.C. Section 1821(e)(8)(D).
“
Record
”
means any
document, microfiche, microfilm and computer records (including but not limited
to magnetic tape, disc storage, card forms and printed copy) of the Failed Bank
generated or maintained by the Failed Bank that is owned by or in the
possession of the Receiver at Bank Closing.
“
Related Liability
”
with respect
to any Asset means any liability existing and reflected on the Accounting
Records of the Failed Bank as of Bank Closing for (i) indebtedness secured
by mortgages, deeds of trust, chattel mortgages, security interests or other
liens on or affecting such Asset, (ii) ad valorem taxes applicable to such
Asset, and (iii) any other obligation determined by the Receiver to be
directly related to such Asset.
“
Related Liability Amount
”
with respect
to any Related Liability on the books of the Assuming Bank, means the amount of
such Related Liability as stated on the Accounting Records of the Assuming Bank
(as maintained in accordance with generally accepted accounting principles) as
of the date as of which the Related Liability Amount is being determined. With
respect to a liability that relates to more than one asset, the amount of such
Related Liability shall be allocated among such assets for the purpose of
determining the Related Liability Amount with respect to any one of such
assets. Such allocation shall be made by specific allocation, where
determinable, and otherwise shall be pro rata based upon the dollar amount of
such assets stated on the Accounting Records of the entity that owns such
asset.
“
Repurchase Price
”
means, with
respect to any Loan the Book Value, adjusted to reflect changes to Book Value
after Bank Closing, plus (i) any advances and interest on such Loan after
Bank Closing, minus (ii) the total of amounts received by the Assuming
Bank for such Loan, regardless of how applied, after Bank Closing, plus (iii) advances
made by Assuming Bank, plus (iv) total disbursements of principal made by
Receiver that are not included in the Book Value.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
7
“
Safe Deposit Boxes
”
means the safe
deposit boxes of the Failed Bank, if any, including the removable safe deposit
boxes and safe deposit stacks in the Failed Bank’s vault(s), all rights and
benefits under rental agreements with respect to such safe deposit boxes, and
all keys and combinations thereto.
“
Settlement Date
”
means the
first Business Day immediately prior to the day which is one hundred eighty
(180) days after Bank Closing, or such other date prior thereto as may be
agreed upon by the Receiver and the Assuming Bank. The Receiver, in its
discretion, may extend the Settlement Date.
“
Settlement Interest Rate
”
means, for the
first calendar quarter or portion thereof during which interest accrues, the
rate determined by the Receiver to be equal to the equivalent coupon issue
yield on twenty-six (26)-week United States Treasury Bills in effect as of Bank
Closing as published in
The Wall Street Journal
;
provided
,
that
if no such equivalent coupon issue yield is available as of Bank Closing, the
equivalent coupon issue yield for such Treasury Bills most recently published
in
The Wall Street Journal
prior to Bank Closing shall be used.
Thereafter, the rate shall be adjusted to the rate determined by the Receiver
to be equal to the equivalent coupon issue yield on such Treasury Bills in
effect as of the first day of each succeeding calendar quarter during which
interest accrues as published in
The Wall Street Journal
.
“
Subsidiary
”
has the
meaning set forth in Section 3(w)(4) of the Federal Deposit Insurance
Act, 12 U.S.C. Section 1813(w)(4), as amended.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1
Liabilities Assumed by Assuming
Bank
.
The Assuming Bank expressly assumes at Book Value
(subject to adjustment pursuant to Article VIII) and agrees to pay,
perform, and discharge all of the following liabilities of the Failed Bank as
of Bank Closing, except as otherwise provided in this Agreement (such
liabilities referred to as “Liabilities Assumed”):
(a) Assumed Deposits, except those Deposits specifically
listed on Schedule 2.1 (a);
provided
,
that
as to any Deposits of
public money which are Assumed Deposits, the Assuming Bank agrees to properly
secure such Deposits with such Assets as appropriate which, prior to Bank
Closing, were pledged as security by the Failed Bank, or with assets of the
Assuming Bank, if such securing Assets, if any, are insufficient to properly
secure such Deposits;
(b) liabilities for indebtedness secured by mortgages, deeds
of trust, chattel mortgages, security interests or other liens on or affecting
any Assets, if any;
provided
,
that
the assumption of any
liability pursuant to this paragraph shall be limited to the market value of
the Assets securing such liability as determined by the Receiver;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
8
(c) borrowings from Federal Reserve Banks and Federal Home
Loan Banks, if any,
provided
,
that
the assumption of any
liability pursuant to this paragraph shall be limited to the market value of
the assets securing such liability as determined by the Receiver; and
overdrafts, debit balances, service charges, reclamations, and adjustments to
accounts with the Federal Reserve Banks as reflected on the books and records
of any such Federal Reserve Bank within ninety (90) days after Bank Closing, if
any;
(d) ad valorem taxes applicable to any Asset, if any;
provided
,
that
the assumption of any ad valorem taxes pursuant to this paragraph
shall be limited to an amount equal to the market value of the Asset to which
such taxes apply as determined by the Receiver;
(e) liabilities, if any, for federal funds purchased,
repurchase agreements and overdrafts in accounts maintained with other
depository institutions (including any accrued and unpaid interest thereon
computed to and including Bank Closing);
provided
,
that
the
assumption of any liability pursuant to this paragraph shall be limited to the
market value of the Assets securing such liability as determined by the
Receiver;
(f) United States Treasury tax and loan note option accounts,
if any;
(g) liabilities for any acceptance or commercial letter of
credit (other than “standby letters of credit” as defined in 12 C.F.R.
Section 337.2 (a));
provided
,
that
the assumption of any
liability pursuant to this paragraph shall be limited to the market value of
the Assets securing such liability as determined by the Receiver;
(h) duties and obligations assumed pursuant to this Agreement
including without limitation those relating to the Failed Bank’s Records,
credit card business, overdraft protection plans, safe deposit business,
safekeeping business or trust business, if any;
(i) liabilities, if any, for Commitments;
(j) liabilities, if any, for amounts owed to any Subsidiary
of the Failed Bank acquired under Section 3.1;
(k) liabilities, if any, with respect to Qualified Financial
Contracts;
(l) duties and obligations under any contract pursuant to
which the Failed Bank provides mortgage servicing for others, or mortgage
servicing is provided to the Failed Bank by others; and
(m) all asset-related offensive litigation liabilities and all
asset-related defensive litigation liabilities, but only to the extent such
liabilities relate to assets
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
9
subject to a loss share agreement, and provided that
all other defensive litigation and any class actions with respect to credit
card business are retained by the Receiver.
Schedule 2.1 attached hereto and incorporated herein
sets forth certain categories of Liabilities Assumed and the aggregate Book Value
of the Liabilities Assumed in such categories. Such schedule is based upon the
best information available to the Receiver and may be adjusted as provided in
Article VIII.
2.2
Interest on Deposit Liabilities
.
The Assuming Bank agrees that, from and after Bank Closing, it will
accrue and pay interest on Deposit liabilities assumed pursuant to
Section 2.1 at a rate (s) it shall determine;
provided
,
that
for non-transaction Deposit liabilities such rate(s) shall not be less
than the lowest rate offered by the Assuming Bank to its depositors for
non-transaction deposit accounts. The Assuming Bank shall permit each depositor
to withdraw, without penalty for early withdrawal, all or any portion of such
depositor’s Deposit, whether or not the Assuming Bank elects to pay interest in
accordance with any deposit agreement formerly existing between the Failed Bank
and such depositor;
and
further provided
,
that
if such
Deposit has been pledged to secure an obligation of the depositor or other
party, any withdrawal thereof shall be subject to the terms of the agreement
governing such pledge. The Assuming Bank shall give notice to such depositors
as provided in Section 5.3 of the rate(s) of interest which it has
determined to pay and of such withdrawal rights.
2.3
Unclaimed Deposits
.
Fifteen (15)
months following the Bank Closing Date, the Assuming Bank will provide the
Receiver a listing of all deposit accounts, including the type of account, not
claimed by the depositor. The Receiver will review the list and authorize the
Assuming Bank to act on behalf of the Receiver to send a “Final Legal Notice”
in a form substantially similar to Exhibit 2.3A to the owner(s) of
the unclaimed deposits reminding them of the need to claim or arrange to
continue their account(s) with the Assuming Bank. The Assuming Bank will send
the “Final Legal Notice” to the depositors within thirty (30) days following
notification of the Receiver’s authorization. The Assuming Bank will prepare an
Affidavit of Mailing and will forward the Affidavit of Mailing to the Receiver
after mailing out the “Final Legal Notice” in a form substantially similar to
Exhibit 2.3B to the owner(s) of unclaimed deposit accounts.
If, within eighteen (18) months after Bank Closing,
any depositor of the Failed Bank does not claim or arrange to continue such
depositor’s Deposit assumed pursuant to Section 2.1 at the Assuming Bank,
the Assuming Bank shall, within fifteen (15) Business Days after the end of
such eighteen (18) month period, (i) refund to the Receiver the full amount
of each such deposit (without reduction for service charges), (ii) provide
to the Receiver a schedule of all such refunded Deposits in such form as may be
prescribed by the Receiver, and (iii) assign, transfer, convey, and
deliver to the Receiver, all right, title, and interest of the Assuming Bank in
and to the Records previously transferred to the Assuming Bank and other
records generated or maintained by the Assuming Bank pertaining to such
Deposits. During such eighteen (18) month period, at the request of the
Receiver, the Assuming Bank promptly shall provide to the Receiver schedules of
unclaimed deposits in such form as may be prescribed by the Receiver.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
10
2.4
Employee Plans
.
Except as
provided in Section 4.12, the Assuming Bank shall have no liabilities,
obligations or responsibilities under the Failed Bank’s health care, bonus,
vacation, pension, profit sharing, deferred compensation, 401K or stock purchase
plans or similar plans, if any, unless the Receiver and the Assuming Bank agree
otherwise subsequent to the date of this Agreement.
ARTICLE III
PURCHASE OF ASSETS
3.1
Assets Purchased by Assuming Bank
. With the
exception of certain assets expressly excluded in Sections 3.5 and 3.6, the
Assuming Bank hereby purchases from the Receiver, and the Receiver hereby
sells, assigns, transfers, conveys, and delivers to the Assuming Bank, all
right, title, and interest of the Receiver in and to all of the assets (real,
personal and mixed, wherever located and however acquired) including all
subsidiaries, joint ventures, partnerships, and any and all other business
combinations or arrangements, whether active, inactive, dissolved or
terminated, of the Failed Bank whether or not reflected on the books of the
Failed Bank as of Bank Closing. Schedule 3.1 attached hereto and incorporated
herein sets forth certain categories of Assets purchased hereunder. Such
schedule is based upon the best information available to the Receiver and may
be adjusted as provided in Article VIII. Assets are purchased hereunder by
the Assuming Bank subject to all liabilities for indebtedness collateralized by
Liens affecting such Assets to the extent provided in Section 2.1. Notwithstanding
Section 4.8, the Assuming Bank specifically purchases all mortgage
servicing rights and obligations of the Failed Bank.
3.2
Asset Purchase Price
.
(a) All Assets and assets of the Failed Bank subject to an
option to purchase by the Assuming Bank shall be purchased for the amount, or
the amount resulting from the method specified for determining the amount, as
specified on Schedule 3.2, except as otherwise may be provided herein. Any
Asset, asset of the Failed Bank subject to an option to purchase or other asset
purchased for which no purchase price is specified on Schedule 3.2 or otherwise
herein shall be purchased at its Book Value. Loans or other assets charged off
the Accounting Records of the Failed Bank before the Bid Valuation Date shall
be purchased at a price of zero.
(b) The purchase price for securities (other than the capital
stock of any Acquired Subsidiary and FRB and FHLB stock) purchased under
Section 3.1 by the Assuming Bank shall be the market value thereof as of
Bank Closing, which market value shall be (i) the market price for each
such security quoted at the close of the trading day effective on Bank Closing
as published electronically by Bloomberg, L.P., or alternatively, at the
discretion of the Receiver, IDC/Financial Times (FT) Interactive Data;
(ii)
provided
,
that
if such market price is not available
for any such security, the Assuming Bank will submit a bid for each such
security within three days of notification/bid request by the Receiver (unless
a different time period is agreed to by the Assuming Bank and the Receiver) and
the Receiver, in its sole discretion will accept or reject each such bid; and
(iii)
further
provided
in the absence of an acceptable bid
from
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
11
the Assuming Bank, each such security shall not pass
to the Assuming Bank and shall be deemed to be an excluded asset hereunder.
(c) Qualified Financial Contracts shall be purchased at market
value determined in accordance with the terms of Exhibit 3.2(c). Any costs
associated with such valuation shall be shared equally by the Receiver and the
Assuming Bank.
3.3
Manner of Conveyance; Limited
Warranty; Nonrecourse; Etc
. THE CONVEYANCE OF ALL ASSETS, INCLUDING
REAL AND PERSONAL PROPERTY INTERESTS, PURCHASED BY THE ASSUMING BANK UNDER THIS
AGREEMENT SHALL BE MADE, AS NECESSARY, BY RECEIVER’S DEED OR RECEIVER’S BILL OF
SALE, “AS IS”, “WHERE IS”, WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED IN THIS AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH
RESPECT TO SUCH ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO TITLE,
ENFORCEABILITY, COLLECTIBILITY, DOCUMENTATION OR FREEDOM FROM LIENS OR ENCUMBRANCES
(IN WHOLE OR IN PART), OR ANY OTHER MATTERS.
3.4
Puts of Assets to the Receiver
.
(a)
Puts Within 30 Days
After Bank Closing
. During the thirty (30)-day period following
Bank Closing and only during such period (which thirty (30)-day period may be extended
in writing
in the sole absolute discretion of the Receiver for any
Loan), in accordance with this Section 3.4, the Assuming Bank shall be
entitled to require the Receiver to purchase any Deposit Secured Loan
transferred to the Assuming Bank pursuant to Section 3.1 which is not
fully secured by Assumed Deposits or deposits at other insured depository
institutions due to either insufficient Assumed Deposit or deposit collateral
or deficient documentation regarding such collateral; provided with regard to
any Deposit Secured Loan secured by an Assumed Deposit, no such purchase may be
required until any Deposit setoff determination, whether voluntary or
involuntary, has been made; and,
at the end of the thirty (30)-day period following Bank Closing and at
that time only, in accordance with this Section 3.4, the Assuming Bank
shall be entitled to require the Receiver to purchase any remaining overdraft
transferred to the Assuming Bank pursuant to 3.1 which both was made after the
Bid Valuation Date and was not made pursuant to an overdraft protection plan or
similar extension of credit.
Notwithstanding the foregoing, the Assuming Bank shall
not
have
the right to require the Receiver to purchase any Loan if (i) the Obligor
with respect to such Loan is an Acquired Subsidiary, or (ii) the Assuming
Bank has:
(A)
made any
advance in accordance with the terms of a Commitment or otherwise with respect
to such Loan;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
12
(B)
taken any
action that increased the amount of a Related Liability with respect to such
Loan over the amount of such liability immediately prior to the time of such
action;
(C)
created or
permitted to be created any Lien on such Loan which secures indebtedness for
money borrowed or which constitutes a conditional sales agreement, capital
lease or other title retention agreement;
(D)
entered into,
agreed to make, grant or permit, or made, granted or permitted any modification
or amendment to, any waiver or extension with respect to, or any renewal,
refinancing or refunding of, such Loan or related Credit Documents or
collateral, including, without limitation, any act or omission which diminished
such collateral; or
(E)
sold, assigned
or transferred all or a portion of such Loan to a third party (whether with or
without recourse).
The Assuming Bank shall transfer all such Assets to the Receiver
without recourse, and shall indemnify the Receiver against any and all claims
of any Person claiming by, through or under the Assuming Bank with respect to
any such Asset, as provided in Section 12.4.
(b)
Notices to the
Receiver
. In the event that the Assuming Bank elects to require
the Receiver to purchase one or more Assets, the Assuming Bank shall deliver to
the Receiver a notice (a “Put Notice”) which shall include:
(i)
a list of all
Assets that the Assuming Bank requires the Receiver to purchase;
(ii)
a list of all
Related Liabilities with respect to the Assets identified pursuant to
(i) above; and
(iii)
a statement of
the estimated Repurchase Price of each Asset identified pursuant to
(i) above as of the applicable Put Date.
Such notice shall be in the form prescribed by the Receiver or such
other form to which the Receiver shall consent. As provided in
Section 9.6, the Assuming Bank shall deliver to the Receiver such
documents, Credit Files and such additional information relating to the subject
matter of the Put Notice as the Receiver may request and shall provide to the
Receiver full access to all other relevant books and records.
(c)
Purchase by Receiver
.
The Receiver shall purchase Assets that are specified in the Put Notice and
shall assume Related Liabilities with respect to such Assets, and the transfer
of such Assets and Related Liabilities shall be effective as of a date
determined by the Receiver which date shall not be later than thirty (30) days
after receipt by the Receiver of the Put Notice (the “Put Date”).
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
13
(d)
Purchase
Price and Payment Date
. Each Asset purchased by
the Receiver pursuant to this Section 3.4 shall be purchased at a price
equal to the Repurchase Price of such Asset less the Related Liability Amount
applicable to such Asset, in each case determined as of the applicable Put
Date. If the difference between such Repurchase Price and such Related
Liability Amount is positive, then the Receiver shall pay to the Assuming Bank
the amount of such difference; if the difference between such amounts is
negative, then the Assuming Bank shall pay to the Receiver the amount of such
difference. The Assuming Bank or the Receiver, as the case may be, shall pay
the purchase price determined pursuant to this Section 3.4(d) not
later than the twentieth (20th) Business Day following the applicable Put Date,
together with interest on such amount at the Settlement Interest Rate for the
period from and including such Put Date to and including the day preceding the
date upon which payment is made.
(e)
Servicing
.
The Assuming Bank shall administer and manage any Asset subject to purchase
by the Receiver in accordance with usual and prudent banking standards and
business practices until such time as such Asset is purchased by the Receiver.
(f)
Reversals
. In the event
that the Receiver purchases an Asset (and assumes the Related Liability) that
it is not required to purchase pursuant to this Section 3.4, the Assuming
Bank shall repurchase such Asset (and assume such Related Liability) from the
Receiver at a price computed so as to achieve the same economic result as would
apply if the Receiver had never purchased such Asset pursuant to this
Section 3.4.
3.5
Assets Not Purchased by Assuming
Bank
. The Assuming Bank does not purchase, acquire or
assume, or (except as otherwise expressly provided in this Agreement) obtain an
option to purchase, acquire or assume under this Agreement:
(a) any financial institution bonds, banker’s blanket bonds,
or public liability, fire, extended coverage insurance policy, bank owned life
insurance or any other insurance policy of the Failed Bank, or premium refund,
unearned premium derived from cancellation, or any proceeds payable with
respect to any of the foregoing;
(b) any interest, right, action, claim, or judgment against
(i) any officer, director, employee, accountant, attorney, or any other
Person employed or retained by the Failed Bank or any Subsidiary of the Failed
Bank on or prior to Bank Closing arising out of any act or omission of such
Person in such capacity, (ii) any underwriter of financial institution
bonds, banker’s blanket bonds or any other insurance policy of the Failed Bank,
(iii) any shareholder or holding company of the Failed Bank, or
(iv) any other Person whose action or inaction may be related to any loss
(exclusive of any loss resulting from such Person’s failure to pay on a Loan
made by the Failed Bank) incurred by the Failed Bank;
provided
,
that
for the purposes hereof, the acts, omissions or other events giving rise to any
such claim shall have occurred on or before Bank Closing, regardless of when
any such claim is discovered and regardless of whether any such claim is made
with respect to a financial institution bond, banker’s blanket bond, or any
other insurance policy of the Failed Bank in force as of Bank Closing;
(c) prepaid regulatory assessments of the Failed Bank, if any;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
14
(d) legal or equitable interests in tax receivables of the
Failed Bank, if any, including any claims arising as a result of the Failed
Bank having entered into any agreement or otherwise being joined with another
Person with respect to the filing of tax returns or the payment of taxes;
(e) amounts reflected on the Accounting Records of the Failed
Bank as of Bank Closing as a general or specific loss reserve or contingency
account, if any;
(f) leased or owned Bank Premises and leased or owned
Furniture and Equipment and Fixtures and data processing equipment (including
hardware and software) located on leased or owned Bank Premises, if any;
provided
,
that
the Assuming Bank does obtain an option under Section 4.6,
Section 4.7 or Section 4.8, as the case may be, with respect thereto;
(g) owned Bank Premises which the Receiver, in its discretion,
determines may contain environmentally hazardous substances;
(h) any “goodwill,” as such term is defined in the
instructions to the report of condition prepared by banks examined by the
Corporation in accordance with 12 C.F.R. Section 304.4, and other
intangibles;
(i) any criminal restitution or forfeiture orders issued in
favor of the Failed Bank;
(j) reserved;
(k) assets essential to the Receiver in accordance with
Section 3.6;
(l) the securities listed on the attached Schedule 3.5(l);
and
(m) prepaid accounts associated with any contract or agreement
that the Assuming Bank either does not directly assume pursuant to the terms of
this Agreement nor has an option to assume under Section 4.8.
3.6
Retention or Repurchase of Assets
Essential to Receiver
.
(a) The Receiver may refuse to sell to the Assuming Bank, or
the Assuming Bank agrees, at the request of the Receiver set forth in a written
notice to the Assuming Bank, to assign, transfer, convey, and deliver to the
Receiver all of the Assuming Bank’s right, title and interest in and to, any
Asset or asset essential to the Receiver as determined by the Receiver in its
discretion (together with all Credit Documents evidencing or pertaining
thereto), which may include any Asset or asset that the Receiver determines to
be:
(i)
made to an
officer, director, or other Person engaging in the affairs of the Failed Bank,
its Subsidiaries or Affiliates or any related entities of any of the foregoing;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
15
(ii)
the subject of
any investigation relating to any claim with respect to any item described in
Section 3.5(a) or (b), or the subject of, or potentially the subject of, any
legal proceedings;
(iii)
made to a
Person who is an Obligor on a loan owned by the Receiver or the Corporation in
its corporate capacity or its capacity as receiver of any institution;
(iv)
secured by
collateral which also secures any asset owned by the Receiver; or
(v)
related to any
asset of the Failed Bank not purchased by the Assuming Bank under this
Article III or any liability of the Failed Bank not assumed by the
Assuming Bank under Article II.
(b) Each such Asset or asset purchased by the Receiver shall
be purchased at a price equal to the Repurchase Price thereof less the Related
Liability Amount with respect to any Related Liabilities related to such Asset
or asset, in each case determined as of the date of the notice provided by the
Receiver pursuant to Section 3.6(a). The Receiver shall pay the Assuming
Bank not later than the twentieth (20th) Business Day following receipt of
related Credit Documents and Credit Files together with interest on such amount
at the Settlement Interest Rate for the period from and including the date of
receipt of such documents to and including the day preceding the day on which
payment is made. The Assuming Bank agrees to administer and manage each such
Asset or asset in accordance with usual and prudent banking standards and
business practices until each such Asset or asset is purchased by the Receiver.
All transfers with respect to Asset or assets under this Section 3.6 shall
be made as provided in Section 9.6. The Assuming Bank shall transfer all such
Asset or assets and Related Liabilities to the Receiver without recourse, and
shall indemnify the Receiver against any and all claims of any Person claiming
by, through or under the Assuming Bank with respect to any such Asset or asset,
as provided in Section 12.4.
ARTICLE IV
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS
The Assuming Bank agrees with the Receiver and the
Corporation as follows:
4.1
Continuation of Banking Business
. For the
period commencing the first banking Business Day after Bank Closing and ending
no earlier than the first anniversary of Bank Closing, the Assuming Bank will
provide full service banking in the trade area of the Failed Bank. Thereafter,
the Assuming Bank may cease providing such banking services in the trade area
of the Failed Bank, provided the Assuming Bank has received all necessary
regulatory approvals. At the option of the Assuming Bank, such banking services
may be provided at any or all of the Bank Premises, or at other premises within
such trade area. The trade area shall be determined by the Receiver. For the
avoidance of doubt, the foregoing shall not restrict the Assuming Bank from
opening, closing or selling branches upon receipt of the necessary
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
16
regulatory approvals, if the Assuming Bank or its
successors continue to provide banking services in the trade area. Assuming
Bank will pay to the Receiver, upon the sale of a branch or branches within the
year following the date of this agreement, fifty percent (50%) of any franchise
premium in excess of the franchise premium paid by the Assuming Bank with
respect to such branch or branches.
4.2
Agreement with Respect to Credit
Card Business
. The Assuming Bank agrees to honor and perform,
from and after Bank Closing, all duties and obligations with respect to the
Failed Bank’s credit card business, and/or processing related to credit cards,
if any, and assumes all outstanding extensions of credit with respect thereto.
4.3
Agreement with Respect to Safe
Deposit Business
. The Assuming Bank assumes and agrees to discharge,
from and after Bank Closing, in the usual course of conducting a banking
business, the duties and obligations of the Failed Bank with respect to all
Safe Deposit Boxes, if any, of the Failed Bank and to maintain all of the
necessary facilities for the use of such boxes by the renters thereof during
the period for which such boxes have been rented and the rent therefore paid to
the Failed Bank, subject to the provisions of the rental agreements between the
Failed Bank and the respective renters of such boxes;
provided
,
that
the Assuming Bank may relocate the Safe Deposit Boxes of the Failed Bank to any
office of the Assuming Bank located in the trade area of the Failed Bank. The
Safe Deposit Boxes shall be located and maintained in the trade area of the
Failed Bank for a minimum of one year from Bank Closing. The trade area shall
be determined by the Receiver. Fees related to the safe deposit business earned
prior to the Bank Closing Date shall be for the benefit of the Receiver and
fees earned after the Bank Closing Date shall be for the benefit of the
Assuming Bank.
4.4
Agreement with Respect to Safekeeping
Business
. The Receiver transfers, conveys and delivers to
the Assuming Bank and the Assuming Bank accepts all securities and other items,
if any, held by the Failed Bank in safekeeping for its customers as of Bank
Closing. The Assuming Bank assumes and agrees to honor and discharge, from and
after Bank Closing, the duties and obligations of the Failed Bank with respect
to such securities and items held in safekeeping. The Assuming Bank shall be
entitled to all rights and benefits heretofore accrued or hereafter accruing
with respect thereto. The Assuming Bank shall provide to the Receiver written
verification of all assets held by the Failed Bank for safekeeping within sixty
(60) days after Bank Closing. The assets held for safekeeping by the Failed
Bank shall be held and maintained by the Assuming Bank in the trade area of the
Failed Bank for a minimum of one year from Bank Closing. At the option of the
Assuming Bank, the safekeeping business may be provided at any or all of the
Bank Premises, or at other premises within such trade area. The trade area
shall be determined by the Receiver. Fees related to the safekeeping business
earned prior to the Bank Closing Date shall be for the benefit of the Receiver
and fees earned after the Bank Closing Date shall be for the benefit of the
Assuming Bank.
4.5
Agreement with Respect to Trust
Business
.
(a) The Assuming Bank shall, without further transfer,
substitution, act or deed, to the full extent permitted by law, succeed to the
rights, obligations, properties, assets, investments, deposits, agreements, and
trusts of the Failed Bank under trusts, executorships, administrations,
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
17
guardianships, and agencies, and other fiduciary or
representative capacities, all to the same extent as though the Assuming Bank
had assumed the same from the Failed Bank prior to Bank Closing;
provided
,
that
any liability based on the misfeasance, malfeasance or nonfeasance
of the Failed Bank, its directors, officers, employees or agents with respect
to the trust business is not assumed hereunder.
(b) The Assuming Bank shall, to the full extent permitted by
law, succeed to, and be entitled to take and execute, the appointment to all
executorships, trusteeships, guardianships and other fiduciary or
representative capacities to which the Failed Bank is or may be named in wills,
whenever probated, or to which the Failed Bank is or may be named or appointed
by any other instrument.
(c) In the event additional proceedings of any kind are
necessary to accomplish the transfer of such trust business, the Assuming Bank
agrees that, at its own expense, it will take whatever action is necessary to
accomplish such transfer. The Receiver agrees to use reasonable efforts to
assist the Assuming Bank in accomplishing such transfer.
(d) The Assuming Bank shall provide to the Receiver written
verification of the assets held in connection with the Failed Bank’s trust
business within sixty (60) days after Bank Closing.
4.6
Agreement with Respect to Bank
Premises
.
(a)
Option
to Purchase
.
Subject to Section 3.5, the Receiver
hereby grants to the Assuming Bank an exclusive option for the period of ninety
(90) days commencing the day after Bank Closing to purchase any or all owned
Bank Premises, including all Furniture, Fixtures and Equipment located on the
Bank Premises. The Assuming Bank shall give written notice to the Receiver within
the option period of its election to purchase or not to purchase any of the
owned Bank Premises. Any purchase of such premises shall be effective as of the
date of Bank Closing and such purchase shall be consummated as soon as
practicable thereafter, and in no event later than the Settlement Date. If the
Assuming Bank gives notice of its election not to purchase one or more of the
owned Bank Premises within seven (7) days of Bank Closing, then, not
withstanding any other provision of this Agreement to the contrary, the
Assuming Bank shall not be liable for any of the costs or fees associated with
appraisals for such Bank Premises.
(b)
Option
to Lease
.
The Receiver hereby grants to the Assuming
Bank an exclusive option for the period of ninety (90) days commencing the day
after Bank Closing to cause the Receiver to assign to the Assuming Bank any or
all leases for leased Bank Premises, if any, which have been continuously
occupied by the Assuming Bank from Bank Closing to the date it elects to accept
an assignment of the leases with respect thereto to the extent such leases can
be assigned;
provided
,
that
the exercise of this option with
respect to any lease must be as to all premises or other property subject to
the lease. If an assignment cannot be made of any such leases, the Receiver
may, in its discretion, enter into subleases with the Assuming Bank containing
the same terms and conditions provided under such existing leases for such
leased Bank Premises or other property. The Assuming Bank shall give notice to
the Receiver within the option period of its election to accept or not to
accept an assignment of any or all leases (or
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
18
enter into subleases or new leases in lieu thereof). The Assuming Bank
agrees to assume all leases assigned (or enter into subleases or new leases in
lieu thereof) pursuant to this Section 4.6.
(c)
Facilitation
.
The Receiver agrees to facilitate the assumption, assignment or sublease of
leases or the negotiation of new leases by the Assuming Bank;
provided
,
that
neither the Receiver nor the Corporation shall be obligated to engage in
litigation, make payments to the Assuming Bank or to any third party in
connection with facilitating any such assumption, assignment, sublease or
negotiation or commit to any other obligations to third parties.
(d)
Occupancy
.
The Assuming Bank shall give the Receiver fifteen (15) days’ prior written
notice of its intention to vacate prior to vacating any leased Bank Premises
with respect to which the Assuming Bank has not exercised the option provided
in Section 4.6(b). Any such notice shall be deemed to terminate the
Assuming Bank’s option with respect to such leased Bank Premises.
(e)
Occupancy Costs
.
(i) The Assuming Bank agrees to pay to the Receiver, or to
appropriate third parties at the direction of the Receiver, during and for the
period of any occupancy by it of (x) owned Bank Premises the market rental
value, as determined by the appraiser selected in accordance with the
definition of Fair Market Value, and all operating costs, and (y) leased
Bank Premises, all operating costs with respect thereto and to comply with all
relevant terms of applicable leases entered into by the Failed Bank, including
without limitation the timely payment of all rent. Operating costs include,
without limitation all taxes, fees, charges, utilities, insurance and
assessments, to the extent not included in the rental value or rent. If the
Assuming Bank elects to purchase any owned Bank Premises in accordance with
Section 4.6(a), the amount of any rent paid (and taxes paid to the
Receiver which have not been paid to the taxing authority and for which the
Assuming Bank assumes liability) by the Assuming Bank with respect thereto
shall be applied as an offset against the purchase price thereof.
(ii) The Assuming Bank agrees during the period of occupancy by
it of owned or leased Bank Premises, to pay to the Receiver rent for the use of
all owned or leased Furniture and Equipment and all owned or leased Fixtures
located on such Bank Premises for the period of such occupancy. Rent for such
property owned by the Failed Bank shall be the market rental value thereof, as
determined by the Receiver within sixty (60) days after Bank Closing. Rent for
such leased property shall be an amount equal to any and all rent and other
amounts which the Receiver incurs or accrues as an obligation or is obligated
to pay for such period of occupancy pursuant to all leases and contracts with
respect to such property. If the Assuming Bank purchases any owned Furniture
and Equipment or owned Fixtures in accordance with Section 4.6(f) or
4.6(h), the amount of any rents paid by the Assuming Bank with respect thereto
shall be applied as an offset against the purchase price thereof.
(f)
Certain Requirements
as to Furniture, Equipment and Fixtures
.
If the Assuming Bank
purchases owned Bank Premises or accepts an assignment of the lease (or enters
into a sublease or a new lease in lieu thereof) for leased Bank Premises as
provided in Section
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
19
4.6(a) or 4.6(b), or if the Assuming Bank does not exercise such
option but within twelve (12) months following Bank Closing obtains the right
to occupy such premises (whether by assignment, lease, sublease, purchase or
otherwise), other than in accordance with Section 4.6(a) or (b), the
Assuming Bank shall (i) effective as of the date of Bank Closing, purchase
from the Receiver all Furniture and Equipment and Fixtures owned by the Failed
Bank at Fair Market Value and located thereon as of Bank Closing,
(ii) accept an assignment or a sublease of the leases or negotiate new
leases for all Furniture and Equipment and Fixtures leased by the Failed Bank
and located thereon, and (iii) if applicable, accept an assignment or a
sublease of any ground lease or negotiate a new ground lease with respect to
any land on which such Bank Premises are located;
provided
,
that
the Receiver shall not have disposed of such Furniture and Equipment and
Fixtures or repudiated the leases specified in clause (ii) or (iii).
(g)
Vacating Premises
.
(i) If the Assuming Bank elects not to purchase any owned
Bank Premises, the notice of such election in accordance with
Section 4.6(a) shall specify the date upon which the Assuming Bank’s
occupancy of such premises shall terminate, which date shall not be later than
ninety (90) days after the date of the Assuming Bank’s notice not to exercise
such option. The Assuming Bank promptly shall relinquish and release to the
Receiver such premises and the Furniture and Equipment and Fixtures located
thereon in the same condition as at Bank Closing, normal wear and tear
excepted. By occupying any such premises after the expiration of such ninety
(90)-day period, the Assuming Bank shall, at the Receiver’s option, (x) be
deemed to have agreed to purchase such Bank Premises, and to assume all leases,
obligations and liabilities with respect to leased Furniture and Equipment and
leased Fixtures located thereon and any ground lease with respect to the land
on which such premises are located, and (y) be required to purchase all
Furniture and Equipment and Fixtures owned by the Failed Bank and located on
such premises as of Bank Closing.
(ii) If the Assuming Bank elects not to accept an assignment of
the lease or sublease any leased Bank Premises, the notice of such election in
accordance with Section 4.6(b) shall specify the date upon which the
Assuming Bank’s occupancy of such leased Bank Premises shall terminate, which
date shall not be later than the date which is one hundred eighty (180) days
after Bank Closing. Upon vacating such premises, the Assuming Bank shall
relinquish and release to the Receiver such premises and the Fixtures and the
Furniture and Equipment located thereon in the same condition as at Bank
Closing, normal wear and tear excepted. By failing to provide notice of its
intention to vacate such premises prior to the expiration of the option period
specified in Section 4.6(b), or by occupying such premises after the one
hundred eighty (180)-day period specified above in this paragraph (ii), the
Assuming Bank shall, at the Receiver’s option, (x) be deemed to have
assumed all leases, obligations and liabilities with respect to such premises
(including any ground lease with respect to the land on which premises are
located), and leased Furniture and Equipment and leased Fixtures located
thereon in accordance with this Section 4.6 (unless the Receiver
previously repudiated any such lease), and (y) be required to purchase all
Furniture and Equipment and Fixtures owned by the Failed Bank at Fair Market
Value and located on such premises as of Bank Closing.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
20
(h)
Furniture and
Equipment and Certain Other Equipment
.
The Receiver hereby
grants to the Assuming Bank an option to purchase
all
Furniture and
Equipment or any telecommunications, data processing equipment (including
hardware and software) and check processing and similar operating equipment
owned by the Failed Bank at Fair Market Value and located at any leased Bank
Premises that the Assuming Bank elects to vacate or which it could have, but
did not occupy, pursuant to this Section 4.6;
provided
,
that
,
the Assuming Bank shall give the Receiver notice of its election to purchase
such property at the time it gives notice of its intention to vacate such Bank
Premises or within ten (10) days after Bank Closing for Bank Premises it
could have, but did not, occupy.
4.7
Agreement with Respect to Leased
Data Processing Equipment
(a) The Receiver hereby grants to the Assuming Bank an
exclusive option for the period of ninety (90) days commencing the day after
Bank Closing to accept an assignment from the Receiver of any or all Data
Processing Leases to the extent that such Data Processing Leases can be
assigned.
(b) The Assuming Bank shall (i) give written notice to
the Receiver within the option period specified in Section 4.7(a) of
its intent to accept or decline an assignment or sublease of any or all Data
Processing Leases and promptly accept an assignment or sublease of such Data
Processing Leases, and (ii) give written notice to the appropriate
lessor(s) that it has accepted an assignment or sublease of any such Data
Processing Leases.
(c) The Receiver agrees to facilitate the assignment or
sublease of Data Processing Leases or the negotiation of new leases or license
agreements by the Assuming Bank;
provided
,
that
neither the
Receiver nor the Corporation shall be obligated to engage in litigation or make
payments to the Assuming Bank or to any third party in connection with
facilitating any such assumption, assignment, sublease or negotiation.
(d) The Assuming Bank agrees, during its period of use of any
property subject to a Data Processing Lease, to pay to the Receiver or to
appropriate third parties at the direction of the Receiver all operating costs
with respect thereto and to comply with all relevant terms of the applicable
Data Processing Leases entered into by the Failed Bank, including without
limitation the timely payment of all rent, taxes, fees, charges, utilities,
insurance and assessments.
(e) The Assuming Bank shall, not later than fifty (50) days
after giving the notice provided in Section 4.7(b), (i) relinquish
and release to the Receiver all property subject to the relevant Data
Processing Lease, in the same condition as at Bank Closing, normal wear and
tear excepted, or (ii) accept an assignment or a sublease thereof or
negotiate a new lease or license agreement under this Section 4.7.
4.8
Agreement with Respect to Certain
Existing Agreements
.
(a) Subject to the provisions of Section 4.8(b), with
respect to agreements existing as of Bank Closing which provide for the
rendering of services by or to the Failed Bank, within thirty (30) days after
Bank Closing, the Assuming Bank shall give the Receiver written notice
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
21
specifying whether it elects to assume or not to assume each such
agreement. Except as may be otherwise provided in this Article IV, the
Assuming Bank agrees to comply with the terms of each such agreement for a
period commencing on the day after Bank Closing and ending on: (i) in the
case of an agreement that provides for the rendering of services by the Failed
Bank, the date which is ninety (90) days after Bank Closing, and (ii) in
the case of an agreement that provides for the rendering of services to the
Failed Bank, the date which is thirty (30) days after the Assuming Bank has
given notice to the Receiver of its election not to assume such agreement;
provided
,
that
the Receiver can reasonably make such service agreements available
to the Assuming Bank. The Assuming Bank shall be deemed by the Receiver to have
assumed agreements for which no notification is timely given. The Receiver
agrees to assign, transfer, convey, and deliver to the Assuming Bank all right,
title and interest of the Receiver, if any, in and to agreements the Assuming
Bank assumes hereunder. In the event the Assuming Bank elects not to accept an
assignment of any lease (or sublease) or negotiate a new lease for leased Bank
Premises under Section 4.6 and does not otherwise occupy such premises,
the provisions of this Section 4.8(a) shall not apply to service
agreements related to such premises. The Assuming Bank agrees, during the
period it has the use or benefit of any such agreement, promptly to pay to the
Receiver or to appropriate third parties at the direction of the Receiver all
operating costs with respect thereto and to comply with all relevant terms of
such agreement.
(b) The provisions of Section 4.8(a) regarding the
Assuming Bank’s election to assume or not assume certain agreements shall not
apply to (i) agreements pursuant to which the Failed Bank provides
mortgage servicing for others or mortgage servicing is provided to the Failed
Bank by others, (ii) agreements that are subject to Sections 4.1 through
4.7 and any insurance policy or bond referred to in Section 3.5(a) or
other agreement specified in Section 3.5, and (iii) consulting,
management or employment agreements, if any, between the Failed Bank and its
employees or other Persons. Except as otherwise expressly set forth elsewhere
in this Agreement, the Assuming Bank does not assume any liabilities or acquire
any rights under any of the agreements described in this Section 4.8(b).
4.9
Informational Tax Reporting
. The Assuming
Bank agrees to perform all obligations of the Failed Bank with respect to
Federal and State income tax informational reporting related to (i) the
Assets and the Liabilities Assumed, (ii) deposit accounts that were closed
and loans that were paid off or collateral obtained with respect thereto prior
to Bank Closing, (iii) miscellaneous payments made to vendors of the
Failed Bank, and (iv) any other asset or liability of the Failed Bank,
including, without limitation, loans not purchased and Deposits not assumed by
the Assuming Bank, as may be required by the Receiver.
4.10
Insurance
. The Assuming
Bank agrees to obtain insurance coverage effective from and after Bank Closing,
including public liability, fire and extended coverage insurance acceptable to
the Receiver with respect to owned or leased Bank Premises that it occupies,
and all owned or leased Furniture and Equipment and Fixtures and leased data
processing equipment (including hardware and software) located thereon, in the
event such insurance coverage is not already in force and effect with respect
to the Assuming Bank as the insured as of Bank Closing. All such insurance
shall, where appropriate (as determined by the Receiver), name the Receiver as
an additional insured.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
22
4.11
Office Space for Receiver and
Corporation
. For the period commencing on the day following
Bank Closing and ending on the one hundred eightieth (180th) day thereafter,
the Assuming Bank agrees to provide to the Receiver and the Corporation,
without charge, adequate and suitable office space (including parking
facilities and vault space), furniture, equipment (including photocopying and
telecopying machines), email accounts, network access and technology resources
(such as shared drive) and utilities (including local telephone service and fax
machines) at the Bank Premises occupied by the Assuming Bank for their use in
the discharge of their respective functions with respect to the Failed Bank. In
the event the Receiver and the Corporation determine that the space provided is
inadequate or unsuitable, the Receiver and the Corporation may relocate to
other quarters having adequate and suitable space and the costs of relocation
and any rental and utility costs for the balance of the period of occupancy by
the Receiver and the Corporation shall be borne by the Assuming Bank.
Additionally, the Assuming Bank agrees to pay such bills and invoices on behalf
of the Receiver and Corporation as the Receiver or Corporation may direct for
the period beginning on the date of Bank Closing and ending on Settlement Date.
Assuming Bank shall submit it requests for reimbursement of such expenditures
pursuant to Article VIII of this Agreement.
4.12
Agreement with Respect to
Continuation of Group Health Plan Coverage for Former Employees of the Failed
Bank
.
(a) The Assuming Bank agrees to assist the Receiver, as
provided in this Section 4.12, in offering individuals who were employees
or former employees of the Failed Bank, or any of its Subsidiaries, and who,
immediately prior to Bank Closing, were receiving, or were eligible to receive,
health insurance coverage or health insurance continuation coverage from the
Failed Bank (“Eligible Individuals”), the opportunity to obtain health
insurance coverage in the Corporation’s FIA Continuation Coverage Plan which
provides for health insurance continuation coverage to such Eligible
Individuals who are qualified beneficiaries of the Failed Bank as defined in
Section 607 of the Employee Retirement Income Security Act of 1974, as
amended (respectively, “qualified beneficiaries” and “ERISA”). The Assuming
Bank shall consult with the Receiver and not later than five (5) Business
Days after Bank Closing shall provide written notice to the Receiver of the
number (if available), identity (if available) and addresses (if available) of
the Eligible Individuals who are qualified beneficiaries of the Failed Bank and
for whom a “qualifying event” (as defined in Section 603 of ERISA) has
occurred and with respect to whom the Failed Bank’s obligations under
Part 6 of Subtitle B of Title I of ERISA have not been satisfied in full,
and such other information as the Receiver may reasonably require. The Receiver
shall cooperate with the Assuming Bank in order to permit it to prepare such
notice and shall provide to the Assuming Bank such data in its possession as
may be reasonably required for purposes of preparing such notice.
(b) The Assuming Bank shall take such further action to assist
the Receiver in offering the Eligible Individuals who are qualified
beneficiaries of the Failed Bank the opportunity to obtain health insurance
coverage in the Corporation’s FIA Continuation Coverage Plan as the Receiver
may direct. All expenses incurred and paid by the Assuming Bank (i) in
connection with the obligations of the Assuming Bank under this
Section 4.12, and (ii) in providing health insurance continuation
coverage to any Eligible Individuals who are hired by
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
23
the Assuming Bank and such employees’ qualified beneficiaries shall be
borne by the Assuming Bank.
(c) No later than five (5) Business Days after Bank
Closing, the Assuming Bank shall provide the Receiver with a list of all Failed
Bank employees the Assuming Bank will not hire. Unless agreed to otherwise by
the Assuming Bank and the Receiver, the Assuming Bank shall be responsible for
all costs and expenses (i.e. salary, benefits, etc.) associated with all
other employees not on that list from and after the date of delivery of the
list to the Receiver. The Assuming Bank shall offer to the Failed Bank
employees it retains employment benefits comparable to those the Assuming Bank
offers its current employees.
(d) This Section 4.12 is for the sole and exclusive
benefit of the parties to this Agreement, and for the benefit of no other
Person (including any former employee of the Failed Bank or any Subsidiary
thereof or qualified beneficiary of such former employee). Nothing in this
Section 4.12 is intended by the parties, or shall be construed, to give
any Person (including any former employee of the Failed Bank or any Subsidiary
thereof or qualified beneficiary of such former employee) other than the
Corporation, the Receiver and the Assuming Bank any legal or equitable right,
remedy or claim under or with respect to the provisions of this Section.
4.13
Agreement with Respect to Interim
Asset Servicing
.
At any time after Bank Closing, the Receiver
may establish on its books an asset pool(s) and may transfer to such asset
pool(s) (by means of accounting entries on the books of the Receiver) all
or any assets and liabilities of the Failed Bank which are not acquired by the
Assuming Bank, including, without limitation, wholly unfunded Commitments and
assets and liabilities which may be acquired, funded or originated by the
Receiver subsequent to Bank Closing. The Receiver may remove assets (and
liabilities) from or add assets (and liabilities) to such pool(s) at any
time in its discretion. At the option of the Receiver, the Assuming Bank agrees
to service, administer, and collect such pool assets in accordance with and for
the term set forth in Exhibit 4.13 “Interim Asset Servicing Arrangement”.
4.14
Reserved.
4.15
Agreement with Respect to Loss
Sharing
.
The Assuming Bank shall be entitled to require
reimbursement from the Receiver for loss sharing on certain loans in accordance
with the Single Family Shared-Loss Agreement attached hereto as Exhibit 4.15A
and the Non-SF Shared-Loss Agreement attached hereto as Exhibit 4.15B,
collectively, the “Shared-Loss Agreements.” The Loans that shall be subject to
the Shared-Loss Agreements are identified on the Schedule of Loans 4.15A and
4.15B attached hereto.
ARTICLE V
DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK
5.1
Payment of Checks, Drafts and
Orders
.
Subject to Section 9.5, the Assuming Bank
agrees to pay all properly drawn checks, drafts and withdrawal orders of
depositors of the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
24
Failed Bank presented for payment, whether drawn on the check or draft
forms provided by the Failed Bank or by the Assuming Bank, to the extent that
the Deposit balances to the credit of the respective makers or drawers assumed
by the Assuming Bank under this Agreement are sufficient to permit the payment
thereof, and in all other respects to discharge, in the usual course of
conducting a banking business, the duties and obligations of the Failed Bank
with respect to the Deposit balances due and owing to the depositors of the
Failed Bank assumed by the Assuming Bank under this Agreement.
5.2
Certain Agreements Related to
Deposits
.
Subject to Section 2.2, the Assuming Bank
agrees to honor the terms and conditions of any written escrow or mortgage
servicing agreement or other similar agreement relating to a Deposit liability
assumed by the Assuming Bank pursuant to this Agreement.
5.3
Notice to Depositors
.
(a) Within seven (7) days after Bank Closing, the
Assuming Bank shall give (i) notice to depositors of the Failed Bank of
its assumption of the Deposit liabilities of the Failed Bank, and (ii) any
notice required under Section 2.2, by mailing to each such depositor a
notice with respect to such assumption and by advertising in a newspaper of
general circulation in the county or counties in which the Failed Bank was
located. The Assuming Bank agrees that it will obtain prior approval of all
such notices and advertisements from counsel for the Receiver and that such
notices and advertisements shall not be mailed or published until such approval
is received.
(b) The Assuming Bank shall give notice by mail to depositors
of the Failed Bank concerning the procedures to claim their deposits, which
notice shall be provided to the Assuming Bank by the Receiver or the
Corporation. Such notice shall be included with the notice to depositors to be
mailed by the Assuming Bank pursuant to Section 5.3(a).
(c) If the Assuming Bank proposes to charge fees different
from those charged by the Failed Bank before it establishes new deposit account
relationships with the depositors of the Failed Bank, the Assuming Bank shall
give notice by mail of such changed fees to such depositors.
ARTICLE VI
RECORDS
6.1
Transfer of Records
.
(a) In accordance with Sections 2.1 and 3.1, the Receiver
assigns, transfers, conveys and delivers to the Assuming Bank the following:
(i) all Records pertaining to the Deposit liabilities of the
Failed Bank assumed by the Assuming Bank under this Agreement, including, but
not limited to, the following:
(A) signature cards, orders, contracts between the Failed Bank
and its
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
25
depositors and Records of similar character;
(B) passbooks of depositors held by the Failed Bank, deposit slips,
cancelled checks and withdrawal orders representing charges to accounts of
depositors; and
(ii) all Records pertaining to the Assets, including, but not
limited to, the following:
(A) records of deposit balances carried with other banks,
bankers or trust companies;
(B) Loan and collateral records and Credit Files and other
documents;
(C) deeds, mortgages, abstracts, surveys, and other
instruments or records of title pertaining to real estate or real estate
mortgages;
(D) signature cards, agreements and records pertaining to Safe
Deposit Boxes, if any; and
(E) records pertaining to the credit card business, trust
business or safekeeping business of the Failed Bank, if any.
(b) The Receiver, at its option, may assign and transfer to
the Assuming Bank by a single blanket assignment or otherwise, as soon as
practicable after Bank Closing, any other Records not assigned and transferred
to the Assuming Bank as provided in this Agreement, including but not limited
to loan disbursement checks, general ledger tickets, official bank checks,
proof transactions (including proof tapes) and paid out loan files.
6.2
Delivery of Assigned Records
. The Receiver
shall deliver to the Assuming Bank all Records described in
(i) Section 6.1(a) as soon as practicable on or after the date
of this Agreement, and (ii) Section 6.1(b) as soon as
practicable after making any assignment described therein.
6.3
Preservation of Records
. The Assuming
Bank agrees that it will preserve and maintain for the joint benefit of the
Receiver, the Corporation and the Assuming Bank, all Records of which it has
custody for such period as either the Receiver or the Corporation in its
discretion may require, until directed otherwise,
in writing
, by the
Receiver or Corporation. The Assuming Bank shall have the primary
responsibility to respond to subpoenas, discovery requests, and other similar
official inquiries and customer requests for lien releases with respect to the
Records of which it has custody.
6.4
Access to Records; Copies
. The Assuming
Bank agrees to permit the Receiver and the Corporation access to all Records of
which the Assuming Bank has custody, and to use, inspect, make extracts from or
request copies of any such Records in the manner and to the extent requested,
and to duplicate, in the discretion of the Receiver or the Corporation, any
Record in the form of microfilm or microfiche pertaining to Deposit account
relationships;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
26
provided
,
that
in the event that the Failed Bank maintained one or more duplicate copies of
such microfilm or microfiche Records, the Assuming Bank hereby assigns,
transfers, and conveys to the Corporation one such duplicate copy of each such
Record without cost to the Corporation, and agrees to deliver to the
Corporation all Records assigned and transferred to the Corporation under this
Article VI as soon as practicable on or after the date of this Agreement. The
party requesting a copy of any Record shall bear the cost (based on standard
accepted industry charges to the extent applicable, as determined by the
Receiver) for providing such duplicate Records. A copy of each Record requested
shall be provided as soon as practicable by the party having custody thereof.
ARTICLE VII
FIRST LOSS TRANCHE
The Assuming Bank has submitted to the Receiver an
asset discount bid of ($100,300,000.00) and a positive Deposit premium bid of
0%. The Deposit premium bid will be applied to the total of all Assumed
Deposits except for brokered, CDARS, and any market place or similar
subscription services Deposits. The First Loss Tranche shall be determined by
adding (i) the asset discount bid, (ii) the Deposit premium bid, and
(iii) the Equity Adjustment. If the First Loss Tranche is a positive
number, then this is the Losses on Single Family Shared-Loss Loans and Net
Charge-offs on Shared Loss Assets that the Assuming Bank will incur before
loss-sharing commences under Exhibits 4.15A and 4.15B. If the First Loss
Tranche is a negative number, the Corporation shall pay such amount by wire
transfer to the Assuming Bank by the end of the first business day following
Bank Closing, together with interest determined in accordance with
Section 8.4, and loss sharing shall commence immediately.
ARTICLE VIII
ADJUSTMENTS
8.1
Pro Forma Statement
. The Receiver,
as soon as practicable after Bank Closing, in accordance with the best
information then available, shall provide to the Assuming Bank a pro forma
statement reflecting any adjustments of such liabilities and assets as may be
necessary. Such pro forma statement shall take into account, to the extent
possible, (i) liabilities and assets of a nature similar to those contemplated
by Section 2.1 or Section 3.1, respectively, which at Bank Closing
were carried in the Failed Bank’s suspense accounts, (ii) accruals as of
Bank Closing for all income related to the assets and business of the Failed
Bank acquired by the Assuming Bank hereunder, whether or not such accruals were
reflected on the Accounting Records of the Failed Bank in the normal course of
its operations, and (iii) adjustments to determine the Book Value of any
investment in an Acquired Subsidiary and related accounts on the “bank only”
(unconsolidated) balance sheet of the Failed Bank based on the equity method of
accounting, whether or not the Failed Bank used the equity method of accounting
for investments in subsidiaries, except that the resulting amount cannot be less
than the Acquired Subsidiary’s recorded equity as of Bank Closing as reflected
on the Accounting Records of the Acquired Subsidiary. Any Loan purchased by the
Assuming Bank pursuant to Section 3.1 which the Failed Bank charged off
during the period beginning the day after the Bid Valuation Date to
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
27
the date of Bank Closing shall be deemed not to be charged off for the
purposes of the pro forma statement, and the purchase price shall be determined
pursuant to Section 3.2.
8.2
Correction of Errors and Omissions
;
Other Liabilities
.
(a) In the event any bookkeeping omissions or errors are discovered
in preparing any pro forma statement or in completing the transfers and
assumptions contemplated hereby, the parties hereto agree to correct such
errors and omissions, it being understood that, as far as practicable, all
adjustments will be made consistent with the judgments, methods, policies or
accounting principles utilized by the Failed Bank in preparing and maintaining
Accounting Records, except that adjustments made pursuant to this
Section 8.2(a) are not intended to bring the Accounting Records of
the Failed Bank into accordance with generally accepted accounting principles.
(b) If the Receiver discovers at any time subsequent to the
date of this Agreement that any claim exists against the Failed Bank which is
of such a nature that it would have been included in the liabilities assumed
under Article II had the existence of such claim or the facts giving rise
thereto been known as of Bank Closing, the Receiver may, in its discretion, at
any time, require that such claim be assumed by the Assuming Bank in a manner
consistent with the intent of this Agreement. The Receiver will make
appropriate adjustments to the pro forma statement provided by the Receiver to
the Assuming Bank pursuant to Section 8.1 as may be necessary.
8.3
Payments
. The Receiver
agrees to cause to be paid to the Assuming Bank, or the Assuming Bank agrees to
pay to the Receiver, as the case may be, on the Settlement Date, a payment in
an amount which reflects net adjustments (including any costs, expenses and
fees associated with determinations of value as provided in this Agreement)
made pursuant to Section 8.1 or Section 8.2, plus interest as
provided in Section 8.4. The Receiver and the Assuming Bank agree to
effect on the Settlement Date any further transfer of assets to or assumption
of liabilities or claims by the Assuming Bank as may be necessary in accordance
with Section 8.1 or Section 8.2.
8.4
Interest
. Any amounts paid under Section 8.3 or
Section 8.5, shall bear interest for the period from and including the day
following Bank Closing to and including the day preceding the payment at the
Settlement Interest Rate.
8.5
Subsequent Adjustments
.
In the event
that the Assuming Bank or the Receiver discovers any errors or omissions as
contemplated by Section 8.2 or any error with respect to the payment made
under Section 8.3 after the Settlement Date, the Assuming Bank and the
Receiver agree to promptly correct any such errors or omissions, make any
payments and effect any transfers or assumptions as may be necessary to reflect
any such correction plus interest as provided in Section 8.4.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
28
ARTICLE IX
CONTINUING COOPERATION
9.1
General Matters
. The parties
hereto agree that they will, in good faith and with their best efforts,
cooperate with each other to carry out the transactions contemplated by this
Agreement and to effect the purposes hereof.
9.2
Additional Title Documents
. The Receiver,
the Corporation and the Assuming Bank each agree, at any time, and from time to
time, upon the request of any party hereto, to execute and deliver such
additional instruments and documents of conveyance as shall be reasonably
necessary to vest in the appropriate party its full legal or equitable title in
and to the property transferred pursuant to this Agreement or to be transferred
in accordance herewith. The Assuming Bank shall prepare such instruments and
documents of conveyance (in form and substance satisfactory to the Receiver) as
shall be necessary to vest title to the Assets in the Assuming Bank. The
Assuming Bank shall be responsible for recording such instruments and documents
of conveyance at its own expense.
9.3
Claims and Suits
.
(a) The Receiver shall have the right, in its discretion, to
(i) defend or settle any claim or suit against the Assuming Bank with
respect to which the Receiver has indemnified the Assuming Bank in the same
manner and to the same extent as provided in Article XII, and
(ii) defend or settle any claim or suit against the Assuming Bank with
respect to any Liability Assumed, which claim or suit may result in a loss to
the Receiver arising out of or related to this Agreement, or which existed
against the Failed Bank on or before Bank Closing. The exercise by the Receiver
of any rights under this Section 9.3(a) shall not release the
Assuming Bank with respect to any of its obligations under this Agreement.
(b) In the event any action at law or in equity shall be
instituted by any Person against the Receiver and the Corporation as
codefendants with respect to any asset of the Failed Bank retained or acquired
pursuant to this Agreement by the Receiver, the Receiver agrees, at the request
of the Corporation, to join with the Corporation in a petition to remove the
action to the United States District Court for the proper district. The
Receiver agrees to institute, with or without joinder of the Corporation as
coplaintiff, any action with respect to any such retained or acquired asset or
any matter connected therewith whenever notice requiring such action shall be
given by the Corporation to the Receiver.
9.4
Payment of Deposits
. In the event
any depositor does not accept the obligation of the Assuming Bank to pay any
Deposit liability of the Failed Bank assumed by the Assuming Bank pursuant to
this Agreement and asserts a claim against the Receiver for all or any portion
of any such Deposit liability, the Assuming Bank agrees on demand to provide to
the Receiver funds sufficient to pay such claim in an amount not in excess of
the Deposit liability reflected on the books of the Assuming Bank at the time
such claim is made. Upon payment by the Assuming Bank to the Receiver of such
amount, the Assuming Bank shall be discharged from any further obligation under
this Agreement to pay to any such depositor the amount of such Deposit
liability paid to the Receiver.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
29
9.5
Withheld Payments
. At any time, the Receiver or the Corporation
may, in its discretion, determine that all or any portion of any deposit
balance assumed by the Assuming Bank pursuant to this Agreement does not
constitute a “Deposit” (or otherwise, in its discretion, determine that it is
the best interest of the Receiver or Corporation to withhold all or any portion
of any deposit), and may direct the Assuming Bank to withhold payment of all or
any portion of any such deposit balance. Upon such direction, the Assuming Bank
agrees to hold such deposit and not to make any payment of such deposit balance
to or on behalf of the depositor, or to itself, whether by way of transfer,
set-off, or otherwise. The Assuming Bank agrees to maintain the “withheld
payment” status of any such deposit balance until directed in writing by the
Receiver or the Corporation as to its disposition. At the direction of the
Receiver or the Corporation, the Assuming Bank shall return all or any portion
of such deposit balance to the Receiver or the Corporation, as appropriate, and
thereupon the Assuming Bank shall be discharged from any further liability to
such depositor with respect to such returned deposit balance. If such deposit
balance has been paid to the depositor prior to a demand for return by the
Corporation or the Receiver, and payment of such deposit balance had not been
previously withheld pursuant to this Section, the Assuming Bank shall not be
obligated to return such deposit balance to the Receiver or the Corporation.
The Assuming Bank shall be obligated to reimburse the Corporation or the
Receiver, as the case may be, for the amount of any deposit balance or portion
thereof paid by the Assuming Bank in contravention of any previous direction to
withhold payment of such deposit balance or return such deposit balance the
payment of which was withheld pursuant to this Section.
9.6
Proceedings with Respect to Certain
Assets and Liabilities
.
(a) In connection with any investigation, proceeding or other
matter with respect to any asset or liability of the Failed Bank retained by
the Receiver, or any asset of the Failed Bank acquired by the Receiver pursuant
to this Agreement, the Assuming Bank shall cooperate to the extent reasonably
required by the Receiver.
(b) In addition to its obligations under Section 6.4, the
Assuming Bank shall provide representatives of the Receiver access at
reasonable times and locations without other limitation or qualification to
(i) its directors, officers, employees and agents and those of the
Subsidiaries acquired by the Assuming Bank, and (ii) its books and
records, the books and records of such Subsidiaries and all Credit Files, and
copies thereof. Copies of books, records and Credit Files shall be provided by
the Assuming Bank as requested by the Receiver and the costs of duplication
thereof shall be borne by the Receiver.
(c) Not later than ten (10) days after the Put Notice
pursuant to Section 3.4 or the date of the notice of transfer of any Loan
by the Assuming Bank to the Receiver pursuant to Section 3.6, the Assuming
Bank shall deliver to the Receiver such documents with respect to such Loan as
the Receiver may request, including without limitation the following:
(i) all related Credit Documents (other than certificates, notices and
other ancillary documents), (ii) a certificate setting forth the principal
amount on the date of the transfer and the amount of interest, fees and other
charges then accrued and unpaid thereon, and any restrictions on transfer to
which any such Loan is subject, and (iii) all Credit Files, and all
documents, microfiche, microfilm and computer
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
30
records (including but not limited to magnetic tape, disc storage, card
forms and printed copy) maintained by, owned by, or in the possession of the
Assuming Bank or any Affiliate of the Assuming Bank relating to the transferred
Loan.
9.7
Information
. The Assuming
Bank promptly shall provide to the Corporation such other information,
including financial statements and computations, relating to the performance of
the provisions of this Agreement as the Corporation or the Receiver may request
from time to time, and, at the request of the Receiver, make available
employees of the Failed Bank employed or retained by the Assuming Bank to
assist in preparation of the pro forma statement pursuant to Section 8.1.
ARTICLE X
CONDITION PRECEDENT
The obligations of the parties to this Agreement are
subject to the Receiver and the Corporation having received at or before Bank
Closing evidence reasonably satisfactory to each of any necessary approval,
waiver, or other action by any governmental authority, the board of directors
of the Assuming Bank, or other third party, with respect to this Agreement and
the transactions contemplated hereby, the closing of the Failed Bank and the
appointment of the Receiver, the chartering of the Assuming Bank, and any
agreements, documents, matters or proceedings contemplated hereby or thereby.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK
The Assuming Bank represents and warrants to the Corporation
and the Receiver as follows:
(a)
Corporate
Existence and Authority
. The Assuming Bank
(i) is duly organized, validly existing and in good standing under the
laws of its Chartering Authority and has full power and authority to own and
operate its properties and to conduct its business as now conducted by it, and
(ii) has full power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The Assuming Bank has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement and the performance of the transactions contemplated hereby.
(b)
Third
Party Consents
. No
governmental authority or other third party consents (including but not limited
to approvals, licenses, registrations or declarations) are required in
connection with the execution, delivery or performance by the Assuming Bank of
this Agreement, other than such consents as have been duly obtained and are in
full force and effect.
(c)
Execution
and Enforceability
. This Agreement has been
duly executed and delivered by the Assuming Bank and when this Agreement has
been duly authorized, executed
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
31
and delivered by the Corporation and the Receiver, this Agreement will
constitute the legal, valid and binding obligation of the Assuming Bank,
enforceable in accordance with its terms.
(d)
Compliance with Law
.
(i) Neither the Assuming Bank nor any of its Subsidiaries is
in violation of any statute, regulation, order, decision, judgment or decree
of, or any restriction imposed by, the United States of America, any State,
municipality or other political subdivision or any agency of any of the
foregoing, or any court or other tribunal having jurisdiction over the Assuming
Bank or any of its Subsidiaries or any assets of any such Person, or any
foreign government or agency thereof having such jurisdiction, with respect to
the conduct of the business of the Assuming Bank or of any of its Subsidiaries,
or the ownership of the properties of the Assuming Bank or any of its
Subsidiaries, which, either individually or in the aggregate with all other
such violations, would materially and adversely affect the business, operations
or condition (financial or otherwise) of the Assuming Bank or the ability of
the Assuming Bank to perform, satisfy or observe any obligation or condition
under this Agreement.
(ii) Neither the execution and delivery nor the performance by
the Assuming Bank of this Agreement will result in any violation by the
Assuming Bank of, or be in conflict with, any provision of any applicable law
or regulation, or any order, writ or decree of any court or governmental
authority.
e)
Representations
Remain True
. The Assuming Bank represents and warrants that it
has executed and delivered to the Corporation a Purchaser Eligibility
Certification and Confidentiality Agreement and that all information provided
and representations made by or on behalf of the Assuming Bank in connection
with this Agreement and the transactions contemplated hereby, including, but
not limited to, the Purchaser Eligibility Certification and Confidentiality
Agreement (which are affirmed and ratified hereby) are and remain true and
correct in all material respects and do not fail to state any fact required to
make the information contained therein not misleading.
ARTICLE XII
INDEMNIFICATION
12.1
Indemnification of Indemnitees
. From and
after Bank Closing and subject to the limitations set forth in this
Section and Section 12.6 and compliance by the Indemnitees with
Section 12.2, the Receiver agrees to indemnify and hold harmless the
Indemnitees against any and all costs, losses, liabilities, expenses (including
attorneys’ fees) incurred prior to the assumption of defense by the Receiver
pursuant to paragraph (d) of Section 12.2, judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
claims against any Indemnitee based on liabilities of the Failed Bank that are
not assumed by the Assuming Bank pursuant to this Agreement or subsequent to
the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the
Assuming Bank for which indemnification is provided hereunder in (a) of
this Section 12.1, subject to certain exclusions as provided in
(b) of this Section 12.1:
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
32
(a)
(1) claims based on the rights of any shareholder or former
shareholder as such of (x) the Failed Bank, or (y) any Subsidiary or
Affiliate of the Failed Bank;
(2) claims based on the rights of any creditor as such of the Failed
Bank, or any creditor as such of any director, officer, employee or agent of
the Failed Bank, with respect to any indebtedness or other obligation of the
Failed Bank arising prior to Bank Closing;
(3) claims based on the rights of any present or former director,
officer, employee or agent as such of the Failed Bank or of any Subsidiary or
Affiliate of the Failed Bank;
(4) claims based on any action or inaction prior to Bank Closing of
the Failed Bank, its directors, officers, employees or agents as such, or any
Subsidiary or Affiliate of the Failed Bank, or the directors, officers,
employees or agents as such of such Subsidiary or Affiliate;
(5) claims based on any malfeasance, misfeasance or nonfeasance of the
Failed Bank, its directors, officers, employees or agents with respect to the
trust business of the Failed Bank, if any;
(6) claims based on any failure or alleged failure (not in violation
of law) by the Assuming Bank to continue to perform any service or activity
previously performed by the Failed Bank which the Assuming Bank is not required
to perform pursuant to this Agreement or which arise under any contract to
which the Failed Bank was a party which the Assuming Bank elected not to assume
in accordance with this Agreement and which neither the Assuming Bank nor any
Subsidiary or Affiliate of the Assuming Bank has assumed subsequent to the
execution hereof;
(7) claims arising from any action or inaction of any Indemnitee,
including for purposes of this Section 12.1(a)(7) the former officers or
employees of the Failed Bank or of any Subsidiary or Affiliate of the Failed
Bank that is taken upon the specific written direction of the Corporation or
the Receiver,
other
than
any action or inaction taken in a manner
constituting bad faith, gross negligence or willful misconduct; and
(8) claims based on the rights of any depositor of the Failed Bank
whose deposit has been accorded “withheld payment” status and/or returned to
the Receiver or Corporation in accordance with Section 9.5 and/or has
become an “unclaimed deposit” or has been returned to the Corporation or the
Receiver in accordance with Section 2.3;
(b)
provided
,
that
, with respect to this
Agreement, except for paragraphs (7) and (8) of Section 12.1(a),
no indemnification will be provided under this Agreement for any:
(1) judgment or fine against, or any amount paid in settlement
(without the written approval of the Receiver) by, any Indemnitee in connection
with any action that seeks damages
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
33
against any Indemnitee (a “counterclaim”) arising with respect to any
Asset and based on any action or inaction of either the Failed Bank, its
directors, officers, employees or agents as such prior to Bank Closing, unless
any such judgment, fine or amount paid in settlement exceeds the greater of
(i) the Repurchase Price of such Asset, or (ii) the monetary recovery
sought on such Asset by the Assuming Bank in the cause of action from which the
counterclaim arises; and in such event the Receiver will provide
indemnification only in the amount of such excess; and no indemnification will
be provided for any costs or expenses other than any costs or expenses
(including attorneys’ fees) which, in the determination of the Receiver, have
been actually and reasonably incurred by such Indemnitee in connection with the
defense of any such counterclaim; and it is expressly agreed that the Receiver
reserves the right to intervene, in its discretion, on its behalf and/or on
behalf of the Receiver, in the defense of any such counterclaim;
(2) claims with respect to any liability or obligation of the Failed
Bank that is expressly assumed by the Assuming Bank pursuant to this Agreement
or subsequent to the execution hereof by the Assuming Bank or any Subsidiary or
Affiliate of the Assuming Bank;
(3) claims with respect to any liability of the Failed Bank to any
present or former employee as such of the Failed Bank or of any Subsidiary or
Affiliate of the Failed Bank, which liability is expressly assumed by the
Assuming Bank pursuant to this Agreement or subsequent to the execution hereof
by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank;
(4) claims based on the failure of any Indemnitee to seek recovery of
damages from the Receiver for any claims based upon any action or inaction of
the Failed Bank, its directors, officers, employees or agents as fiduciary,
agent or custodian prior to Bank Closing;
(5) claims based on any violation or alleged violation by any
Indemnitee of the antitrust, branching, banking or bank holding company or
securities laws of the United States of America or any State thereof;
(6) claims based on the rights of any present or former creditor,
customer, or supplier as such of the Assuming Bank or any Subsidiary or
Affiliate of the Assuming Bank;
(7) claims based on the rights of any present or former shareholder as
such of the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank
regardless of whether any such present or former shareholder is also a present
or former shareholder of the Failed Bank;
(8) claims, if the Receiver determines that the effect of providing
such indemnification would be to (i) expand or alter the provisions of any
warranty or disclaimer thereof provided in Section 3.3 or any other
provision of this Agreement, or (ii) create any warranty not expressly
provided under this Agreement;
(9) claims which could have been enforced against any Indemnitee had
the Assuming Bank not entered into this Agreement;
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
The Buckhead Community
Bank
|
|
Version 1.12
|
Atlanta, GA
|
|
November 17, 2009
|
|
34
(10) claims based on any liability for taxes or fees assessed with
respect to the consummation of the transactions contemplated by this Agreement,
including without limitation any subsequent transfer of any Assets or
Liabilities Assumed to any Subsidiary or Affiliate of the Assuming Bank;
(11) except as expressly provided in this Article XII, claims based
on any action or inaction of any Indemnitee, and nothing in this Agreement
shall be construed to provide indemnification for (i) the Failed Bank,
(ii) any Subsidiary or Affiliate of the Failed Bank, or (iii) any
present or former director, officer, employee or agent of the Failed Bank or
its Subsidiaries or Affiliates;
provided
,
that
the Receiver, in
its discretion, may provide indemnification hereunder for any present or former
director, officer, employee or agent of the Failed Bank or its Subsidiaries or
Affiliates who is also or becomes a director, officer, employee or agent of the
Assuming Bank or its Subsidiaries or Affiliates;
(12) claims or actions which constitute a breach by the Assuming Bank of
the representations and warranties contained in Article XI;
(13) claims arising out of or relating to the condition of or generated
by an Asset arising from or relating to the presence, storage or release of any
hazardous or toxic substance, or any pollutant or contaminant, or condition of
such Asset which violate any applicable Federal, State or local law or
regulation concerning environmental protection; and
(14) claims based on, related to or arising from any asset, including a
loan, acquired or liability assumed by the Assuming Bank, other than pursuant
to this Agreement.
12.2
Conditions Precedent to Indemnification
. It shall be a
condition precedent to the obligation of the Receiver to indemnify any Person
pursuant to this Article XII that such Person shall, with respect to any
claim made or threatened against such Person for which such Person is or may be
entitled to indemnification hereunder:
(a) give
written notice to the Regional Counsel (Litigation Branch) of the Corporation
in the manner and at the address provided in Section 13.7 of such claim as
soon as practicable after such claim is made or threatened;
provided
,
that
notice must be given on or before the date which is six (6) years from the
date of this Agreement;
(b) provide
to the Receiver such information and cooperation with respect to such claim as
the Receiver may reasonably require;
(c) cooperate
and take all steps, as the Receiver may reasonably require, to preserve and
protect any defense to such claim;
(d) in
the event suit is brought with respect to such claim, upon reasonable prior
notice, afford to the Receiver the right, which the Receiver may exercise in
its sole discretion, to conduct the investigation, control the defense and
effect settlement of such claim, including without limitation the right to
designate counsel and to control all negotiations, litigation, arbitration,
settlements, compromises and appeals of any such claim, all of which shall be
at the
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
35
expense of the Receiver;
provided
,
that
the Receiver
shall have notified the Person claiming indemnification in writing that such
claim is a claim with respect to which the Person claiming indemnification is
entitled to indemnification under this Article XII;
(e) not
incur any costs or expenses in connection with any response or suit with
respect to such claim, unless such costs or expenses were incurred upon the
written direction of the Receiver;
provided
,
that
the Receiver
shall not be obligated to reimburse the amount of any such costs or expenses
unless such costs or expenses were incurred upon the written direction of the
Receiver;
(f) not
release or settle such claim or make any payment or admission with respect
thereto, unless the Receiver consents in writing thereto, which consent shall
not be unreasonably withheld;
provided
,
that
the Receiver shall
not be obligated to reimburse the amount of any such settlement or payment
unless such settlement or payment was effected upon the written direction of
the Receiver; and
(g) take
reasonable action as the Receiver may request in writing as necessary to
preserve, protect or enforce the rights of the indemnified Person against any
Primary Indemnitor.
12.3
No Additional Warranty
. Nothing in this
Article XII shall be construed or deemed to (i) expand or otherwise
alter any warranty or disclaimer thereof provided under Section 3.3 or any
other provision of this Agreement with respect to, among other matters, the
title, value, collectibility, genuineness, enforceability or condition of any
(x) Asset, or (y) asset of the Failed Bank purchased by the Assuming
Bank subsequent to the execution of this Agreement by the Assuming Bank or any
Subsidiary or Affiliate of the Assuming Bank, or (ii) create any warranty
not expressly provided under this Agreement with respect thereto.
12.4
Indemnification of Receiver and Corporation
. From and
after Bank Closing, the Assuming Bank agrees to indemnify and hold harmless the
Corporation and the Receiver and their respective directors, officers,
employees and agents from and against any and all costs, losses, liabilities, expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any of the following:
(a) claims
based on any and all liabilities or obligations of the Failed Bank assumed by
the Assuming Bank pursuant to this Agreement or subsequent to the execution
hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming
Bank, whether or not any such liabilities subsequently are sold and/or
transferred, other than any claim based upon any action or inaction of any
Indemnitee as provided in paragraph (7) or (8) of Section 12.1(a);
and
(b) claims
based on any act or omission of any Indemnitee (including but not limited to
claims of any Person claiming any right or title by or through the Assuming
Bank with respect to Assets transferred to the Receiver pursuant to
Section 3.4 or 3.6), other than any action or inaction of any Indemnitee
as provided in paragraph (7) or (8) of Section 12.1(a).
12.5
Obligations Supplemental
. The obligations
of the Receiver, and the Corporation as guarantor in accordance with
Section 12.7, to provide indemnification under this Article XII
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
36
are to supplement any amount payable by any Primary Indemnitor to the
Person indemnified under this Article XII. Consistent with that intent,
the Receiver agrees only to make payments pursuant to such indemnification to
the extent not payable by a Primary Indemnitor. If the aggregate amount of
payments by the Receiver, or the Corporation as guarantor in accordance with
Section 12.7, and all Primary Indemnitors with respect to any item of
indemnification under this Article XII exceeds the amount payable with
respect to such item, such Person being indemnified shall notify the Receiver
thereof and, upon the request of the Receiver, shall promptly pay to the
Receiver, or the Corporation as appropriate, the amount of the Receiver’s (or
Corporation’s) payments to the extent of such excess.
12.6
Criminal Claims
. Notwithstanding any
provision of this Article XII to the contrary, in the event that any
Person being indemnified under this Article XII shall become involved in
any criminal action, suit or proceeding, whether judicial, administrative or
investigative, the Receiver shall have no obligation hereunder to indemnify
such Person for liability with respect to any criminal act or to the extent any
costs or expenses are attributable to the defense against the allegation of any
criminal act, unless (i) the Person is successful on the merits or
otherwise in the defense against any such action, suit or proceeding, or
(ii) such action, suit or proceeding is terminated without the imposition
of liability on such Person.
12.7
Limited Guaranty of the Corporation
.
The Corporation
hereby guarantees performance of the Receiver’s obligation to indemnify the
Assuming Bank as set forth in this Article XII. It is a condition to the
Corporation’s obligation hereunder that the Assuming Bank shall comply in all
respects with the applicable provisions of this Article XII. The
Corporation shall be liable hereunder only for such amounts, if any, as the
Receiver is obligated to pay under the terms of this Article XII but shall
fail to pay. Except as otherwise provided above in this Section 12.7,
nothing in this Article XII is intended or shall be construed to create
any liability or obligation on the part of the Corporation, the United States
of America or any department or agency thereof under or with respect to this
Article XII, or any provision hereof, it being the intention of the
parties hereto that the obligations undertaken by the Receiver under this
Article XII are the sole and exclusive responsibility of the Receiver and
no other Person or entity.
12.8
Subrogation
.
Upon payment by the
Receiver, or the Corporation as guarantor in accordance with Section 12.7,
to any Indemnitee for any claims indemnified by the Receiver under this
Article XII, the Receiver, or the Corporation as appropriate, shall become
subrogated to all rights of the Indemnitee against any other Person to the
extent of such payment.
ARTICLE XIII
MISCELLANEOUS
13.1
Entire Agreement
. This Agreement embodies the
entire agreement of the parties hereto in relation to the subject matter herein
and supersedes all prior understandings or agreements, oral or written, between
the parties.
13.2
Headings
. The headings and
subheadings of the Table of Contents, Articles and Sections contained in this
Agreement, except the terms identified for definition in Article I and
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
37
elsewhere in this Agreement, are inserted for convenience only and
shall not affect the meaning or interpretation of this Agreement or any
provision hereof.
13.3
Counterparts
. This Agreement may be
executed in any number of counterparts and by the duly authorized
representative of a different party hereto on separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same Agreement.
13.4
GOVERNING LAW
. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED STATES OF AMERICA, AND IN THE
ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE
STATE IN WHICH THE MAIN OFFICE OF THE FAILED BANK IS LOCATED.
13.5
Successors
. All terms and conditions
of this Agreement shall be binding on the successors and assigns of the
Receiver, the Corporation and the Assuming Bank. Except as otherwise
specifically provided in this Agreement, nothing expressed or referred to in
this Agreement is intended or shall be construed to give any Person other than
the Receiver, the Corporation and the Assuming Bank any legal or equitable
right, remedy or claim under or with respect to this Agreement or any
provisions contained herein, it being the intention of the parties hereto that
this Agreement, the obligations and statements of responsibilities hereunder,
and all other conditions and provisions hereof are for the sole and exclusive
benefit of the Receiver, the Corporation and the Assuming Bank and for the
benefit of no other Person.
13.6
Modification; Assignment
. No amendment
or other modification, rescission, release, or assignment of any part of this
Agreement shall be effective except pursuant to a written agreement subscribed
by the duly authorized representatives of the parties hereto.
13.7
Notice
. Any notice, request,
demand, consent, approval or other communication to any party hereto shall be
effective when received and shall be given
in
writing
, and
delivered in person against receipt therefore, or sent by certified mail,
postage prepaid, courier service, telex, facsimile transmission or email to
such party (with copies as indicated below) at its address set forth below or
at such other address as it shall hereafter furnish in writing to the other
parties. All such notices and other communications shall be deemed given on the
date received by the addressee.
Assuming Bank
State Bank and Trust Company
4219 Forsyth Rd.
Macon, Georgia 31210
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
38
Attention: J. Daniel Speight
with a copy to: Joe Evans
Receiver and Corporation
Federal Deposit Insurance Corporation,
Receiver of The Buckhead Community Bank
1601 Bryan Street, Suite 1700
Dallas, Texas 75201
Attention: Settlement Manager
with copy to: Regional Counsel (Litigation Branch)
and with respect to notice under Article XII:
Federal Deposit Insurance Corporation
Receiver of The Buckhead Community Bank
1601 Bryan Street, Suite 1700
Dallas, Texas 75201
Attention: Regional Counsel (Litigation Branch)
13.8
Manner of Payment
. All payments due under
this Agreement shall be in lawful money of the United States of America in
immediately available funds as each party hereto may specify to the other
parties;
provided
,
that
in the event the Receiver or the
Corporation is obligated to make any payment hereunder in the amount of
$25,000.00 or less, such payment may be made by check.
13.9
Costs, Fees and Expenses
. Except as
otherwise specifically provided herein, each party hereto agrees to pay all
costs, fees and expenses which it has incurred in connection with or incidental
to the matters contained in this Agreement, including without limitation any
fees and disbursements to its accountants and counsel;
provided
,
that
the Assuming Bank shall pay all fees, costs and expenses (other than attorneys’
fees incurred by the Receiver) incurred in connection with the transfer to it
of any Assets or Liabilities Assumed hereunder or in accordance herewith.
13.10
Waiver
. Each of the Receiver, the
Corporation and the Assuming Bank may waive its respective rights, powers or
privileges under this Agreement;
provided
,
that
such waiver shall
be in writing;
and
further
provided
,
that
no
failure or delay on the part of the Receiver, the Corporation or the Assuming
Bank to exercise any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor will any single or partial exercise of any
right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or privilege by the
Receiver, the Corporation, or the
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
39
Assuming Bank under this Agreement, nor will any such waiver operate or
be construed as a future waiver of such right, power or privilege under this
Agreement.
13.11
Severability
. If any provision of this
Agreement is declared invalid or unenforceable, then, to the extent possible,
all of the remaining provisions of this Agreement shall remain in full force
and effect and shall be binding upon the parties hereto.
13.12
Term of Agreement
. This Agreement shall
continue in full force and effect until the tenth (10th) anniversary of Bank
Closing;
provided
,
that
the provisions of Section 6.3 and
6.4 shall survive the expiration of the term of this Agreement. Provided,
however, the receivership of the Failed Bank may be terminated prior to the
expiration of the term of this Agreement; in such event, the guaranty of the Corporation,
as provided in and in accordance with the provisions of Section 12.7 shall
be in effect for the remainder of the term. Expiration of the term of this
Agreement shall not affect any claim or liability of any party with respect to
any (i) amount which is owing at the time of such expiration, regardless
of when such amount becomes payable, and (ii) breach of this Agreement
occurring prior to such expiration, regardless of when such breach is
discovered.
13.13
Survival of Covenants, Etc
.
The covenants,
representations, and warranties in this Agreement shall survive the execution
of this Agreement and the consummation of the transactions contemplated
hereunder.
[Signature
Page Follows]
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
40
IN WITNESS WHEREOF
, the parties
hereto have caused this Agreement to be executed by their duly authorized
representatives as of the date first above written.
|
|
FEDERAL DEPOSIT INSURANCE CORPORATION,
|
|
|
RECEIVER OF THE BUCKHEAD COMMUNITY
|
|
|
BANK
|
|
|
ATLANTA, GEORGIA
|
|
|
|
|
|
|
|
|
BY:
|
/s/ Frederick J. Ozyp
|
|
|
NAME:
|
Frederick J. Ozyp
|
|
|
|
|
|
|
|
|
TITLE: Receiver-in-Charge
|
|
|
|
|
|
|
|
|
|
|
|
FEDERAL DEPOSIT INSURANCE CORPORATION
|
|
|
|
|
|
|
|
|
BY:
|
/s/ Frederick J. Ozyp
|
|
|
NAME:
|
Frederick J. Ozyp
|
|
|
|
|
|
TITLE: Receiver-in-Charge
|
|
|
|
|
|
|
|
|
|
|
|
STATE BANK AND TRUST COMPANY
|
|
|
|
|
|
|
|
|
BY:
|
/s/ J. Daniel Speight
|
|
|
NAME:
|
J. Daniel Speight
|
|
|
|
|
|
|
|
|
TITLE: Vice Chairman, CFO and COO
|
|
|
|
|
|
|
|
|
|
|
|
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
41
SCHEDULE
2.1 - Certain Liabilities Assumed by the Assuming Bank
|
Module 1 — Whole Bank w/ Loss
Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
42
SCHEDULE
2.1(a) — Excluded Deposit Liability Accounts
The
Buckhead Community Bank
Atlanta, Georgia
The Buckhead Community Bank has deposits associated
with the Depository Organization (DO) Cede & Co as Nominee for DTC.
The DO accounts do not pass to the Assuming Bank and are excluded from the
transaction as described in section 2.1 of the P&A Agreement. The attached
Schedule 2.1. a DO Detail Report identifies the DO accounts as of the date of
the deposit download. This schedule will be updated post closing with data as
of Bank Closing date.
|
ACCOUNT
|
|
|
|
|
NUMBER
|
|
P & I
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
|
|
|
$
|
63,000,122.05
|
|
|
|
|
|
|
|
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
43
SCHEDULE
3.1 - Certain Assets Purchased
SEE
ATTACHED LIST
THE LIST(S) ATTACHED TO THIS SCHEDULE (OR
SUBSCHEDULE(S)) AND THE INFORMATION THEREIN, IS AS OF THE DATE OF THE MOST
RECENT PERTINENT DATA MADE AVAILABLE TO THE ASSUMING BANK AS PART OF THE
INFORMATION PACKAGE. IT WILL BE ADJUSTED TO REFLECT THE COMPOSITION AND BOOK
VALUE OF THE LOANS AND ASSETS AS OF THE DATE OF BANK CLOSING. THE
LIST(S) MAY NOT INCLUDE ALL LOANS AND ASSETS (E.G., CHARGED OFF
LOANS). THE LIST(S) MAY BE REPLACED WITH A MORE ACCURATE LIST POST CLOSING.
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
44
SCHEDULE
3.2 - Purchase Price of Assets or assets
|
(a)
|
|
cash and receivables from depository institutions, including cash
items in the process of collection, plus interest thereon:
|
|
Book Value
|
|
|
|
|
|
|
|
(b)
|
|
securities (exclusive of the capital stock of Acquired Subsidiaries
and FRB and FHLB stock), plus interest thereon:
|
|
As provided in Section 3.2(b)
|
|
|
|
|
|
|
|
(c)
|
|
federal funds sold and repurchase agreements, if any, including
interest thereon:
|
|
Book Value
|
|
|
|
|
|
|
|
(d)
|
|
Loans:
|
|
Book Value
|
|
|
|
|
|
|
|
(e)
|
|
credit card business, if any, including all outstanding extensions of
credit and offensive litigation, but excluding any class action lawsuits
related to the credit card business:
|
|
Book Value
|
|
|
|
|
|
|
|
(f)
|
|
Safe Deposit Boxes and related business, safekeeping business and
trust business, if any:
|
|
Book Value
|
|
|
|
|
|
|
|
(g)
|
|
Records and other documents:
|
|
Book Value
|
|
|
|
|
|
|
|
(h)
|
|
Other Real Estate
|
|
Book Value
|
|
|
|
|
|
|
|
(i)
|
|
boats, motor vehicles, aircraft, trailers, fire arms, repossessed
collateral
|
|
Book Value
|
|
|
|
|
|
|
|
(j)
|
|
capital stock of any Acquired Subsidiaries and FRB and FHLB stock:
|
|
Book Value
|
|
|
|
|
|
|
|
(k)
|
|
amounts owed to the Failed Bank by any Acquired Subsidiary:
|
|
Book Value
|
|
(l)
|
|
assets securing Deposits of public money, to the extent not otherwise
purchased hereunder:
|
|
Book Value
|
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
45
|
(m)
|
|
Overdrafts of customers:
|
|
Book Value
|
|
|
|
|
|
|
|
(n)
|
|
rights, if any, with respect to Qualified Financial Contracts.
|
|
As provided in Section 3.2(c)
|
|
|
|
|
|
|
|
(o)
|
|
rights of the Failed Bank to provide mortgage servicing for others
and to have mortgage servicing provided to the Failed Bank by others and
related contracts.
|
|
Book Value
|
assets subject to an option to purchase:
|
(a)
|
|
Bank Premises:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(b)
|
|
Furniture and Equipment:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(c)
|
|
Fixtures:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(d)
|
|
Other Equipment:
|
|
Fair Market Value
|
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
46
SCHEDULE
3.5 (l) — Excluded Securities
NONE
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
47
SCHEDULE
4.15A
LOANS
SUBJECT TO LOSS SHARING UNDER THE
SINGLE FAMILY SHARED-LOSS AGREEMENT
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
48
SCHEDULE 4.15B
LOANS
SUBJECT TO LOSS SHARING UNDER THE
NON SINGLE FAMILY SHARED-LOSS AGREEMENT
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
49
SCHEDULE 7
-Accounts Excluded from Calculation of Deposit Franchise Bid Premium
The
Buckhead Community Bank
Atlanta, Georgia
The accounts identified below will pass to the Assuming Bank (unless
otherwise noted). When calculating the premium to be paid on Assumed Deposits
in a P&A transaction, the FDIC will exclude the following categories of
deposit accounts:
|
Category
|
|
Description
|
|
Amount
|
|
|
I
|
|
Non- DO Brokered Deposits
|
|
$
|
34,279,613
|
|
|
II
|
|
CDARS
|
|
$
|
19,423,159
|
|
|
III
|
|
Market Place Deposits
|
|
$
|
100,501,052
|
|
|
|
|
Total deposits excluded from Calculation of premium
|
|
$
|
154,203,824
|
|
Category Description
I Brokered Deposits
Brokered deposit accounts are accounts for which the “depositor of
record” is an agent, nominee, or custodian who deposits funds for a principal
or principals to whom “pass-through” deposit insurance coverage may be
extended. The FDIC separates brokered deposit accounts into 2 categories: 1)
Depository Organization (DO) Brokered Deposits and 2) Non-Depository
Organization (Non-DO) Brokered Deposits. This distinction is made by the FDIC
to facilitate our role as Receiver and Insurer. These terms will not appear on
other “brokered deposit” reports generated by the institution.
Non-DO Brokered Deposits pass to the Assuming Bank, but are excluded
from Assumed Deposits when the deposit premium is calculated. Please see the
attached “Schedule 7 Non-DO Broker Deposit Detail Report” for a listing of
these accounts. This list will be updated post closing with balances as of Bank
Closing date.
DO Brokered Deposits (Cede & Co as Nominee for DTC), are
typically excluded from Assumed Deposits in the P&A transaction. A list of
these accounts is provided on “Schedule 2.1 DO Brokered Deposit Detail Report”.
If, however, the terms of a particular transaction are altered and the DO
Brokered Deposits pass to the Assuming Bank, they will not be included in
Assumed Deposits for purposes of calculating the deposit premium.
II CDARS
CDARS deposits pass to the Assuming Bank, but are excluded from Assumed
Deposits when the deposit premium is calculated.
The Buckhead Community Bank did participate in the CDARS program as of
the date of the deposit download. If CDARS deposits are taken between the date
of the deposit download and the Bank Closing Date, they will be identified post
closing and made part of Schedule 7 to the P&A Agreement.
III Market Place Deposits
“Market Place Deposits” is a description given to deposits that may
have been solicited via a money desk, internet subscription service (for
example, Qwickrate), or similar programs.
The Buckhead Community Bank does have Qwickrate deposits as identified
above. The Qwickrate deposits are reported as product code 23 on the banks
system to identify both brokered and Qwickrate deposits. Please see the
attached Schedule 7 — Qwickrate Deposit Detail Report for a listing of these
accounts as of the deposit download date. This list will be updated post
closing with balances as of Bank Closing date.
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
50
This schedule provides account categories and balances as of the date
of the deposit download, or as indicated. The deposit franchise bid premium
will be calculated using account categories and balances as of Bank Closing
Date that are reflected in the general ledger or subsystem as described above.
The final numbers for Schedule 7 will be provided post closing.
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
51
EXHIBIT 2.3
A
FINAL NOTICE LETTER
FINAL LEGAL
NOTICE
Claiming Requirements for Deposits
Under 12 U.S.C. 1822(e)
[Date]
[Name of Unclaimed Depositor]
[Address of Unclaimed Depositor]
[Anytown, USA]
Subject:
[XXXXX —
Name of Bank
City, State]
— In Receivership
Dear
[Sir/Madam]:
As you may know, on
[Date: Closing Date]
, the
[Name
of Bank (“The Bank”) ]
was closed and the Federal Deposit Insurance
Corporation (“FDIC”) transferred
[The Bank’s]
accounts to
[Name of Acquiring Institution].
According to federal law under 12 U.S.C., 1822(e),
on
[Date: eighteen months from the Closing
Date]
,
[Name of Acquiring
Institution]
must transfer the funds in your account(s) back to
the FDIC if you have not claimed your account(s) with
[Name of Acquiring Institution].
Based on
the records recently supplied to us by
[Name
of Acquiring Institution]
, your account(s) currently fall into this
category.
This letter is your formal Legal Notice that you
have until
[Date: eighteen months from the
Closing Date]
, to claim or arrange to continue your
account(s) with
[Name of Acquiring
Institution].
There are several ways that you can claim your
account(s) at
[Name of Acquiring
Institution]
. It is only necessary for you to take any one of the
following actions in order for your account(s) at
[Name of Acquiring Institution]
to be
deemed claimed. In addition, if you have more than one account, your claim to
one account will automatically claim all accounts:
1.
Write to
[Name of Acquiring Institution]
and notify
them that you wish to keep your account(s) active with them. Please be
sure to include the name of the account(s), the account number(s), the
signature of an authorized signer on the account(s), name, and address.
[Name of Acquiring Institution]
address is:
[123 Main Street
Anytown, USA]
2.
Execute a new signature card
on your account(s), enter into a new deposit agreement with
[Name of Acquiring Institution],
change the
ownership on your account(s), or renegotiate the terms of your certificate of
deposit account(s) (if any).
3.
Provide
[Name of Acquiring Institution]
with a
change of address form.
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
52
4.
Make a deposit to or
withdrawal from your account(s). This includes writing a check on any account
or having an automatic direct deposit credited to or an automatic withdrawal
debited from an account.
If you do not want to continue your
account(s) with
[Name of Acquiring
Institution]
for any reason, you can withdraw your funds and close
your account(s). Withdrawing funds from one or more of your
account(s) satisfies the federal law claiming requirement. If you have
time deposits, such as certificates of deposit,
[Name of Acquiring Institution]
can advise you how to withdraw
them without being charged an interest penalty for early withdrawal.
If you do not claim ownership of your
account(s) at
[Name of Acquiring
Institution by Date: eighteen months from the Closing Date]
federal
law requires
[Name of Acquiring Institution]
to return your deposits to the FDIC, which will deliver them as unclaimed
property to the State indicated in your address in the Failed Institution’s
records. If your address is outside of the United States, the FDIC will deliver
the deposits to the State in which the Failed Institution had its main office.
12 U.S.C. § 1822(e). If the State accepts custody of your deposits, you will
have 10 years from the date of delivery to claim your deposits from the State.
After 10 years you will be permanently barred from claiming your deposits.
However, if the State refuses to take custody of your deposits, you will be
able to claim them from the FDIC until the receivership is terminated. If you have
not claimed your insured deposits before the receivership is terminated, and a
receivership may be terminated at any time, all of your rights in those
deposits will be barred.
If you have any questions or concerns about these
items, please contact
[Bank Employee]
at
[Name of Acquiring Institution]
by
phone at
[(XXX) XXX-XXXX].
|
|
Sincerely,
|
|
|
|
|
|
|
|
|
[Name of Claims Specialist]
|
|
|
[Title]
|
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
53
EXHIBIT 2.3B
AFFIDAVIT OF MAILING
AFFIDAVIT OF MAILING
State of
COUNTY OF
I am employed as a
[Title of Office]
by the
[Name of Acquiring Institution]
.
This will attest that on
[Date of
mailing]
, I caused a true and correct copy of the Final Legal
Notice, attached hereto, to owners of unclaimed deposits of
[Name of Failed Bank]
, City, State, to be
prepared for deposit in the mail of the United States of America on behalf of
the Federal Deposit Insurance Corporation. A list of depositors to whom the
notice was mailed is attached. This notice was mailed to the depositor’s last
address as reflected on the books and records of the
[Name of Failed Bank]
as of the date of failure.
|
|
|
|
|
|
[Name]
|
|
|
[Title of Office]
|
|
|
[Name of Acquiring Institution]
|
Subscribed and sworn to before me this day
of [Month, Year].
|
My commission expires:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[Name], Notary Public
|
|
Module 1 — Whole Bank w/
Loss Share — P&A
|
|
The
Buckhead Community Bank
|
|
Version 1.12
|
|
Atlanta,
GA
|
|
November 17, 2009
|
|
|
54
EXHIBIT 3.2(c) —
VALUATION OF CERTAIN
QUALIFIED FINANCIAL CONTRACTS
A.
Scope
Interest Rate Contracts - All interest rate swaps,
forward rate agreements, interest rate futures, caps, collars and floors,
whether purchased or written.
Option Contracts - All put and call option
contracts, whether purchased or written, on marketable securities, financial
futures, foreign currencies, foreign exchange or foreign exchange futures
contracts.
Foreign Exchange Contracts - All contracts for
future purchase or sale of foreign currencies, foreign currency or cross
currency swap contracts, or foreign exchange futures contracts.
B.
Exclusions
All financial contracts used to hedge assets and
liabilities that are acquired by the Assuming Bank but are not subject to adjustment
from Book Value.
C.
Adjustment
The difference between the Book Value and market
value as of Bank Closing.
D.
Methodology
1.
The price at
which the Assuming Bank sells or disposes of Qualified Financial Contracts will
be deemed to be the fair market value of such contracts, if such sale or
disposition occurs at prevailing market rates within a predefined timetable as
agreed upon by the Assuming Bank and the Receiver.
2.
In valuing all
other Qualified Financial Contracts, the following principles will apply:
(i)
All known cash
flows under swaps or forward exchange contracts shall be present valued to the
swap zero coupon interest rate curve.
(ii)
All valuations
shall employ prices and interest rates based on the actual frequency of rate
reset or payment.
(iii)
Each tranche of
amortizing contracts shall be separately valued. The total value of such
amortizing contract shall be the sum of the values of its component tranches.
55
(iv)
For regularly
traded contracts, valuations shall be at the midpoint of the bid and ask prices
quoted by customary sources (e.g.,
The Wall Street Journal
, Telerate,
Reuters or other similar source) or regularly traded exchanges.
(v)
For all other
Qualified Financial Contracts where published market quotes are unavailable,
the adjusted price shall be the average of the bid and ask price quotes from
three (3) securities dealers acceptable to the Receiver and Assuming Bank
as of Bank Closing. If quotes from securities dealers cannot be obtained, an
appraiser acceptable to the Receiver and the Assuming Bank will perform a
valuation based on modeling, correlation analysis, interpolation or other
techniques, as appropriate.]
56
EXHIBIT 4.13
INTERIM ASSET SERVICING ARRANGEMENT
(a)
With respect to
each asset (or liability) designated from time to time by the Receiver to be
serviced by the Assuming Bank pursuant to this Arrangement (such being
designated as “Pool Assets”), during the term of this Arrangement, the Assuming
Bank shall:
(i) Promptly apply payments
received with respect to any Pool Assets;
(ii) Reverse and return
insufficient funds checks;
(iii) Pay
(A) participation payments to participants in Loans, as and when received;
and (B) tax and insurance bills on Pool Assets as they come due, out of
escrow funds maintained for purposes;
(iv) Maintain accurate
records reflecting (A) the payment history of Pool Assets, with updated
information received concerning changes in the address or identity of the
obligors and (B) usage of data processing equipment and employee services
with respect to servicing duties;
(v) Send billing statements
to obligors on Pool Assets to the extent that such statements were sent by the
Failed Bank;
(vi) Send notices to
obligors who are in default on Loans (in the same manner as the Failed Bank);
(vii) Send to the Receiver,
Attn: Managing Liquidator, at the address provided in Section 13.7 of the
Agreement,
via
overnight
delivery
: (A) on a weekly
basis, weekly reports for the Pool Assets, including, without limitation,
reports reflecting collections and the trial balances, transaction journals and
loan histories for Pool Assets having activity, together with copies of
(1) checks received, (2) insufficient funds checks returned,
(3) checks for payment to participants or for taxes and insurance,
(4) pay-off requests, (5) notices to defaulted obligors, and
(6) data processing and employee logs and (B) any other reports,
copies or information as may be periodically or from time to time requested;
(viii) Remit on a weekly
basis to the Receiver, Attn: Division of Finance, Cashier Unit, Operations, at
the address in (vii),
via
wire
transfer
to the account
designated by the Receiver, all payments received on Pool Assets managed by the
Assuming Bank or at such time and place and in such manner as may be directed
by the Receiver;
(ix) prepare and timely file
all information reports with appropriate tax authorities, and, if required by
the Receiver, prepare and file tax returns and pay taxes due on or before the
due date, relating to the Pool Assets; and
(x) provide and furnish such
other services, operations or functions as may be required with regard to Pool
Assets, including, without limitation, as may be required with
57
regard to any business, enterprise or agreement which is a Pool Asset,
all as may be required by the Receiver.
Notwithstanding anything to the contrary in this Section, the Assuming
Bank shall not be required to initiate litigation or other collection
proceedings against any obligor or any collateral with respect to any defaulted
Loan. The Assuming Bank shall promptly notify the Receiver, at the address
provided above in subparagraph (a)(vii), of any claims or legal actions
regarding any Pool Asset.
(b)
The Receiver
agrees to reimburse the Assuming Bank for actual, reasonable and necessary
expenses incurred in connection with the performance of duties pursuant to this
Arrangement, including expenses of photocopying, postage and express mail, and
data processing and employee services (based upon the number of hours spent
performing servicing duties).
(c)
The Assuming
Bank shall provide the services described herein for an initial period of
ninety (90) days after Bank Closing. At the option of the Receiver, exercisable
by notice given not later than ten (10) days prior to the end of such
initial period or a renewal period, the Assuming Bank shall continue to provide
such services for such renewal period (s) as designated by the Receiver,
up to the Settlement Date.
(d)
At any time
during the term of this Arrangement, the Receiver may, upon written notice to
the Assuming Bank, remove one or more Pool Assets from the Pool, at which time
the Assuming Bank’s responsibility with respect thereto shall terminate.
(e)
At the
expiration of this Agreement or upon the termination of the Assuming Bank’s
responsibility with respect to any Pool Asset pursuant to paragraph
(d) hereof, the Assuming Bank shall:
(i) deliver to the Receiver
(or its designee) all of the Credit Documents and Pool Records relating to the
Pool Assets; and
(ii) cooperate with the
Receiver to facilitate the orderly transition of managing the Pool Assets to
the Receiver (or its designee).
(f)
At the request
of the Receiver, the Assuming Bank shall perform such transitional services
with regard to the Pool Assets as the Receiver may request. Transitional
services may include, without limitation, assisting in any due diligence process
deemed necessary by the Receiver and providing to the Receiver or its
designee(s) (x) information and data regarding the Pool Assets,
including, without limitation, system reports and data downloads sufficient to
transfer the Pool Assets to another system or systems, and (y) access to
employees of the Assuming Bank involved in the management of, or otherwise
familiar with, the Pool Assets.
58
EXHIBIT 4.15A
SINGLE
FAMILY SHARED-LOSS AGREEMENT
This agreement for the reimbursement of loss sharing
on certain single family residential mortgage loans (the “Single Family
Shared-Loss Agreement”) shall apply when the Assuming Bank purchases Single
Family Shared-Loss Loans as that term is defined herein. The terms hereof shall
modify and supplement, as necessary, the terms of the Purchase and Assumption
Agreement to which this Single Family Shared-Loss Agreement is attached as
Exhibit 4.15A and incorporated therein. To the extent any inconsistencies
may arise between the terms of the Purchase and Assumption Agreement and this
Single Family Shared-Loss Agreement with respect to the subject matter of this
Single Family Shared-Loss Agreement, the terms of this Single Family
Shared-Loss Agreement shall control. References in this Single Family Shared-Loss
Agreement to a particular Section shall be deemed to refer to a
Section in this Single Family Shared-Loss Agreement, unless the context
indicates that it is intended to be a reference to a Section of the
Purchase and Assumption Agreement.
ARTICLE I
— DEFINITIONS
The capitalized terms used in this Single Family Shared-Loss Agreement
that are not defined in this Single Family Shared-Loss Agreement are defined in
the Purchase and Assumption Agreement. In addition to the terms defined above,
defined below are certain additional terms relating to loss-sharing, as used in
this Single Family Shared-Loss Agreement.
“
Accounting
Records
” means the subsidiary system of record on which the loan
history and balance of each Single Family Shared-Loss Loan is maintained;
individual loan files containing either an original or copies of documents that
are customary and reasonable with respect to loan servicing, including
management and disposition of Other Real Estate; the records documenting
alternatives considered with respect to loans in default or for which a default
is reasonably foreseeable; records of loss calculations and supporting
documentation with respect to line items on the loss calculations; and, monthly
delinquency reports and other performance reports customarily utilized by the
Assuming Bank in management of loan portfolios.
“
Accrued
Interest
” means, with respect to Single Family Shared-Loss
Loans, the amount of earned and unpaid interest at the note rate specified in
the applicable loan documents, limited to 90 days.
“
Affiliate
”
shall have the
meaning set forth in the Purchase and Assumption Agreement;
provided
,
that
,
for purposes of this Single Family Shared-Loss Agreement, no Third Party
Servicer shall be deemed to be an Affiliate of the Assuming Bank.
“
Commencement
Date
” means the first calendar day following the Bank Closing.
“
Commercial Shared-Loss
Agreement
” means the Commercial and Other Assets Shared-Loss
Agreement attached to the Purchase and Assumption Agreement as Exhibit
59
4.15B.
“
Cumulative
Loss Amount
” means the sum of the Monthly Loss Amounts less the
sum of all Recovery Amounts.
“
Cumulative
Servicing Amount
” means the sum of the Period Servicing Amounts
for every consecutive twelve-month period prior to and ending on the True-Up
Measurement Date in respect of each of the Shared-Loss Agreements during which
the loss-sharing provisions of the applicable Shared-Loss Agreement is in
effect.
“
Cumulative Shared-Loss
Amount
” means the excess, if any, of the Cumulative Loss Amount
over the First Loss Tranche.
“
Cumulative
Shared-Loss Payments
” means (i) the aggregate of all of the
payments made or payable to the Assuming Bank under the Shared-Loss Agreements
minus (ii) the aggregate of all of the payments made or payable to the
Receiver under the Shared-Loss Agreements.
“
Customary
Servicing Procedures
” means procedures (including collection
procedures) that the Assuming Bank (or, to the extent a Third Party Servicer is
engaged, the Third Party Servicer) customarily employs and exercises in
servicing and administering mortgage loans for its own accounts and the
servicing procedures established by FNMA or FHLMC (as in effect from time to
time), which are in accordance with accepted mortgage servicing practices of
prudent lending institutions.
“
Deficient
Valuation
”
means the determination by a court in a bankruptcy
proceeding that the value of the collateral is less than the amount of the loan
in which case the loss will be the difference between the then unpaid principal
balance (or the NPV of a modified loan that defaults) and the value of the
collateral so established.
“
Examination Criteria
”
means the loan
classification criteria employed by, or any applicable regulations of, the
Assuming Bank’s Chartering Authority at the time such action is taken, as such
criteria may be amended from time to time.
“
Home Equity
Loans
” means loans or funded portions of lines of credit secured
by mortgages on one-to four-family residences or stock of cooperative housing
associations, where the Failed Bank did not have a first lien on the same
property as collateral.
“
Final
Shared-Loss Month
” means the calendar month in which the tenth
anniversary of the Commencement Date occurs.
“
Final
Shared-Loss Recovery Month
” means the calendar month in which
the tenth anniversary of the Commencement Date occurs.
“
Foreclosure
Loss
” means the loss realized when the Assuming Bank has
completed the foreclosure on a Single Family Shared-Loss Loan and realized
final recovery on the collateral through liquidation and recovery of all
insurance proceeds. Each Foreclosure Loss shall be calculated in accordance
with the form and methodology specified in Exhibit 2a or
60
Exhibit 2a(1).
“
Investor-Owned
Residential Loans
” means Loans, excluding advances made pursuant
to Home Equity Loans, that are secured by mortgages on one- to four family
residences or stock of cooperative housing associations that are not
owner-occupied. These loans can be treated as Restructured Loans on a
commercially reasonable basis and can be a restructured under terms separate
from the Exhibit 5 standards. Please refer to Exhibit 2b for guidance
in Calculation of Loss for Restructured Loans.
“
Loss
”
means a Foreclosure Loss, Restructuring Loss, Short Sale Loss, Portfolio Loss,
Modification Default Loss or Deficient Valuation.
“
Loss Amount
”
means the dollar amount of loss incurred and reported on the Monthly
Certificate for a Single Family Shared-Loss Loan.
“
Modification
Default Loss
” means the loss calculated in Exhibits 2a(1) and
2c(1) for single family loans modified under this part of the agreement
that default and result in a foreclosure or short sale.
“
Modification
Guidelines
”
has the meaning provided in
Section 2.1(a) of this Single Family Shared-Loss Agreement.
“
Monthly
Certificate
” has the meaning provided in
Section 2.1(b) of this Single Family Shared-Loss Agreement.
“
Monthly Loss
Amount
” means the sum of all Foreclosure Losses, Restructuring
Losses, Short Sale Losses, Portfolio Losses, Modification Default Losses and
losses in connection with Deficient Valuations realized by the Assuming Bank
for any Shared Loss Month.
“
Monthly
Shared-Loss Amount
” means the change in the Cumulative Shared-Loss
Amount from the beginning of each month to the end of each month.
“
Neutral Member
”
has the meaning provided in Section 2. 1(f)(ii) of this Single Family
Shared-Loss Agreement.
“
Period
Servicing Amount
” means, for any twelve month period with
respect to each of the Shared-Loss Agreements during which the loss-sharing
provisions of the applicable Shared-Loss Agreement are in effect, the product
of (i) the simple average of the principal amount of Shared-Loss Loans and
Shared-Loss Assets (other than the Shared-Loss Securities) (in each case as
defined in the Shared-Loss Agreements), as the case may be, at the beginning of
such period and at the end of such period times (ii) one percent (1%).
“
Portfolio Loss
”
means the loss realized on either (i) a portfolio sale of Single Family
Shared-Loss Loans in accordance with the terms of Article IV or
(ii) the sale of a loan with the consent of the Receiver as provided in
Section 2.7.
“
Recovery
Amount
” means, with respect to any period prior to the
Termination
61
Date, the amount of collected funds received by the Assuming Bank that
(i) are applicable against a Foreclosure Loss which has previously been
paid to the Assuming Bank by the Receiver or (ii) gains realized from a
Section 4.1 sale of Single Family Shared-Loss Loans for which the Assuming
Bank has previously received a Restructuring Loss payment from the Receiver
(iii) or any incentive payments from national programs paid to an investor
or borrower on loans that have been modified or otherwise treated (short sale
or foreclosure) in accordance with Exhibit 5.
“
Restructuring
Loss
” means the loss on a modified or restructured loan measured
by the difference between (a) the principal, Accrued Interest, tax and
insurance advances, third party or other fees due on a loan prior to the
modification or restructuring, and (b) the net present value of estimated
cash flows on the modified or restructured loan, discounted at the Then-Current
Interest Rate. Each Restructuring Loss shall be calculated in accordance with
the form and methodology attached as Exhibit 2b, as applicable.
“
Restructured
Loan
” means a Single Family Shared-Loss Loan for which the
Assuming Bank has received a Restructuring Loss payment from the Receiver. This
applies to owner occupied and investor owned residences.
“
Servicing
Officer
” has the meaning provided in Section 2.1(b) of
this Single Family Shared-Loss Agreement.
“
Shared Loss
Payment Trigger
” means when the sum of the Cumulative Loss
Amount under this Single Family Shared-Loss Agreement and the Shared-Loss
Amount under the Commercial and Other Assets Shared-Loss Agreement, exceeds the
First Loss Tranche. If the First Loss Tranche is zero or a negative number, the
Shared Loss Payment Trigger shall be deemed to have been reached upon Bank
Closing.
“
Shared-Loss
Month
” means each calendar month between the Commencement Date
and the last day of the month in which the tenth anniversary of the
Commencement Date occurs, provided that, the first Shared-Loss Month shall
begin on the Commencement Date and end on the last day of that month.
“
Short-Sale
Loss
” means the loss resulting from the Assuming Bank’s
agreement with the mortgagor to accept a payoff in an amount less than the balance
due on the loan (including the costs of any cash incentives to borrower to
agree to such sale or to maintain the property pending such sale), further
provided
,
that
each Short-Sale Loss shall be calculated in accordance with the
form and methodology specified in Exhibit 2c or Exhibit 2c(1).
“
Single Family
Shared-Loss Loans
” means the single family one-to-four
residential mortgage loans (whether owned by the Assuming Bank or any
Subsidiary) identified on Schedule 4.15A of the Purchase and Assumption Agreement.
“
Stated
Threshold
” means total losses under the shared loss agreements
in the amount of $254,000,000.00.
“
Termination
Date
” means the last day of the Final Shared-Loss Recovery
Month.
62
“
Then-Current
Interest Rate
” means the most recently published Freddie Mac
survey rate for 30-year fixed-rate loans.
“
Third Party
Servicer
” means any servicer appointed from time to time by the
Assuming Bank or any Affiliate of the Assuming Bank to service the Shared-Loss
Loans on behalf of the Assuming Bank, the identity of which shall be given to
the Receiver prior to or concurrent with the appointment thereof.
ARTICLE II — SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss Arrangement
.
(a)
Loss Mitigation and Consideration of Alternatives
. For each
Single Family Shared-Loss Loan in default or for which a default is reasonably
foreseeable, the Assuming Bank shall undertake reasonable and customary loss
mitigation efforts, in accordance with any of the following programs selected
by Assuming Bank in its sole discretion, Exhibit 5 (FDIC Mortgage Loan
Modification Program), the United States Treasury’s Home Affordable
Modification Program Guidelines or any other modification program approved by
the United States Treasury Department, the Corporation, the Board of Governors
of the Federal Reserve System or any other governmental agency (it being
understood that the Assuming Bank can select different programs for the various
Single Family Shared-Loss Loans) (such program chosen, the “Modification
Guidelines”). After selecting the applicable Modification Guideline for any
such Single Family Shared-Loss Loan, the Assuming Bank shall document its
consideration of foreclosure, loan restructuring under such Modification
Guideline chosen, and short-sale (if short-sale is a viable option)
alternatives and shall select the alternative the Assuming Bank believes, based
on its estimated calculations, will result in the least Loss. Losses on Home
Equity Loans shall be shared under the charge-off policies of the Assuming Bank’s
Examination Criteria as if they were Single Family Shared-Loss Loans with
respect to the calculation of the Stated Threshold. Assuming Bank shall retain
its calculations of the estimated loss under each alternative, such
calculations to be provided to the Receiver upon request. For the avoidance of
doubt and notwithstanding anything herein to the contrary, (i) the
Assuming Bank is not required to modify or restructure any Single Family
Shared-Loss Loan on more than one occasion and (ii) the Assuming Bank is
not required to consider any alternatives with respect to any Shared-Loss Loan
in the process of foreclosure as of the Bank Closing and shall be entitled to
continue such foreclosure measures and recover the Foreclosure Loss as provided
herein, and (iii) the Assuming Bank shall have a transition period of up
to 90 days after Bank Closing to implement the Modification Guidelines, during
which time, the Assuming Bank may submit claims under such guidelines as may be
in place at the Failed Bank.
(b)
Monthly Certificates
.
Not later than fifteen (15) days after the end of
each Shared-Loss Month, beginning with the month in which the Commencement Date
occurs and ending in the month in which the tenth anniversary of the Commencement
Date occurs, the Assuming Bank shall deliver to the Receiver a certificate,
signed by an officer of the Assuming Bank involved in, or responsible for, the
administration and servicing of the Single Family Shared-Loss Loans whose name
appears on a list of servicing officers furnished by the Assuming Bank to the
Receiver, (a
63
“Servicing Officer”) setting forth in such form and detail as the
Receiver may reasonably specify (a “Monthly Certificate”):
(i)
(A)
a schedule
substantially in the form of Exhibit 1 listing:
(i) each Single Family
Shared-Loss Loan for which a Loss Amount (calculated in accordance with the
applicable Exhibit) is being claimed, the related Loss Amount for each Single
Family Shared- Loss Loan, and the total Monthly Loss Amount for all Single
Family Shared-Loss Loans;
(ii) each Single Family
Shared-Loss Loan for which a Recovery Amount was received, the Recovery Amount
for each Single Family Shared-Loss Loan, and the total Recovery Amount for all
Single Family Shared-Loss Loans;
(iii) the total Monthly Loss
Amount for all Single Family Shared-Loss Loans minus the total monthly Recovery
Amount for all Single Family Shared-Loss Loans;
(iv) the Cumulative
Shared-Loss Amount as of the beginning and end of the month;
(v) the Monthly Shared Loss
Amount;
(vi) the result obtained in
(v) times 80%, or times 95% if the Stated Threshold has been reached,
which in either case is the amount to be paid under Section 2.1(d) of
this Single Family Shared-Loss Agreement by the Receiver to the Assuming Bank
if the amount is a positive number, or by the Assuming Bank to the Receiver if
the amount is a negative number;
(ii)
(B)
for each of the
Single Family Shared-Loss Loans for which a Loss is claimed for that
Shared-Loss Month, a schedule showing the calculation of the Loss Amount using
the form and methodology shown in Exhibit 2a, Exhibit 2b, or
Exhibit 2c, as applicable.
(iii)
(C)
For each of the
Restructured Loans where a gain or loss is realized in a sale under
Section 4.1 or 4.2, a schedule showing the calculation using the form and
methodology shown in Exhibit 2d.
(iv)
(D)
a portfolio
performance and summary schedule substantially in the form shown in
Exhibit 3.
(c)
Monthly Data Download
. Not later than fifteen
(15) days after the end of each month, beginning with the month in which the
Commencement Date occurs and ending with the Final Shared-Loss Recovery Month,
Assuming Bank shall provide Receiver:
64
(v)
(i)
the servicing
file in machine-readable format including but not limited to the following
fields for each outstanding Single Family Shared-Loss Loan, as applicable:
(A)
Loan number
(B)
FICO score
(C)
Origination date
(D)
Original principal amount
(E)
Maturity date
(F)
Paid-to date
(G)
Last payment date
(H)
Loan status (bankruptcy, in
foreclosure, etc.)
(I)
Delinquency counters
(J)
Current principal balance
(K)
Current escrow account
balance
(L)
Current Appraisal/BPO value
(M)
Current Appraisal/BPO date
(N)
Interest rate
(O)
Monthly principal and
interest payment amount
(P)
Monthly escrow payment for
taxes and insurance
(Q)
Interest rate type (fixed or
adjustable)
(R)
If adjustable: index,
margin, next interest rate reset date
(S)
Payment/Interest rate cap
and/or floor
(T)
Underwriting type (Full doc,
Alt Doc, No Doc)
(U)
Lien type (1
st
, 2
nd
)
(V)
Amortization type
(amortizing or I/O)
(W)
Property address, including
city, state, zip code
(X)
A code indicating whether
the Mortgaged Property is owner occupied
(Y)
Property type (single-family
detached, condominium, duplex, etc.)
(vi)
(ii)
An Excel file
for ORE held as a result of foreclosure on a Single Family Shared-Loss Loan
listing:
(A)
Foreclosure date
(B)
Unpaid loan principal
balance
(C)
Appraised value or BPO
value, as applicable
(D)
Projected liquidation date
Notwithstanding the foregoing, the Assuming Bank
shall not be required to provide any of the foregoing information to the extent
it is unable to do so as a result of the Failed Bank’s or Receiver’s failure to
provide information required to produce the information set forth in this
Section 2.1(c);
provided
, that the Assuming Bank shall, consistent
with Customary Servicing Procedures seek to produce any such missing
information or improve any inaccurate information previously provided to it.
65
(d)
Payments With Respect to Shared-Loss Assets
.
(i)
Losses Under the Stated Threshold
. After the Shared Loss
Payment Trigger is reached, not later than fifteen (15) days after the date on
which the Receiver receives the Monthly Certificate, the Receiver shall pay to
the Assuming Bank, in immediately available funds, an amount equal to eighty
percent (80%) of the Monthly Shared-Loss Amount reported on the Monthly
Certificate. If the total Monthly Shared-Loss Amount reported on the Monthly
Certificate is a negative number, the Assuming Bank shall pay to the Receiver
in immediately available funds eighty percent (80%) of that amount.
(iii)
Losses in Excess of the Stated Threshold
. In the event
that the sum of the Cumulative Loss Amount under this Single Family Shared-Loss
Agreement and the Stated Loss Amount under the Commercial Shared-Loss Agreement
meets or exceeds the Stated Threshold, the loss/recovery sharing percentages
set forth herein shall change from 80/20 to 95/5 and thereafter the Receiver
shall pay to the Assuming Bank, in immediately available funds, an amount equal
to ninety-five percent (95%) of the Monthly Shared-Loss Amount reported on the
Monthly Certificate. If the Monthly Shared-Loss Amount reported on the Monthly
Certificate is a negative number, the Assuming Bank shall pay to the Receiver
in immediately available funds ninety-five percent (95%) of that amount.
(e)
Limitations on Shared-Loss Payment
. The Receiver shall not be
required to make any payments pursuant to Section 2.1(d) with respect
to any Foreclosure Loss, Restructuring Loss, Short Sale Loss or Portfolio Loss
that the Receiver determines, based upon the criteria set forth in this Single
Family Shared-Loss Agreement (including the analysis and documentation
requirements of Section 2.1(a)) or Customary Servicing Procedures, should
not have been effected by the Assuming Bank; provided, however, (x) the
Receiver must provide notice to the Assuming Bank detailing the grounds for not
making such payment, (y) the Receiver must provide the Assuming Bank with
a reasonable opportunity to cure any such deficiency and (z) (1) to
the extent curable, if cured, the Receiver shall make payment with respect to
the properly effected Loss, and (2) to the extent not curable, notwithstanding
the foregoing, the Receiver shall make a payment as to all Losses (or portion
of Losses) that were effected which would have been payable as a Loss if the
Assuming Bank had properly effected such Loss. In the event that the Receiver
does not make any payment with respect to Losses claimed pursuant to
Section 2.1 (d), the Receiver and Assuming Bank shall, upon final
resolution, make the necessary adjustments to the Monthly Shared-Loss Amount
for that Monthly Certificate and the payment pursuant to Section 2.1(d) above
shall be adjusted accordingly.
(f)
Payments by Wire-Transfer
. All payments under this
Single Family Shared-Loss Agreement shall be made by wire-transfer in
accordance with the wire-transfer instructions on Exhibit 4.
(g)
Payment in the Event Losses Fail to Reach Expected Level
. On the date
that is 45 days following the last day (such day, the “True-Up Measurement Date”)
of the calendar month in which the tenth anniversary of the calendar day
following the Bank Closing occurs, the Assuming Bank shall pay to the Receiver
fifty percent (50%) of the excess, if any, of (i) twenty percent (20%) of
the Stated Threshold less (ii) the sum of (A) twenty-five percent
(25%) of the asset premium (discount) plus (B) twenty-five percent (25%) of
the Cumulative
66
Shared-Loss Payments plus (C) the Cumulative Servicing Amount. The
Assuming Bank shall deliver to the Receiver not later than 30 days following
the True-Up Measurement Date, a schedule, signed by an officer of the Assuming
Bank, setting forth in reasonable detail the calculation of the Cumulative
Shared-Loss Payments and the Cumulative Servicing Amount.
2.2
Auditor Report; Right to Audit
.
(a)
Within ninety
(90) days after the end of each fiscal year during which the Receiver makes any
payment to the Assuming Bank under this Single Family Shared-Loss Agreement,
the Assuming Bank shall deliver to the Corporation and to the Receiver a report
signed by its independent public accountants stating that they have reviewed
the terms of this Single Family Shared-Loss Agreement and that, in the course
of their annual audit of the Assuming Bank’s books and records, nothing has
come to their attention suggesting that any computations required to be made by
the Assuming Bank during such year pursuant to this Article II were not
made by the Assuming Bank in accordance herewith. In the event that the
Assuming Bank cannot comply with the preceding sentence, it shall promptly
submit to the Receiver corrected computations together with a report signed by
its independent public accountants stating that, after giving effect to such
corrected computations, nothing has come to their attention suggesting that any
computations required to be made by the Assuming Bank during such year pursuant
to this Article II were not made by the Assuming Bank in accordance
herewith. In such event, the Assuming Bank and the Receiver shall make all such
accounting adjustments and payments as may be necessary to give effect to each
correction reflected in such corrected computations, retroactive to the date on
which the corresponding incorrect computation was made. It is the intention of
this provision to align the timing of the audit required under this
Single-Family Shared-Loss Agreement with the examination audit required
pursuant to 12 CFR Section 363.
(b)
The Receiver or
the FDIC in its corporate capacity (“Corporation”) may perform an audit or
audits to determine the Assuming Bank’s compliance with the provisions of this
Single Family Shared-Loss Agreement, including this Article II, by
providing not less than ten (10) Business Days’ prior written notice.
Assuming Bank shall provide access to pertinent records and proximate working
space in Assuming Bank’s facilities. The scope and duration of any such audit
shall be within the reasonable discretion of the Receiver or the Corporation,
but shall in no event be administered in a manner that unreasonably interferes
with the operation of the Assuming Bank’s business. The Receiver or the
Corporation, as the case may be, shall bear the expense of any such audit. In
the event that any corrections are necessary as a result of such an audit or
audits, the Assuming Bank and the Receiver shall make such accounting
adjustments and payments as may be necessary to give retroactive effect to such
corrections.
2.3
Withholdings
. Notwithstanding any other provision in this
Article II, the Receiver, upon the direction of the Director (or designee)
of the Federal Deposit Insurance Corporation’s Division of Resolutions and
Receiverships, may withhold payment for any amounts included in a Monthly
Certificate delivered pursuant to Section 2.1, if in its good faith and
reasonable judgment there is a reasonable basis under the requirements of this
Single Family Shared-Loss Agreement for denying the eligibility of an item for
which reimbursement or payment is sought under such Section. In such event, the
Receiver shall provide a written notice
67
to the Assuming Bank detailing the grounds for withholding such
payment. At such time as the Assuming Bank demonstrates to the satisfaction of
the Receiver, in its reasonable judgment, that the grounds for such withholding
of payment, or portion of payment, no longer exist or have been cured, then the
Receiver shall pay the Assuming Bank the amount withheld which the Receiver
determines is eligible for payment, within fifteen (15) Business Days.
2.4
Books and Records
. The Assuming Bank shall at
all times during the term of this Single Family Shared-Loss Agreement keep
books and records sufficient to ensure and document compliance with the terms
of this Single Family Shared-Loss Agreement, including but not limited to
(a) documentation of alternatives considered with respect to defaulted
loans or loans for which default is reasonably foreseeable,
(b) documentation showing the calculation of loss for claims submitted to
the Receiver, (c) retention of documents that support each line item on
the loss claim forms, and (d) documentation with respect to the Recovery
Amount on loans for which the Receiver has made a loss-share payment
2.5
Information
. The Assuming Bank shall promptly provide to
the Receiver such other information, including but not limited to, financial
statements, computations, and bank policies and procedures, relating to the
performance of the provisions of this Single Family Shared-Loss Agreement, as
the Receiver may reasonably request from time to time.
2.6
Tax Ruling
. The Assuming Bank shall not at any time, without the
Receiver’s prior written consent, seek a private letter ruling or other
determination from the Internal Revenue Service or otherwise seek to qualify
for any special tax treatment or benefits associated with any payments made by
the Receiver pursuant to this Single Family Shared-Loss Agreement.
2.7
Sale of Single Family Shared-Loss Loans
. The Receiver
shall be relieved of its obligations with respect to a Single Family
Shared-Loss Loan upon payment of a Foreclosure Loss amount or a Short Sale Loss
amount with respect to such Single Family Shared-Loss Loan or upon the sale of
a Single Family Shared-Loss Loan by Assuming Bank to a person or entity that is
not an Affiliate; provided, however, that if the Receiver consents to the sale
of any such Single Family Shared-Loss Loan, any loss on such sale shall be a
Portfolio Loss. The Assuming Bank shall provide the Receiver with timely notice
of any such sale. Notwithstanding the foregoing, a sale of the Single Family
Shared-Loss Loan, for purposes of this Section 2.7, shall not be deemed to
have occurred as the result of (i) any change in the ownership or control
of Assuming Bank or the transfer of any or all of the Single Family Shared-Loss
Loan(s) to any Affiliate of Assuming Bank, (ii) a merger by Assuming
Bank with or into any other entity, or (iii) a sale by Assuming Bank of
all or substantially all of its assets.
ARTICLE III
- RULES REGARDING THE ADMINISTRATION OF SINGLE FAMILY
SHARED-LOSS LOANS
3.1
Agreement with Respect to Administration
. The Assuming
Bank shall (and shall cause any of its Affiliates to which the Assuming Bank
transfers any Single Family Shared- Loss Loans to) manage, administer, and
collect the Single Family Shared-Loss Loans while owned by the Assuming Bank or
any Affiliate thereof during the term of this Single Family Shared-Loss
Agreement in accordance with the rules set forth in this Article III.
The Assuming Bank shall be responsible to the Receiver in the performance of
its duties hereunder and shall
68
provide to the Receiver such reports as the Receiver reasonably deems
advisable, including but not limited to the reports required by Sections 2.1,
2.2 and 3.3 hereof, and shall permit the Receiver to monitor the Assuming Bank’s
performance of its duties hereunder.
3.2
Duties of
the
Assuming
Bank
. (a) In performance of its duties under this Article III,
the Assuming Bank shall:
(i) manage and administer
each Single Family Shared-Loss Loan in accordance with Assuming Bank’s usual
and prudent business and banking practices and Customary Servicing Procedures;
(ii) exercise its best
business judgment in managing, administering and collecting amounts owed on the
Single Family Shared-Loss Loans;
(iii) use commercially
reasonable efforts to maximize Recoveries with respect to Losses on Single
Family Shared-Loss Loans without regard to the effect of maximizing collections
on assets held by the Assuming Bank or any of its Affiliates that are not
Single Family Shared- Loss Loans;
(iv) retain sufficient staff
(in Assuming Bank’s discretion) to perform its duties hereunder; and
(v) other than as provided
in Section 2.1(a), comply with the terms of the Modification Guidelines
for any Single Family Shared-Loss Loans meeting the requirements set forth
therein. For the avoidance of doubt, the Assuming Bank may propose exceptions
to Exhibit 5 (the FDIC Loan Modification Program) for a group of Loans
with similar characteristics, with the objectives of (1) minimizing the
loss to the Assuming Bank and the FDIC and (2) maximizing the opportunity
for qualified homeowners to remain in their homes with affordable mortgage
payments.
(b)
Any transaction
with or between any Affiliate of the Assuming Bank with respect to any Single
Family Shared-Loss Loan including, without limitation, the execution of any
contract pursuant to which any Affiliate of the Assuming Bank will manage,
administer or collect any of the Single Family Shared-Loss Loans will be
provided to FDIC for informational purposes and if such transaction is not
entered into on an arm’s length basis on commercially reasonable terms such
transaction shall be subject to the prior written approval of the Receiver.
3.3
Shared-Loss Asset Records and Reports
. The Assuming Bank shall
establish and maintain such records as may be appropriate to account for the
Single Family Shared-Loss Loans in such form and detail as the Receiver may
reasonably require, and to enable the Assuming Bank to prepare and deliver to
the Receiver such reports as the Receiver may from time to time request
regarding the Single Family Shared-Loss Loans and the Monthly Certificates
required by Section 2.1 of this Single Family Shared-Loss Agreement.
3.4
Related Loans
.
(a)
Assuming Bank
shall use its best efforts to determine which loans are “Related Loans”, as
hereinafter defined. The Assuming Bank shall not manage, administer or collect
any “Related Loan” in any manner that would have the effect of increasing the
amount of any collections with respect to the Related Loan to the detriment of
the Single Family Shared-
69
Loss Loan to which such loan is related. A “Related Loan” means any
loan or extension of credit held by the Assuming Bank at any time on or prior
to the end of the Final Shared-Loss Month that is made to an Obligor of a
Single Family Shared-Loss Loan.
(b)
The Assuming
Bank shall prepare and deliver to the Receiver with the Monthly Certificates
for the calendar months ending June 30 and December 31, a schedule of
all Related Loans on the Accounting Records of the Assuming Bank as of the end
of each such semi-annual period.
3.5
Legal Action; Utilization of Special Receivership Powers
. The Assuming
Bank shall notify the Receiver in writing (such notice to be given in accordance
with Article V below and to include all relevant details) prior to
utilizing in any legal action any special legal power or right which the
Assuming Bank derives as a result of having acquired an asset from the
Receiver, and the Assuming Bank shall not utilize any such power unless the
Receiver shall have consented in writing to the proposed usage. The Receiver
shall have the right to direct such proposed usage by the Assuming Bank and the
Assuming Bank shall comply in all respects with such direction. Upon request of
the Receiver, the Assuming Bank will advise the Receiver as to the status of
any such legal action. The Assuming Bank shall immediately notify the Receiver
of any judgment in litigation involving any of the aforesaid special powers or
rights.
3.6
Third Party Servicer
. The Assuming Bank may
perform any of its obligations and/or exercise any of its rights under this
Single Family Shared-Loss Agreement through or by one or more Third Party
Servicers, who may take actions and make expenditures as if any such Third Party Servicer was the Assuming
Bank hereunder (and, for the avoidance of doubt, such expenses incurred by any
such Third Party Servicer on behalf of the Assuming Bank shall be included in
calculating Losses to the extent such expenses would be included in such
calculation if the expenses were incurred by Assuming Bank); provided, however,
that the use thereof by the Assuming Bank shall not release the Assuming Bank
of any obligation or liability hereunder.
ARTICLE IV
— PORTFOLIO SALE
4.1
Assuming Bank Portfolio Sales of Remaining Single Family Shared-Loss
Loans
. The Assuming Bank shall
have the right with the concurrence of the Receiver to liquidate for cash
consideration, from time to time in one or more transactions, all or a portion
of Single Family Shared-Loss Loans held by the Assuming Bank at any time prior
to the Termination Date (“Portfolio
Sales”). If the Assuming Bank exercises its option under this Section 4.1,
it must give thirty (30) days notice in writing to the Receiver setting forth
the details and schedule for the Portfolio Sale which shall be conducted by
means of sealed bid sales to third parties, not including any of the Assuming
Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s
contractors. Sales of Restructured Loans shall be sold in a separate pool from
Single Family Shared-Loss Loans not restructured. The Receiver’s review of the
Assuming Bank’s proposed Portfolio Sale will be considered in a timely fashion
and approval will not be unreasonably withheld, delayed or conditioned.
4.2
Assuming Bank’s Liquidation of Remaining Single Family Shared-Loss Loans
. In the event
that the Assuming Bank does not conduct
a Portfolio Sale pursuant to Section 4.1, the Receiver shall have the
right, exercisable in its sole and absolute discretion, to
70
require the Assuming Bank to liquidate for cash consideration, any
Single Family Shared-Loss Loans held by the Assuming Bank at any time after the
date that is six months prior to the Termination Date. If the Receiver
exercises its option under this Section 4.2, it must give notice in
writing to the Assuming Bank, setting forth the time period within which the
Assuming Bank shall be required to liquidate the Single Family Shared-Loss
Loans. The Assuming Bank will comply with the Receiver’s notice and must
liquidate the Single Family Shared-Loss Loans as soon as reasonably practicable
by means of sealed bid sales to third parties, not including any of the
Assuming Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s
contractors. The selection of any financial advisor or other third party broker
or sales agent retained for the liquidation of the remaining Single Family
Shared-Loss Loans pursuant to this Section shall be subject to the prior
approval of the Receiver, such approval not to be unreasonably withheld,
delayed or conditioned.
4.3
Calculation of Sale Gain or Loss
. For Single Family
Shared-Loss Loans that are not Restructured Loans gain or loss on the sales
under Section 4.1 or Section 4.2 will be calculated as the sale price
received by the Assuming Bank less the unpaid principal balance of the
remaining Single Family Shared-Loss Loans. For any Restructured Loan included
in the sale gain or loss on sale will be calculated as (a) the sale price
received by the Assuming Bank less (b) the net present value of estimated
cash flows on the Restructured Loan that was used in the calculation of the
related Restructuring Loss plus (c) Loan principal payments collected by
the Assuming Bank from the date the Loan was restructured to the date of sale.
(See Exhibit 2d for example calculation).
ARTICLE V
— LOSS-SHARING NOTICES GIVEN TO RECEIVER AND PURCHASER
All notices, demands and other communications
hereunder shall be in writing and shall be delivered by hand, or overnight
courier, receipt requested, addressed to the parties as follows:
If
to Receiver, to:
Federal Deposit
Insurance Corporation as Receiver
for The Buckhead Community Bank
Division of Resolutions and Receiverships
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Ralph Malami, Manager, Capital Markets
with
a copy to:
Federal Deposit
Insurance Corporation
as Receiver for The Buckhead
Community Bank
Room E7056
3501 Fairfax Drive, Arlington,
VA 2226
Attn: Special Issues Unit
With respect to a notice under Section 3.5 of
this Single Family Shared-Loss Agreement, copies of such notice shall be sent
to:
Federal Deposit Insurance Corporation
Legal Division 1601 Bryan St.
71
Dallas, Texas 75201
Attention: Regional Counsel
If to Assuming Bank, to:
State Bank and Trust Company
4219 Forsyth Rd.
Macon, Georgia 31210
Attention: J. Daniel Speight
with a copy to: Joe Evans
Such Persons and addresses may be changed from time
to time by notice given pursuant to the provisions of this Article V. Any
notice, demand or other communication delivered pursuant to the provisions of
this Article V shall be deemed to have been given on the date actually
received.
ARTICLE VI
— MISCELLANEOUS
6.1.
Expenses
. Except as otherwise expressly provided herein, all
costs and expenses incurred by or on behalf of a party hereto in connection
with this Single Family Shared-Loss Agreement shall be borne by such party
whether or not the transactions contemplated herein shall be consummated.
6.2
Successors and Assigns; Specific Performance
.
All terms and provisions of this Single Family
Shared-Loss Agreement shall be binding upon and shall inure to the benefit of
the parties hereto only;
provided
,
however
, that, Receiver may
assign or otherwise transfer this Single Family Shared-Loss Agreement (in whole
or in part) to the Federal Deposit Insurance Corporation in its corporate
capacity without the consent of Assuming Bank. Notwithstanding anything to the
contrary contained in this Single Family Shared-Loss Agreement, except as is
expressly permitted in this Section 6.2, Assuming Bank may not assign or
otherwise transfer this Single Family Shared-Loss Agreement (in whole or in
part) without the prior written consent of the Receiver, which consent may be
granted or withheld by the Receiver in its sole discretion, and any attempted
assignment or transfer in violation of this provision shall be void
ab initio.
For the avoidance of doubt, a
merger or consolidation of the Assuming Bank with and into another financial
institution, the sale of all or substantially all of the assets of the Assuming
Bank to another financial institution constitutes the transfer of this Single
Family Shared-Loss Agreement which requires the consent of the Receiver; and
for a period of thirty-six (36) months after Bank Closing, a merger or
consolidation shall also include the sale by any individual shareholder, or
shareholders acting in concert, of more than 9% of the outstanding shares of
the Assuming Bank, or of its holding company, or of any subsidiary holding
Shared-Loss Assets, or the sale of shares by the Assuming Bank or its holding
company or any subsidiary holding Shared-Loss Assets, in a public or private
offering, that increases the number of shares outstanding by more than 9%,
constitutes the transfer of this Single Family Shared-Loss
72
Agreement which requires the consent of the Receiver. However, no Loss
shall be recognized as a result of any accounting adjustments that are made due
to any such merger, consolidation or sale consented to by the FDIC. The FDIC’s
consent shall not be required if the aggregate outstanding principal balance of
Shared-Loss Assets is less than twenty percent (20%) of the initial aggregate
balance of Shared-Loss Assets.
6.3
Governing Law
. This Single Family Shared-Loss Agreement
shall be construed in accordance with federal law, or, if there is no
applicable federal law, the laws of the State of New York, without regard to
any rule of conflict of law that would result in the application of the
substantive law of any jurisdiction other than the State of New York.
6.4
WAIVER OF JURY TRIAL
. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF
OR RELATING TO OR IN CONNECTION WITH THIS SINGLE FAMILY SHARED-LOSS AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
6.5
Captions
. All captions and headings contained in this Single
Family Shared-Loss Agreement are for convenience of reference only and do not
form a part of, and shall not affect the meaning or interpretation of, this
Single Family Shared-Loss Agreement.
6.6
Entire Agreement; Amendments
. This Single Family
Shared-Loss Agreement, along with the Commercial Shared-Loss Agreement and the
Purchase and Assumption Agreement, including the Exhibits and any other
documents delivered pursuant hereto or thereto, embody the entire agreement of
the parties with respect to the subject matter hereof, and supersede all prior
representations, warranties, offers, acceptances, agreements and
understandings, written or oral, relating to the subject matter herein. This
Single Family Shared-Loss Agreement may be amended or modified or any provision
thereof waived only by a written instrument signed by both parties or their
respective duly authorized agents.
6.7
Severability
. Whenever
possible, each provision of this Single Family Shared-Loss Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Single Family Shared-Loss Agreement is held to be
prohibited by or invalid, illegal or unenforceable under applicable law, such
provision shall be construed and enforced as if it had been more narrowly drawn
so as not to be prohibited, invalid, illegal or unenforceable, and the
validity, legality and enforceability of the remainder of such provision and
the remaining provisions of this Single Family Shared-Loss Agreement shall not
in any way be affected or impaired thereby.
6.8
No
Third Party Beneficiary
. This Single Family Shared-Loss
Agreement and the Exhibits hereto are for the sole and exclusive benefit of the
parties hereto and their respective permitted successors and permitted assigns
and there shall be no other third party beneficiaries, and nothing in this
Single Family Shared-Loss Agreement or the Exhibits shall be construed to grant
to any other Person any right, remedy or Claim under or in respect of this
Single Family Shared-Loss Agreement or any provision hereof.
73
6.9
Counterparts
. This Single Family Shared-Loss Agreement
may be executed separately by Receiver and Assuming Bank in any number of
counterparts, each of which when executed and delivered shall be an original,
but such counterparts shall together constitute one and the same instrument.
6.10
Consent
. Except as
otherwise provided herein, when the consent of a party is required herein, such
consent shall not be unreasonably withheld or delayed.
6.11
Rights
Cumulative
. Except as otherwise expressly provided herein, the
rights of each of the parties under this Single Family Shared-Loss Agreement
are cumulative, may be exercised as often as any party considers appropriate
and are in addition to each such party’s rights under the Purchase and Sale
Agreement and any of the related agreements or under law. Except as otherwise
expressly provided herein, any failure to exercise or any delay in exercising
any of such rights, or any partial or defective exercise of such rights, shall
not operate as a waiver or variation of that or any other such right.
ARTICLE VII
DISPUTE RESOLUTION
7.1
Dispute Resolution Procedures
.
(a)
In the event a
dispute arises about the interpretation, application, calculation of Loss, or
calculation of payments or otherwise with respect to this Single Family
Shared-Loss Agreement (“SF Shared-Loss Dispute Item”), then the Receiver and
the Assuming Bank shall make every attempt in good faith to resolve such items
within sixty (60) days following the receipt of a written description of the SF
Shared-Loss Dispute Item, with notification of the possibility of taking the
matter to arbitration (the date on which such 60-day period expires, or any
extension of such period as the parties hereto may mutually agree to in
writing, herein called the “Resolution Deadline Date”). If the Receiver and the
Assuming Bank resolve all such items to their mutual satisfaction by the
Resolution Deadline Date, then within thirty (30) days following such
resolution, any payment arising out such resolution shall be made arising from
the settlement of the SF Shared-Loss Dispute.
(b)
If the Receiver
and the Assuming Bank fail to resolve any outstanding SF Shared-Loss Dispute
Items by the Resolution Deadline Date, then either party may notify the other
of its intent to submit the SF Shared-Loss Dispute Item to arbitration pursuant
to the provisions of this Article VII. Failure of either party to notify
the other of its intent to submit any unresolved SF Shared-Loss Dispute Item to
arbitration within thirty (30) days following the Resolution Deadline Date (the
date on which such thirty (30) day period expires is herein called the “Arbitration
Deadline Date”) shall be deemed an acceptance of such SF Shared-Loss Dispute
not submitted to arbitration, as well as a waiver of the submitting party’s
right to dispute such non- submitted SF Shared-Loss Dispute Item but not a
waiver of any similar claim which may arise in the future.
(c)
If a SF
Shared-Loss Dispute Item is submitted to arbitration, it shall be governed by
the rules of the American Arbitration Association (the “AAA”), except as
otherwise provided
74
herein. Either party may submit a matter for arbitration by delivering
a notice, prior to the Arbitration Deadline Date, to the other party in writing
setting forth:
(i)
A brief
description of each SF Shared-Loss Dispute Item submitted for arbitration;
(ii)
A statement of
the moving party’s position with respect to each SF Shared-Loss Dispute Item
submitted for arbitration;
(iii)
The value
sought by the moving party, or other relief requested regarding each SF
Shared-Loss Dispute Item submitted for arbitration, to the extent reasonably
calculable; and
(iv)
The name and
address of the arbiter selected by the moving party (the “Moving Arbiter”), who
shall be a neutral, as determined by the AAA.
Failure to adequately include any information above
shall not be deemed to be a waiver of the parties right to arbitrate so long as
after notification of such failure the moving party cures such failure as
promptly as reasonably practicable.
(d)
The non-moving
party shall, within thirty (30) days following receipt of a notice of
arbitration pursuant to this Section 7.1, deliver a notice to the moving
party setting forth:
(i)
The name and
address of the arbiter selected by the non-moving party (the “Respondent
Arbiter”), who shall be a neutral, as determined by the AAA;
(ii)
A statement of
the position of the respondent with respect to each Dispute Item; and
(iii)
The ultimate
resolution sought by the respondent or other relief, if any, the respondent
deems is due the moving party with respect to each SF Shared-Loss Dispute Item.
Failure to adequately include any information above
shall not be deemed to be a waiver of the non-moving party’s right to defend
such arbitration so long as after notification of such failure the non-moving
party cures such failure as promptly as reasonably practicable
(e)
The Moving
Arbiter and Respondent Arbiter shall select a third arbiter from a list furnished
by the AAA. In accordance with the rules of the AAA, the three
(3) arbiters shall constitute the arbitration panel for resolution of each
SF Loss-Share Dispute Item. The concurrence of any two (2) arbiters shall
be deemed to be the decision of the arbiters for all purposes hereunder. The
arbitration shall proceed on such time schedule and in accordance with the
Rules of Commercial Arbitration of the AAA then in effect, as modified by
this Section 7.1. The arbitration proceedings shall take place at such location
as the parties thereto may mutually agree, but if they cannot agree, then they
will take place at the offices of the Corporation in Washington, DC, or
Arlington, Virginia.
(f)
The Receiver
and Assuming Bank shall facilitate the resolution of each outstanding SF
Shared-Loss Dispute Item by making available in a prompt and timely manner to
one another and to the arbiters for examination and copying, as appropriate,
all documents, books, and records under their respective control and that would
be discoverable under the Federal Rules of Civil Procedure.
75
(g) The arbiters designated pursuant to subsections (c),
(d) and (e) hereof shall select, with respect to each Dispute Item
submitted to arbitration pursuant to this Section 7.1, either (i) the
position and relief submitted by the Assuming Bank with respect to each SF
Shared-Loss Dispute Item, or (ii) the position and relief submitted by the
Receiver with respect to each SF Shared-Loss Dispute Item, in either case as
set forth in its respective notice of arbitration. The arbiters shall have no
authority to select a value for each Dispute Item other than the determination
set forth in Section 7.1(c) and Section 7.1(d). The arbitration
shall be final, binding and conclusive on the parties.
(h) Any amounts ultimately determined to be payable pursuant
to such award shall bear interest at the Settlement Interest Rate from and
including the date specified for the arbiters decisions specified in this
Section 7.1, without regard to any extension of the finality of such
award, to but not including the date paid. All payments required to be made
under this Section 7.1 shall be made by wire transfer.
(i) For the avoidance of doubt, to the extent any notice of a
SF Shared-Loss Dispute Item(s) is provided prior to the Termination Date,
the terms of this Single Family Shared-Loss Agreement shall remain in effect
with respect to the Single Family Shared-Loss Loans that are the subject of
such SF Shared-Loss Dispute Item(s) until such time as any such dispute is
finally resolved.
7.2
Fees and Expenses of Arbiters
.
The aggregate
fees and expenses of the arbiters shall be borne equally by the parties. The
parties shall pay the aggregate fees and expenses within thirty (30) days after
receipt of the written decision of the arbiters (unless the arbiters agree in
writing on some other payment schedule).
Exhibit 1
Monthly
Certificate
SEE
FOLLOWING PAGE
76
77
Pursuant to Section 2.1 of the Single Family
Shared-Loss Agreement, the undersigned hereby certifies the information on this
Certificate is true, complete and correct.
|
OFFICER SIGNATURE
|
|
|
|
|
OFFICER NAME:
|
|
|
TITLE
|
|
|
|
|
|
|
|
|
78
Exhibit 2a
This
exhibit contains three versions of the loss share calculation for foreclosure,
plus explanatory notes.
|
Exhibit 2a(1)
CALCULATION OF FORECLOSURE
LOSS
Foreclosure Occurred Prior to Loss Share Agreement
|
|
|
|
|
|
|
1
|
Shared-Loss Month
|
|
May-09
|
|
|
2
|
Loan no:
|
|
364574
|
|
|
3
|
REO #
|
|
621
|
|
|
|
|
|
|
|
|
4
|
Foreclosure date
|
|
12/18/08
|
|
|
5
|
Liquidation date
|
|
4/12/09
|
|
|
6
|
Note Interest rate
|
|
8.100
|
%
|
|
7
|
Most recent BPO
|
|
228,000
|
|
|
8
|
Most recent BPO date
|
|
1/21/09
|
|
|
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
|
|
9
|
Book value at date of Loss Share agreement
|
|
244,900
|
|
|
|
|
|
|
|
|
10
|
Accrued interest, limited to 90 days or days
from failure to sale, whichever is less
|
|
3,306
|
|
|
11
|
Costs incurred after Loss Share agreement in
place:
|
|
|
|
|
12
|
Attorney’s
fees
|
|
0
|
|
|
13
|
Foreclosure
costs, including title search, filing fees,
advertising, etc.
|
|
0
|
|
|
14
|
Property
protection costs, maint. and repairs
|
|
6,500
|
|
|
15
|
Tax
and insurance advances
|
|
0
|
|
|
|
Other
Advances
|
|
|
|
|
16
|
Appraisal/Broker’s
Price Opinion fees
|
|
0
|
|
|
17
|
Inspections
|
|
0
|
|
|
18
|
Other
|
|
0
|
|
|
|
|
|
|
|
|
19
|
Gross balance recoverable by Purchaser
|
|
254,706
|
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
20
|
Net liquidation proceeds (from HUD-1 sett
stmt)
|
|
219,400
|
|
|
21
|
Hazard Insurance proceeds
|
|
0
|
|
|
22
|
Mortgage Insurance proceeds
|
|
0
|
|
|
23
|
T & I escrow account balances, if
positive
|
|
0
|
|
|
24
|
Other credits, if any (itemize)
|
|
0
|
|
|
25
|
Total
Cash Recovery
|
|
219,400
|
|
|
|
|
|
|
|
|
26
|
Loss Amount
|
|
35,306
|
|
79
|
Exhibit 2a(2)
CALCULATION
OF FORECLOSURE LOSS
No Preceeding Loan Mod under Loss Share
|
|
|
|
|
|
|
1
|
Shared-Loss
Month
|
|
May-09
|
|
|
2
|
Loan no:
|
|
292334
|
|
|
3
|
REO #
|
|
477
|
|
|
|
|
|
|
|
|
4
|
Interest paid-to-date
|
|
4/30/08
|
|
|
5
|
Foreclosure date
|
|
1/15/09
|
|
|
6
|
Liquidation date
|
|
4/12/09
|
|
|
7
|
Note Interest rate
|
|
8.000
|
%
|
|
8
|
Owner occupied?
|
|
Yes
|
|
|
9
|
If owner-occupied:
|
|
|
|
|
10
|
Borrower
current gross annual income
|
|
42,000
|
|
|
11
|
Estimated
NPV of loan mod
|
|
195,000
|
|
|
12
|
Most recent BPO
|
|
235,000
|
|
|
13
|
Most recent BPO date
|
|
1/21/09
|
|
|
|
|
|
|
|
|
|
Foreclosure
Loss calculation
|
|
|
|
|
16
|
Loan Principal balance
after last paid installment
|
|
300,000
|
|
|
|
|
|
|
|
|
17
|
Accrued interest, limited
to 90 days
|
|
6,000
|
|
|
18
|
Attorney’s fees
|
|
0
|
|
|
19
|
Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
4,000
|
|
|
20
|
Property protection costs,
maint. and repairs
|
|
5,500
|
|
|
21
|
Tax and insurance advances
|
|
1,500
|
|
|
|
Other Advances
|
|
|
|
|
22
|
Appraisal/Broker’s
Price Opinion fees
|
|
0
|
|
|
23
|
Inspections
|
|
50
|
|
|
24
|
Other
|
|
0
|
|
|
|
|
|
|
|
|
25
|
Gross balance recoverable
by Purchaser
|
|
317,050
|
|
|
|
|
|
|
|
|
|
Cash
Recoveries:
|
|
|
|
|
26
|
Net liquidation proceeds
(from HUD-1 settl stmt)
|
|
205,000
|
|
|
27
|
Hazard Insurance proceeds
|
|
0
|
|
|
28
|
Mortgage Insurance proceeds
|
|
0
|
|
|
29
|
T & I escrow
account balances, if positive
|
|
0
|
|
|
30
|
Other credits, if any
(itemize)
|
|
0
|
|
|
31
|
Total
Cash Recovery
|
|
205,000
|
|
|
|
|
|
|
|
|
32
|
Loss
Amount
|
|
112,050
|
|
80
|
Exhibit 2a(3)
CALCULATION OF FORECLOSURE LOSS
Foreclosure after a Covered
Loan Mod
|
|
|
|
|
|
|
1
|
Shared-Loss
Month
|
|
May-09
|
|
|
2
|
Loan no:
|
|
138554
|
|
|
3
|
REO #
|
|
843
|
|
|
|
|
|
|
|
|
4
|
Loan mod date
|
|
1/17/08
|
|
|
5
|
Interest paid-to-date
|
|
4/30/08
|
|
|
6
|
Foreclosure date
|
|
1/15/09
|
|
|
7
|
Liquidation date
|
|
4/12/09
|
|
|
8
|
Note Interest rate
|
|
4.000
|
%
|
|
9
|
Most recent BPO
|
|
210,000
|
|
|
10
|
Most recent BPO date
|
|
1/20/09
|
|
|
|
|
|
|
|
|
|
Foreclosure
Loss calculation
|
|
|
|
|
11
|
NPV of projected cash
flows at loan mod
|
|
285,000
|
|
|
12
|
Less: Principal payments
between loan mod and deliquency
|
|
2,500
|
|
|
13
|
Plus:
|
|
|
|
|
14
|
Attorney’s
fees
|
|
0
|
|
|
15
|
Foreclosure
costs, including title search, filing fees, advertising, etc.
|
|
4,000
|
|
|
16
|
Property
protection costs, maint. and repairs
|
|
7,000
|
|
|
17
|
Tax
and insurance advances
|
|
2,000
|
|
|
18
|
Other
Advances
|
|
|
|
|
19
|
Appraisal/Broker’s
Price Opinion fees
|
|
0
|
|
|
20
|
Inspections
|
|
0
|
|
|
21
|
Other
|
|
0
|
|
|
|
|
|
|
|
|
22
|
Gross balance recoverable
by Purchaser
|
|
295,500
|
|
|
|
|
|
|
|
|
|
Cash
Recoveries:
|
|
|
|
|
23
|
Net liquidation proceeds
(from HUD-1 settl stmt)
|
|
201,000
|
|
|
24
|
Hazard Insurance proceeds
|
|
0
|
|
|
25
|
Mortgage Insurance
proceeds
|
|
0
|
|
|
26
|
T & I escrow
account balances, if positive
|
|
0
|
|
|
27
|
Other credits, if any
(itemize)
|
|
0
|
|
|
28
|
Total
Cash Recovery
|
|
201,000
|
|
|
|
|
|
|
|
|
29
|
Loss
Amount
|
|
94,500
|
|
81
Notes
to Exhibit 2a (foreclosure)
1.
The data shown are for
illustrative purpose. The figures will vary for actual restructurings.
2.
The covered loss is the
difference between the gross balance recoverable by Purchaser and the total
cash recovery. There are three methods of calculation for covered losses from
foreclosures, depending upon the circumstances. They are shown below:
a.
If foreclosure occurred
prior to the beginning of the Loss Share agreement, use Exhibit 2a(1).
This version uses the book value of the REO as the starting point for the
covered loss.
b.
If foreclosure occurred
after the Loss Share agreement was in place, and if the loan was not
restructured when the Loss Share agreement was in place, use
Exhibit 2a(2). This version uses the unpaid balance of the loan as of the
last payment as the starting point for the covered loss.
c.
If the loan was restructured
when the Loss Share agreement was in place, and then foreclosure occurred, use
Exhibit 2a(3). This version uses the Net Present Value (NPV) of the modified
loan as the starting point for the covered loss.
3.
For Exhibit 2a(1), the
gross balance recoverable by the purchaser is calculated as the sum of lines 9
— 18; it is shown in line 19. For Exhibit 2a(2), the gross balance
recoverable by the purchaser is calculated as the sum of lines 16 — 24; it is
shown in line 25. For Exhibit 2a(3), the gross balance recoverable by the
purchaser is calculated as line 11 minus line 12 plus lines 13 — 21; it is
shown in line 22.
4.
For Exhibit 2a(1), the
total cash recovery is calculated as the sum of lines 20 — 24; it is shown in
line 25. For Exhibit 2a(2), the total cash recovery is calculated as the
sum of lines 26 — 30; it is shown in line 31. For Exhibit 2a(3), the total
cash recovery is calculated as the sum of lines 23 — 27; it is shown in line
28.
5.
Reasonable and customary
third party attorney’s fees and expenses incurred by or on behalf of Assuming
Bank in connection with any enforcement procedures, or otherwise with respect
to such loan, are reported under Attorney’s fees.
6.
Assuming Bank’s (or Third
Party Servicer’s) reasonable and customary out-of-pocket costs paid to either a
third party or an affiliate (if affiliate is pre-approved by the FDIC) for
foreclosure, property protection and maintenance costs, repairs, assessments,
taxes, insurance and similar items are treated as part of the gross recoverable
balance, to the extent they are not paid from funds in the borrower’s escrow
account. Allowable costs are limited to amounts per Freddie Mac and Fannie Mae
guidelines (as in effect from time to time), where applicable, provided that
this limitation shall not apply to costs or expenses relating to environmental
conditions.
7.
Do not include late fees,
prepayment penalties, or any similar lender fees or charges by the Failed Bank
or Assuming Bank to the loan account, any allocation of Assuming Bank’s
servicing costs, or any allocations of Assuming Bank’s general and
administrative (G&A) or other operating costs.
8.
If
Exhibit 2a(3) is used, then no accrued interest may be included as a
covered loss. Otherwise, the amount of accrued interest that may be included as
a covered loss is limited to the minimum of:
a.
90 days
b.
The number of days that the
loan is delinquent when the property was sold
82
c.
The number of days between
the resolution date and the date when the property was sold
To
calculate accrued interest, apply the note interest rate that would have been
in effect if the loan were performing to the principal balance after
application of the last payment made by the borrower.
83
Exhibit 2b
This exhibit contains the
loss share calculation for restructuring (loan mod), plus explanatory notes.
|
Exhibit 2b
CALCULATION OF RESTRUCTURING LOSS
|
|
|
|
|
|
|
1
|
Shared-Loss
Month
|
|
May-09
|
|
|
2
|
Loan no:
|
|
123456
|
|
|
|
|
|
|
|
|
|
Loan
before Restructuring
|
|
|
|
|
3
|
Original loan amount
|
|
500,000
|
|
|
4
|
Current unpaid principal
balance
|
|
450,000
|
|
|
5
|
Remaining term
|
|
298
|
|
|
6
|
Interest rate
|
|
7.500
|
%
|
|
7
|
Interest Paid-To-Date
|
|
2/29/08
|
|
|
8
|
Monthly payment - P&I
|
|
3,333
|
|
|
9
|
Monthly payment - T&I
|
|
1,000
|
|
|
10
|
Total
monthly payment
|
|
4,333
|
|
|
11
|
Loan
type (fixed-rate, ARM, I/O, Option ARM, etc.)
|
|
Option
ARM
|
|
|
12
|
Borrower current annual
income
|
|
82,000
|
|
|
|
|
|
|
|
|
|
Terms of
Modified/Restructured Loan
|
|
|
|
|
13
|
Closing date on
modified/restructured loan
|
|
4/19/09
|
|
|
14
|
New Principal balance
|
|
461,438
|
|
|
15
|
Remaining term
|
|
313
|
|
|
16
|
Interest rate
|
|
3.500
|
%
|
|
17
|
Monthly payment - P&I
|
|
1,346
|
|
|
18
|
Monthly payment - T&I
|
|
800
|
|
|
19
|
Total
monthly payment
|
|
2,146
|
|
|
20
|
Loan type (fixed-rate,
ARM, I/O, Option ARM, etc.)
|
|
IO
Hybrid
|
|
|
21
|
Lien type (1st, 2nd)
|
|
1st
|
|
|
|
If adjustable:
|
|
|
|
|
22
|
Initial
interest rate
|
|
3.500
|
%
|
|
23
|
Term
- initial interest rate
|
|
60
Months
|
|
|
24
|
Initial payment amount
|
|
2,146
|
|
|
25
|
Term-initial payment
amount
|
|
60
Months
|
|
|
26
|
Negative amortization?
|
|
No
|
|
|
27
|
Rate reset frequency after
first adjustment
|
|
6
Months
|
|
|
28
|
Next reset date
|
|
5/1/14
|
|
|
29
|
Index
|
|
LIBOR
|
|
|
30
|
Margin
|
|
2.750
|
%
|
|
31
|
Cap per adjustment
|
|
2.000
|
%
|
|
32
|
Lifetime Cap
|
|
9.500
|
%
|
|
33
|
Floor
|
|
2.750
|
%
|
|
34
|
Front end DTI
|
|
31
|
%
|
|
35
|
Back end DTI
|
|
45
|
%
|
|
|
|
|
|
|
|
|
Restructuring
Loss Calculation
|
|
|
|
|
36
|
Loan Principal balance
before restructuring
|
|
450,000
|
|
|
37
|
Accrued interest, limited
to 90 days
|
|
8,438
|
|
|
38
|
Tax and insurance advances
|
|
3,000
|
|
|
39
|
3rd party fees due
|
|
—
|
|
|
40
|
Total
loan balance due before restructuring
|
|
461,438
|
|
|
|
|
|
|
|
|
|
Assumptions
for NPV Calculation, Restructured Loan:
|
|
|
|
|
41
|
Discount rate for
projected cash flows
|
|
5.530
|
%
|
|
42
|
Loan prepayment in full
|
|
120
Months
|
|
|
43
|
NPV
of projected cash flows
|
|
403,000
|
|
|
|
|
|
|
|
|
44
|
Loss
Amount
|
|
58,438
|
|
84
Notes to Exhibit 2b (restructuring)
1.
The data shown are for
illustrative purpose. The figures will vary for actual restructurings.
2.
For purposes of loss
sharing, losses on restructured loans are calculated as the difference between:
a.
The principal, accrued
interest, advances due on the loan, and allowable 3
rd
party fees
prior to restructuring (lines 36-39), and
b.
The Net Present Value (NPV)
of the estimated cash flows (line 43). The cash flows should assume no default
or prepayment for 10 years, followed by prepayment in full at the end of 10
years (120 months).
3.
For owner-occupied
residential loans, the NPV is calculated using the most recently published
Freddie Mac survey rate on 30-year fixed rate loans as of the restructure date.
4.
For investor owned or
non-owner occupied residential loans, the NPV is calculated using commercially
reasonable rate on 30-year fixed rate loans as of the restructure date.
5.
If the new loan is an
adjustable-rate loan, interest rate resets and related cash flows should be
projected based on the index rate in effect at the date of the loan
restructuring. If the restructured loan otherwise provides for specific charges
in monthly P&I payments over the term of the loan, those changes should be
reflected in the projected cash flows. Assuming Bank must retain supporting
schedule of projected cash flows as required by Section 2.1 of the Single
Family Shared-Loss Agreement and provide it to the FDIC if requested for a
sample audit.
6.
Do not include late fees,
prepayment penalties, or any similar lender fees or charges by the Failed Bank
or Assuming Bank to the loan account, any allocation of Assuming Bank’s
servicing costs, or any allocations of Assuming Bank’s general and
administrative (G&A) or other operating costs.
7.
The amount of accrued
interest that may be added to the balance of the loan is limited to the minimum
of:
a.
90 days
b.
The number of days that the
loan is delinquent at the time of restructuring
c.
The number of days between
the resolution date and the restructuring
To
calculate accrued interest, apply the note interest rate that would have been
in effect if the loan were performing to the principal balance after
application of the last payment made by the borrower.
85
Exhibit 2c
This
exhibit contains two versions of the loss share calculation for short sales,
plus explanatory notes.
Exhibit 2c(1)
CALCULATION OF LOSS
FOR SHORT SALE LOANS
No Preceeding Loan
Mod under Loss Share
|
1
|
Shared-Loss Month:
|
|
May-09
|
|
|
2
|
Loan #
|
|
58776
|
|
|
3
|
RO #
|
|
542
|
|
|
|
|
|
|
|
|
4
|
Interest paid-to-date
|
|
7/31/08
|
|
|
5
|
Short Payoff Date
|
|
4/17/09
|
|
|
6
|
Note Interest rate
|
|
7.750
|
%
|
|
7
|
Owner occupied?
|
|
Yes
|
|
|
|
If so:
|
|
|
|
|
8
|
Borrower current gross annual
income
|
|
38,500
|
|
|
9
|
Estimated NPV of loan mod
|
|
200,000
|
|
|
10
|
Most recent BPO
|
|
380,000
|
|
|
11
|
Most recent BPO date
|
|
1/31/06
|
|
|
|
|
|
|
|
|
|
Short-Sale Loss calculation
|
|
|
|
|
12
|
Loan Principal balance
|
|
375,000
|
|
|
|
|
|
|
|
|
13
|
Accrued interest, limited to 90 days
|
|
7,266
|
|
|
14
|
Attorney’s fees
|
|
0
|
|
|
15
|
Tax and insurance advances
|
|
0
|
|
|
16
|
3rd party fees due
|
|
2,800
|
|
|
17
|
Incentive to borrower
|
|
2,000
|
|
|
18
|
Gross balance recoverable by
Purchaser
|
|
387,066
|
|
|
|
|
|
|
|
|
19
|
Amount accepted in Short-Sale
|
|
255,000
|
|
|
20
|
Hazard Insurance
|
|
0
|
|
|
21
|
Mortgage Insurance
|
|
0
|
|
|
|
|
|
|
|
|
22
|
Total Cash Recovery
|
|
255,000
|
|
|
|
|
|
|
|
|
23
|
Loss Amount
|
|
132,066
|
|
86
Exhibit 2c(2)
CALCULATION
OF LOSS FOR SHORT SALE LOANS
Short Sale
after a Covered Loan Mod
|
1
|
Shared-Loss Month:
|
|
May-09
|
|
|
2
|
Loan #
|
|
20076
|
|
|
3
|
REO #
|
|
345
|
|
|
|
|
|
|
|
|
4
|
Loan mod date
|
|
5/12/08
|
|
|
5
|
Interest paid-to-date
|
|
9/30/08
|
|
|
6
|
Short Payoff Date
|
|
4/2/09
|
|
|
7
|
Note Interest rate
|
|
7.500
|
%
|
|
8
|
Most recent BPO
|
|
230,000
|
|
|
9
|
Most recent BPO date
|
|
1/21/09
|
|
|
|
|
|
|
|
|
|
Short-Sale Loss calculation
|
|
|
|
|
11
|
NPV of projected cash flows at loan mod
|
|
311,000
|
|
|
12
|
Less: Principal payments between loan mod and deliquency
|
|
1,000
|
|
|
|
Plus:
|
|
|
|
|
13
|
Attorney’s fees
|
|
0
|
|
|
14
|
Tax and insurance advances
|
|
1,500
|
|
|
15
|
3rd party fees due
|
|
2,600
|
|
|
16
|
Incentive to borrower
|
|
3,500
|
|
|
17
|
Gross balance recoverable by Purchaser
|
|
317,600
|
|
|
|
|
|
|
|
|
18
|
Amount accepted in Short-Sale
|
|
234,000
|
|
|
19
|
Hazard Insurance
|
|
0
|
|
|
20
|
Mortgage Insurance
|
|
0
|
|
|
|
|
|
|
|
|
21
|
Total Cash Recovery
|
|
234,000
|
|
|
|
|
|
|
|
|
22
|
Loss Amount
|
|
83,600
|
|
87
Notes to Exhibit 2c (short sale)
1.
The
data shown are for illustrative purpose. The figures will vary for actual short
sales.
2.
The
covered loss is the difference between the gross balance recoverable by
Purchaser and the total cash recovery. There are two methods of calculation for
covered losses from short sales, depending upon the circumstances. They are
shown below:
a.
If
the loan was restructured when the Loss Share agreement was in place, and then
the short sale occurred, use Exhibit 2c(2). This version uses the Net
Present Value (NPV) of the modified loan as the starting point for the covered
loss.
b.
Otherwise,
use Exhibit 2c(1). This version uses the unpaid balance of the loan as of
the last payment as the starting point for the covered loss.
3.
For
Exhibit 2c(1), the gross balance recoverable by the purchaser is
calculated as the sum of lines 12 — 17; it is shown in line 18. For Exhibit 2a(2),
the gross balance recoverable by the purchaser is calculated as line 11 minus
line 12 plus lines 13 — 16; it is shown in line 17.
4.
For
Exhibit 2c(1), the total cash recovery is calculated as the sum of lines
19 — 21; it is shown in line 22. For Exhibit 2c(2), the total cash
recovery is calculated as the sum of lines 18 — 20; it is shown in line 21.
5.
Reasonable
and customary third party attorney’s fees and expenses incurred by or on behalf
of Assuming Bank in connection with any enforcement procedures, or otherwise
with respect to such loan, are reported under Attorney’s fees.
6.
Do
not include late fees, prepayment penalties, or any similar lender fees or
charges by the Failed Bank or Assuming Bank to the loan account, any allocation
of Assuming Bank’s servicing costs, or any allocations of Assuming Bank’s
general and administrative (G&A) or other operating costs.
7.
If
Exhibit 2c(2) is used, then no accrued interest may be included as a
covered loss. Otherwise, the amount of accrued interest that may be included as
a covered loss is limited to the minimum of:
d.
90
days
e.
The
number of days that the loan is delinquent when the property was sold
f.
The
number of days between the resolution date and the date when the property was
sold
To
calculate accrued interest, apply the note interest rate that would have been
in effect if the loan were performing to the principal balance after
application of the last payment made by the borrower.
88
Exhibit 2d
|
Shared-Loss Month:
|
[input month]
|
|
Loan no.:
|
[input loan no.)
|
NOTE
The calculation of recovery on a loan for
which a Restructuring Loss has been paid will only apply if the loan is sold.
|
EXAMPLE CALCULATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
Loss Information
|
|
|
|
|
|
|
|
|
Loan
principal balance before restructuring
|
|
|
|
$
|
200,000
|
|
A
|
|
|
NPV,
restructured loan
|
|
|
|
165,000
|
|
B
|
|
|
Loss
on restructured loan
|
|
|
|
$
|
35,000
|
|
A – B
|
|
|
Times
FDIC applicable loss share % (80% or 95%)
|
|
|
|
80
|
%
|
|
|
|
Loss share payment to purchaser
|
|
|
|
$
|
28,000
|
|
C
|
|
|
|
|
|
|
|
|
|
|
|
Calculation — Recovery amount due to
Receiver
|
|
|
|
|
|
|
|
|
Loan
sales price
|
|
|
|
$
|
190,000
|
|
|
|
|
NPV
of restructured loan at mod date
|
|
|
|
165,000
|
|
|
|
|
Gain
- step 1
|
|
|
|
25,000
|
|
D
|
|
|
PLUS
|
|
|
|
|
|
|
|
|
Loan
UPB after restructuring
|
|
(1
|
)
|
200,000
|
|
|
|
|
Loan
UPB at liquidation date
|
|
|
|
192,000
|
|
|
|
|
Gain
- step 2 (principal collections after restructuring)
|
|
|
|
8,000
|
|
E
|
|
|
Recovery
amount
|
|
|
|
33,000
|
|
D+ E
|
|
|
Times
FDIC loss share %
|
|
|
|
80
|
%
|
|
|
|
Recovery due to FDIC
|
|
|
|
$
|
26,400
|
|
F
|
|
|
|
|
|
|
|
|
|
|
|
Net loss share paid to purchaser (C — F)
|
|
|
|
$
|
1,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proof Calculation
|
|
(2
|
)
|
|
|
|
|
|
Loan
principal balance
|
|
|
|
$
|
200,000
|
|
G
|
|
|
|
|
|
|
|
|
|
|
|
Principal
collections on loan
|
|
|
|
8,000
|
|
|
|
|
Sales
price for loan
|
|
|
|
190,000
|
|
|
|
|
Total
collections on loan
|
|
|
|
198,000
|
|
H
|
|
|
Net
loss on loan
|
|
|
|
$
|
2,000
|
|
G – H
|
|
|
Times
FDIC applicable loss share % (80% or 95%)
|
|
|
|
80
|
%
|
|
|
|
Loss share payment to purchaser
|
|
|
|
$
|
1,600
|
|
|
|
(1)
This
example assumes that the FDIC loan modification program as shown in Exhibit 5
is applied and the loan restructuring does not result in a reduction in the
loan principal balance due from the borrower.
(2)
This
proof calculation is provided to illustrate the concept and the Assuming Bank
is not required to provide this with its Recovery calculations.
89
Exhibit 3
Portfolio
Performance and Summary Schedule
|
SHARED-LOSS LOANS
|
|
|
|
PORTFOLIO PERFORMANCE AND SUMMARY
SCHEDULE
|
|
|
|
MONTH ENDED:
|
|
[input report month]
|
|
POOL SUMMARY
|
|
|
|
|
|
|
|
|
|
|
#
|
|
$
|
|
|
|
|
|
Loans at Sale Date
|
|
xx
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans as of this month-end
|
|
xx
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATED THRESHOLD
TRACKING
|
|
#
|
|
$
|
|
|
|
|
|
Stated Threshold amount
|
|
****
|
|
|
|
A
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative loss payments, prior
month
|
|
|
|
|
|
|
|
|
Loss payment for current month
|
|
|
|
|
|
|
|
|
Cumulative loss payment, this
month
|
|
|
|
|
|
|
|
|
Cumulative Commercial &
Other Loans Net Charge-Offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
|
Remaining to Stated Threshold
|
|
****
|
|
|
|
A - B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Total
|
|
|
PORTFOLIO
PERFORMANCE STATUS
|
|
#
|
|
$
|
|
|
#
|
|
|
Current
|
|
|
|
|
|
|
|
|
30 — 59 days past due
|
|
|
|
|
|
|
|
|
60 — 89 days past due
|
|
|
|
|
|
|
|
|
90 — 119 days past due
|
|
|
|
|
|
|
|
|
120 and over days past due
|
|
|
|
|
|
|
|
|
In foreclosure
|
|
|
|
|
|
|
|
|
ORE
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo Item
:
|
|
|
|
|
|
|
|
|
Loans in process of restructuring
— total
|
|
|
|
|
|
****
|
|
|
Loans in bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans in process of restructuring
by delinquency status
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
30 - 59 days past due
|
|
|
|
|
|
|
|
|
60 - 89 days past due
|
|
|
|
|
|
|
|
|
90 - 119 days past due
|
|
|
|
|
|
|
|
|
120 and over days past due In
foreclosure
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
90
List of Loans Paid Off During Month
List of Loans Sold During Month
91
Exhibit 4
Wire Transfer
Instructions
PURCHASER WIRING
INSTRUCTIONS
BANK RECEIVING WIRE
9 DIGIT ABA ROUTING NUMBER
ACCOUNT NUMBER
NAME OF ACCOUNT
ATTENTION TO WHOM
PURPOSE OF WIRE
FDIC RECEIVER
WIRING INSTRUCTIONS
BANK RECEIVING WIRE
SHORT NAME
ADDRESS OF BANK RECEIVING WIRE
9 DIGIT ABA ROUTING NUMBER
ACCOUNT NUMBER
NAME OF ACCOUNT
ATTENTION TO WHOM
PURPOSE OF WIRE
92
EXHIBIT 5
FDIC
MORTGAGE LOAN MODIFICATION PROGRAM
Objective
The objective of this FDIC Mortgage Loan Modification Program
(“Program”) is to modify the terms of certain residential mortgage loans so as
to improve affordability, increase the probability of performance, allow
borrowers to remain in their homes and increase the value of the loans to the
FDIC and assignees. The Program provides for the modification of Qualifying
Loans (as defined below) by reducing the borrower’s monthly housing debt to
income ratio (“DTI Ratio”) to no more than 31% at the time of the modification
and eliminating adjustable interest rate and negative amortization features.
Qualifying Mortgage Loans
In order for a mortgage loan to be a Qualifying Loan it must meet all
of the following criteria, which must be confirmed by the lender:
·
The collateral
securing the mortgage loan is owner-occupied and the owner’s primary residence;
and
·
The mortgagor
has a first priority lien on the collateral; and
·
Either the
borrower is at least 60 days delinquent or a default is reasonably foreseeable.
Modification Process
The lender shall undertake a review of its mortgage loan portfolio to
identify Qualifying Loans. For each Qualifying Loan, the lender shall determine
the net present value of the modified loan and, if it will exceed the net
present value of the foreclosed collateral upon disposition, then the
Qualifying Loan shall be modified so as to reduce the borrower’s monthly DTI
Ratio to no more than 31% at the time of the modification. To achieve this, the
lender shall use a combination of interest rate reduction, term extension and
principal forbearance, as necessary.
The borrower’s monthly DTI Ratio shall be a percentage calculated by
dividing the borrower’s monthly income by the borrower’s monthly housing
payment (including principal, interest, taxes and insurance). For these
purposes, (1) the borrower’s monthly income shall be the amount of the
borrower’s (along with any co-borrowers’) documented and verified gross monthly
income, and (2) the borrower’s monthly housing payment shall be the amount
required to pay monthly principal and interest plus one-twelfth of the then
current annual amount required to pay real property taxes and homeowner’s
insurance with respect to the collateral.
In order to calculate the monthly principal payment, the lender shall
capitalize to the outstanding principal balance of the Qualifying Loan the
amount of all delinquent interest, delinquent taxes, past due insurance
premiums, third party fees and (without duplication) escrow advances (such
amount, the “Capitalized Balance”).
93
In order to achieve the goal of reducing the DTI Ratio to 31%, the
lender shall take the following steps in the following order of priority with
respect to each Qualifying Loan:
1.
Reduce the interest rate to
the then current Freddie Mac Survey Rate for 30-year fixed rate mortgage loans,
and adjust the term to 30 years.
2.
If the DTI Ratio is still in
excess of 31%, reduce the interest rate further, but no lower than 3%, until
the DTI ratio of 31% is achieved.
3.
If the DTI Ratio is still in
excess of 31% after adjusting the interest rate to 3%, extend the remaining
term of the loan by 10 years.
4.
If the DTI Ratio is still in
excess of 31%, calculate a new monthly payment (the “Adjusted Payment Amount”)
that will result in the borrower’s monthly DTI Ratio not exceeding 31%. After
calculating the Adjusted Payment Amount, the lender shall bifurcate the
Capitalized Balance into two portions — the amortizing portion and the non-amortizing
portion. The amortizing portion of the Capitalized Balance shall be the
mortgage amount that will fully amortize over a 40-year term at an annual
interest rate of 3% and monthly payments equal to the Adjusted Payment Amount.
The non-amortizing portion of the Capitalized Balance shall be the difference
between the Capitalized Balance and the amortizing portion of the Capitalized
Balance. If the amortizing portion of the Capitalized Balance is less than 75%
of the current estimated value of the collateral, then the lender may choose
not to restructure the loan. If the lender chooses to restructure the loan,
then the lender shall forbear on collecting the non-amortizing portion of the
Capitalized Balance, and such amount shall be due and payable only upon the
earlier of (i) maturity of the modified loan, (ii) a sale of the
property or (iii) a pay-off or refinancing of the loan. No interest shall
be charged on the non-amortizing portion of the Capitalized Balance, but
repayment shall be secured by a first lien on the collateral.
Special Note
:
The net present value calculation used to determine whether a loan
should be modified based on the modification process above is distinct and
different from the net present value calculation used to determine the covered
loss if the loan is modified. Please refer only to the net present value
calculation described in this exhibit for the modification process, with its
separate assumptions, when determining whether to provide a modification to a
borrower. Separate assumptions may include, without limitation, Assuming Bank’s
determination of a probability of default without modification, a probability
of default with modification, home price forecasts, prepayment speeds, and
event timing. These assumptions are applied to different projected cash flows
over the term of the loan, such as the projected cash flow of the loan
performing or defaulting without modification and the projected cash flow of
the loan performing or defaulting with modification.
By contrast, the net present value for determining the covered loss is
based on a 10 year period. While the assumptions in the net present value
calculation used in the modification process may change, the net present value
calculation for determining the covered loss remains constant.
94
EXHIBIT 4.15B
COMMERCIAL
AND OTHER ASSETS SHARED-LOSS AGREEMENT
This agreement for reimbursement of loss sharing
expenses on certain loans and other assets (the “Commercial Shared-Loss
Agreement”) shall apply when the Assuming Bank purchases Shared-Loss Assets as
that term is defined herein. The terms hereof shall modify and supplement, as
necessary, the terms of the Purchase and Assumption Agreement to which this
Commercial Shared-Loss Agreement is attached as Exhibit 4.15B and
incorporated therein. To the extent any inconsistencies may arise between the
terms of the Purchase and Assumption Agreement and this Commercial Shared-Loss
Agreement with respect to the subject matter of this Commercial Shared-Loss
Agreement, the terms of this Commercial Shared-Loss Agreement shall control.
References in this Commercial Shared-Loss Agreement to a particular
Section shall be deemed to refer to a Section in this Commercial
Shared-Loss Agreement unless the context indicates that a Section of the
Purchase and Assumption Agreement is intended.
ARTICLE I
— DEFINITIONS
Capitalized terms used in this Commercial
Shared-Loss Agreement that are not defined in this Commercial Shared-Loss
Agreement are defined in the Purchase and Assumption Agreement In addition to
the terms defined above, defined below are certain additional terms relating to
loss-sharing, as used in this Commercial Shared-Loss Agreement.
“
AAA
”
means the
American Arbitration Association as provided in Section 2.1(f)(iii) of
this Commercial Shared-Loss Agreement.
“
Accrued Interest
”
means, with
respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan
Commitment Advance at any time, the amount of earned and unpaid interest,
taxes, credit life and/or disability insurance premiums (if any) payable by the
Obligor accrued on or with respect to such Shared-Loss Loan, Permitted Advance
or Shared-Loss Loan Commitment Advance, all as reflected on the Accounting
Records of the Failed Bank or the Assuming Bank (as applicable);
provided
,
that
Accrued Interest shall not include any amount that accrues on or
with respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan
Commitment Advance after that Asset has been placed on non-accrual or nonperforming
status by either the Failed Bank or the Assuming Bank (as applicable).
“
Additional ORE
”
means
Shared-Loss Loans that become Other Real Estate after Bank Closing Date.
“
Affiliate
”
shall have the
meaning set forth in the Purchase and Assumption Agreement;
provided
,
that
,
for purposes of this Commercial Shared-Loss Agreement, no Third Party Servicer
shall be deemed to be an Affiliate of the Assuming Bank.
“
Applicable Anniversary of the Commencement Date
”
means the
fifth (5th) anniversary of the Commencement Date.
95
“
Calendar Quarter
”
means a
quarterly period (a) for the first such period, beginning on the
Commencement Date and ending on the last calendar day of either March, June, September or
December, whichever is the first to occur after the Commencement Date, and
(b) for quarterly periods thereafter, beginning on the first calendar day
of the calendar month immediately after the month that ended the prior period
and ending on the last calendar day of each successive three-calendar-month
period thereafter (i.e., each March, June, September and December,
starting in the applicable order depending on the ending date of first such
period) of any year.
“
Capitalized Expenditures
”
means those
expenditures that (i) would be capitalized under generally accepted
accounting principles, and (ii) are incurred with respect to Shared-Loss
Loans, Other Real Estate, Additional ORE or Subsidiary ORE. Capitalized
Expenditures shall not include expenses related to environmental conditions
including, but not limited to, remediation, storage or disposal of any
hazardous or toxic substances or any pollutant or contaminant.
“
Charge-Offs
”
means, with
respect to any Shared-Loss Assets for any period, an amount equal to the
aggregate amount of loans or portions of loans classified as “Loss” under the
Examination Criteria, including (a) charge-offs of (i) the principal
amount of such assets net of unearned interest (including write-downs
associated with Other Real Estate, Additional ORE, Subsidiary ORE or loan
modification(s)) (ii) Accrued Interest, and (iii) Capitalized
Expenditures plus (b) Pre-Charge-Off Expenses incurred on the respective
Shared-Loss Loans, all as effected by the Assuming Bank during such period and
reflected on the Accounting Records of the Assuming Bank;
provided
,
that
:
(i) the aggregate amount of Accrued Interest (including any reversals
thereof) for the period after Bank Closing that shall be included in
determining the amount of Charge-Offs for any Shared-Loss Loan shall not exceed
ninety (90) days’ Accrued Interest; (ii) no Charge-Off shall be taken with
respect to any anticipated expenditure by the Assuming Bank until such
expenditure is actually incurred; (iii) any financial statement
adjustments made in connection with the purchase of any Assets pursuant to this
Purchase and Assumption Agreement or any future purchase, merger, consolidation
or other acquisition of the Assuming Bank shall not constitute “Charge-Offs”;
and (iv) except for Portfolio Sales or any other sales or dispositions
consented to by the Receiver, losses incurred on the sale or other disposition
of Shared-Loss Assets to any Person (other than the sale or other disposition
of Other Real Estate, Additional ORE or Subsidiary ORE to a Person other than
an Affiliate of the Assuming Bank which is conducted in a commercially
reasonable and prudent manner) shall not constitute Charge-Offs.
“
Commencement Date
”
means the
first calendar day following Bank Closing.
“
Consumer Loans
”
means Loans to
individuals for household, family and other personal expenditures (including
United States and/or State-guaranteed student loans and extensions of credit
pursuant to a credit card plan or debit card plan).
“
Cumulative Servicing
Amount
”
means the sum of the Period Servicing Amounts for
every consecutive twelve-month period prior to and ending on the True-Up
96
Measurement Date in respect of each of the Shared-Loss Agreements
during which the loss-sharing provisions of the applicable Shared-Loss
Agreement is in effect.
“
Cumulative Shared-Loss
Payments
”
means (i) the aggregate of all of the payments
made or payable to the Assuming Bank under the Shared-Loss Agreements minus
(ii) the aggregate of all of the payments made or payable to the Receiver
under the Shared-Loss Agreements.
“
Environmental Assessment
”
means an
assessment of the presence, storage or release of any hazardous or toxic
substance, pollutant or contaminant with respect to the collateral securing a
Shared-Loss Loan that has been fully or partially charged off.
“
Examination Criteria
”
means the loan
classification criteria employed by, or any applicable regulations of, the
Assuming Bank’s Chartering Authority at the time such action is taken, as such
criteria may be amended from time to time.
“
Failed Bank
Charge-Offs/Write-Downs
”
means, with respect to any
Shared-Loss Asset, an amount equal to the aggregate amount of reversals or
charge-offs of Accrued Interest and charge-offs and write-downs of principal
effected by the Failed Bank with respect to that Shared-Loss Asset as reflected
on the Accounting Records of the Failed Bank.
“
Fair Value
”
means the
value of a Shared Loss MTM Asset as stated on the books and records of the
Failed Bank as of Bank Closing, inclusive of all adjustments.
“
FDIC Party
”
has the
meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss
Agreement.
“
Net Charge-Offs
”
means, with
respect to any period, an amount equal to the aggregate amount of Charge-Offs
for such period less the amount of Recoveries for such period.
“
Neutral Member
”
has the
meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss
Agreement.
“
New Shared-Loss Loans
”
means loans
that would otherwise be subject to loss sharing under this Commercial
Shared-Loss Agreement that were originated after the Bid Valuation Date and
before Bank Closing.
“
Notice of Dispute
”
has the meaning
provided in Section 2.1(f)(iii) of this Commercial Shared-Loss
Agreement.
“
ORE Subsidiary
”
means any
Subsidiary of the Assuming Bank that engages solely in holding, servicing,
managing or liquidating interests of a type described in clause (A) of the
definition of “Other Real Estate,” which interests have arisen from the
collection or settlement of a Shared-Loss Loan.
“
Other Real Estate
”
means all of
the following (including any of the following fully or partially charged off
the books and records of the Failed Bank or the Assuming Bank)
97
that (i) are owned by the Failed Bank as of Bank Closing and are
purchased pursuant to the Purchase and Assumption Agreement or (ii) have
arisen subsequent to Bank Closing from the collection or settlement by the
Assuming Bank of a Shared-Loss Loan:
(A) all interests in real estate (other than Bank Premises and
Fixtures), including but not limited to mineral rights, leasehold rights,
condominium and cooperative interests, air rights and development rights; and
(B) all other assets (whether real or personal property)
acquired by foreclosure or in full or partial satisfaction of judgments or
indebtedness.
“
Period Servicing Amount
”
means, for any
twelve month period with respect to each of the Shared-Loss Agreements during
which the loss-sharing provisions of the applicable Shared-Loss Agreement are
in effect, the product of (i) the simple average of the principal amount
of Shared-Loss Loans and Shared-Loss Assets (other than the Shared-Loss
Securities) (in each case as defined in the Shared-Loss Agreements), as the
case may be, at the beginning of such period and at the end of such period
times (ii) one percent (1%).
“
Permitted Advance
”
means an
advance of funds by the Assuming Bank with respect to a Shared-Loss Loan, or
the making of a legally binding commitment by the Assuming Bank to advance
funds with respect to a Shared-Loss Loan, that (i) in the case of such an
advance, is actually made, and, in the case of such a commitment, is made and
all of the proceeds thereof actually advanced, within one (1) year after
the Commencement Date, (ii) does not cause the sum of (A) the book
value of such Shared-Loss Loan as reflected on the Accounting Records of the
Assuming Bank after any such advance has been made by the Assuming Bank
plus
(B) the unfunded amount of any such commitment made by the Assuming Bank
related thereto, to exceed 110% of the Book Value of such Shared-Loss Loan,
(iii) is not made with respect to a Shared-Loss Loan with respect to which
(A) there exists a related Shared-Loss Loan Commitment or (B) the
Assuming Bank has taken a Charge-Off and (iv) is made in good faith, is supported
at the time it is made by documentation in the Credit Files and conforms to and
is in accordance with the applicable requirements set forth in Article III
of this Commercial Shared-Loss Agreement and with the then effective written
internal credit policy guidelines of the Assuming Bank;
provided
,
that
the limitations in subparagraphs (i), (ii) and (iii) of this
definition shall not apply to any such action (other than to an advance or
commitment related to the remediation, storage or final disposal of any
hazardous or toxic substance, pollutant or contaminant) that is taken by
Assuming Bank in its reasonable discretion to preserve or secure the value of
the collateral for such Shared-Loss Loan.
“
Permitted Amendment
”
means, with
respect to any Shared-Loss Loan Commitment or Shared-Loss Loan, any amendment,
modification, renewal or extension thereof, or any waiver of any term, right,
or remedy thereunder, made by the Assuming Bank in good faith and otherwise in
accordance with the applicable requirements set forth in Article III of
this Commercial Shared-Loss Agreement and the then effective written internal
credit policy guidelines of the Assuming Bank;
provided
,
that
:
(i) with respect to a Shared-Loss Loan
Commitment or a Shared-Loss Loan that is not a
98
revolving line of credit, no such amendment, modification, renewal,
extension, or waiver, except as allowed under the definition of Permitted
Advance, shall operate to increase the amount of principal (A) then
remaining available to be advanced by the Assuming Bank under the Shared-Loss
Loan Commitment or (B) then outstanding under the Shared-Loss Loan;
(ii) with respect to a Shared-Loss Loan
Commitment or a Shared-Loss Loan that is a revolving line of credit, no such
amendment, modification, renewal, extension, or waiver, except as allowed under
the definition of Permitted Advance, shall operate to increase the maximum
amount of principal authorized as of Bank Closing to be outstanding at any one time
under the underlying revolving line of credit relationship with the debtor
(regardless of the extent to which such revolving line of credit may have been
funded as of Bank Closing or may subsequently have been funded and/or repaid);
and
(iii) no such amendment, modification, renewal,
extension or waiver shall extend the term of such Shared-Loss Loan Commitment
or Shared-Loss Loan beyond the end of the final Shared-Loss Quarter unless the
term of such Shared-Loss Loan Commitment or Shared-Loss Loan as existed on Bank
Closing was beyond the end of the final Shared-Loss Quarter, in which event no
such amendment, modification, renewal, extension or waiver shall extend such
term beyond the term as existed as of Bank Closing.
“
Pre-Charge-Off
Expenses
”
means those expenses incurred in the usual and prudent
management of a Shared-Loss Loan that would qualify as a Reimbursable Expense
or Recovery Expense if incurred after a Charge-Off of the related Shared-Loss
Asset had occurred.
“
Quarterly Certificate
”
has the
meaning provided in Section 2.1(a)(i) of this Commercial Shared-Loss
Agreement.
“
Recoveries
”
(I)(A) In
addition to any sums to be applied as Recoveries pursuant to subparagraph
(II) below, “Recoveries” means, with respect to any period, the sum of
(without duplication):
(i) the amount of collections during such
period by the Assuming Bank on Charge-Offs of Shared-Loss Assets effected by
the Assuming Bank prior to the end of the final Shared-Loss Quarter;
plus
(ii) the amount of collections during such period
by the Assuming Bank on Failed Bank Charge-Offs/Write-Downs;
plus
(iii) the amount of gain on any sale or other
disposition during such period by the Assuming Bank of Shared Loss Loans, Other
Real Estate, Additional ORE or Subsidiary ORE
(provided
,
that
the
amount of any such gain included in Recoveries shall not exceed the aggregate
amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken
and any related Reimbursable Expenses and Recovery Expenses);
plus
(iv) the amount of collections during such
period by the Assuming Bank of any Reimbursable Expenses or Recovery Expenses;
plus
99
(v) the amount of any fee or other
consideration received by the Assuming Bank during or prior to such period in
connection with any amendment, modification, renewal, extension, refinance,
restructure, commitment or other similar action taken by the Assuming Bank with
respect to a Shared-Loss Asset with respect to which there exists a Failed Bank
Charge-Off/Write-Down or a Shared-Loss Loan as to which a Charge-Off has been
effected by the Assuming Bank during or prior to such period
(provided
,
that
the amount of any such fee or other consideration included in Recoveries shall
not exceed the aggregate amount of the related Failed Bank
Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable
Expenses and Recovery Expenses).
(I)(B) For the purpose of determining the
amounts to be applied as Recoveries pursuant to subparagraph (I)(A) above,
the Assuming Bank shall apply amounts received on the Assets that are not
otherwise applied to reduce the book value of principal of a Shared-Loss Loan
(or, in the case of Other Real Estate, Additional ORE, Subsidiary ORE and
Capitalized Expenditures, that are not otherwise applied to reduce the book
value thereof) in the following order: first to Charge-Offs and Failed Bank
Charge-Offs/Write Downs; then to Reimbursable Expenses and Recovery Expenses;
then to interest income; and then to other expenses incurred by the Assuming
Bank.
(II)
If
there occurs an amendment,
modification, renewal, extension, refinance, restructure, commitment, sale or
other similar action with respect to a Shared-Loss Loan as to which there
exists a Failed Bank Charge-Off/Write Down or as to which a Charge-Off has been
effected by the Assuming Bank during or prior to such period,
and
if
,
as a result of such occurrence, the Assuming Bank recognizes any interest
income for financial accounting purposes on that Shared-Loss Loan,
then
“Recoveries”
shall also include the portion of the total amount of any such interest income
recognized by the Assuming Bank which is derived by
multiplying
:
(A) the total amount of any such interest
income recognized by the Assuming Bank during such period with respect to that
Shared-Loss Loan as described above,
by
(B) a fraction, the
numerator
of which
is the aggregate principal amount (excluding reversals or charge-offs of
Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs
effected by the Assuming Bank with respect to that Shared-Loss Loan plus the
principal amount of that Shared-Loss Loan that has not yet been charged-off but
has been placed on nonaccrual status, all of which occurred at any time prior
to or during the period in which the interest income referred to in
subparagraph (II)(A) immediately above was recognized, and the
denominator
of which is the total amount of principal indebtedness (including all such
prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above)
due from the Obligor on that Shared-Loss Loan as of the end of such period;
provided
,
however
,
that
the amount of any
interest income included as Recoveries for a particular Shared-Loss Loan shall
not exceed the aggregate amount of (a) Failed Bank Charge-Offs/Write-Downs,
(b) Charge-Offs effected by the Assuming Bank during or prior to the
period in which the amount of Recoveries is being determined, plus (c) any
Reimbursable Expenses and
100
Recovery Expenses paid to the Assuming Bank pursuant to this Commercial
Shared-Loss Agreement during or prior to the period in which the amount of
Recoveries is being determined, all with respect to that particular Shared-Loss
Loan; and,
provided
,
further
,
that
any collections on any
such Shared-Loss Loan that are
not
applied to reduce book value of
principal or recognized as interest income shall be applied pursuant to
subparagraph (I) above.
(III) Notwithstanding subparagraphs
(I) and (II) above, the term “Recoveries” shall not include:
(a) any amounts paid to the Assuming Bank by the Receiver pursuant to
Section 2.1 of this Commercial Shared-Loss Agreement, (b) amounts
received with respect to Charge-Offs effected by the Assuming Bank after the final
Shared-Loss Quarter, (c) after the final Shared-Loss Quarter, income
received by the Assuming Bank from the operation of, and any gains recognized
by the Assuming Bank on the disposition of, Other Real Estate, Additional ORE
or Subsidiary ORE (such income and gains being hereinafter together referred to
as “ORE Income”),
except
to the extent that aggregate ORE Income exceeds
the aggregate expenses paid to third parties by or on behalf of the Assuming
Bank after the final Shared-Loss Quarter to manage, operate and maintain Other
Real Estate, Additional ORE or Subsidiary ORE (such expenses being hereinafter
referred to as “ORE Expenses”). In determining the extent aggregate ORE Income
exceeds aggregate ORE Expenses for any Recovery Quarter as set forth immediately
above in subparagraph (c), the Assuming Bank will subtract (i) ORE
Expenses paid to third parties during such Recovery Quarter (provided, that, in
the case of the final Recovery Quarter only, the Assuming Bank will subtract
ORE Expenses paid to third parties from the beginning of the final Recovery
Quarter up to the date the Assuming Bank is required to deliver the final
Quarterly Certificate pursuant to this Commercial Shared-Loss Agreement)
from
(ii) ORE Income received during such Recovery Quarter, to calculate net
ORE income (“Net ORE Income”) for that Recovery Quarter. If the amount of Net
ORE Income so calculated for a Recovery Quarter is positive, such amount shall
be reported as Recoveries on the Quarterly Certificate for such Recovery Quarter.
If the amount of Net ORE Income so calculated for a Recovery Quarter is
negative (“Net ORE Loss Carryforward”), such amount shall be added to any ORE
Expenses paid to third parties in the next succeeding Recovery Quarter, which
sum shall then be subtracted from ORE Income for that next succeeding Recovery
Quarter, for the purpose of determining the amount of Net ORE Income (or, if
applicable, Net ORE Loss Carryforward) for that next succeeding Recovery
Quarter. If, as of the end of the final Recovery Quarter, a Net ORE Loss
Carryforward exists, then the amount of the Net ORE Loss Carryforward that does
not
exceed the aggregate amount of Net ORE Income reported as Recoveries
on Quarterly Certificates for
all
Recovery Quarters may be included as a
Recovery Expense on the Quarterly Certificate for the final Recovery Quarter.
“
Recovery Amount
”
has the
meaning provided in Section 2.1 (b)(ii) of this Commercial
Shared-Loss Agreement.
“
Recovery Expenses
”
means, for any
Recovery Quarter, the amount of actual, reasonable and necessary out-of-pocket
expenses (other than Capitalized Expenditures) paid to third parties (other
than Affiliates of the Assuming Bank) by or on behalf of the Assuming Bank, as
limited by Sections 3.2(c) and (d) of Article III to this Commercial
Shared-Loss Agreement, to recover amounts owed with respect to (i) any
Shared-Loss Asset as to which a Charge-Off was effected prior to the end of the
final Shared-Loss Quarter (provided that such amounts were
101
incurred no earlier than the date the first Charge-Off on such
Shared-Loss Asset could have been reflected on the Accounting Records of the
Assuming Bank), and (ii) Failed Bank Charge-Offs/Write-Downs (including,
in each case, all costs and expenses related to an Environmental Assessment and
any other costs or expenses related to any environmental conditions with
respect to the Shared-Loss Assets (it being understood that any remediation
expenses for any such pollutant or contaminant are not recoverable if in excess
of $200,000 per Shared-Loss Asset, without the Assuming Bank having obtained
the prior consent of the Receiver for such expenses);
provided
,
that
,
so long as income with respect to a Shared-Loss Loan is being prorated pursuant
to the arithmetical formula in subsection (II) of the definition of “Recoveries”,
the term “Recovery Expenses” shall
not
include that portion of any such
expenses paid during such Recovery Quarter to recover any amounts owed on that
Shared-Loss Loan that is derived by:
subtracting
(1) the product
derived by
multiplying
:
(A) the total amount of any such expenses paid
by or on behalf of the Assuming Bank during such Recovery Quarter with respect
to that Shared-Loss Loan,
by
(B) a fraction, the
numerator
of which
is the aggregate principal amount (excluding reversals or charge-offs of
Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and
Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan
plus the principal amount of that Shared-Loss Loan that has not yet been
charged-off but has been placed on nonaccrual status, all of which occurred at
any time prior to or during the period in which the interest income referred to
in subparagraph (II)(A) of the definition of “Recoveries” was recognized,
and the
denominator
of which is the total amount of principal
indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and
Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan
as of the end of such period;
from
(2) the total amount
of any such expenses paid during that Recovery Quarter with respect to that
Shared-Loss Loan.
“
Recovery Quarter
”
has the
meaning provided in Section 2.1 (a)(ii) of this Commercial
Shared-Loss Agreement.
“
Reimbursable Expenses
”
means, for any
Shared-Loss Quarter, the amount of actual, reasonable and necessary
out-of-pocket expenses (other than Capitalized Expenditures), paid to third
parties (other than Affiliates of the Assuming Bank) by or on behalf of the
Assuming Bank, as limited by Sections 3.2 (c) and (d) of Article III
of this Commercial Shared-Loss Agreement, to:
(i) recover amounts owed with respect to any
Shared-Loss Asset as to which a Charge-Off has been effected prior to the end
of the final Shared-Loss Quarter (provided that such amounts were incurred no
earlier than the date the first Charge-Off on such Shared-Loss Asset could have
been reflected on the Accounting Records of the Assuming Bank) and recover
102
amounts owed with respect to Failed Bank Charge-Offs/Write-Downs
(including, in each case, all costs and expenses related to an Environmental
Assessment and any other costs or expenses related to any environmental
conditions with respect to the Shared-Loss Assets (it being understood that any
such remediation expenses for any such pollutant or contaminant are not
recoverable if in excess of $200,000 per Shared-Loss Asset, without the
Assuming Bank having obtained the prior consent of the Receiver for such
expenses);
provided
,
that
, so long as income with respect to a
Shared-Loss Loan is being pro-rated pursuant to the arithmetical formula in
subsection (II) of the definition of “Recoveries”, the term “Reimbursable
Expenses” shall
not
include that portion of any such expenses paid
during such Shared-Loss Quarter to recover any amounts owed on that Shared-Loss
Loan that is derived by:
subtracting
(1) the product
derived by
multiplying
:
(A) the total amount of any such expenses paid
by or on behalf of the Assuming Bank during such Shared-Loss Quarter with
respect to that Shared-Loss Loan,
by
(B) a fraction, the
numerator
of which
is the aggregate principal amount (excluding reversals or charge-offs of
Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and
Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan
plus the principal amount of that Shared-Loss Loan that has not yet been
charged-off but has been placed on nonaccrual status, all of which occurred at
any time prior to or during the period in which the interest income referred to
in subparagraph (II)(A) of the definition of “Recoveries” was recognized,
and the
denominator
of which is the total amount of principal
indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and
Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan
as of the end of such period;
from
(2) the total amount
of any such expenses paid during that Shared-Loss Quarter with respect to that
Shared-Loss Loan; and
(ii) manage, operate or maintain Other Real
Estate, Additional ORE or Subsidiary ORE
less
the amount of any income
received by the Assuming Bank during such Shared-Loss Quarter with respect to
such Other Real Estate, Additional ORE or Subsidiary ORE (which resulting
amount under this clause (ii) may be negative).
“
Review Board
”
has the
meaning provided in Section 2.1 (f)(i) of this Commercial Shared-Loss
Agreement.
“
Shared-Loss Amount
”
has the
meaning provided in Section 2.1 (b)(i) of this Commercial Shared-Loss
Agreement.
“
Shared-Loss Asset
Repurchase Price
”
means, with respect to any Shared-Loss
Asset, the principal amount thereof plus any other fees or penalties due from
an Obligor (including, subject to the limitations discussed below, the amount
of any Accrued Interest) stated on the Accounting Records of the Assuming Bank,
as of the date as of which the Shared-Loss
103
Asset Repurchase Price is being determined (regardless, in the case of
a Shared-Loss Loan, of the Legal Balance thereof) plus all Reimbursable
Expenses and Recovery Expenses incurred up to and through the date of
consummation of purchase of such Shared-Loss Asset;
provided
,
that
(i) in the case of a Shared-Loss Loan there shall be excluded from such
amount the amount of any Accrued Interest accrued on or with respect to such
Shared-Loss Loan prior to the ninety (90)-day period ending on the day prior to
the purchase date determined pursuant to Sections 2.1 (e)(i) or 2.1 (e)(iii) of
this Commercial Shared-Loss Agreement, except to the extent such Accrued
Interest was included in the Book Value of such Shared-Loss Loan, and
(ii) any collections on a Shared-Loss Loan received by the Assuming Bank
after the purchase date applicable to such Shared-Loss Loan shall be applied
(without duplication) to reduce the Shared-Loss Asset Repurchase Price of such
Shared-Loss Loan on a dollar-for-dollar basis. For purposes of determining the
amount of unpaid interest which accrued during a given period with respect to a
variable-rate Shared-Loss Loan, all collections of interest shall be deemed to
be applied to unpaid interest in the chronological order in which such interest
accrued.
“
Shared-Loss Assets
”
means
Shared-Loss Loans, Other Real Estate purchased by the Assuming Bank, Additional
ORE, Subsidiary ORE and Capitalized Expenditures, but does not include Shared
Loss MTM Assets.
“
Shared-Loss Loan
Commitment
”
means:
(i) any Commitment to make a further extension
of credit or to make a further advance with respect to an existing Shared-Loss
Loan; and
(ii) any Shared-Loss Loan Commitment (described
in subparagraph (i) immediately preceding) with respect to which the
Assuming Bank has made a Permitted Amendment.
“
Shared-Loss Loan
Commitment Advance
”
means an advance pursuant to a Shared-Loss
Loan Commitment with respect to which the Assuming Bank has not made a
Permitted Advance.
“
Shared-Loss Loans
”
means:
(i)(A) Loans purchased by the Assuming Bank
pursuant to the Purchase and Assumption Agreement set forth on
Exhibit 4.15 (b) to the Purchase and Assumption Agreement,
(B) New Shared-Loss Loans purchased by the Assuming Bank pursuant to the
Purchase and Assumption Agreement, (C) Permitted Advances and
(D) Shared-Loss Loan Commitment Advances, if any;
provided
,
that
Shared-Loss Loans shall not include Loans, New Shared-Loss Loans, Permitted
Advances and Shared-Loss Loan Commitment Advances with respect to which an
Acquired Subsidiary, or a constituent Subsidiary thereof, is an Obligor;
(E) Loans owned by any Subsidiary which are not Shared-Loss Loans under
the Single Family Shared-Loss Agreement; and (F) Consumer Loans; and
(ii) any Shared-Loss Loans (described in
subparagraph (i) immediately preceding) with respect to which the Assuming
Bank has made a Permitted Amendment.
104
“
Shared-Loss
MTM Assets
”
means those securities and other assets listed on Exhibit 4.15(C).
“
Shared-Loss Payment
Trigger
”
means when the sum of the Cumulative Loss Amount
under the Single Family Shared-Loss Agreement and the cumulative Net
Charge-Offs under this Commercial Shared-Loss Agreement, exceeds the First Loss
Tranche. If the First Loss Tranche is zero or a negative number, the
Shared-Loss Payment Trigger shall be deemed to have been reached upon Bank
Closing.
“
Shared-Loss Quarter
”
has the
meaning provided in Section 2.1(a)(i) of this Commercial Shared-Loss
Agreement.
“
Stated Threshold
”
means total
losses under the shared loss agreements in the amount of $254,000,000.00.
“
Subsidiary ORE
”
means all
assets owned by ORE Subsidiaries that would constitute Additional ORE if such
assets were on the books of the Assuming Bank.
“
Termination Date
”
means the
eighth (8th) anniversary of the Commencement Date.
“
Third Party Servicer
”
means any
servicer appointed from time to time by the Assuming Bank or any Affiliate of
the Assuming Bank to service the Shared-Loss Assets on behalf of the Assuming
bank, the identity of which shall be given to the Receiver prior to or concurrent
with the appointment thereof.
ARTICLE II
—
SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss Arrangement
.
(a)
Quarterly Certificates
.
(i) Not
later than thirty (30) days after the end of each Calendar Quarter from and
including the initial Calendar Quarter to and including the Calendar Quarter in
which the Applicable Anniversary of the Commencement Date falls (each of such
Calendar Quarters being referred to herein as a “Shared-Loss Quarter”), the
Assuming Bank shall deliver to the Receiver a certificate, signed by the
Assuming Bank’s chief executive officer and its chief financial officer,
setting forth in such form and detail as the Receiver may specify (a “Quarterly
Certificate”):
(A) the amount of Charge-Offs, the amount of Recoveries and the
amount of Net Charge-Offs (which amount may be negative) during such
Shared-Loss Quarter with respect to the Shared-Loss Assets (and for Recoveries,
with respect to the Assets for which a charge-off was effected by the Failed
Bank prior to Bank Closing); and
(B) the aggregate amount of Reimbursable Expenses (which amount may
be negative) during such Shared-Loss Quarter; and
105
(C) net realized loss on the Shared Loss MTM Assets determined
pursuant to FAS 115, expressed as a positive number (MTM Net Realized Loss), or
net realized gain on the Shared Loss MTM assets, expressed as a negative number
(MTM Net Realized Gain); and
(D) any other than temporary impairment of the Shared Loss MTM
Assets, determined pursuant to FAS 115, expressed as a positive number (“OTTI
Loss”) or reversals of OTTI Loss, expressed as a negative number (for the
avoidance of doubt, normal and customary unrealized mark-to-market changes by
reason of the application of fair value accounting do not qualify for loss
sharing payments).
(ii) Not later than thirty (30) days after
the end of each Calendar Quarter from and including the first Calendar Quarter
following the final Shared-Loss Quarter to and including the Calendar Quarter
in which the Termination Date falls (each of such Calendar Quarters being
referred to herein as a “Recovery Quarter”), the Assuming Bank shall deliver to
the Receiver a Quarterly Certificate setting forth, in such form and detail as
the Receiver may specify
(A) the amount of Recoveries and Recovery Expenses during such
Recovery Quarter. On the Quarterly Certificate for the
first Recovery
Quarter only
,
the Assuming Bank may report as a separate item, in
such form and detail as the Receiver may specify, the aggregate amount of any
Reimbursable Expenses that: (a) were incurred prior to or during the final
Shared-Loss Quarter,
and
(b) had
not
been included in any
Quarterly Certificate for any Shared-Loss Quarter because they had not been
actually paid by or on behalf of the Assuming Bank (in accordance with the
terms of this Commercial Shared-Loss Agreement) during any Shared-Loss Quarter
and
(c) were actually paid by or on behalf of the Assuming Bank (in accordance
with the terms of this Commercial Shared-Loss Agreement) during the first
Recovery Quarter; and
(B) net realized gain on the Shared Loss MTM Assets.
(b)
Payments With Respect to Shared-Loss Assets
.
(i) For
purposes of this Section 2.1 (b), the Assuming Bank shall initially record
the Shared-Loss Assets on its Accounting Records at Book Value, and initially
record the Shared Loss MTM Assets on its Accounting Records at Fair Value, and
adjust such amounts as such values may change after the Bank Closing. If the
amount of all Net Charge-Offs during any Shared-Loss Quarter
plus
Reimbursable Expenses,
plus
MTM Net Realized Gain or MTM Net Realized
Loss,
plus
OTTI Loss during such Shared-Loss Quarter (the “Shared-Loss
Amount”) is positive, then, except as provided in Sections 2.1(c) and
(e) below, and subject to the provisions of Section 2.1
(b)(vi) below, not later than fifteen (15) days after the date on which
the Receiver receives the Quarterly Certificate with respect to such Shared-Loss
Quarter, the Receiver shall pay to the Assuming Bank an amount equal to eighty
percent (80%) of the Shared-Loss Amount
106
for such Shared-Loss Quarter. If the Shared-Loss Amount during any Shared-Loss
Quarter is negative, the Assuming Bank shall pay to the Receiver an amount
equal to eighty percent (80%) of the Shared-Loss Amount for such Shared-Loss
Quarter, which payment shall be delivered to the Receiver together with the
Quarterly Certificate for such Shared-Loss Quarter. When the cumulative
Shared-Loss Amounts for all Shared-Loss Quarters plus the Cumulative Loss
Amount under the Single Family Shared-Loss Agreement equals or exceeds the
Stated Threshold, the Receiver shall pay to the Assuming Bank an amount equal
to ninety-five percent ((95%) of the Shared-Loss Amount for each Shared-Loss
Quarter, until such time as the cumulative Shared-Loss Amount for all
Shared-Loss Quarters is less than the Stated Threshold, when the percentage
shall revert back to eighty percent (80%).
(ii) If
the amount of gross Recoveries during any Recovery Quarter
less
Recovery
Expenses during such Recovery Quarter plus net realized gains or reversals of
OTTI Loss on Shared Loss MTM Assets (the “Recovery Amount”) is positive, then,
simultaneously with its delivery of the Quarterly Certificate with respect to
such Recovery Quarter, the Assuming Bank shall pay to the Receiver an amount
equal to eighty percent (80%) of the Recovery Amount for such Recovery Quarter.
If the Recovery Amount is negative, then such negative amount shall be
subtracted from the amount of gross Recoveries during the next succeeding
Recovery Quarter in determining the Recovery Amount in such next succeeding
Recovery Quarter;
provided
,
that
this Section 2.1
(b)(ii) shall operate successively in the event that the Recovery Amount
(after giving effect to this Section 2.1 (b)(ii)) in such next succeeding
Recovery Quarter is negative. The Assuming Bank shall specify, in the Quarterly
Certificate for the final Recovery Quarter, the aggregate amount for all
Recovery Quarters only, as of the end of, and including, the final Recovery
Quarter of (A) Recoveries plus net realized gains or reversals of OTTI
Loss on Shared Loss MTM Assets (“Aggregate Recovery Period Recoveries”),
(B) Recovery Expenses (“Aggregate Recovery Expenses”), and (C)
only
those Recovery Expenses that have been actually “offset” against Aggregate
Recovery Period Recoveries (including those so “offset” in that final Recovery
Quarter) (“Aggregate Offset Recovery Expenses”); as used in this sentence, the
term “offset” means the amount that has been applied to reduce gross Recoveries
in any Recovery Quarter pursuant to the methodology set forth in this
Section 2.1 (b)(ii). If, at the end of the final Recovery Quarter the
amount of Aggregate Recovery Expenses exceeds the amount of Aggregate Recovery
Period Recoveries, the Receiver shall have no obligation to pay to the Assuming
Bank all or any portion of such excess. Subsequent to the Assuming Bank’s
calculation of the Recovery Amount (if any) for the final Recovery Quarter, the
Assuming Bank shall also show on the Quarterly Certificate for the final
Recovery Quarter the results of the following three mathematical calculations:
(i) Aggregate Recovery Period Recoveries
minus
Aggregate Offset
Recovery Expenses; (ii) Aggregate Recovery Expenses
minus
Aggregate
Offset Recovery Expenses; and (iii) the
lesser
of the two amounts
calculated in (i) and (ii) immediately above (“Additional Recovery
Expenses”)
multiplied by
80% (the amount so calculated in
(iii) being defined as the “Additional Recovery Expense Amount”). If the
Additional Recovery Expense Amount is greater than zero, then the Assuming Bank
may request in the Quarterly Certificate for the final Recovery Quarter that
the Receiver reimburse the Assuming Bank the amount of the Additional Recovery
Expense Amount and the Receiver shall pay to the Assuming Bank the Additional
Recovery Expense Amount within fifteen (15) days after the date on which the Receiver
receives that Quarterly Certificate. On the Quarterly Certificate for the final
Recovery Quarter only, the Assuming Bank
107
may include, in addition to any Recovery Expenses for that Recovery
Quarter that were paid by or on behalf of the Assuming Bank in that Recovery
Quarter, those Recovery Expenses that: (a) were incurred prior to or
during the final Recovery Quarter,
and
(b) had
not
been
included in any Quarterly Certificate for any Recovery Quarter because they had
not been actually paid by or on behalf of the Assuming Bank (in accordance with
the terms of this Commercial Shared-Loss Agreement) during any Recovery
Quarter,
and
(c) were actually paid by or on behalf of the Assuming
Bank (in accordance with the terms of this Commercial Shared-Loss Agreement)
prior to the date the Assuming Bank is required to deliver that final Quarterly
Certificate to the Receiver under the terms of Section 2.1 (a)(ii).
(iii) With
respect to each Shared-Loss Quarter and Recovery Quarter, collections by or on
behalf of the Assuming Bank on any charge-off effected by the Failed Bank prior
to Bank Closing on an Asset other than a Shared-Loss Asset or Shared-Loss MTM
Assets shall be reported as Recoveries under this Section 2.1 only to the
extent such collections exceed the Book Value of such Asset, if any. For any
Shared-Loss Quarter or Recovery Quarter in which collections by or on behalf of
the Assuming Bank on such Asset are applied to both Book Value and to a charge-off
effected by the Failed Bank prior to Bank Closing, the amount of expenditures
incurred by or on behalf of the Assuming Bank attributable to the collection of
any such Asset, that shall be considered a Reimbursable Expense or a Recovery
Expense under this Section 2.1 will be limited to a proportion of such
expenditures which is equal to the proportion derived by dividing (A) the
amount of collections on such Asset applied to a charge-off effected by the
Failed Bank prior to Bank Closing, by (B) the total collections on such
Assets.
(iv) If
the Assuming Bank has duly specified an amount of Reimbursable Expenses on the
Quarterly Certificate for the first Recovery Quarter as described above in the
last sentence of Section 2.1 (a)(ii), then, not later than fifteen (15)
days after the date on which the Receiver receives that Quarterly Certificate,
the Receiver shall pay to the Assuming Bank an amount equal to eighty percent
(80%) (or, if the Cumulative Loss Amount under the Single Family Shared-Loss
Agreement plus the cumulative Shared-Loss Amount for all Shared-Loss Quarters
equals or exceeds the Stated Threshold, ninety-five percent (95%)) of the
amount of such Reimbursable Expenses.
(v) If
the First Loss Tranche as determined under the Purchase and Assumption
Agreement is a positive number, Receiver has no obligation to make payment for
any Shared Loss Quarters until the Shared-Loss Payment Trigger is satisfied.
(vi) Payments
from the Receiver with respect to this Commercial Shared-Loss Agreement are
administrative expenses of the Receiver. To the extent the Receiver needs funds
for shared-loss payments respect to this Commercial Shared-Loss Agreement, the
Receiver shall request funds under the Master Loan and Security Agreement, as
amended (“MLSA”), from FDIC in its corporate capacity. The Receiver will not
agree to any amendment of the MLSA that would prevent the Receiver from drawing
on the MLSA to fund shared-loss payments.
(c)
Limitation on Shared-Loss Payment
.
The Receiver
shall not be required to make any payments pursuant to this Section 2.1
with respect to any Charge-Off of a Shared- Loss Asset that the Receiver or the
Corporation determines, based upon the Examination
108
Criteria, should not have been effected by the Assuming Bank; provided,
(x) the Receiver must provide notice to the Assuming Bank detailing the
grounds for not making such payment, (y) the Receiver must provide the
Assuming Bank with a reasonable opportunity to cure any such deficiency and
(z) (1) to the extent curable, if cured, the Receiver shall make
payment with respect to any properly effected Charge-Off and (2) to the
extent not curable, the Receiver shall make a payment as to all Charge-Offs (or
portion of Charge-Offs) that were effected which would have been payable as a
Charge-Off if the Assuming Bank had properly effected such Charge-Off. In the
event that the Receiver does not make any payments with respect to any
Charge-Off of a Shared-Loss Asset pursuant to this Section 2.1 or
determines that a payment was improperly made, the Assuming Bank and the
Receiver shall, upon final resolution, make such accounting adjustments and
payments as may be necessary to give retroactive effect to such corrections.
(d)
Sale of
,
or Additional Advances or Amendments
with Respect to
,
Shared-Loss Loans and Administration of Related Loans
.
No Shared-Loss Loan shall be treated as a Shared-Loss Asset pursuant to
this Section 2.1 (i) if the Assuming Bank sells or otherwise
transfers such Shared-Loss Loan or any interest therein (whether with or
without recourse) to any Person, (ii) after the Assuming Bank makes any
additional advance, commitment or increase in the amount of a commitment with
respect to such Shared-Loss Loan that does not constitute a Permitted Advance
or a Shared-Loss Loan Commitment Advance, (iii) after the Assuming Bank
makes any amendment, modification, renewal or extension to such Shared-Loss
Loan that does not constitute a Permitted Amendment, or (iv) after the Assuming
Bank has managed, administered or collected any “Related Loan” (as such term is
defined in Section 3.4 of Article III of this Commercial Shared-Loss
Agreement) in any manner which would have the effect of increasing the amount
of any collections with respect to the Related Loan to the detriment of such
Shared-Loss Asset to which such loan is related;
provided
,
that
any such Shared-Loss Loan that has been the subject of Charge-Offs prior to the
taking of any action described in clause (i), (ii), (iii) or (iv) of
this Section 2.1 (d) by the Assuming Bank shall be treated as a
Shared-Loss Asset pursuant to this Section 2.1 solely for the purpose of
treatment of Recoveries on such Charge-Offs until such time as the amount of
Recoveries with respect to such Shared-Loss Asset equals such Charge-Offs.
(e)
Option to Purchase
.
(i) In
the event that the Assuming Bank determines that there is a substantial
likelihood that continued efforts to collect a Shared-Loss Asset or an Asset
for which a charge-off was effected by the Failed Bank with, in either case, a
Legal Balance of $500,000 or more on the Accounting Records of the Assuming
Bank will result in an expenditure, after Bank Closing, of funds by on behalf
of the Assuming Bank to a third party for a specified purpose (the expenditure
of which, in its best judgment, will maximize collections), which do not
constitute Reimbursable Expenses or Recovery Expenses, and such expenses will
exceed ten percent (10%) of the then book value thereof as reflected on the
Accounting Records of the Assuming Bank, the Assuming Bank shall
(i) promptly so notify the Receiver and (ii) request that such
expenditure be treated as a Reimbursable Expense or Recovery Expense for
purposes of this Section 2.1. (Where the Assuming Bank determines that
there is a substantial likelihood that the previously mentioned situation
exists with respect to continued efforts to collect a Shared-Loss Asset or an
109
Asset for which a charge-off was effected by the Failed Bank with, in
either case, a Legal Balance of less than $1,000,000 on the Accounting Records
of the Assuming Bank, the Assuming Bank may so notify the Receiver and request
that such expenditure be treated as a Reimbursable Expense or Recovery Expense.)
Within thirty (30) days after its receipt of such a notice, the Receiver will
advise the Assuming Bank of its consent or denial, that such expenditures shall
be treated as a Reimbursable Expense or Recovery Expense, as the case may be.
Notwithstanding the failure of the Receiver to give its consent with respect to
such expenditures, the Assuming Bank shall continue to administer such
Shared-Loss Asset in accordance with Section 2.2, except that the Assuming
Bank shall not be required to make such expenditures. At any time after its
receipt of such a notice and on or prior to the Termination Date the Receiver
shall have the right to purchase such Shared-Loss Asset or Asset as provided in
Section 2.1 (e)(iii), notwithstanding any consent by the Receiver with
respect to such expenditure.
(ii) During the period prior to the Termination Date, the
Assuming Bank shall notify the Receiver within fifteen (15) days after any of
the following becomes fully or partially charged-off:
(A) a Shared-Loss Loan having a Legal
Balance (or, in the case of more than one (1) Shared-Loss Loan made to the
same Obligor, a combined Legal Balance) of $500,000 or more in circumstances in
which the legal claim against the relevant Obligor survives; or
(B) a Shared-Loss Loan to a director, an “executive
officer” as defined in 12 C.F.R. 215.2
(d), a “principal shareholder” as defined in 12 C.F.R. 215.2 (l), or an Affiliate of the Assuming
Bank.
(iii) If the Receiver determines in its discretion that the
Assuming Bank is not diligently pursuing collection efforts with respect to any
Shared-Loss Asset which has been fully or partially charged-off or written-down
(including any Shared-Loss Asset which is identified or required to be
identified in a notice pursuant to Section 2.1 (e)(ii)) or any Asset for
which there exists a Failed Bank Charge-Off/Write-Down, the Receiver may at its
option, exercisable at any time on or prior to the Termination Date, require
the Assuming Bank to assign, transfer and convey such Shared-Loss Asset or Asset
to and for the sole benefit of the Receiver for a price equal to the
Shared-Loss Asset Repurchase Price thereof less the Related Liability Amount
with respect to any Related Liabilities related to such Shared-Loss Asset or
Asset.
(iv) Not later than ten (10) days after the date upon
which the Assuming Bank receives notice of the Receiver’s intention to purchase
or require the assignment of any Shared-Loss Asset or Asset pursuant to
Section 2.1(e)(i) or (iii), the Assuming Bank shall transfer to the
Receiver such Shared-Loss Asset or Asset and any Credit Files relating thereto
and shall take all such other actions as may be necessary and appropriate to
adequately effect the transfer of such Shared-Loss Asset or Asset from the
Assuming Bank to the Receiver. Not later than fifteen (15) days after the date
upon which the Receiver receives such Shared-Loss Asset or Asset and any Credit
Files relating thereto, the Receiver shall pay to the Assuming Bank an amount
equal to the Shared-Loss Asset Repurchase Price of such Shared-Loss Asset or
Asset less the Related
110
Liability Amount.
(v) The Receiver shall assume all Related Liabilities with
respect to any Shared-Loss Asset or Asset set forth in the notice described in
Section 2.1 (e)(iv).
(f)
Dispute Resolution
.
(i) (A) Any dispute as to whether a Charge-Off of a
Shared-Loss Asset was made in accordance with Examination Criteria shall be
resolved by the Assuming Bank’s Chartering Authority. (B) With respect to
any other dispute arising under the terms of this Commercial Shared-Loss
Agreement which the parties hereto cannot resolve after having negotiated such
matter, in good faith, for a thirty (30) day period, other than a dispute the
Corporation is not permitted to submit to arbitration under the Administrative
Dispute Resolution Act of 1996 (“ADRA”), as amended, such other dispute shall
be resolved by determination of a review board (a “Review Board”) established
pursuant to Section 2.1 (f). Any Review Board under this
Section 2.1(f) shall follow the provisions of the Federal Arbitration
Act and shall follow the provisions of the ADRA. (C) Any determination by
the Assuming Bank’s Chartering Authority or by a Review Board shall be
conclusive and binding on the parties hereto and not subject to further
dispute, and judgment may be entered on said determination in accordance with
applicable arbitration law in any court having jurisdiction thereof.
(ii) A Review Board shall consist of three
(3) members, each of whom shall have such expertise as the Corporation and
the Assuming Bank agree is relevant. As appropriate, the Receiver or the
Corporation (the “FDIC Party”) will select one member, one member will be
selected by the Assuming Bank and the third member (the “Neutral Member”) will
be selected by the other two members. The member of the Review Board selected
by a party may be removed at any time by such party upon two (2) days’
written notice to the other party of the selection of a replacement member. The
Neutral Member may be removed by unanimous action of the members appointed by
the FDIC Party and the Assuming Bank after two (2) days’ prior written
notice to the FDIC Party and the Assuming Bank of the selection of a
replacement Neutral Member. In addition, if a Neutral Member fails for any
reason to serve or continue to serve on the Review Board, the other remaining
members shall so notify the parties to the dispute and the Neutral Member in
writing that such Neutral Member will be replaced, and the Neutral Member shall
thereafter be replaced by the unanimous action of the other remaining members
within twenty (20) business days of that notification.
(iii) No dispute may be submitted to a Review Board by any of
the parties to this Commercial Shared-Loss Agreement unless such party has
provided to the other party a written notice of dispute (“Notice of Dispute”).
During the forty-five (45)-day period following the providing of a Notice of
Dispute, the parties to the dispute will make every effort in good faith to resolve
the dispute by mutual agreement. As part of these good faith efforts, the
parties should consider the use of less formal dispute resolution techniques,
as judged appropriate by each party in its sole discretion. Such techniques may
include, but are not limited to, mediation, settlement conference, and early
neutral evaluation. If the parties have not agreed to a resolution of the
dispute by the end of such forty-five (45)-day period, then, subject to the
discretion of the Corporation and the written consent of the Assuming Bank as
set forth in Section 2.1(f)(i)(B)
111
above, on the first day following the end of such
period, the FDIC Party and the Assuming Bank shall notify each other of its
selection of its member of the Review Board and such members shall be
instructed to promptly select the Neutral Member of the Review Board. If the
members appointed by the FDIC Party and the Assuming Bank are unable to
promptly agree upon the initial selection of the Neutral Member, or a timely
replacement Neutral Member as set forth in Section 2.1 (f)(ii) above,
the two appointed members shall apply to the American Arbitration Association (“AAA”),
and such Neutral Member shall be appointed in accordance with the Commercial
Arbitration Rules of the AAA.
(iv) The resolution of a dispute pursuant to this
Section 2.1 (f) shall be governed by the Commercial Arbitration
Rules of the AAA to the extent that such rules are not inconsistent
with this Section 2.1 (f). The Review Board may modify the procedures set
forth in such rules from time to time with the prior approval of the FDIC
Party and the Assuming Bank.
(v) Within fifteen (15) days after the last to occur of the
final written submissions of both parties, the presentation of witnesses, if
any, and oral presentations, if any, the Review Board shall adopt the position
of one of the parties and shall present to the parties a written award
regarding the dispute. The determination of any two (2) members of a Review
Board will constitute the determination of such Review Board.
(vi) The FDIC Party and the Assuming Bank will each pay the
fees and expenses of the member of the Review Board selected by it. The FDIC
Party and Assuming Bank will share equally the fees and expenses of the Neutral
Member. No such fees or expenses incurred by or on behalf of the Assuming Bank
shall be subject to reimbursement by the FDIC Party under this Commercial
Shared-Loss Agreement or otherwise.
(vii) Each party will bear all costs and expenses incurred by
it in connection with the submission of any dispute to a Review Board. No such
costs or expenses incurred by or on behalf of the Assuming Bank shall be
subject to reimbursement by the FDIC Party under this Commercial Shared-Loss
Agreement or otherwise. The Review Board shall have no authority to award costs
or expenses incurred by either party to these proceedings.
(viii) Any dispute resolution proceeding
held pursuant to this Section 2.1 (f) shall not be public. In
addition, each party and each member of any Review Board shall strictly
maintain the confidentiality of all issues, disputes, arguments, positions and
interpretations of any such proceeding, as well as all information,
attachments, enclosures, exhibits, summaries, compilations, studies, analyses,
notes, documents, statements, schedules and other similar items associated
therewith, except as the parties agree in writing or such disclosure is
required pursuant to law, rule or regulation. Pursuant to ADRA, dispute
resolution communications may not be disclosed either by the parties or by any
member of the Review board unless:
(1) all
parties to the dispute resolution proceeding agree in writing;
(2) the
communication has already been made public;
(3) the
communication is required by statute, rule or regulation to be made
public; or
(4) a court
determines that such testimony or disclosure is necessary to prevent a
112
manifest injustice, help
establish a violation of the law or prevent harm to the public health or
safety, or of sufficient magnitude in the particular case to outweigh the
integrity of dispute resolution proceedings in general by reducing the
confidence of parties in future cases that their communications will remain confidential.
(ix) Any
dispute resolution proceeding pursuant to this Section 2.1
(f) (whether as a matter of good faith negotiations, by resort to a Review
Board, or otherwise) is a compromise negotiation for purposes of the Federal
Rules of Evidence and state rules of evidence. The parties agree that
all proceedings, including any statement made or document prepared by any
party, attorney or other participants are privileged and shall not be disclosed
in any subsequent proceeding or document or construed for any purpose as an
admission against interest. Any document submitted and any statements made
during any dispute resolution proceeding are for settlement purposes only. The
parties further agree not to subpoena any of the members of the Review Board or
any documents submitted to the Review Board. In no event will the Neutral
Member voluntarily testify on behalf of any party.
(x) No
decision, interpretation, determination, analysis, statement, award or other
pronouncement of any Review Board shall constitute precedent as regards any
subsequent proceeding (whether or not such proceeding involves dispute
resolution under this Commercial Shared-Loss Agreement) nor shall any Review
Board be bound to follow any decision, interpretation, determination, analysis,
statement, award or other pronouncement rendered by any previous Review Board
or any other previous dispute resolution panel which may have convened in
connection with a transaction involving other failed financial institutions or
Federal assistance transactions.
(xi) The
parties may extend any period of time in this Section 2.1(f) by
mutual agreement. Notwithstanding anything above to the contrary, no dispute
shall be submitted to a Review Board until each member of the Review Board, and
any substitute member, if applicable, agrees to be bound by the provisions of
this Section 2.1(f) as applicable to members of a Review Board. Prior
to the commencement of the Review Board proceedings, or, in the case of a
substitute Neutral Member, prior to the re-commencement of such proceedings
subsequent to that substitution, the Neutral Member shall provide a written
oath of impartiality.
(xii) For
the avoidance of doubt, and notwithstanding anything herein to the contrary, in
the event any notice of dispute is provided to a party under this
Section 2.1(g) prior to the Termination Date, the terms of this
Commercial Shared-Loss Agreement shall remain in effect with respect to any
such items set forth in such notice until such time as any such dispute with
respect to such item is finally resolved.
(g)
Payment in the Event Losses Fail to Reach Expected
Level
. On the date that is 45 days following the last day (such
day, the “True-Up Measurement Date”) of the calendar month in which the tenth
anniversary of the calendar day following the Bank Closing occurs, the Assuming
Bank shall pay to the Receiver fifty percent (50%) of the excess, if any, of
(i) twenty percent (20%) of the Stated Threshold less (ii) the sum of
(A) twenty-five percent (25%) of the asset premium (discount) plus
(B) twenty-five percent (25%) of the Cumulative
113
Shared-Loss Payments plus (C) the Cumulative Servicing Amount. The
Assuming Bank shall deliver to the Receiver not later than 30 days following
the True-Up Measurement Date, a schedule, signed by an officer of the Assuming
Bank, setting forth in reasonable detail the calculation of the Cumulative
Shared-Loss Payments and the Cumulative Servicing Amount.
2.2
Administration of Shared-Loss Assets
.
The Assuming
Bank shall at all times prior to the Termination Date comply with the
Rules Regarding the Administration of Shared- Loss Assets as set forth in
Article III of this Commercial Shared-Loss Agreement.
2.3
Auditor
Report
;
Right to Audit
.
(a) Within
ninety (90) days after the end of each fiscal year from and including the
fiscal year during which Bank Closing falls to and including the calendar year
during which the Termination Date falls, the Assuming Bank shall deliver to the
Corporation and to the Receiver a report signed by its independent public
accountants stating that they have reviewed the terms of this Commercial
Shared-Loss Agreement and that, in the course of their annual audit of the
Assuming Bank’s books and records, nothing has come to their attention
suggesting that any computations required to be made by the Assuming Bank
during such year by this Article II were not made by the Assuming Bank in
accordance herewith. In the event that the Assuming Bank cannot comply with the
preceding sentence, it shall promptly submit to the Receiver corrected
computations together with a report signed by its independent public
accountants stating that, after giving effect to such corrected computations,
nothing has come to their attention suggesting that any computations required
to be made by the Assuming Bank during such year by this Article II were
not made by the Assuming Bank in accordance herewith. In such event, the
Assuming Bank and the Receiver shall make all such accounting adjustments and
payments as may be necessary to give effect to each correction reflected in
such corrected computations, retroactive to the date on which the corresponding
incorrect computation was made. It is the intention of this provision to align
the timing of the audit required under this Commercial Shared-Loss Agreement
with the examination audit required pursuant to 12 CFR Section 363.
(b) The
Assuming Bank shall perform on an annual basis an internal audit of its
compliance with the provisions of this Article II and shall provide the
Receiver and the Corporation with copies of the internal audit reports and
access to internal audit workpapers related to such internal audit.
(c) The
Receiver or the Corporation may perform an audit to determine the Assuming Bank’s
compliance with the provisions of this Commercial Shared-Loss Agreement,
including this Article II, at any time by providing not less than ten
(10) Business Days prior written notice. The scope and duration of any
such audit shall be within the discretion of the Receiver or the Corporation,
as the case may be, but shall in no event be administered in a manner that
unreasonably interferes with the operation of the Assuming Bank’s business. The
Receiver or the Corporation, as the case may be, shall bear the expense of any
such audit. In the event that any corrections are necessary as a result of such
an audit, the Assuming Bank and the Receiver shall make such accounting
adjustments and payments as may be necessary to give retroactive effect to such
corrections.
114
2.4
Withholdings
.
Notwithstanding any other
provision in this Article II, the Receiver, upon the direction of the
Director (or designee) of the Corporation’s Division of Resolutions and
Receiverships, may withhold payment for any amounts included in a Quarterly
Certificate delivered pursuant to Section 2.1, if, in its judgment, there
is a reasonable basis under the terms of this Commercial Shared-Loss Agreement
for denying the eligibility of an item for which reimbursement or payment is
sought under such Section. In such event, the Receiver shall provide a written
notice to the Assuming Bank detailing the grounds for withholding such payment.
At such time as the Assuming Bank demonstrates to the satisfaction of the
Receiver that the grounds for such withholding of payment, or portion of
payment, no longer exist or have been cured, then the Receiver shall pay the
Assuming Bank the amount withheld which the Receiver determines is eligible for
payment, within fifteen (15) Business Days. In the event the Receiver or the
Assuming Bank elects to submit the issue of the eligibility of the item for
reimbursement or payment for determination under the dispute resolution
procedures of Section 2.1 (f), then (i) if the dispute is settled by
the mutual agreement of the parties in accordance with Section 2.1
(f)(iii), the Receiver shall pay the amount withheld (to the extent so agreed)
within fifteen (15) Business Days from the date upon which the dispute is
determined by the parties to be resolved by mutual agreement, and (ii) if
the dispute is resolved by the determination of a Review Board, the Receiver
shall pay the amount withheld (to the extent so determined) within fifteen (15)
Business Days from the date upon which the Receiver is notified of the
determination by the Review Board of its obligation to make such payment. Any
payment by the Receiver pursuant to this Section 2.4 shall be made
together with interest on the amount thereof from the date the payment was agreed
or determined otherwise to be due, at the interest rate per annum determined by
the Receiver to be equal to the coupon equivalent of the three (3)-month U.S.
Treasury Bill Rate in effect as of the first Business Day of each Calendar
Quarter during which such interest accrues as reported in the Federal Reserve
Board’s Statistical Release for Selected Interest Rates H.15 opposite the
caption “Auction Average - 3-Month” or, if not so reported for such day, for
the next preceding Business Day for which such rate was so reported.
2.5
Books and Records
. The Assuming Bank shall at
all times during the term of this Commercial Shared-Loss Agreement keep books
and records which fairly present all dealings and transactions carried out in
connection with its business and
affairs. Except as otherwise provided for in the Purchase and Assumption
Agreement or this Commercial Shared-Loss Agreement, all financial books and
records shall be kept in accordance with generally accepted accounting
principles, consistently applied for the periods involved and in a manner such
that information necessary to determine compliance with any requirement of the
Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement will
be readily obtainable, and in a manner such that the purposes of the Purchase
and Assumption Agreement or this Commercial Shared-Loss Agreement may be
effectively accomplished. Without the prior written approval of the
Corporation, the Assuming Bank shall not make any change in its accounting
principles adversely affecting the value of the Shared-Loss Assets except as
required by a change in generally accepted accounting principles. The Assuming
Bank shall notify the Corporation of any change in its accounting principles
affecting the Shared-Loss Assets which it believes are required by a change in
generally accepted accounting principles.
2.6
Information
. The Assuming Bank shall
promptly provide to the Corporation such other information, including financial
statements and computations, relating to the performance
115
of the provisions of the
Purchase and Assumption Agreement or otherwise relating to its business and
affairs or this Commercial Shared-Loss Agreement, as the Corporation or the
Receiver may request from time to time.
2.7
Tax Ruling
.
The Assuming Bank shall not
at any time, without the Corporation’s prior written consent, seek a private
letter ruling or other
determination from the Internal Revenue Service or otherwise seek to qualify
for any special tax treatment or benefits associated with any payments made by
the Corporation pursuant to the Purchase and Assumption Agreement or this
Commercial Shared-Loss Agreement.
ARTICLE III
- RULES REGARDING THE ADMINISTRATION OF SHARED-LOSS
ASSETS AND SHARED-LOSS MTM ASSETS
3.1
Agreement with Respect to Administration
.
The Assuming
Bank shall (and shall cause any of its Affiliates to which the Assuming Bank
transfers any Shared-Loss Assets or Shared-Loss MTM Assets) to, or a Third
Party Servicer to, manage, administer, and collect the Shared-Loss Assets and
Shared-Loss MTM Assets while owned by the Assuming Bank or any Affiliate
thereof during the term of this Commercial Shared-Loss Agreement in accordance
with the rules set forth in this Article III (“Rules”). The Assuming
Bank shall be responsible to the Receiver and the Corporation in the
performance of its duties
hereunder and shall provide to the Receiver and the Corporation such reports as
the Receiver or the Corporation reasonably deems advisable, including but not
limited to the reports required by Section 3.3 hereof, and shall permit
the Receiver and the Corporation at all times to monitor the Assuming Bank’s
performance of its duties hereunder.
3.2
Duties of the Assuming Bank with Respect to Shared-Loss
Assets
.
(a) In performance of its duties under these Rules, the Assuming Bank
shall:
(i) manage, administer,
collect and effect Charge-Offs and Recoveries with respect to each Shared-Loss
Asset in a manner consistent with (A) usual and prudent business and
banking practices; (B) the Assuming Bank’s (or, in the case a Third Party
Servicer is engaged, the Third Party Servicer’s) practices and procedures
including, without limitation, the then-effective written internal credit
policy guidelines of the Assuming Bank, with respect to the management,
administration and collection of and taking of charge-offs and write-downs with
respect to loans, other real estate and repossessed collateral that do not
constitute Shared Loss Assets;
(ii) exercise its best
business judgment in managing, administering, collecting and effecting
Charge-Offs with respect to Shared-Loss Assets;
(iii) use its best
efforts to maximize collections with respect to Shared- Loss Assets and, if
applicable for a particular Shared-Loss Asset, without regard to the effect of
maximizing collections on assets held by the Assuming Bank or any of its
Affiliates that are not Shared-Loss Assets;
116
(iv) adopt and implement accounting, reporting,
record-keeping and similar systems with respect to the Shared-Loss Assets, as
provided in Section 3.4 hereof;
(v) retain sufficient staff to perform its
duties hereunder; and
(vi) provide written notification in accordance
with Article IV of this Commercial Shared-Loss Agreement immediately after
the execution of any contract pursuant to which any third party (other than an
Affiliate of the Assuming Bank) will manage, administer or collect any of the
Shared-Loss Assets, together with a copy of that contract.
(b) Any
transaction with or between any Affiliate of the Assuming Bank with respect to
any Shared-Loss Asset including, without limitation, the execution of any
contract pursuant to which any Affiliate of the Assuming Bank will manage,
administer or collect any of the Shared-Loss Assets, or any other action
involving self-dealing, shall be subject to the prior written approval of the
Receiver or the Corporation.
(c) The
following categories of expenses shall not be deemed to be Reimbursable
Expenses or Recovery Expenses:
(i) Federal, State, or local income taxes and
expenses related thereto;
(ii) salaries or other compensation and related
benefits of Assuming Bank employees and the employees of its Affiliates
including, without limitation, any bonus, commission or severance arrangements,
training, payroll taxes, dues, or travel- or relocation- related expenses,;
(iii) the cost of space occupied by the
Assuming Bank, any Affiliate thereof and their staff, the rental of and
maintenance of furniture and equipment, and expenses for data processing
including the purchase or enhancement of data processing systems;
(iv) except as otherwise provided herein, fees
for accounting and other independent professional consultants (other than
consultants retained to assess the presence, storage or release of any
hazardous or toxic substance, or any pollutant or contaminant with respect to
the collateral securing a Shared-Loss Loan that has been fully or partially charged-off);
provided
,
that
for purposes of this Section 3.2 (c)(iv),
fees of attorneys and appraisers engaged as necessary to assist in collections
with respect to Shared-Loss Assets shall not be deemed to be fees of other
independent consultants;
(v) allocated portions of any other overhead or
general and administrative expense other than any fees relating to specific
assets, such as appraisal fees or environmental audit fees, for services of a
type the Assuming Bank does not normally perform internally;
(vi) any expense not incurred in good faith and
with the same degree of care that the Assuming Bank normally would exercise in
the collection of troubled assets in which it alone had an interest; and
117
(vii) any expense incurred for a product,
service or activity that is of an extravagant nature or design.
(d) Subject
to Section 3.7, the Assuming Bank shall not contract with third parties to
provide services the cost of which would be a Reimbursable Expense or Recovery
Expense if the Assuming Bank would have provided such services itself if the
relevant Shared-Loss Assets were not subject to the loss-sharing provisions of
Section 2.1 of this Commercial Shared-Loss Agreement.
3.3
Duties of the Assuming Bank with Respect to Shared-Loss
MTM Assets
.
(a) In performance of its duties under these
Rules, the Assuming Bank shall:
(i) manage, administer, collect and each
Shared-Loss MTM Asset in a manner consistent with (A) usual and prudent
business and banking practices; (B) the Assuming Bank’s practices and
procedures including, without limitation, the then-effective written internal
credit policy guidelines of the Assuming Bank, with respect to the management,
administration and collection of similar assets that are not Shared-Loss MTM
Assets;
(ii) exercise its best business judgment in
managing, administering, collecting and effecting Charge-Offs with respect to
Shared-Loss MTM Assets;
(iii) use its best efforts to maximize
collections with respect to Shared-Loss MTM Assets and, if applicable for a
particular Shared-Loss MTM Asset, without regard to the effect of maximizing
collections on assets held by the Assuming Bank or any of its Affiliates that
are not Shared-Loss MTM Assets, provided that, any sale of a Shared-Loss MTM
Asset shall only be made with the prior approval of the Receiver or the
Corporation;
(iv) adopt and implement accounting, reporting,
record-keeping and similar systems with respect to the Shared-Loss MTM Assets,
as provided in Section 3.4 hereof;
(v) retain sufficient staff to perform its
duties hereunder; and
(vi) provide written notification in accordance
with Article IV of this Commercial Shared-Loss Agreement immediately after
the execution of any contract pursuant to which any third party (other than an
Affiliate of the Assuming Bank) will manage, administer or collect any of the
Shared-Loss MTM Assets, together with a copy of that contract.
(b) Any
transaction with or between any Affiliate of the Assuming Bank with respect to
any Shared-Loss MTM Asset including, without limitation, the execution of any
contract pursuant to which any Affiliate of the Assuming Bank will manage,
administer or collect any of the Shared-Loss Assets, or any other action
involving self-dealing, shall be subject to the prior written approval of the
Receiver or the Corporation.
(c) The
Assuming Bank shall not contract with third parties to provide services
118
the cost of which would be a Reimbursable Expense or Recovery Expense
if the Assuming Bank would have provided such services itself if the relevant
Shared-Loss Assets were not subject to the loss-sharing provisions of
Section 2.1 of this Commercial Shared-Loss Agreement.
3.4
Records and Reports
. The Assuming Bank shall
establish and maintain records on a separate general ledger, and on such
subsidiary ledgers as may be appropriate to account for the Shared-Loss Assets
and the Shared-Loss MTM Assets, in such form and detail as the Receiver or the
Corporation may require, to enable the Assuming Bank to prepare and deliver to
the Receiver or the Corporation such reports as the Receiver or the Corporation
may from time to time request regarding the Shared-Loss Assets, the Shared-Loss
MTM Assets and the Quarterly Certificates required by Section 2.1 of this
Commercial Shared-Loss Agreement.
3.5
Related Loans
.
(a) The
Assuming Bank shall not manage, administer or collect any “Related Loan” in any
manner which would have the effect of increasing the amount of any collections
with respect to the Related Loan to the detriment of the Shared-Loss Asset to
which such loan is related. A “Related Loan” means any loan or extension of
credit held by the Assuming Bank at any time on or prior to the end of the
final Recovery Quarter that is: (i) made to the same Obligor with respect
to a Loan that is a Shared-Loss Asset or with respect to a Loan from which
Other Real Estate, Additional ORE or Subsidiary ORE derived, or
(ii) attributable to the same primary Obligor with respect to any Loan
described in clause (i) under the rules of the Assuming Bank’s
Chartering Authority concerning the legal lending limits of financial
institutions organized under its jurisdiction as in effect on the Commencement
Date, as applied to the Assuming Bank.
(b) The
Assuming Bank shall prepare and deliver to the Receiver with the Quarterly
Certificates for the Calendar Quarters ending June 30 and December 31
for all Shared-Loss Quarters and Recovery Quarters, a schedule of all Related
Loans which are commercial loans or commercial real estate loans with Legal
Balances of $500,000 or more on the Accounting Records of the Assuming Bank as
of the end of each such semi-annual period, and all other commercial loans or
commercial real estate loans attributable to the same Obligor on such loans of
$500,000 or more.
3.6
Legal Action; Utilization of Special Receivership Powers
. The Assuming
Bank shall notify the Receiver in writing (such notice to be given in
accordance with Article IV below and to include all relevant details)
prior to utilizing in any legal action any special legal power or right which
the Assuming Bank derives as a result of having acquired a Shared-Loss Asset
from the Receiver, and the Assuming Bank shall not utilize any such power unless
the Receiver shall have consented in writing to the proposed usage. The
Receiver shall have the right to direct such proposed usage by the Assuming
Bank and the Assuming Bank shall comply in all respects with such direction.
Upon request of the Receiver, the Assuming Bank will advise the Receiver as to
the status of any such legal action. The Assuming Bank shall immediately notify
the Receiver of any judgment in litigation involving any of the aforesaid
special powers or rights.
3.7
Third Party Servicer
. The Assuming Bank may
perform any of its obligations and/or exercise any of its rights under this
Commercial Shared-Loss Agreement through or by
119
one or more Third Party Servicers, who may take actions and make
expenditures as if any such Third Party Servicer was the Assuming Bank
hereunder (and, for the avoidance of doubt, such expenses incurred by any such
Third Party Servicer on behalf of the Assuming Bank shall be Reimbursable
Expenses or Recovery Expenses, as the case may be, to the same extent such
expenses would so qualify if incurred by the Assuming Bank); provided, however,
that the use thereof by the Assuming Bank shall not release the Assuming Bank
of any obligation or liability hereunder.
ARTICLE IV
— PORTFOLIO SALE
4.1
Assuming Bank Portfolio Sales of Remaining Shared-Loss
Assets
. The Assuming Bank shall have the right with the
concurrence of the Receiver, commencing as of the first day of the third to
last Shared-Loss Quarter, to liquidate for cash consideration, in one or more
transactions, all or a portion of Shared-Loss Assets held by the Assuming Bank
(“Portfolio Sales”). If the Assuming Bank exercises its option under this
Section 4.1, it must give thirty (30) days notice in writing to the
Receiver setting forth the details and schedule for the Portfolio Sale which
shall be conducted by means of sealed bid sales to third parties, not including
any of the Assuming Bank’s affiliates, contractors, or any affiliates of the
Assuming Bank’s contractors.
4.2
Calculation of Sale Gain or Loss
. For
Shared-Loss Assets gain or loss on the sales under Section 4.1 will be
calculated as the sale price received by the Assuming Bank less the book value
of the remaining Shared-Loss Assets.
ARTICLE V
— LOSS-SHARING NOTICES GIVEN TO CORPORATION AND/OR
RECEIVER
As a supplement to the notice provisions contained
in Section 13.7 of the Purchase and Assumption Agreement, any notice,
request, demand, consent, approval, or other communication (a “Notice”) given
to the Corporation and/or the Receiver in the loss-sharing context shall be
given as follows:
5.1
With respect to
a Notice under Section 2 and Sections 3.1-3.5 of this Commercial
Shared-Loss Agreement:
Federal Deposit Insurance Corporation
Division of Resolutions and Receiverships
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Assistant Director, Franchise and Asset
Marketing
5.2
With respect to
a Notice under Section 3.6 of this Commercial Shared-Loss Agreement:
Federal Deposit Insurance Corporation Legal Division
1601 Bryan Street
120
Dallas, Texas 75201
Attention: Regional Counsel
with a copy to:
Federal Deposit Insurance Corporation Legal Division
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Senior Counsel (Special Issues Group)
ARTICLE VI
— MISCELLANEOUS
6.1
Expenses
. Except as otherwise
expressly provided herein, all costs and expenses incurred by a party hereto in
connection with this Commercial Shared-Loss Agreement shall be borne by such
party whether or not the transactions contemplated herein shall be consummated.
6.2
Successors and Assigns; Specific Performance
.
All terms and
provisions of this Commercial Shared-Loss Agreement shall be binding upon and
shall inure to the benefit of the parties hereto only;
provided
,
however
,
that, Receiver may assign or otherwise transfer this Commercial Shared-Loss
Agreement (in whole or in part) to the Federal Deposit Insurance Corporation in
its corporate capacity without the consent of Assuming Bank. Notwithstanding
anything to the contrary contained in this Commercial Shared-Loss Agreement,
except as is expressly permitted in this Section 6.2, Assuming Bank may
not assign or otherwise transfer this Commercial Shared-Loss Agreement (in
whole or in part) without the prior written consent of the Receiver, which
consent may be granted or withheld by the Receiver in its sole discretion, and
any attempted assignment or transfer in violation of this provision shall be
void
ab initio.
For the avoidance
of doubt, a merger or consolidation of the Assuming Bank with and into another
financial institution, the sale of all or substantially all of the assets of
the Assuming Bank to another financial institution constitutes the transfer of
this Commercial Shared-Loss Agreement which requires the consent of the
Receive; and for a period of thirty-six (36) months after Bank Closing, a
merger or consolidation shall also include the sale by any individual
shareholder, or shareholders acting in concert, of more than 9% of the
outstanding shares of the Assuming Bank, or of its holding company, or of any
subsidiary holding Shared-Loss Assets, or the sale of shares by the Assuming
Bank or its holding company or any subsidiary holding Shared-Loss Assets, in a
public or private offering, that increases the number of shares outstanding by
more than 9%, constitutes the transfer of this Commercial Shared-Loss Agreement
which requires the consent of the Receiver. However, no Loss shall be
recognized as a result of any accounting adjustments that are made due to any
such merger, consolidation or sale consented to by the FDIC. The FDIC’s consent
shall not be required if the aggregate outstanding principal balance of
Shared-Loss Assets is less than twenty percent (20%) of the initial aggregate
balance of Shared-Loss Assets.
6.3
Governing Law
. This Commercial
Shared-Loss Agreement shall be construed in accordance with federal law, or, if
there is no applicable federal law, the laws of the State of New York, without
regard to any rule of conflict of law that would result in the application
of the substantive law of any jurisdiction other than the State of New York.
121
6.4
WAIVER OF JURY TRIAL
. EACH PARTY
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING
OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT
OF OR RELATING TO OR IN CONNECTION WITH THIS COMMERCIAL SHARED-LOSS AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
6.5
Captions
. All captions
and headings contained in this Commercial Shared-Loss Agreement are for
convenience of reference only and do not form a part of, and shall not affect
the meaning or interpretation of, this Commercial Shared-Loss Agreement.
6.6
Entire Agreement; Amendments
. This
Commercial Shared-Loss Agreement, along with the Single Family Shared-Loss
Agreement and the Purchase and Assumption Agreement, including the Exhibits and
any other documents delivered pursuant hereto, embody the entire agreement of
the parties with respect to the subject matter hereof, and supersede all prior
representations, warranties, offers, acceptances, agreements and understandings,
written or oral, relating to the subject matter herein. This Commercial
Shared-Loss Agreement may be amended or modified or any provision thereof
waived only by a written instrument signed by both parties or their respective
duly authorized agents.
6.7
Severability
. Whenever
possible, each provision of this Commercial Shared-Loss Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Commercial Shared-Loss Agreement is held to be prohibited
by or invalid, illegal or unenforceable under applicable law, such provision
shall be construed and enforced as if it had been more narrowly drawn so as not
to be prohibited, invalid, illegal or unenforceable, and the validity, legality
and enforceability of the remainder of such provision and the remaining
provisions of this Commercial Shared-Loss Agreement shall not in any way be
affected or impaired thereby.
6.8
No Third Party Beneficiary
.
This Commercial
Shared-Loss Agreement and the Exhibits hereto are for the sole and exclusive
benefit of the parties hereto and their respective permitted successors and
permitted assigns and there shall be no other third party beneficiaries, and
nothing in Commercial Shared-Loss Agreement or the Exhibits shall be construed
to grant to any other Person any right, remedy or claim under or in respect of
this Commercial Shared-Loss Agreement or any provision hereof.
6.9
Consent
. Except as
otherwise provided herein, when the consent of a party is required herein, such
consent shall not be unreasonably withheld or delayed.
122
6.10
Rights Cumulative
. Except as
otherwise expressly provided herein, the rights of each of the parties under
this Commercial Shared-Loss Agreement are cumulative, may be exercised as often
as any party considers appropriate and are in addition to each such party’s
rights under the Purchase and Sale Agreement and any of the related agreements
or under law. Except as otherwise expressly provided herein, any failure to
exercise or any delay in exercising any of such rights, or any partial or
defective exercise of such rights, shall not operate as a waiver or variation
of that or any other such right.
123
EXHIBIT
2.3
PURCHASE
AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL
DEPOSITS
AMONG
FEDERAL
DEPOSIT INSURANCE CORPORATION,
RECEIVER OF FIRST SECURITY NATIONAL BANK,
NORCROSS, GEORGIA
FEDERAL
DEPOSIT INSURANCE CORPORATION
and
STATE BANK AND TRUST COMPANY
DATED AS OF
DECEMBER 4, 2009
TABLE OF
CONTENTS
|
ARTICLE I
|
DEFINITIONS
|
2
|
|
|
|
|
|
ARTICLE II
|
ASSUMPTION OF LIABILITIES
|
8
|
|
|
|
|
|
2.1
|
Liabilities Assumed by Assuming Bank
|
8
|
|
2.2
|
Interest on Deposit Liabilities
|
10
|
|
2.3
|
Unclaimed Deposits
|
10
|
|
2.4
|
Employee Plans
|
10
|
|
|
|
|
|
ARTICLE III
|
PURCHASE OF ASSETS
|
11
|
|
|
|
|
|
3.1
|
Assets Purchased by Assuming Bank
|
11
|
|
3.2
|
Asset Purchase Price
|
11
|
|
3.3
|
Manner of Conveyance; Limited Warranty; Nonrecourse; Etc.
|
12
|
|
3.4
|
Puts of Assets to the Receiver
|
12
|
|
3.5
|
Assets Not Purchased by Assuming Bank
|
14
|
|
3.6
|
Assets Essential to Receiver
|
15
|
|
|
|
|
|
ARTICLE IV
|
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS
|
16
|
|
|
|
|
|
4.1
|
Continuation of Banking Business
|
16
|
|
4.2
|
Agreement with Respect to Credit Card Business
|
17
|
|
4.3
|
Agreement with Respect to Safe Deposit Business
|
17
|
|
4.4
|
Agreement with Respect to Safekeeping Business
|
17
|
|
4.5
|
Agreement with Respect to Trust Business
|
17
|
|
4.6
|
Agreement with Respect to Bank Premises
|
18
|
|
4.7
|
Agreement with Respect to Leased Data Processing Equipment
|
21
|
|
4.8
|
Agreement with Respect to Certain Existing Agreements
|
21
|
|
4.9
|
Informational Tax Reporting
|
22
|
|
4.10
|
Insurance
|
22
|
|
4.11
|
Office Space for Receiver and Corporation
|
22
|
|
4.12
|
Agreement with Respect to Continuation of Group Health Plan Coverage
for Former Employees
|
23
|
|
4.13
|
Agreement with Respect to Interim Asset Servicing
|
24
|
|
4.14
|
Reserved
|
24
|
|
4.15
|
Agreement with Respect to Loss Sharing
|
24
|
ii
|
ARTICLE V
|
DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK
|
24
|
|
|
|
|
|
5.1
|
Payment of Checks, Drafts and Orders
|
24
|
|
5.2
|
Certain Agreements Related to Deposits
|
25
|
|
5.3
|
Notice to Depositors
|
25
|
|
|
|
|
|
ARTICLE VI
|
RECORDS
|
25
|
|
|
|
|
|
6.1
|
Transfer of Records
|
25
|
|
6.2
|
Delivery of Assigned Records
|
26
|
|
6.3
|
Preservation of Records
|
26
|
|
6.4
|
Access to Records; Copies
|
26
|
|
|
|
|
|
ARTICLE VII
|
FIRST LOSS TRANCHE
|
26
|
|
|
|
|
|
ARTICLE VIII
|
ADJUSTMENTS
|
27
|
|
|
|
|
|
8.1
|
Pro Forma Statement
|
27
|
|
8.2
|
Correction of Errors and Omissions; Other Liabilities
|
|
|
8.3
|
Payments
|
28
|
|
8.4
|
Interest
|
28
|
|
8.5
|
Subsequent Adjustments
|
28
|
|
|
|
|
|
ARTICLE IX
|
CONTINUING COOPERATION
|
28
|
|
|
|
|
|
9.1
|
General Matters
|
28
|
|
9.2
|
Additional Title Documents
|
29
|
|
9.3
|
Claims and Suits
|
29
|
|
9.4
|
Payment of Deposits
|
29
|
|
9.5
|
Withheld Payments
|
29
|
|
9.6
|
Proceedings with Respect to Certain Assets and Liabilities
|
30
|
|
9.7
|
Information
|
30
|
|
|
|
|
|
ARTICLE X
|
CONDITION PRECEDENT
|
31
|
|
|
|
|
|
ARTICLE XI
|
REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK
|
31
|
|
|
|
|
|
ARTICLE XII
|
INDEMNIFICATION
|
32
|
|
|
|
|
|
12.1
|
Indemnification of Indemnitees
|
32
|
|
12.2
|
Conditions Precedent to Indemnification
|
35
|
|
12.3
|
No Additional Warranty
|
36
|
|
12.4
|
Indemnification of Corporation and Receiver
|
36
|
|
12.5
|
Obligations Supplemental
|
36
|
iii
|
12.6
|
Criminal Claims
|
37
|
|
12.7
|
Limited Guaranty of the Corporation
|
37
|
|
12.8
|
Subrogation
|
37
|
|
|
|
|
|
ARTICLE XIII
|
MISCELLANEOUS
|
37
|
|
|
|
|
|
13.1
|
Entire Agreement
|
37
|
|
13.2
|
Headings
|
37
|
|
13.3
|
Counterparts
|
37
|
|
13.4
|
Governing Law
|
37
|
|
13.5
|
Successors
|
38
|
|
13.6
|
Modification; Assignment
|
38
|
|
13.7
|
Notice
|
38
|
|
13.8
|
Manner of Payment
|
39
|
|
13.9
|
Costs, Fees and Expenses
|
39
|
|
13.10
|
Waiver
|
39
|
|
13.11
|
Severability
|
39
|
|
13.12
|
Term of Agreement
|
39
|
|
13.13
|
Survival of Covenants, Etc.
|
40
|
|
|
|
|
|
SCHEDULES
|
|
|
|
|
|
|
|
2.1
|
Certain Liabilities Assumed
|
42
|
|
2.1(a)
|
Excluded Deposit Liability Accounts
|
43
|
|
3.1
|
Certain Assets Purchased
|
44
|
|
3.2
|
Purchase Price of Assets or Assets
|
45
|
|
3.5(l)
|
Excluded Securities
|
47
|
|
4.15A
|
Single Family Loss Share Loans
|
48
|
|
4.15B
|
Non-Single Family Loss Share Loans
|
49
|
|
7
|
Calculation of Deposit Premium
|
50
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
|
|
2.3A
|
Final Notice Letter
|
50
|
|
2.3B
|
Affidavit of Mailing
|
55
|
|
4.13
|
Interim Asset Servicing Arrangement
|
58
|
|
4.15A
|
Single Family Loss Share Agreement
|
60
|
|
4.15B
|
Commercial Loss Share Agreement
|
96
|
iv
PURCHASE
AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL
DEPOSITS
THIS AGREEMENT
, made and
entered into as of the 4
th
day of December, 2009, by and among the
FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER OF
FIRST SECURITY NATIONAL BANK, NORCROSS, GEORGIA
(the “Receiver”),
STATE BANK & TRUST COMPANY,
organized under the laws of the state of Georgia, and having its principal
place of business in
MACON, GEORGIA
(the
“Assuming Bank”), and the
FEDERAL DEPOSIT
INSURANCE CORPORATION
, organized under the laws of the United States
of America and having its principal office in Washington, D.C., acting in its
corporate capacity (the “Corporation”).
WITNESSETH
:
WHEREAS
, on Bank
Closing, the Chartering Authority closed
First
Security National Bank
(the “Failed Bank”) pursuant to applicable
law and the Corporation was appointed Receiver thereof; and
WHEREAS
, the Assuming
Bank desires to purchase certain assets and assume certain deposit and other
liabilities of the Failed Bank on the terms and conditions set forth in this
Agreement; and
WHEREAS
, pursuant to
12 U.S.C. Section 1823(c)(2)(A), the Corporation may provide assistance to
the Assuming Bank to facilitate the transactions contemplated by this
Agreement, which assistance may include indemnification pursuant to Article XII;
and
WHEREAS
, the Board of
Directors of the Corporation (the “Board”) has determined to provide assistance
to the Assuming Bank on the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS
, the Board has
determined pursuant to 12 U.S.C. Section 1823(c)(4)(A) that such
assistance is necessary to meet the obligation of the Corporation to provide
insurance coverage for the insured deposits in the Failed Bank.
NOW THEREFORE
, in
consideration of the mutual promises herein set forth and other valuable
consideration, the parties hereto agree as follows:
1
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement shall have
the meanings set forth in this Article I, or elsewhere in this Agreement.
As used herein, words imparting the singular include the plural and vice versa.
“
Accounting Records
”
means the
general ledger and subsidiary ledgers and supporting schedules which support
the general ledger balances.
“
Acquired Subsidiaries
”
means
Subsidiaries of the Failed Bank acquired pursuant to Section 3.1.
“
Affiliate
”
of any Person
means any director, officer, or employee of that Person and any other Person
(i) who is directly or indirectly controlling, or controlled by, or under
direct or indirect common control with, such Person, or (ii) who is an
affiliate of such Person as the term “affiliate” is defined in Section 2
of the Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841.
“
Agreement
”
means this
Purchase and Assumption Agreement by and among the Assuming Bank, the
Corporation and the Receiver, as amended or otherwise modified from time to
time.
“
Assets
”
means all
assets of the Failed Bank purchased pursuant to Section 3.1. Assets owned
by Subsidiaries of the Failed Bank are not “Assets” within the meaning of this
definition.
“
Assumed Deposits
”
means
Deposits.
“
Bank Closing
”
means the
close of business of the Failed Bank on the date on which the Chartering
Authority closed such institution.
“
Bank Premises
”
means the
banking houses, drive-in banking facilities, and teller facilities (staffed or
automated) together with adjacent parking, storage and service facilities and
structures connecting remote facilities to banking houses, and land on which
the foregoing are located, and unimproved land that are owned or leased by the
Failed Bank and that have formerly been utilized, are currently utilized, or
are intended to be utilized in the future by the Failed Bank as shown on the
Accounting Record of the Failed Bank as of Bank Closing.
“
Bid Valuation Date
”
means
September 18, 2009.
“
Book Value
”
means, with
respect to any Asset and any Liability Assumed, the dollar amount thereof
stated on the Accounting Records of the Failed Bank. The Book Value of any item
shall be determined as of Bank Closing after adjustments made by the Receiver
for differences in accounts, suspense items, unposted debits and credits, and
other similar adjustments or corrections and for setoffs, whether voluntary or
involuntary. The Book Value of
2
a Subsidiary of the Failed Bank acquired by the Assuming Bank shall be
determined from the investment in subsidiary and related accounts on the “bank
only” (unconsolidated) balance sheet of the Failed Bank based on the equity
method of accounting. Without limiting the generality of the foregoing, (i) the
Book Value of a Liability Assumed shall include all accrued and unpaid interest
thereon as of Bank Closing, and (ii) the Book Value of a Loan shall
reflect adjustments for earned interest, or unearned interest (as it relates to
the “rule of 78s” or add-on-interest loans, as applicable), if any, as of
Bank Closing, adjustments for the portion of earned or unearned loan-related
credit life and/or disability insurance premiums, if any, attributable to the
Failed Bank as of Bank Closing, and adjustments for Failed Bank Advances, if
any, in each case as determined for financial reporting purposes. The Book
Value of an Asset shall not include any adjustment for loan premiums, discounts
or any related deferred income, fees or expenses, or general or specific
reserves on the Accounting Records of the Failed Bank.
“
Business Day
”
means a day
other than a Saturday, Sunday, Federal legal holiday or legal holiday under the
laws of the State where the Failed Bank is located, or a day on which the
principal office of the Corporation is closed.
“
Chartering Authority
”
means (i) with
respect to a national bank, the Office of the Comptroller of the Currency, (ii) with
respect to a Federal savings association or savings bank, the Office of Thrift
Supervision, (iii) with respect to a bank or savings institution chartered
by a State, the agency of such State charged with primary responsibility for
regulating and/or closing banks or savings institutions, as the case may be,
(iv) the Corporation in accordance with 12 U.S.C. Section 1821(c),
with regard to self appointment, or (v) the appropriate Federal banking
agency in accordance with 12 U.S.C. 1821(c)(9).
“
Commitment
”
means the
unfunded portion of a line of credit or other commitment reflected on the books
and records of the Failed Bank to make an extension of credit (or additional
advances with respect to a Loan) that was legally binding on the Failed Bank as
of Bank Closing, other than extensions of credit pursuant to the credit card
business and overdraft protection plans of the Failed Bank, if any.
“
Credit Documents
”
mean the
agreements, instruments, certificates or other documents at any time evidencing
or otherwise relating to, governing or executed in connection with or as
security for, a Loan, including without limitation notes, bonds, loan
agreements, letter of credit applications, lease financing contracts, banker’s
acceptances, drafts, interest protection agreements, currency exchange
agreements, repurchase agreements, reverse repurchase agreements, guarantees,
deeds of trust, mortgages, assignments, security agreements, pledges,
subordination or priority agreements, lien priority agreements, undertakings,
security instruments, certificates, documents, legal opinions, participation
agreements and intercreditor agreements, and all amendments, modifications,
renewals, extensions, rearrangements, and substitutions with respect to any of
the foregoing.
“
Credit File
”
means all
Credit Documents and all other credit, collateral, or insurance documents in
the possession or custody of the Assuming Bank, or any of its Subsidiaries or
Affiliates, relating to an Asset or a Loan included in a Put Notice, or copies
of any thereof.
3
“
Data Processing Lease
”
means any
lease or licensing agreement, binding on the Failed Bank as of Bank Closing,
the subject of which is data processing equipment or computer hardware or
software used in connection with data processing activities. A lease or
licensing agreement for computer software used in connection with data
processing activities shall constitute a Data Processing Lease regardless of
whether such lease or licensing agreement also covers data processing
equipment.
“
Deposit
”
means a
deposit as defined in 12 U.S.C. Section 1813(l), including without
limitation, outstanding cashier’s checks and other official checks and all
uncollected items included in the depositors’ balances and credited on the
books and records of the Failed Bank;
provided,
that
the term “Deposit”
shall not include all or any portion of those deposit balances which, in the
discretion of the Receiver or the Corporation, (i) may be required to
satisfy it for any liquidated or contingent liability of any depositor arising
from an unauthorized or unlawful transaction, or (ii) may be needed to
provide payment of any liability of any depositor to the Failed Bank or the
Receiver, including the liability of any depositor as a director or officer of
the Failed Bank, whether or not the amount of the liability is or can be
determined as of Bank Closing.
“
Deposit Secured Loan
”
means a loan
in which the only collateral securing the loan is Assumed Deposits or deposits
at other insured depository institutions
“
Equity Adjustment
”
means the
dollar amount resulting by subtracting the Book Value, as of Bank Closing, of
all Liabilities Assumed under this Agreement by the Assuming Bank from the
purchase price, as determined in accordance with this Agreement, as of Bank
Closing, of all Assets acquired under this Agreement by the Assuming Bank,
which may be a positive or a negative number.
“
Failed Bank Advances
”
means the
total sums paid by the Failed Bank to (i) protect its lien position, (ii) pay
ad valorem taxes and hazard insurance, and (iii) pay credit life
insurance, accident and health insurance, and vendor’s single interest
insurance.
“
Fair Market Value
”
means (i)(a) ”Market
Value” as defined in the regulation prescribing the standards for real estate
appraisals used in federally related transactions, 12 C.F.R. § 323.2(g), and
accordingly shall mean the most probable price which a property should bring in
a competitive and open market under all conditions requisite to a fair sale, the
buyer and seller each acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are
well informed or well advised, and acting in what they consider their own best
interests;
(3) A reasonable time
is allowed for exposure in the open market;
(4) Payment is made in
terms of cash in U.S. dollars or in terms of financial arrangements comparable
thereto; and
4
(5) The price
represents the normal consideration for the property sold unaffected by special
or creative financing or sales concessions granted by anyone associated with
the sale;
as determined as of Bank Closing by an appraiser chosen by the Assuming
Bank from a list of acceptable appraisers provided by the Receiver; any costs
and fees associated with such determination shall be shared equally by the
Receiver and the Assuming Bank, and (b) which, with respect to Bank
Premises (to the extent, if any, that Bank Premises are purchased utilizing
this valuation method), shall be determined not later than sixty (60) days
after Bank Closing by an appraiser selected by the Receiver and the Assuming
Bank within seven (7) days after Bank Closing; or (ii) with respect
to property other than Bank Premises purchased utilizing this valuation method,
the price therefore as established by the Receiver and agreed to by the
Assuming Bank, or in the absence of such agreement, as determined in accordance
with clause (i)(a) above.
“
First Loss
Tranche
” means the dollar amount of liability that the Assuming
Bank will incur prior to the commencement of loss sharing, which is the sum of
(i) the Assuming Bank’s asset premium (discount) bid, as reflected on the
Assuming Bank’s bid form, plus (ii) the Assuming Bank’s Deposit premium
bid, as reflected on the Assuming Bank’s bid form, plus (iii) the Equity
Adjustment. The First Loss Tranche may be a positive or negative number.
“
Fixtures
”
means those leasehold improvements, additions, alterations and installations
constituting all or a part of Bank Premises and which were acquired, added, built,
installed or purchased at the expense of the Failed Bank, regardless of the
holder of legal title thereto as of Bank Closing.
“
Furniture and Equipment
”
means the
furniture and equipment, other than motor vehicles, leased or owned by the
Failed Bank and reflected on the books of the Failed Bank as of Bank Closing
and located on or at Bank Premises, including without limitation automated
teller machines, carpeting, furniture, office machinery (including personal
computers), shelving, office supplies, telephone, surveillance, security
systems and artwork. Motor vehicles shall be considered other assets and pass
at Book Value. Furniture and equipment located at a storage facility not
adjacent to a Bank Premises are excluded from this definition.
“
Indemnitees
”
means, except
as provided in paragraph (11) of Section 12.1, (i) the Assuming Bank,
(ii) the Subsidiaries and Affiliates of the Assuming Bank
other
than
any Subsidiaries or Affiliates of the Failed Bank that are or become
Subsidiaries or Affiliates of the Assuming Bank, and (iii) the directors,
officers, employees and agents of the Assuming Bank and its Subsidiaries and
Affiliates who are
not
also present or former directors, officers,
employees or agents of the Failed Bank or of any Subsidiary or Affiliate of the
Failed Bank.
“
Legal Balance
”
means the
amount of indebtedness legally owed by an Obligor with respect to a Loan,
including principal and accrued and unpaid interest, late fees, attorneys’ fees
and expenses, taxes, insurance premiums, and similar charges, if any.
5
“
Liabilities Assumed
”
has the
meaning provided in Section 2.1.
“
Lien
”
means any
mortgage, lien, pledge, charge, assignment for security purposes, security
interest, or encumbrance of any kind with respect to an Asset, including any
conditional sale agreement or capital lease or other title retention agreement
relating to such Asset.
“
Loans
”
means all of
the following owed to or held by the Failed Bank as of Bank Closing:
(i) loans
(including loans which have been charged off the Accounting Records of the
Failed Bank in whole or in part prior to and including the Bid Valuation Date),
participation agreements, interests in participations, overdrafts of customers
(including but not limited to overdrafts made pursuant to an overdraft
protection plan or similar extensions of credit in connection with a deposit
account), revolving commercial lines of credit, home equity lines of credit,
Commitments, United States and/or State-guaranteed student loans, and lease
financing contracts;
(ii) all
Liens, rights (including rights of set-off), remedies, powers, privileges,
demands, claims, priorities, equities and benefits owned or held by, or
accruing or to accrue to or for the benefit of, the holder of the obligations
or instruments referred to in clause (i) above, including but not limited
to those arising under or based upon Credit Documents, casualty insurance
policies and binders, standby letters of credit, mortgagee title insurance
policies and binders, payment bonds and performance bonds at any time and from
time to time existing with respect to any of the obligations or instruments
referred to in clause (i) above; and
(iii) all
amendments, modifications, renewals, extensions, refinancings, and refundings
of or for any of the foregoing.
“
Obligor
”
means each
Person liable for the full or partial payment or performance of any Loan,
whether such Person is obligated directly, indirectly, primarily, secondarily,
jointly, or severally.
“
Other Real Estate
”
means all
interests in real estate (other than Bank Premises and Fixtures), including but
not limited to mineral rights, leasehold rights, condominium and cooperative
interests, air rights and development rights that are owned by the Failed Bank.
“
Person
”
means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, or government or any agency or
political subdivision thereof, excluding the Corporation.
“
Primary Indemnitor
”
means any
Person (other than the Assuming Bank or any of its Affiliates) who is obligated
to indemnify or insure, or otherwise make payments (including payments on
account of claims made against) to or on behalf of any Person in connection
with the claims covered under Article XII, including without limitation
any insurer issuing any
6
directors and officers liability policy or any Person issuing a
financial institution bond or banker’s blanket bond.
“
Proforma
”
means
producing a balance sheet that reflects a reasonably accurate financial
statement of the Failed bank through the date of closing. The Proforma
financial statements serve as a basis for the opening entries of both the
Assuming Bank and the Receiver.
“
Put Date
”
has the
meaning provided in Section 3.4.
“
Put Notice
”
has the
meaning provided in Section 3.4.
“
Qualified Financial
Contract
”
means a qualified financial contract as defined in
12 U.S.C. Section 1821(e)(8)(D).
“
Record
”
means any
document, microfiche, microfilm and computer records (including but not limited
to magnetic tape, disc storage, card forms and printed copy) of the Failed Bank
generated or maintained by the Failed Bank that is owned by or in the
possession of the Receiver at Bank Closing.
“
Related Liability
”
with respect
to any Asset means any liability existing and reflected on the Accounting
Records of the Failed Bank as of Bank Closing for (i) indebtedness secured
by mortgages, deeds of trust, chattel mortgages, security interests or other
liens on or affecting such Asset, (ii) ad valorem taxes applicable to such
Asset, and (iii) any other obligation determined by the Receiver to be
directly related to such Asset.
“
Related Liability Amount
”
with respect
to any Related Liability on the books of the Assuming Bank, means the amount of
such Related Liability as stated on the Accounting Records of the Assuming Bank
(as maintained in accordance with generally accepted accounting principles) as
of the date as of which the Related Liability Amount is being determined. With
respect to a liability that relates to more than one asset, the amount of such
Related Liability shall be allocated among such assets for the purpose of
determining the Related Liability Amount with respect to any one of such
assets. Such allocation shall be made by specific allocation, where
determinable, and otherwise shall be pro rata based upon the dollar amount of
such assets stated on the Accounting Records of the entity that owns such
asset.
“
Repurchase Price
”
means, with
respect to any Loan the Book Value, adjusted to reflect changes to Book Value
after Bank Closing, plus (i) any advances and interest on such Loan after
Bank Closing, minus (ii) the total of amounts received by the Assuming
Bank for such Loan, regardless of how applied, after Bank Closing, plus (iii) advances
made by Assuming Bank, plus (iv) total disbursements of principal made by
Receiver that are not included in the Book Value.
“
Safe Deposit Boxes
”
means the safe
deposit boxes of the Failed Bank, if any, including the removable safe deposit
boxes and safe deposit stacks in the Failed Bank’s vault(s), all rights and
benefits under rental agreements with respect to such safe deposit boxes, and
all keys and combinations thereto.
7
“
Settlement Date
”
means the
first Business Day immediately prior to the day which is one hundred eighty
(180) days after Bank Closing, or such other date prior thereto as may be
agreed upon by the Receiver and the Assuming Bank. The Receiver, in its
discretion, may extend the Settlement Date.
“
Settlement Interest Rate
”
means, for the
first calendar quarter or portion thereof during which interest accrues, the
rate determined by the Receiver to be equal to the equivalent coupon issue
yield on twenty-six (26)-week United States Treasury Bills in effect as of Bank
Closing as published in
The Wall Street Journal;
provided
,
that
if no such equivalent coupon issue yield is available as of Bank Closing, the
equivalent coupon issue yield for such Treasury Bills most recently published
in
The Wall Street Journal
prior to Bank Closing shall be used.
Thereafter, the rate shall be adjusted to the rate determined by the Receiver
to be equal to the equivalent coupon issue yield on such Treasury Bills in
effect as of the first day of each succeeding calendar quarter during which
interest accrues as published in
The Wall Street Journal
.
“
Subsidiary
”
has the
meaning set forth in Section 3(w)(4) of the Federal Deposit Insurance
Act, 12 U.S.C. Section 1813(w)(4), as amended.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1
Liabilities Assumed by Assuming Bank.
The Assuming
Bank expressly assumes at Book Value (subject to adjustment pursuant to Article VIII)
and agrees to pay, perform, and discharge all of the following liabilities of
the Failed Bank as of Bank Closing, except as otherwise provided in this
Agreement (such liabilities referred to as “Liabilities Assumed”):
(a) Assumed
Deposits, except those Deposits specifically listed on Schedule 2.1(a);
provided
,
that
as to any Deposits of public money which are Assumed Deposits, the
Assuming Bank agrees to properly secure such Deposits with such Assets as
appropriate which, prior to Bank Closing, were pledged as security by the
Failed Bank, or with assets of the Assuming Bank, if such securing Assets, if
any, are insufficient to properly secure such Deposits;
(b) liabilities
for indebtedness secured by mortgages, deeds of trust, chattel mortgages,
security interests or other liens on or affecting any Assets, if any;
provided
,
that
the assumption of any liability pursuant to this paragraph shall be
limited to the market value of the Assets securing such liability as determined
by the Receiver;
(c) borrowings
from Federal Reserve Banks and Federal Home Loan Banks, if any,
provided
,
that
the assumption of any liability pursuant to this paragraph shall be
limited to the market value of the assets securing such liability as determined
by the Receiver; and overdrafts, debit balances, service charges,
8
reclamations, and adjustments to accounts with the
Federal Reserve Banks as reflected on the books and records of any such Federal
Reserve Bank within ninety (90) days after Bank Closing, if any;
(d) ad
valorem taxes applicable to any Asset, if any;
provided
,
that
the
assumption of any ad valorem taxes pursuant to this paragraph shall be limited
to an amount equal to the market value of the Asset to which such taxes apply
as determined by the Receiver;
(e) liabilities,
if any, for federal funds purchased, repurchase agreements and overdrafts in
accounts maintained with other depository institutions (including any accrued
and unpaid interest thereon computed to and including Bank Closing);
provided
,
that
the assumption of any liability pursuant to this paragraph shall be
limited to the market value of the Assets securing such liability as determined
by the Receiver;
(f) United
States Treasury tax and loan note option accounts, if any;
(g) liabilities
for any acceptance or commercial letter of credit (other than “standby letters
of credit” as defined in 12 C.F.R. Section 337.2(a));
provided
,
that
the assumption of any liability pursuant to this paragraph shall be limited to
the market value of the Assets securing such liability as determined by the
Receiver;
(h) duties
and obligations assumed pursuant to this Agreement including without limitation
those relating to the Failed Bank’s Records, credit card business, overdraft
protection plans, safe deposit business, safekeeping business or trust
business, if any;
(i) liabilities,
if any, for Commitments;
(j) liabilities,
if any, for amounts owed to any Subsidiary of the Failed Bank acquired under
Section 3.1;
(k) liabilities,
if any, with respect to Qualified Financial Contracts;
(l) duties
and obligations under any contract pursuant to which the Failed Bank provides
mortgage servicing for others, or mortgage servicing is provided to the Failed
Bank by others; and
(m) all
asset-related offensive litigation liabilities and all asset-related defensive
litigation liabilities, but only to the extent such liabilities relate to
assets subject to a loss share agreement, and provided that all other defensive
litigation and any class actions with respect to credit card business are
retained by the Receiver.
9
Schedule 2.1 attached hereto and incorporated herein
sets forth certain categories of Liabilities Assumed and the aggregate Book
Value of the Liabilities Assumed in such categories. Such schedule is based
upon the best information available to the Receiver and may be adjusted as
provided in Article VIII.
2.2
Interest on Deposit Liabilities
.
The Assuming
Bank agrees that, from and after Bank Closing, it will accrue and pay interest
on Deposit liabilities assumed pursuant to Section 2.1 at a rate(s) it
shall determine;
provided
,
that
for non-transaction Deposit
liabilities such rate(s) shall not be less than the lowest rate offered by
the Assuming Bank to its depositors for non-transaction deposit accounts. The
Assuming Bank shall permit each depositor to withdraw, without penalty for
early withdrawal, all or any portion of such depositor’s Deposit, whether or
not the Assuming Bank elects to pay interest in accordance with any deposit
agreement formerly existing between the Failed Bank and such depositor;
and
further provided
,
that
if such Deposit has been pledged to secure
an obligation of the depositor or other party, any withdrawal thereof shall be
subject to the terms of the agreement governing such pledge. The Assuming Bank
shall give notice to such depositors as provided in Section 5.3 of the
rate(s) of interest which it has determined to pay and of such withdrawal
rights.
2.3
Unclaimed Deposits
.
Fifteen (15) months following
the Bank Closing Date, the Assuming Bank will provide the Receiver a listing of
all deposit accounts, including the type of account, not claimed by the
depositor. The Receiver will review the list and authorize the Assuming Bank to
act on behalf of the Receiver to send a “Final Legal Notice” in a form
substantially similar to Exhibit 2.3A to the owner(s) of the
unclaimed deposits reminding them of the need to claim or arrange to continue
their account(s) with the Assuming Bank. The Assuming Bank will send the “Final
Legal Notice” to the depositors within thirty (30) days following notification
of the Receiver’s authorization. The Assuming Bank will prepare an Affidavit of
Mailing and will forward the Affidavit of Mailing to the Receiver after mailing
out the “Final Legal Notice” in a form substantially similar to Exhibit 2.3B
to the owner(s) of unclaimed deposit accounts.
If, within eighteen (18) months after Bank Closing,
any depositor of the Failed Bank does not claim or arrange to continue such depositor’s
Deposit assumed pursuant to Section 2.1 at the Assuming Bank, the Assuming
Bank shall, within fifteen (15) Business Days after the end of such eighteen
(18) month period, (i) refund to the Receiver the full amount of each such
deposit (without reduction for service charges), (ii) provide to the
Receiver a schedule of all such refunded Deposits in such form as may be
prescribed by the Receiver, and (iii) assign, transfer, convey, and
deliver to the Receiver, all right, title, and interest of the Assuming Bank in
and to the Records previously transferred to the Assuming Bank and other
records generated or maintained by the Assuming Bank pertaining to such
Deposits. During such eighteen (18) month period, at the request of the
Receiver, the Assuming Bank promptly shall provide to the Receiver schedules of
unclaimed deposits in such form as may be prescribed by the Receiver.
2.4
Employee Plans
.
Except as provided in
Section 4.12, the Assuming Bank shall have no liabilities, obligations or
responsibilities under the Failed Bank’s
health care, bonus, vacation, pension, profit sharing, deferred compensation,
401K or stock purchase plans or similar
10
plans, if any, unless the Receiver and the Assuming Bank agree
otherwise subsequent to the date of this Agreement.
ARTICLE III
PURCHASE OF ASSETS
3.1
Assets Purchased by Assuming Bank
.
With the
exception of certain assets expressly excluded in Sections 3.5 and 3.6, the
Assuming Bank hereby purchases from the Receiver, and the Receiver hereby
sells, assigns, transfers, conveys, and delivers to the Assuming Bank, all
right, title, and interest of the Receiver in and to all of the assets (real,
personal and mixed, wherever located and however acquired) including all
subsidiaries, joint ventures, partnerships, and any and all other business
combinations or arrangements, whether active, inactive, dissolved or
terminated, of the Failed Bank whether or not reflected on the books of the
Failed Bank as of Bank Closing. Schedule 3.1 attached hereto and incorporated
herein sets forth certain categories of Assets purchased hereunder. Such
schedule is based upon the best information available to the Receiver and may
be adjusted as provided in Article VIII. Assets are purchased hereunder by
the Assuming Bank subject to all liabilities for indebtedness collateralized by
Liens affecting such Assets to the extent provided in Section 2.1.
Notwithstanding Section 4.8, the Assuming Bank specifically purchases all
mortgage servicing rights and obligations of the Failed Bank.
3.2
Asset Purchase Price
.
(a) All
Assets and assets of the Failed Bank subject to an option to purchase by the
Assuming Bank shall be purchased for the amount, or the amount resulting from
the method specified for determining the amount, as specified on Schedule 3.2,
except as otherwise may be provided herein. Any Asset, asset of the Failed Bank
subject to an option to purchase or other asset purchased for which no purchase
price is specified on Schedule 3.2 or otherwise herein shall be purchased at
its Book Value. Loans or other assets charged off the Accounting Records of the
Failed Bank before the Bid Valuation Date shall be purchased at a price of
zero.
(b) The
purchase price for securities (other than the capital stock of any Acquired
Subsidiary and FRB and FHLB stock) purchased under Section 3.1 by the
Assuming Bank shall be the market value thereof as of Bank Closing, which
market value shall be (i) the market price for each such security quoted
at the close of the trading day effective on Bank Closing as published
electronically by Bloomberg, L.P., or alternatively, at the discretion of the
Receiver, IDC/Financial Times (FT) Interactive Data; (ii)
provided
,
that
if such market price is not available for any such security, the
Assuming Bank will submit a bid for each such security within three days of
notification/bid request by the Receiver (unless a different time period is
agreed to by the Assuming Bank and the Receiver) and the Receiver, in its sole
discretion will accept or reject each such bid; and (iii)
further
provided
in the absence of an acceptable bid from the Assuming Bank, each such security
shall not pass to the Assuming Bank and shall be deemed to be an excluded asset
hereunder.
11
(c) Qualified
Financial Contracts shall be purchased at market value determined in accordance
with the terms of Exhibit 3.2(c). Any costs associated with such valuation
shall be shared equally by the Receiver and the Assuming Bank.
3.3
Manner of Conveyance; Limited Warranty;
Nonrecourse
; Etc
. THE CONVEYANCE OF ALL ASSETS, INCLUDING
REAL AND PERSONAL PROPERTY INTERESTS, PURCHASED BY THE ASSUMING BANK UNDER THIS
AGREEMENT SHALL BE MADE, AS NECESSARY, BY RECEIVER’S DEED OR RECEIVER’S BILL OF
SALE, “AS IS”, “WHERE IS”, WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED IN THIS AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH
RESPECT TO SUCH ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO TITLE,
ENFORCEABILITY, COLLECTIBILITY, DOCUMENTATION OR FREEDOM FROM LIENS OR
ENCUMBRANCES (IN WHOLE OR IN PART), OR ANY OTHER MATTERS.
3.4
Puts of Assets to the Receiver
.
(a)
Puts
Within
30 Days After Bank Closing
.
During the thirty (30)-day period following Bank Closing and only during such
period (which thirty (30)-day period may be extended
in writing
in the
sole absolute discretion of the Receiver for any Loan), in accordance with this
Section 3.4, the Assuming Bank shall be entitled to require the Receiver
to purchase any Deposit Secured Loan transferred to the Assuming Bank pursuant
to Section 3.1 which is not fully secured by Assumed Deposits or deposits
at other insured depository institutions due to either insufficient Assumed
Deposit or deposit collateral or deficient documentation regarding such
collateral; provided with regard to any Deposit Secured Loan secured by an
Assumed Deposit, no such purchase may be required until any Deposit setoff
determination, whether voluntary or involuntary, has been made; and,
at the end of the thirty (30)-day period following Bank Closing and at
that time only, in accordance with this Section 3.4, the Assuming Bank
shall be entitled to require the Receiver to purchase any remaining overdraft
transferred to the Assuming Bank pursuant to 3.1 which both was made after the
Bid Valuation Date and was not made pursuant to an overdraft protection plan or
similar extension of credit.
Notwithstanding the foregoing, the Assuming Bank shall
not
have
the right to require the Receiver to purchase any Loan if (i) the Obligor
with respect to such Loan is an Acquired Subsidiary, or (ii) the Assuming
Bank has:
(A)
made any
advance in accordance with the terms of a Commitment or otherwise with respect
to such Loan;
(B)
taken any
action that increased the amount of a Related Liability with respect to such
Loan over the amount of such liability immediately prior to the time of such
action;
12
(C)
created or
permitted to be created any Lien on such Loan which secures indebtedness for
money borrowed or which constitutes a conditional sales agreement, capital
lease or other title retention agreement;
(D)
entered into,
agreed to make, grant or permit, or made, granted or permitted any modification
or amendment to, any waiver or extension with respect to, or any renewal,
refinancing or refunding of, such Loan or related Credit Documents or
collateral, including, without limitation, any act or omission which diminished
such collateral; or
(E)
sold, assigned
or transferred all or a portion of such Loan to a third party (whether with or
without recourse).
The Assuming Bank shall transfer all such Assets to the Receiver
without recourse, and shall indemnify the Receiver against any and all claims
of any Person claiming by, through or under the Assuming Bank with respect to
any such Asset, as provided in Section 12.4.
(b)
Notices to the Receiver
.
In the event that the Assuming Bank elects to require the Receiver
to purchase one or more Assets, the Assuming Bank shall deliver to the Receiver
a notice (a “Put Notice”) which shall include:
(i)
a list of all
Assets that the Assuming Bank requires the Receiver to purchase;
(ii)
a list of all
Related Liabilities with respect to the Assets identified pursuant to (i) above;
and
(iii)
a statement of
the estimated Repurchase Price of each Asset identified pursuant to (i) above
as of the applicable Put Date.
Such notice shall be in the form prescribed by the Receiver or such
other form to which the Receiver shall consent. As provided in Section 9.6,
the Assuming Bank shall deliver to the Receiver such documents, Credit Files
and such additional information relating to the subject matter of the Put
Notice as the Receiver may request and shall provide to the Receiver full
access to all other relevant books and records.
(c)
Purchase by Receiver
.
The Receiver shall purchase Assets that are specified in the
Put Notice and shall assume Related Liabilities with respect to such Assets,
and the transfer of such Assets and Related Liabilities shall be effective as of
a date determined by the Receiver which date shall not be later than thirty
(30) days after receipt by the Receiver of the Put Notice (the “Put Date”).
(d)
Purchase Price and Payment Date
.
Each Asset purchased by the Receiver pursuant to this
Section 3.4 shall be purchased at a price equal to the Repurchase Price of
such Asset less the Related Liability Amount applicable to such Asset, in each
case determined as of the applicable Put Date. If the difference between such
Repurchase Price and such Related
13
Liability Amount is positive, then the Receiver shall pay to the
Assuming Bank the amount of such difference; if the difference between such
amounts is negative, then the Assuming Bank shall pay to the Receiver the
amount of such difference. The Assuming Bank or the Receiver, as the case may
be, shall pay the purchase price determined pursuant to this Section 3.4(d) not
later than the twentieth (20th) Business Day following the applicable Put Date,
together with interest on such amount at the Settlement Interest Rate for the
period from and including such Put Date to and including the day preceding the
date upon which payment is made.
(e)
Servicing
.
The Assuming
Bank shall administer and manage any Asset subject to purchase by the Receiver
in accordance with usual and prudent banking standards and business practices
until such time as such Asset is purchased by the Receiver.
(f)
Reversals
.
In the event
that the Receiver purchases an Asset (and assumes the Related Liability) that
it is not required to purchase pursuant to this Section 3.4, the Assuming
Bank shall repurchase such Asset (and assume such Related Liability) from the
Receiver at a price computed so as to achieve the same economic result as would
apply if the Receiver had never purchased such Asset pursuant to this Section 3.4.
3.5
Assets Not Purchased by Assuming Bank
.
The Assuming
Bank does not purchase, acquire or assume, or (except as otherwise expressly
provided in this Agreement) obtain an option to purchase, acquire or assume
under this Agreement:
(a) any
financial institution bonds, banker’s blanket bonds, or public liability, fire,
extended coverage insurance policy, bank owned life insurance or any other
insurance policy of the Failed Bank, or premium refund, unearned premium
derived from cancellation, or any proceeds payable with respect to any of the
foregoing;
(b) any
interest, right, action, claim, or judgment against (i) any officer,
director, employee, accountant, attorney, or any other Person employed or
retained by the Failed Bank or any Subsidiary of the Failed Bank on or prior to
Bank Closing arising out of any act or omission of such Person in such
capacity, (ii) any underwriter of financial institution bonds, banker’s
blanket bonds or any other insurance policy of the Failed Bank, (iii) any
shareholder or holding company of the Failed Bank, or (iv) any other
Person whose action or inaction may be related to any loss (exclusive of any
loss resulting from such Person’s failure to pay on a Loan made by the Failed
Bank) incurred by the Failed Bank;
provided
,
that
for the
purposes hereof, the acts, omissions or other events giving rise to any such
claim shall have occurred on or before Bank Closing, regardless of when any
such claim is discovered and regardless of whether any such claim is made with
respect to a financial institution bond, banker’s blanket bond, or any other
insurance policy of the Failed Bank in force as of Bank Closing;
(c) prepaid
regulatory assessments of the Failed Bank, if any;
(d) legal
or equitable interests in tax receivables of the Failed Bank, if any, including
any claims arising as a result of the Failed Bank having entered into any
agreement or otherwise being joined with another Person with respect to the
filing of tax returns or the payment of taxes;
14
(e) amounts
reflected on the Accounting Records of the Failed Bank as of Bank Closing as a
general or specific loss reserve or contingency account, if any;
(f) leased
or owned Bank Premises and leased or owned Furniture and Equipment and Fixtures
and data processing equipment (including hardware and software) located on
leased or owned Bank Premises, if any;
provided
,
that
the
Assuming Bank does obtain an option under Section 4.6, Section 4.7 or
Section 4.8, as the case may be, with respect thereto;
(g) owned
Bank Premises which the Receiver, in its discretion, determines may contain
environmentally hazardous substances;
(h) any
“goodwill,” as such term is defined in the instructions to the report of
condition prepared by banks examined by the Corporation in accordance with 12
C.F.R. Section 304.4, and other intangibles;
(i) any
criminal restitution or forfeiture orders issued in favor of the Failed Bank;
(j) reserved;
(k) assets
essential to the Receiver in accordance with Section 3.6;
(l) the
securities listed on the attached Schedule 3.5(l); and
(m) prepaid
accounts associated with any contract or agreement that the Assuming Bank
either does not directly assume pursuant to the terms of this Agreement nor has
an option to assume under Section 4.8.
3.6
Retention or Repurchase of Assets Essential to Receiver
.
(a) The
Receiver may refuse to sell to the Assuming Bank, or the Assuming Bank agrees, at
the request of the Receiver set forth in a written notice to the Assuming Bank,
to assign, transfer, convey, and deliver to the Receiver all of the Assuming
Bank’s right, title and interest in and to, any Asset or asset essential to the
Receiver as determined by the Receiver in its discretion (together with all
Credit Documents evidencing or pertaining thereto), which may include any Asset
or asset that the Receiver determines to be:
(i)
made to an
officer, director, or other Person engaging in the affairs of the Failed Bank,
its Subsidiaries or Affiliates or any related entities of any of the foregoing;
(ii)
the subject of
any investigation relating to any claim with respect to any item described in
Section 3.5(a) or (b), or the subject of, or potentially the subject
of, any legal proceedings;
15
(iii)
made to a
Person who is an Obligor on a loan owned by the Receiver or the Corporation in
its corporate capacity or its capacity as receiver of any institution;
(iv)
secured by
collateral which also secures any asset owned by the Receiver; or
(v)
related to any
asset of the Failed Bank not purchased by the Assuming Bank under this Article III
or any liability of the Failed Bank not assumed by the Assuming Bank under
Article II.
(b) Each
such Asset or asset purchased by the Receiver shall be purchased at a price equal
to the Repurchase Price thereof less the Related Liability Amount with respect
to any Related Liabilities related to such Asset or asset, in each case
determined as of the date of the notice provided by the Receiver pursuant to
Section 3.6(a). The Receiver shall pay the Assuming Bank not later than
the twentieth (20th) Business Day following receipt of related Credit Documents
and Credit Files together with interest on such amount at the Settlement
Interest Rate for the period from and including the date of receipt of such
documents to and including the day preceding the day on which payment is made.
The Assuming Bank agrees to administer and manage each such Asset or asset in
accordance with usual and prudent banking standards and business practices
until each such Asset or asset is purchased by the Receiver. All transfers with
respect to Asset or assets under this Section 3.6 shall be made as provided
in Section 9.6. The Assuming Bank shall transfer all such Asset or assets
and Related Liabilities to the Receiver without recourse, and shall indemnify
the Receiver against any and all claims of any Person claiming by, through or
under the Assuming Bank with respect to any such Asset or asset, as provided in
Section 12.4.
ARTICLE IV
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS
The Assuming Bank agrees with the Receiver and the
Corporation as follows:
4.1
Continuation of Banking Business
.
For the period
commencing the first banking Business Day after Bank Closing and ending no
earlier than the first anniversary of Bank Closing, the Assuming Bank will
provide full service banking in the trade area of the Failed Bank. Thereafter,
the Assuming Bank may cease providing such banking services in the trade area
of the Failed Bank, provided the Assuming Bank has received all necessary
regulatory approvals. At the option of the Assuming Bank, such banking services
may be provided at any or all of the Bank Premises, or at other premises within
such trade area. The trade area shall be determined by the Receiver. For the
avoidance of doubt, the foregoing shall not restrict the Assuming Bank from
opening, closing or selling branches upon receipt of the necessary regulatory
approvals, if the Assuming Bank or its successors continue to provide banking
services in the trade area. Assuming Bank will pay to the Receiver, upon the
sale of a branch or branches within the year following the date of this
agreement, fifty percent (50%) of any franchise premium in excess of the
franchise premium paid by the Assuming Bank with respect to such branch or
branches.
16
4.2
Agreement with Respect to Credit Card Business
.
The Assuming
Bank agrees to honor and perform, from and after Bank Closing, all duties and
obligations with respect to the Failed Bank’s credit card business, and/or
processing related to credit cards, if any, and assumes all outstanding
extensions of credit with respect thereto.
4.3
Agreement with Respect to Safe Deposit Business
.
The Assuming
Bank assumes and agrees to discharge, from and after Bank Closing, in the usual
course of conducting a banking business, the duties and obligations of the
Failed Bank with respect to all Safe Deposit Boxes, if any, of the Failed Bank
and to maintain all of the necessary facilities for the use of such boxes by
the renters thereof during the period for which such boxes have been rented and
the rent therefore paid to the Failed Bank, subject to the provisions of the
rental agreements between the Failed Bank and the respective renters of such
boxes;
provided
,
that
the Assuming Bank may relocate the Safe
Deposit Boxes of the Failed Bank to any office of the Assuming Bank located in the
trade area of the Failed Bank. The Safe Deposit Boxes shall be located and
maintained in the trade area of the Failed Bank for a minimum of one year from
Bank Closing. The trade area shall be determined by the Receiver. Fees related
to the safe deposit business earned prior to the Bank Closing Date shall be for
the benefit of the Receiver and fees earned after the Bank Closing Date shall
be for the benefit of the Assuming Bank.
4.4
Agreement with Respect to Safekeeping Business
.
The Receiver
transfers, conveys and delivers to the Assuming Bank and the Assuming Bank
accepts all securities and other items, if any, held by the Failed Bank in
safekeeping for its customers as of Bank Closing. The Assuming Bank assumes and
agrees to honor and discharge, from and after Bank Closing, the duties and
obligations of the Failed Bank with respect to such securities and items held
in safekeeping. The Assuming Bank shall be entitled to all rights and benefits
heretofore accrued or hereafter accruing with respect thereto. The Assuming
Bank shall provide to the Receiver written verification of all assets held by
the Failed Bank for safekeeping within sixty (60) days after Bank Closing. The
assets held for safekeeping by the Failed Bank shall be held and maintained by
the Assuming Bank in the trade area of the Failed Bank for a minimum of one
year from Bank Closing. At the option of the Assuming Bank, the safekeeping
business may be provided at any or all of the Bank Premises, or at other
premises within such trade area. The trade area shall be determined by the
Receiver. Fees related to the safekeeping business earned prior to the Bank
Closing Date shall be for the benefit of the Receiver and fees earned after the
Bank Closing Date shall be for the benefit of the Assuming Bank.
4.5
Agreement with Respect to Trust Business
.
(a) The
Assuming Bank shall, without further transfer, substitution, act or deed, to
the full extent permitted by law, succeed to the rights, obligations,
properties, assets, investments, deposits, agreements, and trusts of the Failed
Bank under trusts, executorships, administrations, guardianships, and agencies,
and other fiduciary or representative capacities, all to the same extent as
though the Assuming Bank had assumed the same from the Failed Bank prior to
Bank Closing;
provided
,
that
any liability based on the
misfeasance, malfeasance or nonfeasance of the Failed Bank, its directors,
officers, employees or agents with respect to the trust business is not assumed
hereunder.
17
(b) The
Assuming Bank shall, to the full extent permitted by law, succeed to, and be
entitled to take and execute, the appointment to all executorships,
trusteeships, guardianships and other fiduciary or representative capacities to
which the Failed Bank is or may be named in wills, whenever probated, or to
which the Failed Bank is or may be named or appointed by any other instrument.
(c) In
the event additional proceedings of any kind are necessary to accomplish the
transfer of such trust business, the Assuming Bank agrees that, at its own
expense, it will take whatever action is necessary to accomplish such transfer.
The Receiver agrees to use reasonable efforts to assist the Assuming Bank in
accomplishing such transfer.
(d) The
Assuming Bank shall provide to the Receiver written verification of the assets
held in connection with the Failed Bank’s trust business within sixty (60) days
after Bank Closing.
4.6
Agreement with Respect to Bank Premises
.
(a)
Option
to Purchase
.
Subject to Section 3.5, the Receiver
hereby grants to the Assuming Bank an exclusive option for the period of ninety
(90) days commencing the day after Bank Closing to purchase any or all owned
Bank Premises, including all Furniture, Fixtures and Equipment located on the
Bank Premises. The Assuming Bank shall give written notice to the Receiver
within the option period of its election to purchase or not to purchase any of
the owned Bank Premises. Any purchase of such premises shall be effective as of
the date of Bank Closing and such purchase shall be consummated as soon as
practicable thereafter, and in no event later than the Settlement Date. If the
Assuming Bank gives notice of its election not to purchase one or more of the
owned Bank Premises within seven (7) days of Bank Closing, then, not
withstanding any other provision of this Agreement to the contrary, the
Assuming Bank shall not be liable for any of the costs or fees associated with
appraisals for such Bank Premises.
(b)
Option
to Lease
.
The Receiver hereby grants to the Assuming Bank an
exclusive option for the period of ninety (90) days commencing the day after
Bank Closing to cause the Receiver to assign to the Assuming Bank any or all
leases for leased Bank Premises, if any, which have been continuously occupied
by the Assuming Bank from Bank Closing to the date it elects to accept an
assignment of the leases with respect thereto to the extent such leases can be
assigned;
provided
,
that
the exercise of this option with respect
to any lease must be as to all premises or other property subject to the lease.
If an assignment cannot be made of any such leases, the Receiver may, in its
discretion, enter into subleases with the Assuming Bank containing the same
terms and conditions provided under such existing leases for such leased Bank
Premises or other property. The Assuming Bank shall give notice to the Receiver
within the option period of its election to accept or not to accept an
assignment of any or all leases (or enter into subleases or new leases in lieu
thereof). The Assuming Bank agrees to assume all leases assigned (or enter into
subleases or new leases in lieu thereof) pursuant to this Section 4.6.
(c)
Facilitation
.
The Receiver
agrees to facilitate the assumption, assignment or sublease of leases or the
negotiation of new leases by the Assuming Bank;
provided
,
that
neither
18
the Receiver nor the Corporation shall be obligated to engage in
litigation, make payments to the Assuming Bank or to any third party in
connection with facilitating any such assumption, assignment, sublease or
negotiation or commit to any other obligations to third parties.
(d)
Occupancy
.
The Assuming Bank shall give
the Receiver fifteen (15) days’ prior written notice of its intention to vacate
prior to vacating any leased Bank Premises with respect to which the Assuming
Bank has not exercised the option provided in Section 4.6(b). Any such
notice shall be deemed to terminate the Assuming Bank’s option with respect to
such leased Bank Premises.
(e)
Occupancy Costs
.
(i) The
Assuming Bank agrees to pay to the Receiver, or to appropriate third parties at
the direction of the Receiver, during and for the period of any occupancy by it
of (x) owned Bank Premises the market rental value, as determined by the
appraiser selected in accordance with the definition of Fair Market Value, and
all operating costs, and (y) leased Bank Premises, all operating costs
with respect thereto and to comply with all relevant terms of applicable leases
entered into by the Failed Bank, including without limitation the timely
payment of all rent. Operating costs include, without limitation all taxes,
fees, charges, utilities, insurance and assessments, to the extent not included
in the rental value or rent. If the Assuming Bank elects to purchase any owned
Bank Premises in accordance with Section 4.6(a), the amount of any rent
paid (and taxes paid to the Receiver which have not been paid to the taxing
authority and for which the Assuming Bank assumes liability) by the Assuming
Bank with respect thereto shall be applied as an offset against the purchase
price thereof.
(ii) The
Assuming Bank agrees during the period of occupancy by it of owned or leased
Bank Premises, to pay to the Receiver rent for the use of all owned or leased
Furniture and Equipment and all owned or leased Fixtures located on such Bank
Premises for the period of such occupancy. Rent for such property owned by the
Failed Bank shall be the market rental value thereof, as determined by the
Receiver within sixty (60) days after Bank Closing. Rent for such leased
property shall be an amount equal to any and all rent and other amounts which
the Receiver incurs or accrues as an obligation or is obligated to pay for such
period of occupancy pursuant to all leases and contracts with respect to such
property. If the Assuming Bank purchases any owned Furniture and Equipment or
owned Fixtures in accordance with Section 4.6(f) or 4.6(h), the
amount of any rents paid by the Assuming Bank with respect thereto shall be
applied as an offset against the purchase price thereof.
(f)
Certain Requirements as to Furniture, Equipment and
Fixtures
.
If the Assuming Bank purchases owned Bank Premises or
accepts an assignment of the lease (or enters into a sublease or a new lease in
lieu thereof) for leased Bank Premises as provided in Section 4.6(a) or
4.6(b), or if the Assuming Bank does not exercise such option but within twelve
(12) months following Bank Closing obtains the right to occupy such premises
(whether by assignment, lease, sublease, purchase or otherwise), other than in
accordance with Section 4.6(a) or (b), the Assuming Bank shall (i) effective
as of the date of Bank Closing, purchase from the Receiver all Furniture and
Equipment and Fixtures owned by the Failed Bank at Fair Market
19
Value and located thereon as of Bank Closing, (ii) accept an
assignment or a sublease of the leases or negotiate new leases for all
Furniture and Equipment and Fixtures leased by the Failed Bank and located
thereon, and (iii) if applicable, accept an assignment or a sublease of
any ground lease or negotiate a new ground lease with respect to any land on
which such Bank Premises are located;
provided
,
that
the Receiver
shall not have disposed of such Furniture and Equipment and Fixtures or
repudiated the leases specified in clause (ii) or (iii).
(g)
Vacating Premises
.
(i) If
the Assuming Bank elects not to purchase any owned Bank Premises, the notice of
such election in accordance with Section 4.6(a) shall specify the
date upon which the Assuming Bank’s occupancy of such premises shall terminate,
which date shall not be later than ninety (90) days after the date of the
Assuming Bank’s notice not to exercise such option. The Assuming Bank promptly
shall relinquish and release to the Receiver such premises and the Furniture
and Equipment and Fixtures located thereon in the same condition as at Bank
Closing, normal wear and tear excepted. By occupying any such premises after the
expiration of such ninety (90)-day period, the Assuming Bank shall, at the
Receiver’s option, (x) be deemed to have agreed to purchase such Bank
Premises, and to assume all leases, obligations and liabilities with respect to
leased Furniture and Equipment and leased Fixtures located thereon and any
ground lease with respect to the land on which such premises are located, and
(y) be required to purchase all Furniture and Equipment and Fixtures owned
by the Failed Bank and located on such premises as of Bank Closing.
(ii) If
the Assuming Bank elects not to accept an assignment of the lease or sublease
any leased Bank Premises, the notice of such election in accordance with
Section 4.6(b) shall specify the date upon which the Assuming Bank’s
occupancy of such leased Bank Premises shall terminate, which date shall not be
later than the date which is one hundred eighty (180) days after Bank Closing.
Upon vacating such premises, the Assuming Bank shall relinquish and release to
the Receiver such premises and the Fixtures and the Furniture and Equipment
located thereon in the same condition as at Bank Closing, normal wear and tear
excepted. By failing to provide notice of its intention to vacate such premises
prior to the expiration of the option period specified in Section 4.6(b),
or by occupying such premises after the one hundred eighty (180)-day period
specified above in this paragraph (ii), the Assuming Bank shall, at the
Receiver’s option, (x) be deemed to have assumed all leases, obligations
and liabilities with respect to such premises (including any ground lease with
respect to the land on which premises are located), and leased Furniture and
Equipment and leased Fixtures located thereon in accordance with this Section 4.6
(unless the Receiver previously repudiated any such lease), and (y) be
required to purchase all Furniture and Equipment and Fixtures owned by the
Failed Bank at Fair Market Value and located on such premises as of Bank
Closing.
(h)
Furniture and Equipment and Certain Other Equipment
.
The Receiver hereby grants to the Assuming Bank an option to purchase
all
Furniture and Equipment or any telecommunications, data processing equipment
(including hardware and software) and check processing and similar operating
equipment owned by the Failed Bank at Fair Market Value and located at any
leased Bank Premises that the Assuming Bank elects to vacate or which it could
have, but did not occupy, pursuant to this Section 4.6;
provided
,
that
,
the Assuming Bank shall
20
give the Receiver notice of its election to purchase such property at
the time it gives notice of its intention to vacate such Bank Premises or
within ten (10) days after Bank Closing for Bank Premises it could have,
but did not, occupy.
4.7
Agreement with Respect to Leased Data Processing
Equipment
(a) The
Receiver hereby grants to the Assuming Bank an exclusive option for the period
of ninety (90) days commencing the day after Bank Closing to accept an
assignment from the Receiver of any or all Data Processing Leases to the extent
that such Data Processing Leases can be assigned.
(b) The
Assuming Bank shall (i) give written notice to the Receiver within the
option period specified in Section 4.7(a) of its intent to accept or
decline an assignment or sublease of any or all Data Processing Leases and
promptly accept an assignment or sublease of such Data Processing Leases, and
(ii) give written notice to the appropriate lessor(s) that it has
accepted an assignment or sublease of any such Data Processing Leases.
(c) The
Receiver agrees to facilitate the assignment or sublease of Data Processing
Leases or the negotiation of new leases or license agreements by the Assuming
Bank;
provided
,
that
neither the Receiver nor the Corporation
shall be obligated to engage in litigation or make payments to the Assuming
Bank or to any third party in connection with facilitating any such assumption,
assignment, sublease or negotiation.
(d) The
Assuming Bank agrees, during its period of use of any property subject to a
Data Processing Lease, to pay to the Receiver or to appropriate third parties
at the direction of the Receiver all operating costs with respect thereto and
to comply with all relevant terms of the applicable Data Processing Leases
entered into by the Failed Bank, including without limitation the timely
payment of all rent, taxes, fees, charges, utilities, insurance and
assessments.
(e) The
Assuming Bank shall, not later than fifty (50) days after giving the notice
provided in Section 4.7(b), (i) relinquish and release to the
Receiver all property subject to the relevant Data Processing Lease, in the
same condition as at Bank Closing, normal wear and tear excepted, or (ii) accept
an assignment or a sublease thereof or negotiate a new lease or license
agreement under this Section 4.7.
4.8
Agreement with Respect to Certain Existing Agreements
.
(a) Subject
to the provisions of Section 4.8(b), with respect to agreements existing
as of Bank Closing which provide for the rendering of services by or to the
Failed Bank, within thirty (30) days after Bank Closing, the Assuming Bank
shall give the Receiver written notice specifying whether it elects to assume
or not to assume each such agreement. Except as may be otherwise provided in
this Article IV, the Assuming Bank agrees to comply with the terms of each
such agreement for a period commencing on the day after Bank Closing and ending
on: (i) in the case of an agreement that provides for the rendering of
services by the Failed Bank, the date which is ninety (90) days after Bank
Closing, and (ii) in the case of an agreement that provides for the
rendering of services to the Failed Bank, the date which is thirty (30) days
after
21
the Assuming Bank has given notice to the Receiver of its election not
to assume such agreement;
provided
,
that
the Receiver can
reasonably make such service agreements available to the Assuming Bank. The
Assuming Bank shall be deemed by the Receiver to have assumed agreements for which
no notification is timely given. The Receiver agrees to assign, transfer,
convey, and deliver to the Assuming Bank all right, title and interest of the
Receiver, if any, in and to agreements the Assuming Bank assumes hereunder. In
the event the Assuming Bank elects not to accept an assignment of any lease (or
sublease) or negotiate a new lease for leased Bank Premises under Section 4.6
and does not otherwise occupy such premises, the provisions of this Section 4.8(a) shall
not apply to service agreements related to such premises. The Assuming Bank
agrees, during the period it has the use or benefit of any such agreement,
promptly to pay to the Receiver or to appropriate third parties at the
direction of the Receiver all operating costs with respect thereto and to
comply with all relevant terms of such agreement.
(b) The
provisions of Section 4.8(a) regarding the Assuming Bank’s election to
assume or not assume certain agreements shall not apply to (i) agreements
pursuant to which the Failed Bank provides mortgage servicing for others or
mortgage servicing is provided to the Failed Bank by others, (ii) agreements
that are subject to Sections 4.1 through 4.7 and any insurance policy or bond
referred to in Section 3.5(a) or other agreement specified in Section 3.5,
and (iii) consulting, management or employment agreements, if any, between
the Failed Bank and its employees or other Persons. Except as otherwise
expressly set forth elsewhere in this Agreement, the Assuming Bank does not
assume any liabilities or acquire any rights under any of the agreements
described in this Section 4.8(b).
4.9
Informational Tax Reporting
. The Assuming
Bank agrees to perform all obligations of the Failed Bank with respect to
Federal and State income tax informational reporting related to (i) the
Assets and the Liabilities Assumed, (ii) deposit accounts that were closed
and loans that were paid off or collateral obtained with respect thereto prior
to Bank Closing, (iii) miscellaneous payments made to vendors of the
Failed Bank, and (iv) any other asset or liability of the Failed Bank,
including, without limitation, loans not purchased and Deposits not assumed by
the Assuming Bank, as may be required by the Receiver.
4.10
Insurance
. The Assuming Bank agrees
to obtain insurance coverage effective from and after Bank Closing, including
public liability, fire and extended coverage insurance acceptable to the
Receiver with respect to owned or leased Bank Premises that it occupies, and
all owned or leased Furniture and Equipment and Fixtures and leased data
processing equipment (including hardware and software) located thereon, in the
event such insurance coverage is not already in force and effect with respect
to the Assuming Bank as the insured as of Bank Closing. All such insurance shall,
where appropriate (as determined by the Receiver), name the Receiver as an
additional insured.
4.11
Office Space for Receiver and Corporation
. For the
period commencing on the day following Bank Closing and ending on the one
hundred eightieth (180th) day thereafter, the Assuming Bank agrees to provide
to the Receiver and the Corporation, without charge, adequate and suitable
office space (including parking facilities and vault space), furniture,
equipment (including photocopying and telecopying machines), email accounts,
network access and technology resources (such as shared drive) and utilities
(including local telephone service and
22
fax machines) at the Bank Premises occupied by the Assuming Bank for
their use in the discharge of their respective functions with respect to the
Failed Bank. In the event the Receiver and the Corporation determine that the
space provided is inadequate or unsuitable, the Receiver and the Corporation
may relocate to other quarters having adequate and suitable space and the costs
of relocation and any rental and utility costs for the balance of the period of
occupancy by the Receiver and the Corporation shall be borne by the Assuming
Bank. Additionally, the Assuming Bank agrees to pay such bills and invoices on
behalf of the Receiver and Corporation as the Receiver or Corporation may
direct for the period beginning on the date of Bank Closing and ending on
Settlement Date. Assuming Bank shall submit it requests for reimbursement of
such expenditures pursuant to Article VIII of this Agreement.
4.12
Agreement with Respect to Continuation of Group Health
Plan Coverage for Former Employees of the Failed Bank
.
(a) The
Assuming Bank agrees to assist the Receiver, as provided in this Section 4.12,
in offering individuals who were employees or former employees of the Failed
Bank, or any of its Subsidiaries, and who, immediately prior to Bank Closing,
were receiving, or were eligible to receive, health insurance coverage or
health insurance continuation coverage from the Failed Bank (“Eligible
Individuals”), the opportunity to obtain health insurance coverage in the
Corporation’s FIA Continuation Coverage Plan which provides for health
insurance continuation coverage to such Eligible Individuals who are qualified
beneficiaries of the Failed Bank as defined in Section 607 of the Employee
Retirement Income Security Act of 1974, as amended (respectively, “qualified
beneficiaries” and “ERISA”). The Assuming Bank shall consult with the Receiver
and not later than five (5) Business Days after Bank Closing shall provide
written notice to the Receiver of the number (if available), identity (if
available) and addresses (if available) of the Eligible Individuals who are
qualified beneficiaries of the Failed Bank and for whom a “qualifying event”
(as defined in Section 603 of ERISA) has occurred and with respect to whom
the Failed Bank’s obligations under Part 6 of Subtitle B of Title I of
ERISA have not been satisfied in full, and such other information as the
Receiver may reasonably require. The Receiver shall cooperate with the Assuming
Bank in order to permit it to prepare such notice and shall provide to the
Assuming Bank such data in its possession as may be reasonably required for
purposes of preparing such notice.
(b) The
Assuming Bank shall take such further action to assist the Receiver in offering
the Eligible Individuals who are qualified beneficiaries of the Failed Bank the
opportunity to obtain health insurance coverage in the Corporation’s FIA
Continuation Coverage Plan as the Receiver may direct. All expenses incurred
and paid by the Assuming Bank (i) in connection with the obligations of
the Assuming Bank under this Section 4.12, and (ii) in providing
health insurance continuation coverage to any Eligible Individuals who are
hired by the Assuming Bank and such employees’ qualified beneficiaries shall be
borne by the Assuming Bank.
(c) No
later than five (5) Business Days after Bank Closing, the Assuming Bank
shall provide the Receiver with a list of all Failed Bank employees the
Assuming Bank will not hire. Unless agreed to otherwise by the Assuming Bank
and the Receiver, the Assuming Bank shall be
23
responsible for all costs and expenses (i.e. salary, benefits, etc.)
associated with all other employees not on that list from and after the date of
delivery of the list to the Receiver. The Assuming Bank shall offer to the
Failed Bank employees it retains employment benefits comparable to those the
Assuming Bank offers its current employees.
(d) This
Section 4.12 is for the sole and exclusive benefit of the parties to this Agreement,
and for the benefit of no other Person (including any former employee of the
Failed Bank or any Subsidiary thereof or qualified beneficiary of such former
employee). Nothing in this Section 4.12 is intended by the parties, or
shall be construed, to give any Person (including any former employee of the
Failed Bank or any Subsidiary thereof or qualified beneficiary of such former
employee) other than the Corporation, the Receiver and the Assuming Bank any
legal or equitable right, remedy or claim under or with respect to the
provisions of this Section.
4.13
Agreement with Respect to Interim Asset Servicing
.
At any time
after Bank Closing, the Receiver may establish on its books an asset pool(s) and
may transfer to such asset pool(s) (by means of accounting entries on the
books of the Receiver) all or any assets and liabilities of the Failed Bank
which are not acquired by the Assuming Bank, including, without limitation,
wholly unfunded Commitments and assets and liabilities which may be acquired,
funded or originated by the Receiver subsequent to Bank Closing. The Receiver
may remove assets (and liabilities) from or add assets (and liabilities) to
such pool(s) at any time in its discretion. At the option of the Receiver,
the Assuming Bank agrees to service, administer, and collect such pool assets
in accordance with and for the term set forth in Exhibit 4.13 “Interim
Asset Servicing Arrangement”.
4.14
Reserved.
4.15
Agreement with Respect to Loss Sharing
.
The Assuming
Bank shall be entitled to require reimbursement from the Receiver for loss
sharing on certain loans in accordance with the Single Family Shared-Loss
Agreement attached hereto as Exhibit 4.15A and the Non-SF Shared-Loss
Agreement attached hereto as Exhibit 4.15B, collectively, the “Shared-Loss
Agreements.” The Loans that shall be subject to the Shared-Loss Agreements are
identified on the Schedule of Loans 4.15A and 4.15B attached hereto.
ARTICLE V
DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK
5.1
Payment of Checks, Drafts and Orders
.
Subject to
Section 9.5, the Assuming Bank agrees to pay all properly drawn checks,
drafts and withdrawal orders of depositors of the Failed Bank presented for
payment, whether drawn on the check or draft forms provided by the Failed Bank
or by the Assuming Bank, to the extent that the Deposit balances to the credit
of the respective makers or drawers assumed by the Assuming Bank under this
Agreement are sufficient to permit the payment thereof, and in all other
respects to discharge, in the usual course of conducting a banking business,
the duties and obligations of the Failed Bank with respect to the Deposit balances
due and owing to the depositors of the Failed Bank assumed by the Assuming Bank
under this Agreement.
24
5.2
Certain Agreements Related to Deposits
.
Subject to
Section 2.2, the Assuming Bank agrees to honor the terms and conditions of
any written escrow or mortgage servicing agreement or other similar agreement
relating to a Deposit liability assumed by the Assuming Bank pursuant to this
Agreement.
5.3
Notice to Depositors
.
(a) Within
seven (7) days after Bank Closing, the Assuming Bank shall give
(i) notice to depositors of the Failed Bank of its assumption of the
Deposit liabilities of the Failed Bank, and (ii) any notice required under
Section 2.2, by mailing to each such depositor a notice with respect to
such assumption and by advertising in a newspaper of general circulation in the
county or counties in which the Failed Bank was located. The Assuming Bank
agrees that it will obtain prior approval of all such notices and
advertisements from counsel for the Receiver and that such notices and
advertisements shall not be mailed or published until such approval is
received.
(b) The
Assuming Bank shall give notice by mail to depositors of the Failed Bank
concerning the procedures to claim their deposits, which notice shall be
provided to the Assuming Bank by the Receiver or the Corporation. Such notice
shall be included with the notice to depositors to be mailed by the Assuming
Bank pursuant to Section 5.3(a).
(c) If
the Assuming Bank proposes to charge fees different from those charged by the
Failed Bank before it establishes new deposit account relationships with the
depositors of the Failed Bank, the Assuming Bank shall give notice by mail of
such changed fees to such depositors.
ARTICLE VI
RECORDS
6.1
Transfer of Records
.
(a) In
accordance with Sections 2.1 and 3.1, the Receiver assigns, transfers, conveys
and delivers to the Assuming Bank the following:
(i) all
Records pertaining to the Deposit liabilities of the Failed Bank assumed by the
Assuming Bank under this Agreement, including, but not limited to, the
following:
(A) signature
cards, orders, contracts between the Failed Bank and its depositors and Records
of similar character;
(B) passbooks
of depositors held by the Failed Bank, deposit slips, cancelled checks and
withdrawal orders representing charges to accounts of depositors; and
(ii) all
Records pertaining to the Assets, including, but not limited to, the following:
25
(A) records
of deposits balances carried with other banks, bankers or trust companies;
(B) Loan
and collateral records and Credit Files and other documents;
(C) deeds,
mortgages, abstracts, surveys, and other instruments or records of title
pertaining to real estate or real estate mortgages;
(D) signature
cards, agreements and records pertaining to Safe Deposit Boxes, if any; and
(E) records
pertaining to the credit card business, trust business or safekeeping business
of the Failed Bank, if any.
(b) The
Receiver, at its option, may assign and transfer to the Assuming Bank by a
single blanket assignment or otherwise, as soon as practicable after Bank
Closing, any other Records not assigned and transferred to the Assuming Bank as
provided in this Agreement, including but not limited to loan disbursement
checks, general ledger tickets, official bank checks, proof transactions
(including proof tapes) and paid out loan files.
6.2
Delivery of Assigned Records
. The Receiver
shall deliver to the Assuming Bank all Records described in
(i) Section 6.1(a) as soon as practicable on or after the date
of this Agreement, and (ii) Section 6.1(b) as soon as
practicable after making any assignment described therein.
6.3
Preservation of Records
.
The Assuming Bank agrees that it will preserve and maintain for the joint
benefit of the Receiver, the Corporation and the Assuming Bank, all Records of
which it has custody for such period as either the Receiver or the Corporation
in its discretion may require, until directed otherwise,
in writing
, by
the Receiver or Corporation. The Assuming Bank shall have the primary
responsibility to respond to subpoenas, discovery requests, and other similar official
inquiries and customer requests for lien releases with respect to the Records
of which it has custody.
6.4
Access to Records;
Copies
. The Assuming Bank
agrees to permit the Receiver and the Corporation access to all Records of
which the Assuming Bank has custody, and to use, inspect, make extracts from or
request copies of any such Records in the manner and to the extent requested,
and to duplicate, in the discretion of the Receiver or the Corporation, any
Record in the form of microfilm or microfiche pertaining to Deposit account
relationships;
provided
,
that
in the event that the Failed Bank
maintained one or more duplicate copies of such microfilm or microfiche
Records, the Assuming Bank hereby assigns, transfers, and conveys to the
Corporation one such duplicate copy of each such Record without cost to the
Corporation, and agrees to deliver to the Corporation all Records assigned and
transferred to the Corporation under this Article VI as soon as
practicable on or after the date of this Agreement. The party requesting a copy
of any Record shall bear the cost (based on standard accepted industry charges
to the extent applicable, as determined by the Receiver) for providing such
duplicate Records. A
26
copy of each Record requested shall be provided as soon as practicable
by the party having custody thereof.
ARTICLE VII
FIRST LOSS TRANCHE
The Assuming Bank has submitted to the Receiver an
asset premium (discount) bid of
($10,700,000.00)
and a positive Deposit premium bid of
0%
.
The Deposit premium bid will be applied to the total of all Assumed Deposits
except for brokered, CDARS, and any market place or similar subscription
services Deposits. The First Loss Tranche shall be determined by adding (i) the
asset premium (discount) bid, (ii) the Deposit premium bid, and
(iii) the Equity Adjustment. If the First Loss Tranche is a positive
number, then this is the Losses on Single Family Shared-Loss Loans and Net
Charge-offs on Shared Loss Assets that the Assuming Bank will incur before
loss-sharing commences under Exhibits 4.15A and 4.15B. If the First Loss
Tranche is a negative number, the Corporation shall pay such amount by wire
transfer to the Assuming Bank by the end of the first business day following
Bank Closing, together with interest determined in accordance with
Section 8.4, and loss sharing shall commence immediately.
ARTICLE VIII
ADJUSTMENTS
8.1
Pro Forma Statement
. The Receiver, as soon as
practicable after Bank Closing, in accordance with the best information then
available, shall provide to the Assuming Bank a pro forma statement reflecting
any adjustments of such liabilities and assets as may be necessary. Such pro
forma statement shall take into account, to the extent possible, (i) liabilities
and assets of a nature similar to those contemplated by Section 2.1 or
Section 3.1, respectively, which at Bank Closing were carried in the
Failed Bank’s suspense accounts, (ii) accruals as of Bank Closing for all
income related to the assets and business of the Failed Bank acquired by the
Assuming Bank hereunder, whether or not such accruals were reflected on the
Accounting Records of the Failed Bank in the normal course of its operations,
and (iii) adjustments to determine the Book Value of any investment in an
Acquired Subsidiary and related accounts on the “bank only” (unconsolidated)
balance sheet of the Failed Bank based on the equity method of accounting,
whether or not the Failed Bank used the equity method of accounting for
investments in subsidiaries, except that the resulting amount cannot be less
than the Acquired Subsidiary’s recorded equity as of Bank Closing as reflected
on the Accounting Records of the Acquired Subsidiary. Any Loan purchased by the
Assuming Bank pursuant to Section 3.1 which the Failed Bank charged off
during the period beginning the day after the Bid Valuation Date to the date of
Bank Closing shall be deemed not to be charged off for the purposes of the pro
forma statement, and the purchase price shall be determined pursuant to
Section 3.2.
27
8.2
Correction of Errors and Omissions; Other Liabilities
.
(a) In
the event any bookkeeping omissions or errors are discovered in preparing any
pro forma statement or in completing the transfers and assumptions contemplated
hereby, the parties hereto agree to correct such errors and omissions, it being
understood that, as far as practicable, all adjustments will be made consistent
with the judgments, methods, policies or accounting principles utilized by the
Failed Bank in preparing and maintaining Accounting Records, except that
adjustments made pursuant to this Section 8.2(a) are not intended to
bring the Accounting Records of the Failed Bank into accordance with generally
accepted accounting principles.
(b) If
the Receiver discovers at any time subsequent to the date of this Agreement
that any claim exists against the Failed Bank which is of such a nature that it
would have been included in the liabilities assumed under Article II had
the existence of such claim or the facts giving rise thereto been known as of
Bank Closing, the Receiver may, in its discretion, at any time, require that
such claim be assumed by the Assuming Bank in a manner consistent with the
intent of this Agreement. The Receiver will make appropriate adjustments to the
pro forma statement provided by the Receiver to the Assuming Bank pursuant to
Section 8.1 as may be necessary.
8.3
Payments
. The Receiver agrees to
cause to be paid to the Assuming Bank, or the Assuming Bank agrees to pay to
the Receiver, as the case may be, on the Settlement Date, a payment in an
amount which reflects net adjustments (including any costs, expenses and fees
associated with determinations of value as provided in this Agreement) made pursuant
to Section 8.1 or Section 8.2, plus interest as provided in
Section 8.4. The Receiver and the Assuming Bank agree to effect on the
Settlement Date any further transfer of assets to or assumption of liabilities
or claims by the Assuming Bank as may be necessary in accordance with
Section 8.1 or Section 8.2.
8.4
Interest
. Any amounts paid under
Section 8.3 or Section 8.5, shall bear interest for the period from
and including the day following Bank Closing to and including the day preceding
the payment at the Settlement Interest Rate.
8.5
Subsequent Adjustments
.
In the event
that the Assuming Bank or the
Receiver discovers any errors or omissions as contemplated by Section 8.2
or any error with respect to the payment made under Section 8.3 after the Settlement
Date, the Assuming Bank and the Receiver agree to promptly correct any such
errors or omissions, make any payments and effect any transfers or assumptions
as may be necessary to reflect any such correction plus interest as provided in
Section 8.4.
ARTICLE IX
CONTINUING COOPERATION
9.1
General Matters
. The parties hereto agree
that they will, in good faith
and with their best efforts, cooperate with each other to carry out the
transactions contemplated by this Agreement and to effect the purposes hereof.
28
9.2
Additional Title Documents
. The Receiver,
the Corporation and the Assuming Bank each agree, at any time, and from time to
time, upon the request of any party hereto, to execute and deliver such
additional instruments and documents of conveyance as shall be reasonably
necessary to vest in the appropriate party its full legal or equitable title in
and to the property transferred pursuant to this Agreement or to be transferred
in accordance herewith. The Assuming Bank shall prepare such instruments and
documents of conveyance (in form and substance satisfactory to the Receiver) as
shall be necessary to vest title to the Assets in the Assuming Bank. The
Assuming Bank shall be responsible for recording such instruments and documents
of conveyance at its own expense.
9.3
Claims and Suits
.
(a) The
Receiver shall have the right, in its discretion, to (i) defend or settle
any claim or suit against the Assuming Bank with respect to which the Receiver has
indemnified the Assuming Bank in the same manner and to the same extent as
provided in Article XII, and (ii) defend or settle any claim or suit
against the Assuming Bank with respect to any Liability Assumed, which claim or
suit may result in a loss to the Receiver arising out of or related to this
Agreement, or which existed against the Failed Bank on or before Bank Closing.
The exercise by the Receiver of any rights under this
Section 9.3(a) shall not release the Assuming Bank with respect to
any of its obligations under this Agreement.
(b) In
the event any action at law or in equity shall be instituted by any Person
against the Receiver and the Corporation as codefendants with respect to any
asset of the Failed Bank retained or acquired pursuant to this Agreement by the
Receiver, the Receiver agrees, at the request of the Corporation, to join with
the Corporation in a petition to remove the action to the United States
District Court for the proper district. The Receiver agrees to institute, with
or without joinder of the Corporation as coplaintiff, any action with respect
to any such retained or acquired asset or any matter connected therewith
whenever notice requiring such action shall be given by the Corporation to the
Receiver.
9.4
Payment of Deposits
. In the event any depositor
does not accept the obligation
of the Assuming Bank to pay any Deposit liability of the Failed Bank assumed by
the Assuming Bank pursuant to this Agreement and asserts a claim against the
Receiver for all or any portion of any such Deposit liability, the Assuming
Bank agrees on demand to provide to the Receiver funds sufficient to pay such
claim in an amount not in excess of the Deposit liability reflected on the
books of the Assuming Bank at the time such claim is made. Upon payment by the
Assuming Bank to the Receiver of such amount, the Assuming Bank shall be
discharged from any further obligation under this Agreement to pay to any such
depositor the amount of such Deposit liability paid to the Receiver.
9.5
Withheld Payments
. At any time, the Receiver
or the Corporation may, in its
discretion, determine that all or any portion of any deposit balance assumed by
the Assuming Bank pursuant to this Agreement does not constitute a “Deposit”
(or otherwise, in its discretion, determine that it is the best interest of the
Receiver or Corporation to withhold all or any portion of any deposit), and may
direct the Assuming Bank to withhold payment of all or any portion of
29
any such deposit balance. Upon such direction, the Assuming Bank agrees
to hold such deposit and not to make any payment of such deposit balance to or
on behalf of the depositor, or to itself, whether by way of transfer, set-off,
or otherwise. The Assuming Bank agrees to maintain the “withheld payment”
status of any such deposit balance until directed in writing by the Receiver or
the Corporation as to its disposition. At the direction of the Receiver or the
Corporation, the Assuming Bank shall return all or any portion of such deposit
balance to the Receiver or the Corporation, as appropriate, and thereupon the
Assuming Bank shall be discharged from any further liability to such depositor
with respect to such returned deposit balance. If such deposit balance has been
paid to the depositor prior to a demand for return by the Corporation or the
Receiver, and payment of such deposit balance had not been previously withheld
pursuant to this Section, the Assuming Bank shall not be obligated to return
such deposit balance to the Receiver or the Corporation. The Assuming Bank
shall be obligated to reimburse the Corporation or the Receiver, as the case
may be, for the amount of any deposit balance or portion thereof paid by the
Assuming Bank in contravention of any previous direction to withhold payment of
such deposit balance or return such deposit balance the payment of which was
withheld pursuant to this Section.
9.6
Proceedings with Respect to Certain Assets and
Liabilities
.
(a) In
connection with any investigation, proceeding or other matter with respect to
any asset or liability of the Failed Bank retained by the Receiver, or any
asset of the Failed Bank acquired by the Receiver pursuant to this Agreement,
the Assuming Bank shall cooperate to the extent reasonably required by the
Receiver.
(b) In
addition to its obligations under Section 6.4, the Assuming Bank shall
provide representatives of the Receiver access at reasonable times and
locations without other limitation or qualification to (i) its directors,
officers, employees and agents and those of the Subsidiaries acquired by the
Assuming Bank, and (ii) its books and records, the books and records of
such Subsidiaries and all Credit Files, and copies thereof. Copies of books,
records and Credit Files shall be provided by the Assuming Bank as requested by
the Receiver and the costs of duplication thereof shall be borne by the
Receiver.
(c) Not
later than ten (10) days after the Put Notice pursuant to Section 3.4
or the date of the notice of transfer of any Loan by the Assuming Bank to the
Receiver pursuant to Section 3.6, the Assuming Bank shall deliver to the
Receiver such documents with respect to such Loan as the Receiver may request,
including without limitation the following: (i) all related Credit Documents
(other than certificates, notices and other ancillary documents), (ii) a
certificate setting forth the principal amount on the date of the transfer and
the amount of interest, fees and other charges then accrued and unpaid thereon,
and any restrictions on transfer to which any such Loan is subject, and
(iii) all Credit Files, and all documents, microfiche, microfilm and
computer records (including but not limited to magnetic tape, disc storage,
card forms and printed copy) maintained by, owned by, or in the possession of
the Assuming Bank or any Affiliate of the Assuming Bank relating to the
transferred Loan.
9.7
Information
. The Assuming Bank promptly
shall provide to the Corporation such other information, including financial
statements and computations, relating to the performance
30
of the provisions of this Agreement as the Corporation or the Receiver
may request from time to time, and, at the request of the Receiver, make
available employees of the Failed Bank employed or retained by the Assuming
Bank to assist in preparation of the pro forma statement pursuant to
Section 8.1.
ARTICLE X
CONDITION PRECEDENT
The obligations of the parties to this Agreement are
subject to the Receiver and the Corporation having received at or before Bank
Closing evidence reasonably satisfactory to each of any necessary approval,
waiver, or other action by any governmental authority, the board of directors
of the Assuming Bank, or other third party, with respect to this Agreement and
the transactions contemplated hereby, the closing of the Failed Bank and the
appointment of the Receiver, the chartering of the Assuming Bank, and any
agreements, documents, matters or proceedings contemplated hereby or thereby.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK
The Assuming Bank represents and warrants to the
Corporation and the Receiver as follows:
(a)
Corporate Existence
and Authority
. The Assuming Bank (i) is duly
organized, validly existing and in good standing under the laws of its
Chartering Authority and has full power and authority to own and operate its
properties and to conduct its business as now conducted by it, and
(ii) has full power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The Assuming Bank has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement and the performance of the transactions contemplated hereby.
(b)
Third Party Consents
. No
governmental authority or other third party consents (including but not limited
to approvals, licenses, registrations or declarations) are required in
connection with the execution, delivery or performance by the Assuming Bank of
this Agreement, other than such consents as have been duly obtained and are in
full force and effect.
(c)
Execution and
Enforceability
. This Agreement has been duly executed and
delivered by the Assuming Bank and when this Agreement has been duly
authorized, executed and delivered by the Corporation and the Receiver, this
Agreement will constitute the legal, valid and binding obligation of the
Assuming Bank, enforceable in accordance with its terms.
(d)
Compliance with Law
.
(i) Neither the Assuming Bank nor any of its Subsidiaries is
in violation of any statute, regulation, order, decision, judgment or decree
of, or any restriction imposed by, the United States of America, any State,
municipality or other political subdivision or any agency of any of the
foregoing, or any court or other tribunal having jurisdiction over the Assuming
Bank
31
or any of its Subsidiaries or any assets of any such Person, or any
foreign government or agency thereof having such jurisdiction, with respect to
the conduct of the business of the Assuming Bank or of any of its Subsidiaries,
or the ownership of the properties of the Assuming Bank or any of its
Subsidiaries, which, either individually or in the aggregate with all other
such violations, would materially and adversely affect the business, operations
or condition (financial or otherwise) of the Assuming Bank or the ability of
the Assuming Bank to perform, satisfy or observe any obligation or condition
under this Agreement.
(ii) Neither
the execution and delivery nor the performance by the Assuming Bank of this
Agreement will result in any violation by the Assuming Bank of, or be in
conflict with, any provision of any applicable law or regulation, or any order,
writ or decree of any court or governmental authority.
e)
Representations Remain True
. The
Assuming Bank represents and warrants that it has executed and delivered to the
Corporation a Purchaser Eligibility Certification and Confidentiality Agreement
and that all information provided and representations made by or on behalf of
the Assuming Bank in connection with this Agreement and the transactions
contemplated hereby, including, but not limited to, the Purchaser Eligibility
Certification and Confidentiality Agreement (which are affirmed and ratified
hereby) are and remain true and correct in all material respects and do not
fail to state any fact required to make the information contained therein not
misleading.
ARTICLE XII
INDEMNIFICATION
12.1
Indemnification of Indemnitees
. From and
after Bank Closing and subject to the limitations set forth in this
Section and Section 12.6 and compliance by the Indemnitees with
Section 12.2, the Receiver agrees to indemnify and hold harmless the
Indemnitees against any and all costs, losses, liabilities, expenses (including
attorneys’ fees) incurred prior to the assumption of defense by the Receiver
pursuant to paragraph (d) of Section 12.2, judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
claims against any Indemnitee based on liabilities of the Failed Bank that are
not assumed by the Assuming Bank pursuant to this Agreement or subsequent to
the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the
Assuming Bank for which indemnification is provided hereunder in (a) of
this Section 12.1, subject to certain exclusions as provided in
(b) of this Section 12.1:
(a)
(1) claims
based on the rights of any shareholder or former shareholder as such of
(x) the Failed Bank, or (y) any Subsidiary or Affiliate of the Failed
Bank;
(2) claims
based on the rights of any creditor as such of the Failed Bank, or any creditor
as such of any director, officer, employee or agent of the Failed Bank, with
respect to any indebtedness or other obligation of the Failed Bank arising
prior to Bank Closing;
32
(3) claims
based on the rights of any present or former director, officer, employee or
agent as such of the Failed Bank or of any Subsidiary or Affiliate of the
Failed Bank;
(4) claims
based on any action or inaction prior to Bank Closing of the Failed Bank, its
directors, officers, employees or agents as such, or any Subsidiary or
Affiliate of the Failed Bank, or the directors, officers, employees or agents
as such of such Subsidiary or Affiliate;
(5) claims
based on any malfeasance, misfeasance or nonfeasance of the Failed Bank, its
directors, officers, employees or agents with respect to the trust business of
the Failed Bank, if any;
(6) claims
based on any failure or alleged failure (not in violation of law) by the
Assuming Bank to continue to perform any service or activity previously
performed by the Failed Bank which the Assuming Bank is not required to perform
pursuant to this Agreement or which arise under any contract to which the
Failed Bank was a party which the Assuming Bank elected not to assume in
accordance with this Agreement and which neither the Assuming Bank nor any
Subsidiary or Affiliate of the Assuming Bank has assumed subsequent to the
execution hereof;
(7) claims
arising from any action or inaction of any Indemnitee, including for purposes
of this Section 12.1(a)(7) the former officers or employees of the
Failed Bank or of any Subsidiary or Affiliate of the Failed Bank that is taken
upon the specific written direction of the Corporation or the Receiver,
other
than
any action or inaction taken in a manner constituting bad faith,
gross negligence or willful misconduct; and
(8) claims
based on the rights of any depositor of the Failed Bank whose deposit has been
accorded “withheld payment” status and/or returned to the Receiver or
Corporation in accordance with Section 9.5 and/or has become an “unclaimed
deposit” or has been returned to the Corporation or the Receiver in accordance
with Section 2.3;
(b)
provided,
that
, with respect to this Agreement, except for paragraphs (7) and
(8) of Section 12.1(a), no indemnification will be provided under this
Agreement for any:
(1) judgment or fine against, or any amount
paid in settlement (without the written approval of the Receiver) by, any
Indemnitee in connection with any action that seeks damages against any
Indemnitee (a “counterclaim”) arising with respect to any Asset and based on
any action or inaction of either the Failed Bank, its directors, officers,
employees or agents as such prior to Bank Closing, unless any such judgment,
fine or amount paid in settlement exceeds the greater of (i) the
Repurchase Price of such Asset, or (ii) the monetary recovery sought on
such Asset by the Assuming Bank in the cause of action from which the
counterclaim arises; and in such event the Receiver will provide
indemnification only in the amount of such excess; and no indemnification will
be provided for any costs or expenses other than any costs or expenses (including
attorneys’ fees) which, in the determination of the Receiver, have been
actually and reasonably incurred by such Indemnitee in connection with the
defense of any such counterclaim; and it is expressly agreed that the Receiver
reserves the right to intervene, in its
33
discretion, on its behalf and/or on behalf of the Receiver, in the
defense of any such counterclaim;
(2) claims
with respect to any liability or obligation of the Failed Bank that is expressly
assumed by the Assuming Bank pursuant to this Agreement or subsequent to the
execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the
Assuming Bank;
(3) claims
with respect to any liability of the Failed Bank to any present or former
employee as such of the Failed Bank or of any Subsidiary or Affiliate of the
Failed Bank, which liability is expressly assumed by the Assuming Bank pursuant
to this Agreement or subsequent to the execution hereof by the Assuming Bank or
any Subsidiary or Affiliate of the Assuming Bank;
(4) claims
based on the failure of any Indemnitee to seek recovery of damages from the
Receiver for any claims based upon any action or inaction of the Failed Bank,
its directors, officers, employees or agents as fiduciary, agent or custodian
prior to Bank Closing;
(5) claims
based on any violation or alleged violation by any Indemnitee of the antitrust,
branching, banking or bank holding company or securities laws of the United
States of America or any State thereof;
(6) claims
based on the rights of any present or former creditor, customer, or supplier as
such of the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank;
(7) claims
based on the rights of any present or former shareholder as such of the
Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank regardless of
whether any such present or former shareholder is also a present or former
shareholder of the Failed Bank;
(8) claims,
if the Receiver determines that the effect of providing such indemnification
would be to (i) expand or alter the provisions of any warranty or
disclaimer thereof provided in Section 3.3 or any other provision of this
Agreement, or (ii) create any warranty not expressly provided under this
Agreement;
(9) claims
which could have been enforced against any Indemnitee had the Assuming Bank not
entered into this Agreement;
(10) claims
based on any liability for taxes or fees assessed with respect to the
consummation of the transactions contemplated by this Agreement, including
without limitation any subsequent transfer of any Assets or Liabilities Assumed
to any Subsidiary or Affiliate of the Assuming Bank;
(11) except
as expressly provided in this Article XII, claims based on any action or
inaction of any Indemnitee, and nothing in this Agreement shall be construed to
provide indemnification for (i) the Failed Bank, (ii) any Subsidiary
or Affiliate of the Failed Bank, or (iii) any present or former director,
officer, employee or agent of the Failed Bank or its Subsidiaries or
Affiliates;
provided,
that
the Receiver, in its discretion, may
provide indemnification
34
hereunder for any present or former director, officer, employee or
agent of the Failed Bank or its Subsidiaries or Affiliates who is also or
becomes a director, officer, employee or agent of the Assuming Bank or its
Subsidiaries or Affiliates;
(12) claims
or actions which constitute a breach by the Assuming Bank of the
representations and warranties contained in Article XI;
(13) claims
arising out of or relating to the condition of or generated by an Asset arising
from or relating to the presence, storage or release of any hazardous or toxic
substance, or any pollutant or contaminant, or condition of such Asset which
violate any applicable Federal, State or local law or regulation concerning
environmental protection; and
(14) claims
based on, related to or arising from any asset, including a loan, acquired or
liability assumed by the Assuming Bank, other than pursuant to this Agreement.
12.2
Conditions Precedent to Indemnification
. It shall be a
condition precedent to the obligation of the Receiver to indemnify any Person
pursuant to this Article XII that such Person shall, with respect to any
claim made or threatened against such Person for which such Person is or may be
entitled to indemnification hereunder:
(a) give
written notice to the Regional Counsel (Litigation Branch) of the Corporation
in the manner and at the address provided in Section 13.7 of such claim as
soon as practicable after such claim is made or threatened;
provided,
that
notice must be given on or before the date which is six (6) years from the
date of this Agreement;
(b) provide
to the Receiver such information and cooperation with respect to such claim as
the Receiver may reasonably require;
(c) cooperate
and take all steps, as the Receiver may reasonably require, to preserve and
protect any defense to such claim;
(d) in
the event suit is brought with respect to such claim, upon reasonable prior
notice, afford to the Receiver the right, which the Receiver may exercise in
its sole discretion, to conduct the investigation, control the defense and
effect settlement of such claim, including without limitation the right to
designate counsel and to control all negotiations, litigation, arbitration,
settlements, compromises and appeals of any such claim, all of which shall be
at the expense of the Receiver;
provided
,
that
the Receiver shall
have notified the Person claiming indemnification in writing that such claim is
a claim with respect to which the Person claiming indemnification is entitled
to indemnification under this Article XII;
(e) not
incur any costs or expenses in connection with any response or suit with
respect to such claim, unless such costs or expenses were incurred upon the
written direction of the Receiver;
provided
,
that
the Receiver
shall not be obligated to reimburse the amount of any such costs or expenses
unless such costs or expenses were incurred upon the written direction of the
Receiver;
35
(f) not
release or settle such claim or make any payment or admission with respect
thereto, unless the Receiver consents in writing thereto, which consent shall
not be unreasonably withheld;
provided
,
that
the Receiver shall
not be obligated to reimburse the amount of any such settlement or payment
unless such settlement or payment was effected upon the written direction of
the Receiver; and
(g) take
reasonable action as the Receiver may request in writing as necessary to
preserve, protect or enforce the rights of the indemnified Person against any
Primary Indemnitor.
12.3
No Additional Warranty
. Nothing in this
Article XII shall be construed or deemed to (i) expand or otherwise
alter any warranty or disclaimer thereof provided under Section 3.3 or any
other provision of this Agreement with respect to, among other matters, the
title, value, collectibility, genuineness, enforceability or condition of any
(x) Asset, or (y) asset of the Failed Bank purchased by the Assuming
Bank subsequent to the execution of this Agreement by the Assuming Bank or any
Subsidiary or Affiliate of the Assuming Bank, or (ii) create any warranty
not expressly provided under this Agreement with respect thereto.
12.4
Indemnification of Receiver and Corporation
. From and
after Bank Closing, the Assuming Bank agrees to indemnify and hold harmless the
Corporation and the Receiver and their respective directors, officers,
employees and agents from and against any and all costs, losses, liabilities,
expenses (including attorneys’ fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with any of the
following:
(a) claims
based on any and all liabilities or obligations of the Failed Bank assumed by
the Assuming Bank pursuant to this Agreement or subsequent to the execution
hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming
Bank, whether or not any such liabilities subsequently are sold and/or
transferred, other than any claim based upon any action or inaction of any Indemnitee
as provided in paragraph (7) or (8) of Section 12.1(a); and
(b) claims
based on any act or omission of any Indemnitee (including but not limited to
claims of any Person claiming any right or title by or through the Assuming
Bank with respect to Assets transferred to the Receiver pursuant to
Section 3.4 or 3.6), other than any action or inaction of any Indemnitee
as provided in paragraph (7) or (8) of Section 12.1(a).
12.5
Obligations Supplemental
. The
obligations of the Receiver, and the Corporation as guarantor in accordance
with Section 12.7, to provide indemnification under this Article XII
are to supplement any amount payable by any Primary Indemnitor to the Person
indemnified under this Article XII. Consistent with that intent, the
Receiver agrees only to make payments pursuant to such indemnification to the
extent not payable by a Primary Indemnitor. If the aggregate amount of payments
by the Receiver, or the Corporation as guarantor in accordance with
Section 12.7, and all Primary Indemnitors with respect to any item of
indemnification under this Article XII exceeds the amount payable with
respect to such item, such Person being indemnified shall notify the Receiver
thereof and, upon the request of the Receiver, shall promptly pay to the Receiver,
or the Corporation as appropriate, the amount of the Receiver’s (or Corporation’s)
payments to the extent of such excess.
36
12.6
Criminal Claims
. Notwithstanding any
provision of this Article XII to the contrary, in the event that any
Person being indemnified under this Article XII shall become involved in
any criminal action, suit or proceeding, whether judicial, administrative or
investigative, the Receiver shall have no obligation hereunder to indemnify
such Person for liability with respect to any criminal act or to the extent any
costs or expenses are attributable to the defense against the allegation of any
criminal act, unless (i) the Person is successful on the merits or
otherwise in the defense against any such action, suit or proceeding, or
(ii) such action, suit or proceeding is terminated without the imposition
of liability on such Person.
12.7
Limited Guaranty of the Corporation
.
The
Corporation hereby guarantees performance of the Receiver’s obligation to
indemnify the Assuming Bank as set forth in this Article XII. It is a
condition to the Corporation’s obligation hereunder that the Assuming Bank
shall comply in all respects with the applicable provisions of this
Article XII. The Corporation shall be liable hereunder only for such
amounts, if any, as the Receiver is obligated to pay under the terms of this
Article XII but shall fail to pay. Except as otherwise provided above in
this Section 12.7, nothing in this Article XII is intended or shall
be construed to create any liability or obligation on the part of the
Corporation, the United States of America or any department or agency thereof
under or with respect to this Article XII, or any provision hereof, it
being the intention of the parties hereto that the obligations undertaken by
the Receiver under this Article XII are the sole and exclusive
responsibility of the Receiver and no other Person or entity.
12.8
Subrogation
.
Upon payment by the
Receiver, or the Corporation as guarantor in accordance with Section 12.7,
to any Indemnitee for any claims indemnified by the Receiver under this
Article XII, the Receiver, or the Corporation as appropriate, shall become
subrogated to all rights of the Indemnitee against any other Person to the extent
of such payment.
ARTICLE XIII
MISCELLANEOUS
13.1
Entire Agreement
. This Agreement embodies
the entire agreement of the parties hereto in relation to the subject matter
herein and supersedes all prior understandings or agreements, oral or written,
between the parties.
13.2
Headings
. The headings and
subheadings of the Table of Contents, Articles and Sections contained in this
Agreement, except the terms identified for definition in Article I and
elsewhere in this Agreement, are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or any provision hereof.
13.3
Counterparts
. This Agreement may be
executed in any number of counterparts and by the duly authorized
representative of a different party hereto on separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same Agreement.
13.4
GOVERNING LAW
. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED STATES OF AMERICA,
37
AND IN THE ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH
THE LAWS OF THE STATE IN WHICH THE MAIN OFFICE OF THE FAILED BANK IS LOCATED.
13.5
Successors
.
All terms and conditions of
this Agreement shall be binding on the successors and assigns of the Receiver,
the Corporation and the Assuming Bank. Except as otherwise specifically
provided in this Agreement, nothing expressed or referred to in this Agreement
is intended or shall be construed to give any Person other than the Receiver,
the Corporation and the Assuming Bank any legal or equitable right, remedy or
claim under or with respect to this Agreement or any provisions contained
herein, it being the intention of the parties hereto that this Agreement, the
obligations and statements of responsibilities hereunder, and all other
conditions and provisions hereof are for the sole and exclusive benefit of the
Receiver, the Corporation and the Assuming Bank and for the benefit of no other
Person.
13.6
Modification; Assignment
.
No amendment
or other modification, rescission, release, or assignment of any part of this
Agreement shall be effective except pursuant to a written agreement subscribed
by the duly authorized representatives of the parties hereto.
13.7
Notice
.
Any notice, request,
demand, consent, approval or other communication to any party hereto shall be
effective when received and shall be given
in writing,
and delivered in
person against receipt therefore, or sent by certified mail, postage prepaid,
courier service, telex, facsimile transmission or email to such party (with
copies as indicated below) at its address set forth below or at such other address
as it shall hereafter furnish in writing to the other parties. All such notices
and other communications shall be deemed given on the date received by the
addressee.
Assuming Bank
State Bank & Trust Company
Attn: Mr. J. Daniel Speight, Vice Chairman and Secretary
4219 Forsyth Road
Macon, Georgia 31210
Fax: ****
|
cc:
|
Mr. Joe Evans
|
|
|
Ms. Kim Childers
|
Receiver and Corporation
Federal Deposit Insurance Corporation,
Receiver of
First Security National
Bank
1601 Bryan Street, Suite 1700
Dallas, Texas 75201
Attention: Settlement Manager
with copy to: Regional Counsel (Litigation Branch)
38
and with respect to notice under Article XII:
Federal Deposit Insurance Corporation
Receiver of
First Security National
Bank
1601 Bryan Street, Suite 1700
Dallas, Texas 75201
Attention: Regional Counsel (Litigation Branch)
13.8
Manner of Payment
. All payments due under
this Agreement shall be in lawful money of the United States of America in
immediately available funds as each party hereto may specify to the other
parties;
provided,
that
in the event the Receiver or the
Corporation is obligated to make any payment hereunder in the amount of
$25,000.00 or less, such payment may be made by check.
13.9
Costs, Fees and Expenses
. Except as
otherwise specifically provided herein, each party hereto agrees to pay all
costs, fees and expenses which it has incurred in connection with or incidental
to the matters contained in this Agreement, including without limitation any
fees and disbursements to its accountants and counsel;
provided,
that
the Assuming Bank shall pay all fees, costs and expenses (other than attorneys’
fees incurred by the Receiver) incurred in connection with the transfer to it
of any Assets or Liabilities Assumed hereunder or in accordance herewith.
13.10
Waiver
. Each of the Receiver, the
Corporation and the Assuming Bank may waive its respective rights, powers or
privileges under this Agreement;
provided,
that
such waiver shall
be in writing;
and
further
provided,
that
no
failure or delay on the part of the Receiver, the Corporation or the Assuming
Bank to exercise any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor will any single or partial exercise of any
right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or privilege by the
Receiver, the Corporation, or the Assuming Bank under this Agreement, nor will
any such waiver operate or be construed as a future waiver of such right, power
or privilege under this Agreement.
13.11
Severability
. If any provision of this
Agreement is declared invalid or unenforceable, then, to the extent possible,
all of the remaining provisions of this Agreement shall remain in full force
and effect and shall be binding upon the parties hereto.
13.12
Term of Agreement
. This Agreement shall
continue in full force and effect until the tenth (10th) anniversary of Bank
Closing;
provided,
that
the provisions of Section 6.3 and
6.4 shall survive the expiration of the term of this Agreement. Provided,
however, the receivership of the Failed Bank may be terminated prior to the
expiration of the term of this Agreement; in such event, the guaranty of the
Corporation, as provided in and in accordance with the provisions of
Section 12.7 shall be in effect for the remainder of the term. Expiration
of the term of this Agreement shall not affect any claim or liability of any
party with respect to any (i) amount which is owing at the time of such
expiration, regardless of when such amount becomes payable, and
(ii) breach of this Agreement occurring prior to such expiration,
regardless of when such breach is discovered.
39
13.13
Survival of Covenants, Etc
.
The covenants,
representations, and warranties in this Agreement shall survive the execution
of this Agreement and the consummation of the transactions contemplated
hereunder.
[Signature
Page Follows]
40
IN WITNESS WHEREOF
, the parties
hereto have caused this Agreement to be executed by their duly authorized
representatives as of the date first above written.
|
|
FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER
OF FIRST SECURITY NATIONAL BANK, NORCROSS, GEORGIA
|
|
|
|
|
|
|
|
|
BY:
|
/s/ Daniel M. Bell
|
|
|
NAME:
|
Daniel M. Bell
|
|
|
TITLE:
|
Receiver-in-Charge
|
|
Attest:
|
|
|
|
|
|
|
|
/s/ X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FEDERAL DEPOSIT INSURANCE CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/ Daniel M. Bell
|
|
|
|
NAME:
|
Daniel M. Bell
|
|
|
|
TITLE:
|
Attorney-in-Fact
|
|
|
|
|
|
|
|
|
|
|
|
Attest:
|
|
|
|
|
|
|
|
|
|
/s/ X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATE BANK & TRUST COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/ J. Daniel Speight
|
|
|
|
NAME:
|
J. Daniel Speight
|
|
|
|
TITLE:
|
Vice Chairman and Secretary
|
|
|
|
|
|
|
Attest:
|
|
|
|
|
|
|
|
|
|
/s/ Kim M. Childers
|
|
|
|
41
SCHEDULE
2.1 - Certain Liabilities Assumed by the Assuming Bank
42
SCHEDULE
2.1(a) — Excluded Deposit Liability Accounts
First
Security National Bank
Norcross,
Georgia
First Security National Bank has deposits associated with the
Depository Organization (DO) Cede & Co as Nominee for DTC. The DO
accounts do not pass to the Assuming Bank and are excluded from the transaction
as described in section 2.1 of the P&A Agreement. This schedule identifies
the DO accounts as of the date of the deposit download. This schedule will be
updated post closing with data as of Bank Closing date.
|
|
|
|
|
CLAIMANT
|
|
ACCOUNT
|
|
CLAIM
|
|
|
|
TYPE
|
|
P & I
|
|
NAME
|
|
NUMBER
|
|
TYPE
|
|
RATE
|
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
|
|
|
|
|
|
|
|
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
|
$
|
2,497,763.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ACCOUNTS : 2
43
SCHEDULE
3.1 - Certain Assets Purchased
SEE ATTACHED LIST
THE LIST(S) ATTACHED TO THIS SCHEDULE (OR
SUBSCHEDULE(S)) AND THE INFORMATION THEREIN, IS AS OF THE DATE OF THE MOST
RECENT PERTINENT DATA MADE AVAILABLE TO THE ASSUMING BANK AS PART OF THE
INFORMATION PACKAGE. IT WILL BE ADJUSTED TO REFLECT THE COMPOSITION AND BOOK
VALUE OF THE LOANS AND ASSETS AS OF THE DATE OF BANK CLOSING. THE
LIST(S) MAY NOT INCLUDE ALL LOANS AND ASSETS (E.G., CHARGED OFF
LOANS). THE LIST(S) MAY BE REPLACED WITH A MORE ACCURATE LIST POST
CLOSING.
44
SCHEDULE
3.2 - Purchase Price of Assets or assets
|
(a)
|
|
cash
and receivables from depository institutions, including cash items in the
process of collection, plus interest thereon:
|
|
Book
Value
|
|
|
|
|
|
|
|
(b)
|
|
securities
(exclusive of the capital stock of Acquired Subsidiaries and FRB and FHLB
stock), plus interest thereon:
|
|
As
provided in Section 3.2(b)
|
|
|
|
|
|
|
|
(c)
|
|
federal
funds sold and repurchase agreements, if any, including interest thereon:
|
|
Book
Value
|
|
|
|
|
|
|
|
(d)
|
|
Loans:
|
|
Book
Value
|
|
|
|
|
|
|
|
(e)
|
|
credit
card business, if any, including all outstanding extensions of credit and
offensive litigation, but excluding any class action lawsuits related to the
credit card business:
|
|
Book
Value
|
|
|
|
|
|
|
|
(f)
|
|
Safe
Deposit Boxes and related business, safekeeping business and trust business,
if any:
|
|
Book
Value
|
|
|
|
|
|
|
|
(g)
|
|
Records
and other documents:
|
|
Book
Value
|
|
|
|
|
|
|
|
(h)
|
|
Other
Real Estate
|
|
Book
Value
|
|
|
|
|
|
|
|
(i)
|
|
boats,
motor vehicles, aircraft, trailers, fire arms, repossessed collateral
|
|
Book
Value
|
|
|
|
|
|
|
|
(j)
|
|
capital
stock of any Acquired Subsidiaries and FRB and FHLB stock:
|
|
Book
Value
|
|
|
|
|
|
|
|
(k)
|
|
amounts
owed to the Failed Bank by any Acquired Subsidiary:
|
|
Book
Value
|
|
|
|
|
|
|
|
(l)
|
|
assets
securing Deposits of public money, to the extent not otherwise purchased
hereunder:
|
|
Book
Value
|
|
|
|
|
|
|
|
(m)
|
|
Overdrafts
of customers:
|
|
Book
Value
|
45
|
(n)
|
|
rights,
if any, with respect to Qualified Financial Contracts.
|
|
As
provided in Section 3.2(c)
|
|
|
|
|
|
|
|
(o)
|
|
rights
of the Failed Bank to provide mortgage servicing for others and to have
mortgage servicing provided to the Failed Bank by others and related
contracts.
|
|
Book
Value
|
assets subject to an option to purchase:
|
(a)
|
|
Bank Premises:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(b)
|
|
Furniture and Equipment:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(c)
|
|
Fixtures:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(d)
|
|
Other Equipment:
|
|
Fair Market Value
|
46
SCHEDULE
3.5(1) — Excluded Securities
|
CUS1P
|
|
DESCRIPTION
|
|
ORIGINAL
FACE VALUE
|
|
FTID
PRICE
|
|
PRICE
DATE
|
|
FACTOR
|
|
FACTOR DATE
|
|
MARKET
VALUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
47
SCHEDULE
4.15A
LOANS
SUBJECT TO LOSS SHARING UNDER THE
SINGLE FAMILY SHARED-LOSS AGREEMENT
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
48
SCHEDULE 4.15B
LOANS
SUBJECT TO LOSS SHARING UNDER THE
NON-SINGLE FAMILY SHARED-LOSS AGREEMENT
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
49
SCHEDULE 7
-Accounts Excluded from Calculation of Deposit Franchise Bid Premium
First
Security National Bank
Norcross, Georgia
The accounts identified below will pass to the Assuming Bank (unless
otherwise noted). When calculating the premium to be paid on Assumed Deposits
in a P&A transaction, the FDIC will exclude the following categories of
deposit accounts:
|
Category
|
|
Description
|
|
Amount
|
|
|
I
|
|
Non-
DO Brokered Deposits
|
|
$
|
3,390,875.47
|
|
|
|
|
(as
of 9/18/09)
|
|
|
|
|
|
|
|
|
|
|
|
II
|
|
CDARS
|
|
NONE
|
|
|
|
|
(as
of 9/18/09)
|
|
|
|
|
III
|
|
Market
Place Deposits
|
|
$
|
4,103,000.00
|
|
|
|
|
(as
of 9/22/09)
|
|
|
|
|
|
|
Total deposits excluded from Calculation
of premium
|
|
$
|
7,493,875.47
|
|
Category Description
I Brokered Deposits
Brokered deposit accounts are accounts for which the “depositor of
record” is an agent, nominee, or custodian who deposits funds for a principal
or principals to whom “pass-through” deposit insurance coverage may be
extended. The FDIC separates brokered deposit accounts into 2 categories: 1)
Depository Organization (DO) Brokered Deposits and 2) Non-Depository
Organization (Non- DO) Brokered Deposits. This distinction is made by the FDIC
to facilitate our role as Receiver and Insurer. These terms will not appear on
other “brokered deposit” reports generated by the institution.
Non-DO Brokered Deposits pass to the Assuming Bank, but are excluded
from Assumed Deposits when the deposit premium is calculated. Please see the
attached “Schedule 7 Non-DO Broker Deposit Detail Report” for a listing of
these accounts. This list will be updated post closing with balances as of Bank
Closing date.
If this institution had any DO Brokered Deposits (Cede & Co as
Nominee for DTC), they are excluded from Assumed Deposits in the P&A
transaction. A list of these accounts is provided on “Schedule 2.1 DO Brokered
Deposit Detail Report”.
II CDARS
CDARS deposits pass to the Assuming Bank, but are excluded from Assumed
Deposits when the deposit premium is calculated.
First Security National Bank did not participate in the CDARS program
as of the date of the deposit download. If CDARS deposits are taken between the
date of the deposit download and the Bank Closing Date, they will be identified
post closing and made part of Schedule 7 to the P&A Agreement.
III Market Place Deposits
“Market Place Deposits” is a description given to deposits that may
have been solicited via a money desk, internet subscription service (for
example, Qwickrate), or similar programs.
First Security National Bank does have Market Place Deposits as
identified above. If Market Place Deposits are taken between the date of the
deposit download and the Bank Closing Date, they will be identified post
closing and made part of Schedule 7 of the P&A Agreement.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
50
Non- DO Brokered Deposits
|
P & I
|
|
CLAIMANT NAME
|
|
ACCOUNT
NUMBER
|
|
CLAIM
TYPE
|
|
Rate
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$3,390,875.47
|
|
|
|
|
|
|
|
|
|
|
Total Accounts: 15
|
|
|
|
|
|
|
|
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
51
Market Place Deposits
|
Maturity Date
|
|
Date Opened
|
|
COD Account
|
|
Primary Name
|
|
Current Balance
|
|
Base
Rate
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
|
|
$
|
4,103,000.000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
52
EXHIBIT 2.3A
FINAL NOTICE LETTER
FINAL LEGAL NOTICE
Claiming Requirements for Deposits
Under 12 U.S.C. 1822(e)
[Date]
[Name of Unclaimed Depositor]
[Address of Unclaimed Depositor]
[Anytown, USA]
|
Subject:
|
[XXXXX — Name of Bank
|
|
|
City, State]
— In Receivership
|
Dear
[Sir/Madam]:
As you may know, on
[Date: Closing Date]
, the
[Name
of Bank (“The Bank”)]
was closed and the Federal Deposit Insurance
Corporation (“FDIC”) transferred
[The Bank’s]
accounts to
[Name of Acquiring Institution].
According to federal law under 12 U.S.C., 1822(e),
on
[Date: eighteen months from the Closing
Date]
,
[Name of Acquiring
Institution]
must transfer the funds in your account(s) back to
the FDIC if you have not claimed your account(s) with
[Name of Acquiring Institution].
Based on
the records recently supplied to us by
[Name
of Acquiring Institution]
, your account(s) currently fall into
this category.
This letter is your formal Legal Notice that you
have until
[Date: eighteen months from the
Closing Date]
, to claim or arrange to continue your
account(s) with
[Name of Acquiring
Institution].
There are several ways that you can claim your
account(s) at
[Name of Acquiring
Institution]
. It is only necessary for you to take any one of the
following actions in order for your account(s) at
[Name of Acquiring Institution]
to be
deemed claimed. In addition, if you have more than one account, your claim to
one account will automatically claim all accounts:
1.
Write to
[Name of Acquiring Institution]
and notify
them that you wish to keep your account(s) active with them. Please be
sure to include the name of the account(s), the account number(s), the
signature of an authorized signer on the account(s), name, and address.
[Name of Acquiring Institution]
address is:
[123 Main Street
Anytown, USA]
2.
Execute a new signature card
on your account(s), enter into a new deposit agreement with
[Name of Acquiring Institution],
change the
ownership on your account(s), or renegotiate the terms of your certificate of
deposit account(s) (if any).
3.
Provide
[Name of Acquiring Institution]
with a
change of address form.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
53
4.
Make a deposit to or
withdrawal from your account(s). This includes writing a check on any account
or having an automatic direct deposit credited to or an automatic withdrawal
debited from an account.
If you do not want to continue your
account(s) with
[Name of Acquiring
Institution]
for any reason, you can withdraw your funds and close
your account(s). Withdrawing funds from one or more of your
account(s) satisfies the federal law claiming requirement. If you have
time deposits, such as certificates of deposit,
[Name of Acquiring Institution]
can advise you how to withdraw
them without being charged an interest penalty for early withdrawal.
If you do not claim ownership of your
account(s) at
[Name of Acquiring
Institution by Date: eighteen months from the Closing Date]
federal
law requires
[Name of Acquiring Institution]
to return your deposits to the FDIC, which will deliver them as unclaimed
property to the State indicated in your address in the Failed Institution’s
records. If your address is outside of the United States, the FDIC will deliver
the deposits to the State in which the Failed Institution had its main office.
12 U.S.C. § 1822(e). If the State accepts custody of your deposits, you will
have 10 years from the date of delivery to claim your deposits from the State.
After 10 years you will be permanently barred from claiming your deposits.
However, if the State refuses to take custody of your deposits, you will be
able to claim them from the FDIC until the receivership is terminated. If you
have not claimed your insured deposits before the receivership is terminated,
and a receivership may be terminated at any time, all of your rights in those
deposits will be barred.
If you have any questions or concerns about these
items, please contact
[Bank Employee]
at
[Name of Acquiring Institution]
by
phone at
[(XXX) XXX-XXXX].
|
|
Sincerely,
|
|
|
|
|
|
|
|
|
[Name of Claims Specialist]
|
|
|
[Title]
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
54
EXHIBIT 2.3B
AFFIDAVIT OF MAILING
AFFIDAVIT OF MAILING
State of
COUNTY OF
I am employed as a
[Title of Office]
by the
[Name of Acquiring Institution]
.
This will attest that on
[Date of
mailing]
, I caused a true and correct copy of the Final Legal
Notice, attached hereto, to owners of unclaimed deposits of
[Name of Failed Bank]
, City, State, to be
prepared for deposit in the mail of the United States of America on behalf of
the Federal Deposit Insurance Corporation. A list of depositors to whom the
notice was mailed is attached. This notice was mailed to the depositor’s last
address as reflected on the books and records of the
[Name of Failed Bank]
as of the date of failure.
|
|
|
|
|
[Name]
|
|
|
[Title of Office]
|
|
|
[Name of Acquiring Institution]
|
Subscribed
and sworn to before me
this day
of [Month, Year].
My
commission expires:
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
55
EXHIBIT 3.2(c) —
VALUATION OF CERTAIN
QUALIFIED FINANCIAL CONTRACTS
A.
Scope
Interest Rate Contracts - All interest rate swaps,
forward rate agreements, interest rate futures, caps, collars and floors,
whether purchased or written.
Option Contracts - All put and call option
contracts, whether purchased or written, on marketable securities, financial
futures, foreign currencies, foreign exchange or foreign exchange futures
contracts.
Foreign Exchange Contracts - All contracts for future
purchase or sale of foreign currencies, foreign currency or cross currency swap
contracts, or foreign exchange futures contracts.
B.
Exclusions
All financial contracts used to hedge assets and
liabilities that are acquired by the Assuming Bank but are not subject to
adjustment from Book Value.
C.
Adjustment
The difference between the Book Value and market
value as of Bank Closing.
D.
Methodology
1.
The price at
which the Assuming Bank sells or disposes of Qualified Financial Contracts will
be deemed to be the fair market value of such contracts, if such sale or
disposition occurs at prevailing market rates within a predefined timetable as
agreed upon by the Assuming Bank and the Receiver.
2.
In valuing all
other Qualified Financial Contracts, the following principles will apply:
(i)
All known cash
flows under swaps or forward exchange contracts shall be present valued to the
swap zero coupon interest rate curve.
(ii)
All valuations
shall employ prices and interest rates based on the actual frequency of rate
reset or payment.
(iii)
Each tranche of
amortizing contracts shall be separately valued. The total value of such
amortizing contract shall be the sum of the values of its component tranches.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
56
(iv)
For regularly
traded contracts, valuations shall be at the midpoint of the bid and ask prices
quoted by customary sources (e.g.,
The Wall Street Journal
, Telerate,
Reuters or other similar source) or regularly traded exchanges.
(v)
For all other
Qualified Financial Contracts where published market quotes are unavailable,
the adjusted price shall be the average of the bid and ask price quotes from
three (3) securities dealers acceptable to the Receiver and Assuming Bank
as of Bank Closing. If quotes from securities dealers cannot be obtained, an
appraiser acceptable to the Receiver and the Assuming Bank will perform a valuation
based on modeling, correlation analysis, interpolation or other techniques, as
appropriate.]
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
57
EXHIBIT 4.13
INTERIM ASSET SERVICING ARRANGEMENT
(a)
With respect to each asset
(or liability) designated from time to time by the Receiver to be serviced by
the Assuming Bank pursuant to this Arrangement (such being designated as “Pool
Assets”), during the term of this Arrangement, the Assuming Bank shall:
(i)
Promptly apply payments
received with respect to any Pool Assets;
(ii)
Reverse and return
insufficient funds checks;
(iii)
Pay (A) participation
payments to participants in Loans, as and when received; and (B) tax and
insurance bills on Pool Assets as they come due, out of escrow funds maintained
for purposes;
(iv)
Maintain accurate records
reflecting (A) the payment history of Pool Assets, with updated
information received concerning changes in the address or identity of the
obligors and (B) usage of data processing equipment and employee services
with respect to servicing duties;
(v)
Send billing statements to
obligors on Pool Assets to the extent that such statements were sent by the
Failed Bank;
(vi)
Send notices to obligors who
are in default on Loans (in the same manner as the Failed Bank);
(vii)
Send to the Receiver, Attn:
Managing Liquidator, at the address provided in Section 13.7 of the
Agreement,
via
overnight
delivery
: (A) on a weekly
basis, weekly reports for the Pool Assets, including, without limitation,
reports reflecting collections and the trial balances, transaction journals and
loan histories for Pool Assets having activity, together with copies of
(1) checks received, (2) insufficient funds checks returned,
(3) checks for payment to participants or for taxes and insurance,
(4) pay-off requests, (5) notices to defaulted obligors, and
(6) data processing and employee logs and (B) any other reports, copies
or information as may be periodically or from time to time requested;
(viii) Remit on a weekly basis to the Receiver, Attn:
Division of Finance, Cashier Unit, Operations, at the address in (vii),
via
wire
transfer
to the account designated by the Receiver, all
payments received on Pool Assets managed by the Assuming Bank or at such time
and place and in such manner as may be directed by the Receiver;
(ix)
prepare and timely file all
information reports with appropriate tax authorities, and, if required by the
Receiver, prepare and file tax returns and pay taxes due on or before the due
date, relating to the Pool Assets; and
(x)
provide and furnish such
other services, operations or functions as may be required with regard to Pool
Assets, including, without limitation, as may be required with
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
58
regard to any business, enterprise or agreement which is a Pool Asset,
all as may be required by the Receiver.
Notwithstanding anything to the contrary in this Section, the Assuming
Bank shall not be required to initiate litigation or other collection
proceedings against any obligor or any collateral with respect to any defaulted
Loan. The Assuming Bank shall promptly notify the Receiver, at the address
provided above in subparagraph (a)(vii), of any claims or legal actions
regarding any Pool Asset.
(b)
The Receiver agrees to
reimburse the Assuming Bank for actual, reasonable and necessary expenses
incurred in connection with the performance of duties pursuant to this
Arrangement, including expenses of photocopying, postage and express mail, and
data processing and employee services (based upon the number of hours spent
performing servicing duties).
(c)
The Assuming Bank shall
provide the services described herein for an initial period of ninety (90) days
after Bank Closing. At the option of the Receiver, exercisable by notice given
not later than ten (10) days prior to the end of such initial period or a
renewal period, the Assuming Bank shall continue to provide such services for
such renewal period(s) as designated by the Receiver, up to the Settlement
Date.
(d)
At any time during the term
of this Arrangement, the Receiver may, upon written notice to the Assuming
Bank, remove one or more Pool Assets from the Pool, at which time the Assuming
Bank’s responsibility with respect thereto shall terminate.
(e)
At the expiration of this
Agreement or upon the termination of the Assuming Bank’s responsibility with
respect to any Pool Asset pursuant to paragraph (d) hereof, the Assuming
Bank shall:
(i)
deliver to the Receiver (or
its designee) all of the Credit Documents and Pool Records relating to the Pool
Assets; and
(ii)
cooperate with the Receiver
to facilitate the orderly transition of managing the Pool Assets to the
Receiver (or its designee).
(f)
At the request of the
Receiver, the Assuming Bank shall perform such transitional services with
regard to the Pool Assets as the Receiver may request. Transitional services
may include, without limitation, assisting in any due diligence process deemed
necessary by the Receiver and providing to the Receiver or its
designee(s) (x) information and data regarding the Pool Assets,
including, without limitation, system reports and data downloads sufficient to
transfer the Pool Assets to another system or systems, and (y) access to
employees of the Assuming Bank involved in the management of, or otherwise
familiar with, the Pool Assets.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
59
EXHIBIT 4.15A
SINGLE
FAMILY SHARED-LOSS AGREEMENT
This agreement for the reimbursement of loss sharing
on certain single family residential mortgage loans (the “Single Family
Shared-Loss Agreement”) shall apply when the Assuming Bank purchases Single
Family Shared-Loss Loans as that term is defined herein. The terms hereof shall
modify and supplement, as necessary, the terms of the Purchase and Assumption
Agreement to which this Single Family Shared-Loss Agreement is attached as
Exhibit 4.1 5A and incorporated therein. To the extent any inconsistencies
may arise between the terms of the Purchase and Assumption Agreement and this
Single Family Shared-Loss Agreement with respect to the subject matter of this
Single Family Shared-Loss Agreement, the terms of this Single Family
Shared-Loss Agreement shall control. References in this Single Family Shared-
Loss Agreement to a particular Section shall be deemed to refer to a
Section in this Single Family Shared-Loss Agreement, unless the context
indicates that it is intended to be a reference to a Section of the Purchase
and Assumption Agreement.
ARTICLE I
— DEFINITIONS
The capitalized terms used in this Single Family Shared-Loss Agreement
that are not defined in this Single Family Shared-Loss Agreement are defined in
the Purchase and Assumption Agreement. In addition to the terms defined above,
defined below are certain additional terms relating to loss-sharing, as used in
this Single Family Shared-Loss Agreement.
“
Accounting
Records
” means the subsidiary system of record on which the loan
history and balance of each Single Family Shared-Loss Loan is maintained;
individual loan files containing either an original or copies of documents that
are customary and reasonable with respect to loan servicing, including
management and disposition of Other Real Estate; the records documenting alternatives
considered with respect to loans in default or for which a default is
reasonably foreseeable; records of loss calculations and supporting
documentation with respect to line items on the loss calculations; and, monthly
delinquency reports and other performance reports customarily utilized by the
Assuming Bank in management of loan portfolios.
“
Accrued
Interest
” means, with respect to Single Family Shared-Loss
Loans, the amount of earned and unpaid interest at the note rate specified in
the applicable loan documents, limited to 90 days.
“
Affiliate
”
shall have the
meaning set forth in the Purchase and Assumption Agreement;
provided
,
that
,
for purposes of this Single Family Shared-Loss Agreement, no Third Party
Servicer shall be deemed to be an Affiliate of the Assuming Bank.
“
Commencement
Date
” means the first calendar day following the Bank Closing.
“
Commercial Shared-Loss
Agreement
” means the Commercial and Other Assets Shared-Loss
Agreement attached to the Purchase and Assumption Agreement as Exhibit 4.15B.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
60
“
Cumulative
Loss Amount
” means the sum of the Monthly Loss Amounts less the
sum of all Recovery Amounts.
“
Cumulative
Servicing Amount
” means the sum of the Period Servicing Amounts
for every consecutive twelve-month period prior to and ending on the True-Up
Measurement Date in respect of each of the Shared-Loss Agreements during which
the loss- sharing provisions of the applicable Shared-Loss Agreement is in
effect.
“
Cumulative
Shared-Loss Amount
” means the excess, if any, of the Cumulative
Loss Amount over the First Loss Tranche.
“
Cumulative
Shared-Loss Payments
” means (i) the aggregate of all of the
payments made or payable to the Assuming Bank under the Shared-Loss Agreements
minus (ii) the aggregate of all of the payments made or payable to the
Receiver under the Shared-Loss Agreements.
“
Customary
Servicing Procedures
” means procedures (including collection
procedures) that the Assuming Bank (or, to the extent a Third Party Servicer is
engaged, the Third Party Servicer) customarily employs and exercises in
servicing and administering mortgage loans for its own accounts and the
servicing procedures established by FNMA or FHLMC (as in effect from time to
time), which are in accordance with accepted mortgage servicing practices of
prudent lending institutions.
“
Deficient
Valuation
”
means the determination by a court in a bankruptcy
proceeding that the value of the collateral is less than the amount of the loan
in which case the loss will be the difference between the then unpaid principal
balance (or the NPV of a modified loan that defaults) and the value of the
collateral so established.
“
Examination Criteria
”
means the loan
classification criteria employed by, or any applicable regulations of, the
Assuming Bank’s Chartering Authority at the time such action is taken, as such
criteria may be amended from time to time.
“
Home Equity
Loans
” means loans or funded portions of lines of credit secured
by mortgages on one-to four-family residences or stock of cooperative housing
associations, where the Failed Bank did not have a first lien on the same
property as collateral.
“
Final
Shared-Loss Month
” means the calendar month in which the tenth
anniversary of the Commencement Date occurs.
“
Final
Shared-Loss Recovery Month
” means the calendar month in which
the tenth anniversary of the Commencement Date occurs.
“
Foreclosure Loss
”
means the loss realized when the Assuming Bank has completed the foreclosure on
a Single Family Shared-Loss Loan and realized final recovery on the collateral
through liquidation and recovery of all insurance proceeds. Each Foreclosure
Loss shall be calculated in accordance with the form and methodology specified
in Exhibit 2a or Exhibit 2a(1).
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
61
“
Investor-Owned
Residential Loans
” means Loans, excluding advances made pursuant
to Home Equity Loans, that are secured by mortgages on one- to four family
residences or stock of cooperative housing associations that are not
owner-occupied. These loans can be treated as Restructured Loans on a
commercially reasonable basis and can be a restructured under terms separate
from the Exhibit 5 standards. Please refer to Exhibit 2b for guidance
in Calculation of Loss for Restructured Loans.
“
Loss
”
means a Foreclosure Loss, Restructuring Loss, Short Sale Loss, Portfolio Loss,
Modification Default Loss or Deficient Valuation.
“
Loss Amount
”
means the dollar amount of loss incurred and reported on the Monthly
Certificate for a Single Family Shared-Loss Loan.
“
Modification
Default Loss
” means the loss calculated in Exhibits
2a(1) and 2c(1) for single family loans modified under this part of
the agreement that default and result in a foreclosure or short sale.
“
Modification Guidelines
”
has the
meaning provided in Section 2.1(a) of this Single Family Shared-Loss
Agreement.
“
Monthly Certificate
”
has the meaning provided in
Section 2.1(b) of this Single Family Shared-Loss Agreement.
“
Monthly Loss Amount
”
means the sum of all
Foreclosure Losses, Restructuring Losses, Short Sale Losses, Portfolio Losses,
Modification Default Losses and losses in connection with Deficient Valuations
realized by the Assuming Bank for any Shared Loss Month.
“
Monthly Shared-Loss Amount
”
means the change in the
Cumulative Shared- Loss Amount from the beginning of each month to the end of
each month.
“
Neutral Member
”
has the meaning provided in
Section 2.1(f)(ii) of this Single Family Shared-Loss Agreement.
“
Period Servicing Amount
”
means, for any twelve month
period with respect to each of the Shared-Loss Agreements during which the
loss-sharing provisions of the applicable Shared-Loss Agreement are in effect,
the product of (i) the simple average of the principal amount of
Shared-Loss Loans and Shared-Loss Assets (other than the Shared-Loss
Securities) (in each case as defined in the Shared-Loss Agreements), as the
case may be, at the beginning of such period and at the end of such period
times (ii) one percent (1%).
“
Portfolio Loss
”
means the loss realized on
either (i) a portfolio sale of Single Family Shared-Loss Loans in
accordance with the terms of Article IV or (ii) the sale of a loan
with the consent of the Receiver as provided in Section 2.7.
“
Recovery Amount
”
means, with respect to any
period prior to the Termination Date, the amount of collected funds received by
the Assuming Bank that (i) are applicable against a Foreclosure Loss which
has previously been paid to the Assuming Bank by the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
62
Receiver or (ii) gains realized from a Section 4.1 sale of
Single Family Shared-Loss Loans for which the Assuming Bank has previously
received a Restructuring Loss payment from the Receiver (iii) or any
incentive payments from national programs paid to an investor or borrower on
loans that have been modified or otherwise treated (short sale or foreclosure)
in accordance with Exhibit 5.
“
Restructuring Loss
”
means the loss on a
modified or restructured loan measured by the difference between (a) the
principal, Accrued Interest, tax and insurance advances, third party or other
fees due on a loan prior to the modification or restructuring, and (b) the
net present value of estimated cash flows on the modified or restructured loan,
discounted at the Then-Current Interest Rate. Each Restructuring Loss shall be
calculated in accordance with the form and methodology attached as
Exhibit 2b, as applicable.
“
Restructured Loan
”
means a Single Family
Shared-Loss Loan for which the Assuming Bank has received a Restructuring Loss
payment from the Receiver. This applies to owner occupied and investor owned
residences.
“
Servicing Officer
”
has the meaning provided in
Section 2.1(b) of this Single Family Shared-Loss Agreement.
“
Shared Loss Payment Trigger
”
means when the sum of the
Cumulative Loss Amount under this Single Family Shared-Loss Agreement and the
Shared-Loss Amount under the Commercial and Other Assets Shared-Loss Agreement,
exceeds the First Loss Tranche. If the First Loss Tranche is zero or a negative
number, the Shared Loss Payment Trigger shall be deemed to have been reached
upon Bank Closing.
“
Shared-Loss Month
”
means each calendar month
between the Commencement Date and the last day of the month in which the tenth
anniversary of the Commencement Date occurs, provided that, the first
Shared-Loss Month shall begin on the Commencement Date and end on the last day
of that month.
“
Short-Sale Loss
”
means the loss resulting
from the Assuming Bank’s agreement with the mortgagor to accept a payoff in an
amount less than the balance due on the loan (including the costs of any cash
incentives to borrower to agree to such sale or to maintain the property
pending such sale), further
provided,
that
each Short-Sale Loss
shall be calculated in accordance with the form and methodology specified in
Exhibit 2c or Exhibit 2c(1).
“
Single Family Shared-Loss Loans
”
means the single family
one-to-four residential mortgage loans (whether owned by the Assuming Bank or
any Subsidiary) identified on Schedule 4.15A of the Purchase and Assumption
Agreement.
“
Stated Threshold
”
means total losses under
the shared loss agreements in the amount of $
27,000,000.00
.
“
Termination Date
”
means the last day of the
Final Shared-Loss Recovery Month.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
63
“
Then-Current Interest Rate
”
means the most recently
published Freddie Mac survey rate for 30-year fixed-rate loans.
“
Third Party Servicer
”
means any servicer
appointed from time to time by the Assuming Bank or any Affiliate of the
Assuming Bank to service the Shared-Loss Loans on behalf of the Assuming Bank,
the identity of which shall be given to the Receiver prior to or concurrent
with the appointment thereof.
ARTICLE II — SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss Arrangement.
(a)
Loss Mitigation and Consideration of Alternatives
. For each
Single Family Shared-Loss Loan in default or for which a default is reasonably
foreseeable, the Assuming Bank shall undertake reasonable and customary loss
mitigation efforts, in accordance with any of the following programs selected
by Assuming Bank in its sole discretion, Exhibit 5 (FDIC Mortgage Loan
Modification Program), the United States Treasury’s Home Affordable
Modification Program Guidelines or any other modification program approved by
the United States Treasury Department, the Corporation, the Board of Governors
of the Federal Reserve System or any other governmental agency (it being
understood that the Assuming Bank can select different programs for the various
Single Family Shared-Loss Loans) (such program chosen, the “Modification
Guidelines”). After selecting the applicable Modification Guideline for any
such Single Family Shared-Loss Loan, the Assuming Bank shall document its
consideration of foreclosure, loan restructuring under such Modification
Guideline chosen, and short-sale (if short-sale is a viable option)
alternatives and shall select the alternative the Assuming Bank believes, based
on its estimated calculations, will result in the least Loss. Losses on Home
Equity Loans shall be shared under the charge-off policies of the Assuming Bank’s
Examination Criteria as if they were Single Family Shared-Loss Loans with
respect to the calculation of the Stated Threshold. Assuming Bank shall retain
its calculations of the estimated loss under each alternative, such
calculations to be provided to the Receiver upon request. For the avoidance of
doubt and notwithstanding anything herein to the contrary, (i) the
Assuming Bank is not required to modify or restructure any Single Family
Shared-Loss Loan on more than one occasion and (ii) the Assuming Bank is
not required to consider any alternatives with respect to any Shared-Loss Loan
in the process of foreclosure as of the Bank Closing and shall be entitled to
continue such foreclosure measures and recover the Foreclosure Loss as provided
herein, and (iii) the Assuming Bank shall have a transition period of up
to 90 days after Bank Closing to implement the Modification Guidelines, during
which time, the Assuming Bank may submit claims under such guidelines as may be
in place at the Failed Bank.
(b)
Monthly Certificates
.
Not later than fifteen (15) days after the end of
each Shared-Loss Month, beginning with the month in which the Commencement Date
occurs and ending in the month in which the tenth anniversary of the
Commencement Date occurs, the Assuming Bank shall deliver to the Receiver a
certificate, signed by an officer of the Assuming Bank involved in, or
responsible for, the administration and servicing of the Single Family
Shared-Loss Loans whose name appears on a list of servicing officers furnished
by the Assuming Bank to the Receiver, (a
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
64
“Servicing Officer”) setting forth in such form and detail as the
Receiver may reasonably specify (a “Monthly Certificate”):
(i)
(A)
a schedule substantially in
the form of Exhibit 1 listing:
(i)
each Single
Family Shared-Loss Loan for which a Loss Amount (calculated in accordance with
the applicable Exhibit) is being claimed, the related Loss Amount for each
Single Family Shared- Loss Loan, and the total Monthly Loss Amount for all
Single Family Shared-Loss Loans;
(ii)
each Single Family
Shared-Loss Loan for which a Recovery Amount was received, the Recovery Amount
for each Single Family Shared-Loss Loan, and the total Recovery Amount for all
Single Family Shared-Loss Loans;
(iii)
the total Monthly Loss
Amount for all Single Family Shared-Loss Loans minus the total monthly Recovery
Amount for all Single Family Shared-Loss Loans;
(iv)
the Cumulative Shared-Loss
Amount as of the beginning and end of the month;
(v)
the Monthly Shared Loss
Amount;
(vi)
the result obtained in
(v) times 80%, or times 95% if the Stated Threshold has been reached,
which in either case is the amount to be paid under Section 2.1(d) of
this Single Family Shared-Loss Agreement by the Receiver to the Assuming Bank
if the amount is a positive number, or by the Assuming Bank to the Receiver if
the amount is a negative number;
(ii)
(B)
for each of the Single
Family Shared-Loss Loans for which a Loss is claimed for that Shared-Loss
Month, a schedule showing the calculation of the Loss Amount using the form and
methodology shown in Exhibit 2a, Exhibit 2b, or Exhibit 2c, as
applicable.
(iii)
(C)
For each of the Restructured
Loans where a gain or loss is realized in a sale under Section 4.1 or 4.2,
a schedule showing the calculation using the form and methodology shown in
Exhibit 2d.
(iv)
(D)
a portfolio performance and
summary schedule substantially in the form shown in Exhibit 3.
(c)
Monthly
Data Download
. Not later than fifteen (15) days after the end of
each month, beginning with the month in which the Commencement Date occurs and
ending with the Final Shared-Loss Recovery Month, Assuming Bank shall provide
Receiver:
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
65
(v)
(i)
the servicing
file in machine-readable format including but not limited to the following
fields for each outstanding Single Family Shared-Loss Loan, as applicable:
(A)
Loan number
(B)
FICO score
(C)
Origination date
(D)
Original principal amount
(E)
Maturity date
(F)
Paid-to date
(G)
Last payment date
(H)
Loan status (bankruptcy, in
foreclosure, etc.)
(I)
Delinquency counters
(J)
Current principal balance
(K)
Current escrow account
balance
(L)
Current Appraisal/BPO value
(M)
Current Appraisal/BPO date
(N)
Interest rate
(O)
Monthly principal and
interest payment amount
(P)
Monthly escrow payment for
taxes and insurance
(Q)
Interest rate type (fixed or
adjustable)
(R)
If adjustable: index,
margin, next interest rate reset date
(S)
Payment/Interest rate cap
and/or floor
(T)
Underwriting type (Full doc,
Alt Doc, No Doc)
(U)
Lien type (1
st
, 2
nd
)
(V)
Amortization type
(amortizing or I/O)
(W)
Property address, including
city, state, zip code
(X)
A code indicating whether
the Mortgaged Property is owner occupied
(Y)
Property type (single-family
detached, condominium, duplex, etc.)
(vi)
(ii)
An Excel file for ORE held
as a result of foreclosure on a Single Family Shared-Loss Loan listing:
(A)
Foreclosure date
(B)
Unpaid loan principal
balance
(C)
Appraised value or BPO
value, as applicable
(D)
Projected liquidation date
Notwithstanding the foregoing, the Assuming Bank
shall not be required to provide any of the foregoing information to the extent
it is unable to do so as a result of the Failed Bank’s or Receiver’s failure to
provide information required to produce the information set forth in this
Section 2.1(c);
provided
, that the Assuming Bank shall, consistent
with Customary Servicing Procedures seek to produce any such missing
information or improve any inaccurate information previously provided to it.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
66
(d)
Payments
With Respect to Shared-Loss Assets
.
(i)
Losses Under the Stated Threshold
. After the Shared Loss
Payment Trigger is reached, not later than fifteen (15) days after the date on
which the Receiver receives the Monthly Certificate, the Receiver shall pay to
the Assuming Bank, in immediately available funds, an amount equal to eighty
percent (80%) of the Monthly Shared-Loss Amount reported on the Monthly
Certificate. If the total Monthly Shared-Loss Amount reported on the Monthly
Certificate is a negative number, the Assuming Bank shall pay to the Receiver
in immediately available funds eighty percent (80%) of that amount.
(ii)
Losses in Excess of the Stated Threshold
. In the event
that the sum of the Cumulative Loss Amount under this Single Family Shared-Loss
Agreement and the Stated Loss Amount under the Commercial Shared-Loss Agreement
meets or exceeds the Stated Threshold, the loss/recovery sharing percentages
set forth herein shall change from 80/20 to 95/5 and thereafter the Receiver
shall pay to the Assuming Bank, in immediately available funds, an amount equal
to ninety-five percent (95%) of the Monthly Shared-Loss Amount reported on the
Monthly Certificate. If the Monthly Shared-Loss Amount reported on the Monthly
Certificate is a negative number, the Assuming Bank shall pay to the Receiver
in immediately available funds ninety-five percent (95%) of that amount.
(e)
Limitations
on Shared-Loss Payment
. The Receiver shall not be
required to make any payments pursuant to Section 2.1(d) with respect
to any Foreclosure Loss, Restructuring Loss, Short Sale Loss or Portfolio Loss
that the Receiver determines, based upon the criteria set forth in this Single
Family Shared-Loss Agreement (including the analysis and documentation
requirements of Section 2.1(a)) or Customary Servicing Procedures, should
not have been effected by the Assuming Bank; provided, however, (x) the
Receiver must provide notice to the Assuming Bank detailing the grounds for not
making such payment, (y) the Receiver must provide the Assuming Bank with
a reasonable opportunity to cure any such deficiency and (z) (1) to
the extent curable, if cured, the Receiver shall make payment with respect to
the properly effected Loss, and (2) to the extent not curable, notwithstanding
the foregoing, the Receiver shall make a payment as to all Losses (or portion
of Losses) that were effected which would have been payable as a Loss if the
Assuming Bank had properly effected such Loss. In the event that the Receiver
does not make any payment with respect to Losses claimed pursuant to
Section 2.1(d), the Receiver and Assuming Bank shall, upon final
resolution, make the necessary adjustments to the Monthly Shared-Loss Amount
for that Monthly Certificate and the payment pursuant to Section 2.1(d) above
shall be adjusted accordingly.
(f)
Payments by
Wire-Transfer
. All payments under this Single Family Shared-Loss
Agreement shall be made by wire-transfer in accordance with the wire-transfer
instructions on Exhibit 4.
(g)
Payment in the Event Losses Fail
to Reach Expected Level
. On the date that is 45
days following the last day (such day, the “True-Up Measurement Date”) of the
calendar month in which the tenth anniversary of the calendar day following the
Bank Closing occurs, the Assuming Bank shall pay to the Receiver fifty percent
(50%) of the excess, if any, of (i) twenty percent (20%) of the Stated
Threshold less (ii) the sum of (A) twenty-five percent (25%) of the
asset premium (discount) plus (B) twenty-five percent (25%) of the
Cumulative
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
67
Shared-Loss Payments plus (C) the Cumulative Servicing Amount. The
Assuming Bank shall deliver to the Receiver not later than 30 days following
the True-Up Measurement Date, a schedule, signed by an officer of the Assuming
Bank, setting forth in reasonable detail the calculation of the Cumulative
Shared-Loss Payments and the Cumulative Servicing Amount.
2.2
Auditor
Report; Right to Audit
.
(a)
Within ninety
(90) days after the end of each fiscal year during which the Receiver makes any
payment to the Assuming Bank under this Single Family Shared-Loss Agreement,
the Assuming Bank shall deliver to the Corporation and to the Receiver a report
signed by its independent public accountants stating that they have reviewed
the terms of this Single Family Shared-Loss Agreement and that, in the course
of their annual audit of the Assuming Bank’s books and records, nothing has
come to their attention suggesting that any computations required to be made by
the Assuming Bank during such year pursuant to this Article II were not
made by the Assuming Bank in accordance herewith. In the event that the Assuming
Bank cannot comply with the preceding sentence, it shall promptly submit to the
Receiver corrected computations together with a report signed by its
independent public accountants stating that, after giving effect to such
corrected computations, nothing has come to their attention suggesting that any
computations required to be made by the Assuming Bank during such year pursuant
to this Article II were not made by the Assuming Bank in accordance
herewith. In such event, the Assuming Bank and the Receiver shall make all such
accounting adjustments and payments as may be necessary to give effect to each
correction reflected in such corrected computations, retroactive to the date on
which the corresponding incorrect computation was made. It is the intention of
this provision to align the timing of the audit required under this
Single-Family Shared-Loss Agreement with the examination audit required
pursuant to 12 CFR Section 363.
(b)
The Receiver or
the FDIC in its corporate capacity (“Corporation”) may perform an audit or
audits to determine the Assuming Bank’s compliance with the provisions of this
Single Family Shared-Loss Agreement, including this Article II, by
providing not less than ten (10) Business Days’ prior written notice.
Assuming Bank shall provide access to pertinent records and proximate working
space in Assuming Bank’s facilities. The scope and duration of any such audit
shall be within the reasonable discretion of the Receiver or the Corporation,
but shall in no event be administered in a manner that unreasonably interferes
with the operation of the Assuming Bank’s business. The Receiver or the
Corporation, as the case may be, shall bear the expense of any such audit. In
the event that any corrections are necessary as a result of such an audit or
audits, the Assuming Bank and the Receiver shall make such accounting
adjustments and payments as may be necessary to give retroactive effect to such
corrections.
2.3
Withholdings
. Notwithstanding any other provision in this
Article II, the Receiver, upon the direction of the Director (or designee)
of the Federal Deposit Insurance Corporation’s Division of Resolutions and
Receiverships, may withhold payment for any amounts included in a Monthly
Certificate delivered pursuant to Section 2.1, if in its good faith and
reasonable judgment there is a reasonable basis under the requirements of this
Single Family Shared-Loss Agreement for denying the eligibility of an item for
which reimbursement or payment is sought under such Section. In such event, the
Receiver shall provide a written notice to the Assuming Bank detailing the
grounds for withholding such payment. At such time as the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
68
Assuming Bank demonstrates to the satisfaction of the Receiver, in its
reasonable judgment, that the grounds for such withholding of payment, or
portion of payment, no longer exist or have been cured, then the Receiver shall
pay the Assuming Bank the amount withheld which the Receiver determines is
eligible for payment, within fifteen (15) Business Days.
2.4
Books and Records
. The Assuming Bank shall at
all times during the term of this Single Family Shared-Loss Agreement keep
books and records sufficient to ensure and document compliance with the terms
of this Single Family Shared-Loss Agreement, including but not limited to
(a) documentation of alternatives considered with respect to defaulted
loans or loans for which default is reasonably foreseeable,
(b) documentation showing the calculation of loss for claims submitted to
the Receiver, (c) retention of documents that support each line item on
the loss claim forms, and (d) documentation with respect to the Recovery
Amount on loans for which the Receiver has made a loss-share payment
2.5
Information
. The Assuming Bank shall promptly provide to
the Receiver such other information, including but not limited to, financial
statements, computations, and bank policies and procedures, relating to the
performance of the provisions of this Single Family Shared-Loss Agreement, as
the Receiver may reasonably request from time to time.
2.6
Tax Ruling
. The Assuming Bank shall not at any time, without
the Receiver’s prior written consent, seek a private letter ruling or other
determination from the Internal Revenue Service or otherwise seek to qualify
for any special tax treatment or benefits associated with any payments made by
the Receiver pursuant to this Single Family Shared-Loss Agreement.
2.7
Sale of Single Family Shared-Loss Loans
. The Receiver
shall be relieved of its obligations with respect to a Single Family
Shared-Loss Loan upon payment of a Foreclosure Loss amount or a Short Sale Loss
amount with respect to such Single Family Shared-Loss Loan or upon the sale of
a Single Family Shared-Loss Loan by Assuming Bank to a person or entity that is
not an Affiliate; provided, however, that if the Receiver consents to the sale
of any such Single Family Shared-Loss Loan, any loss on such sale shall be a
Portfolio Loss. The Assuming Bank shall provide the Receiver with timely notice
of any such sale. Notwithstanding the foregoing, a sale of the Single Family
Shared-Loss Loan, for purposes of this Section 2.7, shall not be deemed to
have occurred as the result of (i) any change in the ownership or control
of Assuming Bank or the transfer of any or all of the Single Family Shared-Loss
Loan(s) to any Affiliate of Assuming Bank, (ii) a merger by Assuming
Bank with or into any other entity, or (iii) a sale by Assuming Bank of
all or substantially all of its assets.
ARTICLE III
- RULES REGARDING THE ADMINISTRATION OF SINGLE FAMILY SHARED-LOSS LOANS
3.1
Agreement with Respect to Administration
. The Assuming
Bank shall (and shall cause any of its Affiliates to which the Assuming Bank
transfers any Single Family Shared-Loss Loans to) manage, administer, and
collect the Single Family Shared-Loss Loans while owned by the Assuming Bank or
any Affiliate thereof during the term of this Single Family Shared-Loss
Agreement in accordance with the rules set forth in this Article III.
The Assuming Bank shall be responsible to the Receiver in the performance of
its duties hereunder and shall provide to the Receiver such reports as the
Receiver reasonably deems advisable, including but
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
69
not limited to the reports required by Sections 2.1, 2.2 and 3.3
hereof, and shall permit the Receiver to monitor the Assuming Bank’s
performance of its duties hereunder.
3.2
Duties of the Assuming Bank
. (a) In performance of
its duties under this Article III, the Assuming Bank shall:
(i)
manage and administer each Single Family Shared-Loss
Loan in accordance with Assuming Bank’s usual and prudent business and banking
practices and Customary Servicing Procedures;
(ii)
exercise its best business judgment in managing,
administering and collecting amounts owed on the Single Family Shared-Loss
Loans;
(iii)
use commercially reasonable efforts to maximize
Recoveries with respect to Losses on Single Family Shared-Loss Loans without
regard to the effect of maximizing collections on assets held by the Assuming
Bank or any of its Affiliates that are not Single Family Shared- Loss Loans;
(iv)
retain sufficient staff (in Assuming Bank’s
discretion) to perform its duties hereunder; and
(v)
other than as provided in Section 2.1(a),
comply with the terms of the Modification Guidelines for any Single Family
Shared-Loss Loans meeting the requirements set forth therein. For the avoidance
of doubt, the Assuming Bank may propose exceptions to Exhibit 5 (the FDIC
Loan Modification Program) for a group of Loans with similar characteristics,
with the objectives of (1) minimizing the loss to the Assuming Bank and
the FDIC and (2) maximizing the opportunity for qualified homeowners to
remain in their homes with affordable mortgage payments.
(b)
Any transaction with or
between any Affiliate of the Assuming Bank with respect to any Single Family
Shared-Loss Loan including, without limitation, the execution of any contract
pursuant to which any Affiliate of the Assuming Bank will manage, administer or
collect any of the Single Family Shared-Loss Loans will be provided to FDIC for
informational purposes and if such transaction is not entered into on an arm’s
length basis on commercially reasonable terms such transaction shall be subject
to the prior written approval of the Receiver.
3.3
Shared-Loss Asset Records and Reports
. The Assuming Bank shall
establish and maintain such records as may be appropriate to account for the
Single Family Shared-Loss Loans in such form and detail as the Receiver may
reasonably require, and to enable the Assuming Bank to prepare and deliver to
the Receiver such reports as the Receiver may from time to time request
regarding the Single Family Shared-Loss Loans and the Monthly Certificates
required by Section 2.1 of this Single Family Shared-Loss Agreement.
3.4
Related Loans
.
(a)
Assuming Bank shall use its
best efforts to determine which loans are “Related Loans”, as hereinafter
defined. The Assuming Bank shall not manage, administer or collect any “Related
Loan” in any manner that would have the effect of increasing the amount of any
collections with respect to the Related Loan to the detriment of the Single
Family Shared- Loss Loan to which such loan is related. A “Related Loan” means
any loan or extension of credit
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
70
held by the Assuming Bank at any time on or prior to the end of the
Final Shared-Loss Month that is made to an Obligor of a Single Family
Shared-Loss Loan.
(b)
The Assuming Bank shall
prepare and deliver to the Receiver with the Monthly Certificates for the
calendar months ending June 30 and December 31, a schedule of all
Related Loans on the Accounting Records of the Assuming Bank as of the end of
each such semi-annual period.
3.5
Legal Action; Utilization of Special Receivership Powers
. The Assuming
Bank shall notify the Receiver in writing (such notice to be given in
accordance with Article V below and to include all relevant details) prior
to utilizing in any legal action any special legal power or right which the
Assuming Bank derives as a result of having acquired an asset from the
Receiver, and the Assuming Bank shall not utilize any such power unless the
Receiver shall have consented in writing to the proposed usage. The Receiver
shall have the right to direct such proposed usage by the Assuming Bank and the
Assuming Bank shall comply in all respects with such direction. Upon request of
the Receiver, the Assuming Bank will advise the Receiver as to the status of
any such legal action. The Assuming Bank shall immediately notify the Receiver
of any judgment in litigation involving any of the aforesaid special powers or
rights.
3.6
Third Party Servicer
. The Assuming Bank may
perform any of its obligations and/or exercise any of its rights under this
Single Family Shared-Loss Agreement through or by one or more Third Party
Servicers, who may take actions and make expenditures as if any such Third
Party Servicer was the Assuming Bank hereunder (and, for the avoidance of
doubt, such expenses incurred by any such Third Party Servicer on behalf of the
Assuming Bank shall be included in calculating Losses to the extent such
expenses would be included in such calculation if the expenses were incurred by
Assuming Bank); provided, however, that the use thereof by the Assuming Bank
shall not release the Assuming Bank of any obligation or liability hereunder.
ARTICLE IV
— PORTFOLIO SALE
4.1
Assuming Bank Portfolio Sales of Remaining Single Family Shared-Loss
Loans
. The Assuming Bank shall have the right with the
concurrence of the Receiver to liquidate for cash consideration, from time to
time in one or more transactions, all or a portion of Single Family Shared-Loss
Loans held by the Assuming Bank at any time prior to the Termination Date (“Portfolio
Sales”). If the Assuming Bank exercises its option under this Section 4.1,
it must give thirty (30) days notice in writing to the Receiver setting forth
the details and schedule for the Portfolio Sale which shall be conducted by
means of sealed bid sales to third parties, not including any of the Assuming
Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s
contractors. Sales of Restructured Loans shall be sold in a separate pool from
Single Family Shared-Loss Loans not restructured. The Receiver’s review of the
Assuming Bank’s proposed Portfolio Sale will be considered in a timely fashion
and approval will not be unreasonably withheld, delayed or conditioned.
4.2
Assuming Bank’s Liquidation of Remaining Single Family Shared-Loss Loans
. In the event
that the Assuming Bank does not conduct a Portfolio Sale pursuant to
Section 4.1, the Receiver shall have the right, exercisable in its sole
and absolute discretion, to require the Assuming Bank to liquidate for cash
consideration, any Single Family Shared-Loss
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
71
Loans held by the Assuming Bank at any time after the date that is six
months prior to the Termination Date. If the Receiver exercises its option
under this Section 4.2, it must give notice in writing to the Assuming
Bank, setting forth the time period within which the Assuming Bank shall be
required to liquidate the Single Family Shared-Loss Loans. The Assuming Bank
will comply with the Receiver’s notice and must liquidate the Single Family
Shared-Loss Loans as soon as reasonably practicable by means of sealed bid
sales to third parties, not including any of the Assuming Bank’s affiliates,
contractors, or any affiliates of the Assuming Bank’s contractors. The
selection of any financial advisor or other third party broker or sales agent
retained for the liquidation of the remaining Single Family Shared-Loss Loans
pursuant to this Section shall be subject to the prior approval of the
Receiver, such approval not to be unreasonably withheld, delayed or
conditioned.
4.3
Calculation of Sale Gain or Loss
. For Single Family
Shared-Loss Loans that are not Restructured Loans gain or loss on the sales
under Section 4.1 or Section 4.2 will be calculated as the sale price
received by the Assuming Bank less the unpaid principal balance of the remaining
Single Family Shared-Loss Loans. For any Restructured Loan included in the sale
gain or loss on sale will be calculated as (a) the sale price received by
the Assuming Bank less (b) the net present value of estimated cash flows
on the Restructured Loan that was used in the calculation of the related
Restructuring Loss plus (c) Loan principal payments collected by the
Assuming Bank from the date the Loan was restructured to the date of sale. (See
Exhibit 2d for example calculation).
ARTICLE V
— LOSS-SHARING NOTICES GIVEN TO RECEIVER AND PURCHASER
All notices, demands and other communications
hereunder shall be in writing and shall be delivered by hand, or overnight
courier, receipt requested, addressed to the parties as follows:
|
If to Receiver, to:
|
|
Federal Deposit Insurance Corporation as Receiver
|
|
|
|
for
First Security National Bank
|
|
|
|
Division of Resolutions and Receiverships
|
|
|
|
550 17th Street, N.W.
|
|
|
|
Washington, D.C. 20429
|
|
|
|
Attention: Ralph Malami, Manager, Capital Markets
|
|
|
|
|
|
with a copy to:
|
|
Federal Deposit Insurance Corporation
|
|
|
|
as Receiver for
First Security
National Bank
|
|
|
|
Room E7056
|
|
|
|
3501 Fairfax Drive, Arlington, VA 2226
|
|
|
|
Attn: Special Issues Unit
|
|
|
|
|
|
With respect to a notice under
Section 3.5 of this Single Family Shared-Loss Agreement, copies of such
notice shall be sent to:
|
|
|
|
|
|
|
|
Federal Deposit Insurance Corporation
|
|
|
|
Legal Division 1601 Bryan St.
|
|
|
|
Dallas, Texas 75201
|
|
|
|
Attention: Regional Counsel
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
72
|
If to Assuming Bank, to:
|
|
State Bank & Trust Company
|
|
|
|
Attn: Mr. J. Daniel Speight, Vice Chairman
|
|
|
|
and Secretary
|
|
|
|
4219 Forsyth Road
|
|
|
|
Macon, Georgia 31210
|
|
|
|
Fax: ****
|
|
|
|
|
|
|
|
cc:
|
Mr. Joe Evans
|
|
|
|
|
Ms. Kim Childers
|
Such Persons and addresses may be changed from time to time by notice
given pursuant to the provisions of this Article V. Any notice, demand or
other communication delivered pursuant to the provisions of this Article V
shall be deemed to have been given on the date actually received.
ARTICLE VI
— MISCELLANEOUS
6.1.
Expenses
.
Except as
otherwise expressly provided herein, all costs and expenses incurred by or on
behalf of a party hereto in connection with this Single Family Shared-Loss
Agreement shall be borne by such party whether or not the transactions
contemplated herein shall be consummated.
6.2
Successors and Assigns; Specific Performance
.
All terms and provisions of this Single Family Shared-Loss Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
only;
provided
,
however
, that, Receiver may assign or
otherwise transfer this Single Family Shared-Loss Agreement (in whole or in
part) to the Federal Deposit Insurance Corporation in its corporate capacity
without the consent of Assuming Bank. Notwithstanding anything to the contrary
contained in this Single Family Shared-Loss Agreement, except as is expressly
permitted in this Section 6.2, Assuming Bank may not assign or otherwise
transfer this Single Family Shared-Loss Agreement (in whole or in part) without
the prior written consent of the Receiver, which consent may be granted or
withheld by the Receiver in its sole discretion, and any attempted assignment
or transfer in violation of this provision shall be void
ab initio.
For the avoidance of doubt, a
merger or consolidation of the Assuming Bank with and into another financial
institution, the sale of all or substantially all of the assets of the Assuming
Bank to another financial institution constitutes the transfer of this Single
Family Shared-Loss Agreement which requires the consent of the Receiver; and
for a period of thirty-six (36) months after Bank Closing, a merger or
consolidation shall also include the sale by any individual shareholder, or
shareholders acting in concert, of more than 9% of the outstanding shares of
the Assuming Bank, or of its holding company, or of any subsidiary holding
Shared-Loss Assets, or the sale of shares by the Assuming Bank or its holding
company or any subsidiary holding Shared-Loss Assets, in a public or private
offering, that increases the number of shares outstanding by more than 9%,
constitutes the transfer of this Single Family Shared-Loss Agreement which requires
the consent of the Receiver. However, no Loss shall be recognized as a result
of any accounting adjustments that are made due to any such merger,
consolidation or sale consented to by the FDIC. The FDIC’s consent shall not be
required if the aggregate outstanding principal balance of Shared-Loss Assets
is less than twenty percent (20%) of the initial aggregate balance of
Shared-Loss Assets.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
73
6.3
Governing Law
. This Single Family Shared-Loss Agreement
shall be construed in accordance with federal law, or, if there is no
applicable federal law, the laws of the State of New York, without regard to
any rule of conflict of law that would result in the application of the
substantive law of any jurisdiction other than the State of New York.
6.4
WAIVER OF JURY TRIAL
. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF
OR RELATING TO OR IN CONNECTION WITH THIS SINGLE FAMILY SHARED-LOSS AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
6.5
Captions
. All captions and headings contained in this Single
Family Shared-Loss Agreement are for convenience of reference only and do not
form a part of, and shall not affect the meaning or interpretation of, this
Single Family Shared-Loss Agreement.
6.6
Entire Agreement; Amendments
. This Single Family
Shared-Loss Agreement, along with the Commercial Shared-Loss Agreement and the
Purchase and Assumption Agreement, including the Exhibits and any other documents
delivered pursuant hereto or thereto, embody the entire agreement of the
parties with respect to the subject matter hereof, and supersede all prior
representations, warranties, offers, acceptances, agreements and
understandings, written or oral, relating to the subject matter herein. This
Single Family Shared- Loss Agreement may be amended or modified or any
provision thereof waived only by a written instrument signed by both parties or
their respective duly authorized agents.
6.7
Severability
. Whenever possible, each provision of this
Single Family Shared- Loss Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Single Family Shared-Loss Agreement is held to be prohibited by or invalid,
illegal or unenforceable under applicable law, such provision shall be
construed and enforced as if it had been more narrowly drawn so as not to be
prohibited, invalid, illegal or unenforceable, and the validity, legality and
enforceability of the remainder of such provision and the remaining provisions
of this Single Family Shared-Loss Agreement shall not in any way be affected or
impaired thereby.
6.8
No Third Party Beneficiary
. This Single Family
Shared-Loss Agreement and the Exhibits hereto are for the sole and exclusive
benefit of the parties hereto and their respective permitted successors and
permitted assigns and there shall be no other third party beneficiaries, and
nothing in this Single Family Shared-Loss Agreement or the Exhibits shall be
construed to grant to any other Person any right, remedy or Claim under or in
respect of this Single Family Shared-Loss Agreement or any provision hereof.
6.9
Counterparts
. This Single Family Shared-Loss Agreement
may be executed separately by Receiver and Assuming Bank in any number of
counterparts, each of which when executed and delivered shall be an original,
but such counterparts shall together constitute one and the same instrument.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
74
6.10
Consent
. Except as otherwise provided herein, when the
consent of a party is required herein, such consent shall not be unreasonably
withheld or delayed.
6.11
Rights Cumulative
. Except as otherwise
expressly provided herein, the rights of each of the parties under this Single
Family Shared-Loss Agreement are cumulative, may be exercised as often as any
party considers appropriate and are in addition to each such party’s rights
under the Purchase and Sale Agreement and any of the related agreements or
under law. Except as otherwise expressly provided herein, any failure to
exercise or any delay in exercising any of such rights, or any partial or
defective exercise of such rights, shall not operate as a waiver or variation
of that or any other such right.
ARTICLE VII
DISPUTE RESOLUTION
7.1
Dispute Resolution Procedures.
(a)
In the event a
dispute arises about the interpretation, application, calculation of Loss, or
calculation of payments or otherwise with respect to this Single Family
Shared-Loss Agreement (“SF Shared-Loss Dispute Item”), then the Receiver and
the Assuming Bank shall make every attempt in good faith to resolve such items
within sixty (60) days following the receipt of a written description of the SF
Shared-Loss Dispute Item, with notification of the possibility of taking the
matter to arbitration (the date on which such 60-day period expires, or any
extension of such period as the parties hereto may mutually agree to in
writing, herein called the “Resolution Deadline Date”). If the Receiver and the
Assuming Bank resolve all such items to their mutual satisfaction by the
Resolution Deadline Date, then within thirty (30) days following such
resolution, any payment arising out such resolution shall be made arising from
the settlement of the SF Shared-Loss Dispute.
(b)
If the Receiver
and the Assuming Bank fail to resolve any outstanding SF Shared- Loss Dispute
Items by the Resolution Deadline Date, then either party may notify the other
of its intent to submit the SF Shared-Loss Dispute Item to arbitration pursuant
to the provisions of this Article VII. Failure of either party to notify
the other of its intent to submit any unresolved SF Shared-Loss Dispute Item to
arbitration within thirty (30) days following the Resolution Deadline Date (the
date on which such thirty (30) day period expires is herein called the “Arbitration
Deadline Date”) shall be deemed an acceptance of such SF Shared-Loss Dispute
not submitted to arbitration, as well as a waiver of the submitting party’s
right to dispute such non- submitted SF Shared-Loss Dispute Item but not a
waiver of any similar claim which may arise in the future.
(c)
If a SF
Shared-Loss Dispute Item is submitted to arbitration, it shall be governed by
the rules of the American Arbitration Association (the “AAA”), except as
otherwise provided herein. Either party may submit a matter for arbitration by
delivering a notice, prior to the Arbitration Deadline Date, to the other party
in writing setting forth:
(i)
A brief
description of each SF Shared-Loss Dispute Item submitted for arbitration;
(ii)
A statement of
the moving party’s position with respect to each SF
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
75
Shared-Loss Dispute Item submitted for arbitration;
(iii) The value sought by the moving party, or other relief
requested regarding each SF Shared-Loss Dispute Item submitted for arbitration,
to the extent reasonably calculable; and
(iv) The name and address of the arbiter selected by the moving
party (the “Moving Arbiter”), who shall be a neutral, as determined by the AAA.
Failure to adequately include any information above
shall not be deemed to be a waiver of the parties right to arbitrate so long as
after notification of such failure the moving party cures such failure as
promptly as reasonably practicable.
(d)
The non-moving
party shall, within thirty (30) days following receipt of a notice of
arbitration pursuant to this Section 7.1, deliver a notice to the moving
party setting forth:
(i)
The name and
address of the arbiter selected by the non-moving party (the “Respondent
Arbiter”), who shall be a neutral, as determined by the AAA;
(ii)
A statement of
the position of the respondent with respect to each Dispute Item; and
(iii)
The ultimate
resolution sought by the respondent or other relief, if any, the respondent
deems is due the moving party with respect to each SF Shared-Loss Dispute Item.
Failure to adequately include any information above
shall not be deemed to be a waiver of the non-moving party’s right to defend
such arbitration so long as after notification of such failure the non-moving
party cures such failure as promptly as reasonably practicable
(e)
The Moving
Arbiter and Respondent Arbiter shall select a third arbiter from a list
furnished by the AAA. In accordance with the rules of the AAA, the three
(3) arbiters shall constitute the arbitration panel for resolution of each
SF Loss-Share Dispute Item. The concurrence of any two (2) arbiters shall
be deemed to be the decision of the arbiters for all purposes hereunder. The
arbitration shall proceed on such time schedule and in accordance with the
Rules of Commercial Arbitration of the AAA then in effect, as modified by
this Section 7.1. The arbitration proceedings shall take place at such
location as the parties thereto may mutually agree, but if they cannot agree,
then they will take place at the offices of the Corporation in Washington, DC,
or Arlington, Virginia.
(f)
The Receiver
and Assuming Bank shall facilitate the resolution of each outstanding SF
Shared-Loss Dispute Item by making available in a prompt and timely manner to
one another and to the arbiters for examination and copying, as appropriate,
all documents, books, and records under their respective control and that would
be discoverable under the Federal Rules of Civil Procedure.
(g)
The arbiters
designated pursuant to subsections (c), (d) and (e) hereof shall
select, with respect to each Dispute Item submitted to arbitration pursuant to
this Section 7.1, either (i) the position and relief submitted by the
Assuming Bank with respect to each SF Shared-Loss Dispute Item, or
(ii) the position and relief submitted by the Receiver with respect to
each SF Shared-Loss Dispute Item, in either case as set forth in its respective
notice of arbitration. The
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
76
arbiters shall have no authority to select a value for each Dispute
Item other than the determination set forth in Section 7.1(c) and
Section 7.1(d). The arbitration shall be final, binding and conclusive on
the parties.
(h)
Any amounts
ultimately determined to be payable pursuant to such award shall bear interest
at the Settlement Interest Rate from and including the date specified for the
arbiters decisions specified in this Section 7.1, without regard to any
extension of the finality of such award, to but not including the date paid.
All payments required to be made under this Section 7.1 shall be made by
wire transfer.
(i)
For the
avoidance of doubt, to the extent any notice of a SF Shared-Loss Dispute
Item(s) is provided prior to the Termination Date, the terms of this
Single Family Shared-Loss Agreement shall remain in effect with respect to the
Single Family Shared-Loss Loans that are the subject of such SF Shared-Loss
Dispute Item(s) until such time as any such dispute is finally resolved.
7.2
Fees and Expenses of Arbiters.
The aggregate fees and
expenses of the arbiters shall be borne equally by the parties. The parties
shall pay the aggregate fees and expenses within thirty (30) days after receipt
of the written decision of the arbiters (unless the arbiters agree in writing
on some other payment schedule).
Exhibit 1
Monthly
Certificate
SEE
FOLLOWING PAGE
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
77
|
|
78 Module 1 –
Whole Bank w/ Loss Share – P&A First Security National Bank Version 1.12
Norcross, GA November 17, 2009 PART 1 - CURRENT MONTH NET LOSS MONTH ENDED:
[input report month] Losses Loss Loan No. Loss Type Amount TOTAL XX A
Recoveries Recovery Loss Loss Loan No. Amount Amount Month TOTAL XX B Net
Losses (Recoveries) XX C = A - B PART 2 - FIRST LOSS TEST Col. D Col. E Col.
D - Col. E Cumulative Loss Amount First Loss Tranche Cumulative Shared-Loss
Amount Balance, beginning of month XX XX XX F Current month Net Losses (from
Part 1) XX Balance, end of month XX XX XX G Shared Loss Amount XX G - F Times
Loss Share percentage 80% Amount due from (to) FDIC as Receiver XX Specify
loss type as Foreclosure, or Short-Sale. Loss Amount is the amount of Loss incurred
and reported on the loan in a Loss Month is the reporting month in which the
Loss was reported. If Col. D minus Col. E is less than zero, enter zero.
|
Pursuant to Section 2.1
of the Single Family Shared-Loss Agreement, the undersigned hereby certifies
the information on this Certificate is true, complete and correct.
|
OFFICER
SIGNATURE
|
|
|
OFFICER
NAME:
|
TITLE
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
79
Exhibit 2a
This exhibit contains three versions of the loss
share calculation for foreclosure, plus explanatory notes.
Exhibit 2a(1)
CALCULATION
OF FORECLOSURE LOSS
Foreclosure Occurred Prior to Loss Share Agreement
|
1
Shared-Loss
Month
|
|
May-09
|
|
|
2
Loan no:
|
|
364574
|
|
|
3
REO #
|
|
621
|
|
|
|
|
|
|
|
4 Foreclosure date
|
|
12/18/08
|
|
|
5 Liquidation date
|
|
4/12/09
|
|
|
6 Note Interest rate
|
|
8.100
|
%
|
|
7 Most recent BPO
|
|
228,000
|
|
|
8 Most recent BPO date
|
|
1/21/09
|
|
|
|
|
|
|
|
Foreclosure
Loss calculation
|
|
|
|
|
9 Book value at date of Loss Share agreement
|
|
244,900
|
|
|
|
|
|
|
|
10
Accrued interest, limited to 90 days or days from failure to sale, whichever
is less
|
|
3,306
|
|
|
11 Costs incurred after Loss Share agreement in place:
|
|
|
|
|
12 Attorney’s fees
|
|
0
|
|
|
13
Foreclosure costs, including title search, filing fees, advertising, etc.
|
|
0
|
|
|
14 Property protection costs, maint. and repairs
|
|
6,500
|
|
|
15 Tax and insurance advances
|
|
0
|
|
|
Other Advances
|
|
|
|
|
16 Appraisal/Broker’s Price Opinion fees
|
|
0
|
|
|
17 Inspections
|
|
0
|
|
|
18 Other
|
|
0
|
|
|
|
|
|
|
|
19 Gross balance recoverable by Purchaser
|
|
254,706
|
|
|
|
|
|
|
|
Cash
Recoveries:
|
|
|
|
|
20 Net liquidation proceeds (from HUD-1 settl stmt)
|
|
219,400
|
|
|
21 Hazard Insurance proceeds
|
|
0
|
|
|
22 Mortgage Insurance proceeds
|
|
0
|
|
|
23 T & I escrow account balances, if positive
|
|
0
|
|
|
24 Other credits, if any (itemize)
|
|
0
|
|
|
25 Total Cash Recovery
|
|
219,400
|
|
|
|
|
|
|
|
26
Loss Amount
|
|
35,306
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
80
Exhibit 2a(2)
CALCULATION
OF FORECLOSURE LOSS
No Preceeding Loan Mod under Loss Share
|
1
Shared-Loss
Month
|
|
May-09
|
|
|
2
Loan no:
|
|
292334
|
|
|
3
REO #
|
|
477
|
|
|
|
|
|
|
|
4
Interest paid-to-date
|
|
4/30/08
|
|
|
5
Foreclosure date
|
|
1/15/09
|
|
|
6
Liquidation date
|
|
4/12/09
|
|
|
7
Note Interest rate
|
|
8.000
|
%
|
|
8
Owner occupied?
|
|
Yes
|
|
|
9
If owner-occupied:
|
|
|
|
|
10
Borrower current gross annual income
|
|
42,000
|
|
|
11
Estimated NPV of loan mod
|
|
195,000
|
|
|
12
Most recent BPO
|
|
235,000
|
|
|
13
Most recent BPO date
|
|
1/21/09
|
|
|
|
|
|
|
|
Foreclosure
Loss calculation
|
|
|
|
|
16
Loan Principal balance after last paid installment
|
|
300,000
|
|
|
|
|
|
|
|
17
Accrued interest, limited to 90 days
|
|
6,000
|
|
|
18
Attorney’s fees
|
|
0
|
|
|
|
|
|
|
|
19 Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
4,000
|
|
|
20
Property protection costs, maint. and repairs
|
|
5,500
|
|
|
21
Tax and insurance advances
|
|
1,500
|
|
|
Other Advances
|
|
|
|
|
22
Appraisal/Broker’s Price Opinion fees
|
|
0
|
|
|
23
Inspections
|
|
50
|
|
|
24
Other
|
|
0
|
|
|
|
|
|
|
|
25
Gross balance recoverable by Purchaser
|
|
317,050
|
|
|
|
|
|
|
|
Cash
Recoveries:
|
|
|
|
|
26
Net liquidation proceeds (from HUD-1 settl stmt)
|
|
205,000
|
|
|
27
Hazard Insurance proceeds
|
|
0
|
|
|
28
Mortgage Insurance proceeds
|
|
0
|
|
|
29
T & I escrow account balances, if positive
|
|
0
|
|
|
30
Other credits, if any (itemize)
|
|
0
|
|
|
31
Total Cash Recovery
|
|
205,000
|
|
|
|
|
|
|
|
32
Loss Amount
|
|
112,050
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
81
Exhibit 2a(3)
CALCULATION
OF FORECLOSURE LOSS
Foreclosure after a Covered Loan Mod
|
1
Shared-Loss
Month
|
|
May-09
|
|
|
2
Loan no:
|
|
138554
|
|
|
3
REO #
|
|
843
|
|
|
|
|
|
|
|
4
Loan mod date
|
|
1/17/08
|
|
|
5
Interest paid-to-date
|
|
4/30/08
|
|
|
6
Foreclosure date
|
|
1/15/09
|
|
|
7
Liquidation date
|
|
4/12/09
|
|
|
8
Note Interest rate
|
|
4.000
|
%
|
|
9
Most recent BPO
|
|
210,000
|
|
|
10
Most recent BPO date
|
|
1/20/09
|
|
|
|
|
|
|
|
Foreclosure
Loss calculation
|
|
|
|
|
11
NPV of projected cash flows at loan mod
|
|
285,000
|
|
|
12 Less: Principal
payments between loan mod and deliquency
|
|
2,500
|
|
|
13
Plus:
|
|
|
|
|
14
Attorney’s fees
|
|
0
|
|
|
15 Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
4,000
|
|
|
16
Property protection costs, maint. and repairs
|
|
7,000
|
|
|
17
Tax and insurance advances
|
|
2,000
|
|
|
18
Other Advances
|
|
|
|
|
19
Appraisal/Broker’s Price Opinion fees
|
|
0
|
|
|
20
Inspections
|
|
0
|
|
|
21
Other
|
|
0
|
|
|
|
|
|
|
|
22
Gross balance recoverable by Purchaser
|
|
295,500
|
|
|
|
|
|
|
|
Cash
Recoveries:
|
|
|
|
|
23
Net liquidation proceeds (from HUD-1 settl stmt)
|
|
201,000
|
|
|
24
Hazard Insurance proceeds
|
|
0
|
|
|
25
Mortgage Insurance proceeds
|
|
0
|
|
|
26
T & I escrow account balances, if positive
|
|
0
|
|
|
27
Other credits, if any (itemize)
|
|
0
|
|
|
28
Total Cash Recovery
|
|
201,000
|
|
|
|
|
|
|
|
29
Loss Amount
|
|
94,500
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
82
Notes to Exhibit 2a (foreclosure)
1.
The data shown are for
illustrative purpose. The figures will vary for actual restructurings.
2.
The covered loss is the
difference between the gross balance recoverable by Purchaser and the total
cash recovery. There are three methods of calculation for covered losses from
foreclosures, depending upon the circumstances. They are shown below:
a.
If foreclosure occurred
prior to the beginning of the Loss Share agreement, use Exhibit 2a(1).
This version uses the book value of the REO as the starting point for the
covered loss.
b.
If foreclosure occurred
after the Loss Share agreement was in place, and if the loan was not
restructured when the Loss Share agreement was in place, use
Exhibit 2a(2). This version uses the unpaid balance of the loan as of the
last payment as the starting point for the covered loss.
c.
If the loan was restructured
when the Loss Share agreement was in place, and then foreclosure occurred, use
Exhibit 2a(3). This version uses the Net Present Value (NPV) of the
modified loan as the starting point for the covered loss.
3.
For Exhibit 2a(1), the
gross balance recoverable by the purchaser is calculated as the sum of lines 9 —
18; it is shown in line 19. For Exhibit 2a(2), the gross balance
recoverable by the purchaser is calculated as the sum of lines 16 — 24; it is
shown in line 25. For Exhibit 2a(3), the gross balance recoverable by the
purchaser is calculated as line 11 minus line 12 plus lines 13 — 21; it is
shown in line 22.
4.
For Exhibit 2a(1), the
total cash recovery is calculated as the sum of lines 20 — 24; it is shown in
line 25. For Exhibit 2a(2), the total cash recovery is calculated as the
sum of lines 26 — 30; it is shown in line 31. For Exhibit 2a(3), the total
cash recovery is calculated as the sum of lines 23 — 27; it is shown in line
28.
5.
Reasonable and customary
third party attorney’s fees and expenses incurred by or on behalf of Assuming
Bank in connection with any enforcement procedures, or otherwise with respect
to such loan, are reported under Attorney’s fees.
6.
Assuming Bank’s (or Third
Party Servicer’s) reasonable and customary out-of-pocket costs paid to either a
third party or an affiliate (if affiliate is pre-approved by the FDIC) for
foreclosure, property protection and maintenance costs, repairs, assessments,
taxes, insurance and similar items are treated as part of the gross recoverable
balance, to the extent they are not paid from funds in the borrower’s escrow
account. Allowable costs are limited to amounts per Freddie Mac and Fannie Mae
guidelines (as in effect from time to time), where applicable, provided that
this limitation shall not apply to costs or expenses relating to environmental
conditions.
7.
Do not include late fees,
prepayment penalties, or any similar lender fees or charges by the Failed Bank
or Assuming Bank to the loan account, any allocation of Assuming Bank’s
servicing costs, or any allocations of Assuming Bank’s general and administrative
(G&A) or other operating costs.
8.
If
Exhibit 2a(3) is used, then no accrued interest may be included as a
covered loss. Otherwise, the amount of accrued interest that may be included as
a covered loss is limited to the minimum of:
a. 90 days
b. The number of days that the loan is
delinquent when the property was sold
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
83
c.
The number of days between
the resolution date and the date when the property was sold
To calculate accrued interest, apply the note
interest rate that would have been in effect if the loan were performing to the
principal balance after application of the last payment made by the borrower.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
84
Exhibit 2b
This exhibit contains the loss share calculation for restructuring
(loan mod), plus explanatory notes.
Exhibit 2b
CALCULATION
OF RESTRUCTURING LOSS
|
1
Shared-Loss Month
|
|
May-09
|
|
|
2
Loan no:
|
|
123456
|
|
|
|
|
|
|
|
Loan
before Restructuring
|
|
|
|
|
|
|
|
|
|
3 Original loan amount
|
|
500,000
|
|
|
4 Current unpaid principal balance
|
|
450,000
|
|
|
5 Remaining term
|
|
298
|
|
|
6 Interest rate
|
|
7.500
|
%
|
|
7 Interest Paid-To-Date
|
|
2/29/08
|
|
|
8 Monthly payment - P&I
|
|
3,333
|
|
|
9 Monthly payment - T&I
|
|
1,000
|
|
|
10 Total monthly payment
|
|
4,333
|
|
|
11 Loan type (fixed-rate, ARM, I/O, Option ARM, etc.)
|
|
Option ARM
|
|
|
12 Borrower current annual income
|
|
82,000
|
|
|
|
|
|
|
|
Terms of
Modified/Restructured Loan
|
|
|
|
|
13 Closing date on modified/restructured loan
|
|
4/19/09
|
|
|
14 New Principal balance
|
|
461,438
|
|
|
15 Remaining term
|
|
313
|
|
|
16 Interest rate
|
|
3.500
|
%
|
|
17 Monthly payment - P&I
|
|
1,346
|
|
|
18 Monthly payment - T&I
|
|
800
|
|
|
19 Total monthly payment
|
|
2,146
|
|
|
20 Loan type (fixed-rate, ARM, I/O, Option ARM, etc.)
|
|
IO Hybrid
|
|
|
21 Lien type (1st, 2nd)
|
|
1st
|
|
|
If adjustable:
|
|
|
|
|
22 Initial interest rate
|
|
3.500
|
%
|
|
23 Term - initial interest rate
|
|
60 Months
|
|
|
24 Initial payment amount
|
|
2,146
|
|
|
25 Term-initial payment amount
|
|
60 Months
|
|
|
26 Negative amortization?
|
|
No
|
|
|
27 Rate reset frequency after first adjustment
|
|
6 Months
|
|
|
28 Next reset date
|
|
5/1/14
|
|
|
29 Index
|
|
LIBOR
|
|
|
30 Margin
|
|
2.750
|
%
|
|
31 Cap per adjustment
|
|
2.000
|
%
|
|
32 Lifetime Cap
|
|
9.500
|
%
|
|
33 Floor
|
|
2.750
|
%
|
|
34 Front end DTI
|
|
31
|
%
|
|
35 Back end DTI
|
|
45
|
%
|
|
|
|
|
|
|
Restructuring Loss
Calculation
|
|
|
|
|
36 Loan Principal balance before restructuring
|
|
450,000
|
|
|
37 Accrued interest, limited to 90 days
|
|
8,438
|
|
|
38 Tax and insurance advances
|
|
3,000
|
|
|
39 3rd party fees due
|
|
—
|
|
|
40 Total loan balance due before restructuring
|
|
461,438
|
|
|
|
|
|
|
|
Assumptions for NPV
Calculation, Restructured Loan:
|
|
|
|
|
41 Discount rate for projected cash flows
|
|
5.530
|
%
|
|
42 Loan prepayment in full
|
|
120 Months
|
|
|
43 NPV of projected cash flows
|
|
403,000
|
|
|
|
|
|
|
|
44
Loss Amount
|
|
58,438
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
85
Notes to Exhibit 2b (restructuring)
1. The data shown are for illustrative purpose. The figures will
vary for actual restructurings.
2. For purposes of loss sharing, losses on restructured loans are
calculated as the difference between:
a.
The principal, accrued
interest, advances due on the loan, and allowable 3
rd
party fees
prior to restructuring (lines 36-39), and
b.
The Net Present Value (NPV)
of the estimated cash flows (line 43). The cash flows should assume no default
or prepayment for 10 years, followed by prepayment in full at the end of 10
years (120 months).
3. For owner-occupied residential loans, the NPV is calculated
using the most recently published Freddie Mac survey rate on 30-year fixed rate
loans as of the restructure date.
4. For investor owned or non-owner occupied residential loans, the
NPV is calculated using commercially reasonable rate on 30-year fixed rate
loans as of the restructure date.
5. If the new loan is an adjustable-rate loan, interest rate resets
and related cash flows should be projected based on the index rate in effect at
the date of the loan restructuring. If the restructured loan otherwise provides
for specific charges in monthly P&I payments over the term of the loan,
those changes should be reflected in the projected cash flows. Assuming Bank
must retain supporting schedule of projected cash flows as required by
Section 2.1 of the Single Family Shared-Loss Agreement and provide it to
the FDIC if requested for a sample audit.
6. Do not include late fees, prepayment penalties, or any similar
lender fees or charges by the Failed Bank or Assuming Bank to the loan account,
any allocation of Assuming Bank’s servicing costs, or any allocations of
Assuming Bank’s general and administrative (G&A) or other operating costs.
7. The amount of accrued interest that may be added to the balance
of the loan is limited to the minimum of:
a. 90 days
b. The number of days that the loan is delinquent
at the time of restructuring
c. The number of days between the resolution
date and the restructuring
To calculate accrued
interest, apply the note interest rate that would have been in effect if the
loan were performing to the principal balance after application of the last
payment made by the borrower.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
86
Exhibit 2c
This exhibit contains two versions of the loss share
calculation for short sales, plus explanatory notes.
Exhibit 2c(1)
CALCULATION
OF LOSS FOR SHORT SALE LOANS
No Preceeding Loan Mod under Loss Share
|
1 Shared-Loss Month:
|
|
May-09
|
|
|
2 Loan #
|
|
58776
|
|
|
3 RO #
|
|
542
|
|
|
|
|
|
|
|
4 Interest paid-to-date
|
|
7/31/08
|
|
|
5 Short Payoff Date
|
|
4/17/09
|
|
|
6 Note
Interest rate
|
|
7.750
|
%
|
|
7 Owner occupied?
|
|
Yes
|
|
|
If so:
|
|
|
|
|
8 Borrower current gross
annual income
|
|
38,500
|
|
|
9 Estimated NPV of loan mod
|
|
200,000
|
|
|
10 Most recent BPO
|
|
380,000
|
|
|
11 Most recent BPO date
|
|
1/31/06
|
|
|
|
|
|
|
|
Short-Sale Loss calculation
|
|
|
|
|
12 Loan Principal balance
|
|
375,000
|
|
|
|
|
|
|
|
13 Accrued interest,
limited to 90 days
|
|
7,266
|
|
|
14 Attorney’s fees
|
|
0
|
|
|
15 Tax and insurance
advances
|
|
0
|
|
|
16 3rd party fees due
|
|
2,800
|
|
|
17 Incentive to borrower
|
|
2,000
|
|
|
18 Gross balance
recoverable by Purchaser
|
|
387,066
|
|
|
|
|
|
|
|
19 Amount accepted in
Short-Sale
|
|
255,000
|
|
|
20 Hazard Insurance
|
|
0
|
|
|
21 Mortgage Insurance
|
|
0
|
|
|
|
|
|
|
|
22 Total
Cash Recovery
|
|
255,000
|
|
|
|
|
|
|
|
23
Loss Amount
|
|
132,066
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
87
Exhibit 2c(2)
CALCULATION
OF LOSS FOR SHORT SALE LOANS
Short Sale after a Covered Loan Mod
|
1 Shared-Loss Month:
|
|
May-09
|
|
|
2 Loan #
|
|
20076
|
|
|
3 REO #
|
|
345
|
|
|
|
|
|
|
|
4 Loan mod date
|
|
5/12/08
|
|
|
5 Interest paid-to-date
|
|
9/30/08
|
|
|
6 Short Payoff Date
|
|
4/2/09
|
|
|
7 Note Interest rate
|
|
7.500
|
%
|
|
8 Most recent BPO
|
|
230,000
|
|
|
9 Most recent BPO date
|
|
1/21/09
|
|
|
|
|
|
|
|
Short-Sale
Loss calculation
|
|
|
|
|
11 NPV of projected cash flows at loan mod
|
|
311,000
|
|
|
12
Less: Principal payments between loan mod and deliquency Plus:
|
|
1,000
|
|
|
13 Attorney’s fees
|
|
0
|
|
|
14 Tax and insurance advances
|
|
1,500
|
|
|
15 3rd party fees due
|
|
2,600
|
|
|
16 Incentive to borrower
|
|
3,500
|
|
|
17 Gross balance recoverable by Purchaser
|
|
317,600
|
|
|
|
|
|
|
|
18 Amount accepted in Short-Sale
|
|
234,000
|
|
|
19 Hazard Insurance
|
|
0
|
|
|
20 Mortgage Insurance
|
|
0
|
|
|
|
|
|
|
|
21 Total Cash Recovery
|
|
234,000
|
|
|
|
|
|
|
|
22
Loss Amount
|
|
83,600
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
88
Notes to Exhibit 2c (short sale)
1. The data shown are for illustrative purpose. The figures will
vary for actual short sales.
2. The covered loss is the difference between the gross balance
recoverable by Purchaser and the total cash recovery. There are two methods of
calculation for covered losses from short sales, depending upon the
circumstances. They are shown below:
a.
If the loan was restructured
when the Loss Share agreement was in place, and then the short sale occurred,
use Exhibit 2c(2). This version uses the Net Present Value (NPV) of the
modified loan as the starting point for the covered loss.
b.
Otherwise, use
Exhibit 2c(1). This version uses the unpaid balance of the loan as of the
last payment as the starting point for the covered loss.
3. For Exhibit 2c(1), the gross balance recoverable by the
purchaser is calculated as the sum of lines 12 – 17; it is shown in line 18.
For Exhibit 2a(2), the gross balance recoverable by the purchaser is
calculated as line 11 minus line 12 plus lines 13 – 16; it is shown in line 17.
4. For Exhibit 2c(1), the total cash recovery is calculated as
the sum of lines 19 – 21; it is shown in line 22. For Exhibit 2c(2), the
total cash recovery is calculated as the sum of lines 18 – 20; it is shown in
line 21.
5. Reasonable and customary third party attorney’s fees and
expenses incurred by or on behalf of Assuming Bank in connection with any
enforcement procedures, or otherwise with respect to such loan, are reported
under Attorney’s fees.
6. Do not include late fees, prepayment penalties, or any similar
lender fees or charges by the Failed Bank or Assuming Bank to the loan account,
any allocation of Assuming Bank’s servicing costs, or any allocations of Assuming
Bank’s general and administrative (G&A) or other operating costs.
7. If Exhibit 2c(2) is used, then no accrued interest may
be included as a covered loss. Otherwise, the amount of accrued interest that
may be included as a covered loss is limited to the minimum of:
d.
90 days
e.
The number of days that the
loan is delinquent when the property was sold
f.
The number of days between
the resolution date and the date when the property was sold
To calculate accrued interest, apply the note
interest rate that would have been in effect if the loan were performing to the
principal balance after application of the last payment made by the borrower.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
89
Exhibit 2d
|
Shared-Loss
Month:
|
[input
month]
|
|
Loan no.:
|
[input
loan no.)
|
NOTE
The calculation of recovery
on a loan for which a Restructuring Loss has been paid will only apply if the
loan is sold.
|
EXAMPLE CALCULATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
Loss Information
|
|
|
|
|
|
|
|
|
Loan principal balance
before restructuring
|
|
|
|
$
|
200,000
|
|
A
|
|
|
NPV, restructured loan
|
|
|
|
165,000
|
|
B
|
|
|
Loss on restructured loan
|
|
|
|
$
|
35,000
|
|
A – B
|
|
|
Times FDIC applicable loss
share % (80% or 95%)
|
|
|
|
80
|
%
|
|
|
|
Loss share payment to purchaser
|
|
|
|
$
|
28,000
|
|
C
|
|
|
|
|
|
|
|
|
|
|
|
Calculation — Recovery amount due to
Receiver
|
|
|
|
|
|
|
|
|
Loan sales price
|
|
|
|
$
|
190,000
|
|
|
|
|
NPV of restructured loan
at mod date
|
|
|
|
165,000
|
|
|
|
|
Gain - step 1
|
|
|
|
25,000
|
|
D
|
|
|
PLUS
|
|
|
|
|
|
|
|
|
Loan UPB after
restructuring
|
|
(1
|
)
|
200,000
|
|
|
|
|
Loan UPB at liquidation
date
|
|
|
|
192,000
|
|
|
|
|
Gain - step 2 (principal
collections after restructuring)
|
|
|
|
8,000
|
|
E
|
|
|
Recovery amount
|
|
|
|
33,000
|
|
D + E
|
|
|
Times FDIC loss share %
|
|
|
|
80
|
%
|
|
|
|
Recovery due to FDIC
|
|
|
|
$
|
26,400
|
|
F
|
|
|
|
|
|
|
|
|
|
|
|
Net loss share paid to purchaser (C – F)
|
|
|
|
$
|
1,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proof Calculation
|
|
(2
|
)
|
|
|
|
|
|
Loan principal balance
|
|
|
|
$
|
200,000
|
|
G
|
|
|
|
|
|
|
|
|
|
|
|
Principal collections on
loan
|
|
|
|
8,000
|
|
|
|
|
Sales price for loan
|
|
|
|
190,000
|
|
|
|
|
Total collections on loan
|
|
|
|
198,000
|
|
H
|
|
|
Net loss on loan
|
|
|
|
$
|
2,000
|
|
G – H
|
|
|
Times FDIC applicable loss
share % (80% or 95%)
|
|
|
|
80
|
%
|
|
|
|
Loss share payment to purchaser
|
|
|
|
$
|
1,600
|
|
|
|
|
(1)
|
This example assumes that the FDIC loan modification program as shown
in Exhibit 5 is applied and the loan restructuring does not result in a
reduction in the loan principal balance due from the borrower.
|
|
(2)
|
This proof calculation is
provided to illustrate the concept and the Assuming Bank is not required to
provide this with its Recovery calculations.
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
90
Exhibit 3
Portfolio Performance and Summary Schedule
|
SHARED-LOSS LOANS
|
|
|
|
PORTFOLIO PERFORMANCE AND SUMMARY SCHEDULE
|
|
|
|
MONTH ENDED:
|
|
[input
report month]
|
|
POOL SUMMARY
|
|
|
|
|
|
|
|
|
|
|
#
|
|
$
|
|
|
|
|
|
Loans at Sale Date
|
|
xx
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans as of this month-end
|
|
xx
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATED THRESHOLD TRACKING
|
|
#
|
|
$
|
|
|
|
|
|
Stated Threshold amount
|
|
****
|
|
|
|
A
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative loss payments,
prior month
|
|
|
|
|
|
|
|
|
Loss payment for current
month
|
|
|
|
|
|
|
|
|
Cumulative loss payment,
this month
|
|
|
|
|
|
|
|
|
Cumulative
Commercial & Other Loans Net Charge-Offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
|
Remaining to Stated
Threshold
|
|
****
|
|
|
|
A - B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Total
|
|
|
PORTFOLIO PERFORMANCE STATUS
|
|
#
|
|
$
|
|
|
#
|
|
|
Current
|
|
|
|
|
|
|
|
|
30 – 59 days past due
|
|
|
|
|
|
|
|
|
60 – 89 days past due
|
|
|
|
|
|
|
|
|
90 – 119 days past due
|
|
|
|
|
|
|
|
|
120 and over days past due
|
|
|
|
|
|
|
|
|
In foreclosure
|
|
|
|
|
|
|
|
|
ORE
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo
Item:
|
|
|
|
|
|
|
|
|
Loans in process of
restructuring — total
|
|
|
|
|
|
****
|
|
|
Loans in bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
in process of restructuring by delinquency status
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
30 - 59 days past due
|
|
|
|
|
|
|
|
|
60 - 89 days past due
|
|
|
|
|
|
|
|
|
90 - 119 days past due
|
|
|
|
|
|
|
|
|
120 and over days past due
In foreclosure
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
91
List of
Loans Paid Off During Month
List of
Loans Sold During Month
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
92
Exhibit 4
Wire Transfer Instructions
PURCHASER WIRING INSTRUCTIONS
BANK RECEIVING WIRE
9 DIGIT ABA ROUTING NUMBER
ACCOUNT NUMBER
NAME OF ACCOUNT
ATTENTION TO WHOM
PURPOSE OF WIRE
FDIC RECEIVER WIRING INSTRUCTIONS
BANK RECEIVING WIRE
SHORT NAME
ADDRESS OF BANK RECEIVING WIRE
9 DIGIT ABA ROUTING NUMBER
ACCOUNT NUMBER
NAME OF ACCOUNT
ATTENTION TO WHOM
PURPOSE OF WIRE
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
93
EXHIBIT 5
FDIC
MORTGAGE LOAN MODIFICATION PROGRAM
Objective
The objective of this FDIC Mortgage Loan Modification Program (“Program”)
is to modify the terms of certain residential mortgage loans so as to improve
affordability, increase the probability of performance, allow borrowers to remain
in their homes and increase the value of the loans to the FDIC and assignees.
The Program provides for the modification of Qualifying Loans (as defined
below) by reducing the borrower’s monthly housing debt to income ratio (“DTI
Ratio”) to no more than 31% at the time of the modification and eliminating
adjustable interest rate and negative amortization features.
Qualifying Mortgage Loans
In order for a mortgage loan to be a Qualifying Loan it must meet all
of the following criteria, which must be confirmed by the lender:
·
The collateral
securing the mortgage loan is owner-occupied and the owner’s primary residence;
and
·
The mortgagor
has a first priority lien on the collateral; and
·
Either the
borrower is at least 60 days delinquent or a default is reasonably foreseeable.
Modification Process
The lender shall undertake a review of its mortgage loan portfolio to
identify Qualifying Loans. For each Qualifying Loan, the lender shall determine
the net present value of the modified loan and, if it will exceed the net
present value of the foreclosed collateral upon disposition, then the
Qualifying Loan shall be modified so as to reduce the borrower’s monthly DTI
Ratio to no more than 31% at the time of the modification. To achieve this, the
lender shall use a combination of interest rate reduction, term extension and
principal forbearance, as necessary.
The borrower’s monthly DTI Ratio shall be a percentage calculated by
dividing the borrower’s monthly income by the borrower’s monthly housing
payment (including principal, interest, taxes and insurance). For these
purposes, (1) the borrower’s monthly income shall be the amount of the
borrower’s (along with any co-borrowers’) documented and verified gross monthly
income, and (2) the borrower’s monthly housing payment shall be the amount
required to pay monthly principal and interest plus one-twelfth of the then
current annual amount required to pay real property taxes and homeowner’s
insurance with respect to the collateral.
In order to calculate the monthly principal payment, the lender shall
capitalize to the outstanding principal balance of the Qualifying Loan the
amount of all delinquent interest, delinquent taxes, past due insurance
premiums, third party fees and (without duplication) escrow advances (such
amount, the “Capitalized Balance”).
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
94
In order to achieve the goal of reducing the DTI Ratio to 31%, the
lender shall take the following steps in the following order of priority with
respect to each Qualifying Loan:
1.
Reduce the interest rate to
the then current Freddie Mac Survey Rate for 30-year fixed rate mortgage loans,
and adjust the term to 30 years.
2.
If the DTI Ratio is still in
excess of 31%, reduce the interest rate further, but no lower than 3%, until
the DTI ratio of 31% is achieved.
3.
If the DTI Ratio is still in
excess of 31% after adjusting the interest rate to 3%, extend the remaining
term of the loan by 10 years.
4.
If the DTI Ratio is still in
excess of 31%, calculate a new monthly payment (the “Adjusted Payment Amount”)
that will result in the borrower’s monthly DTI Ratio not exceeding 31%. After
calculating the Adjusted Payment Amount, the lender shall bifurcate the
Capitalized Balance into two portions — the amortizing portion and the
non-amortizing portion. The amortizing portion of the Capitalized Balance shall
be the mortgage amount that will fully amortize over a 40-year term at an
annual interest rate of 3% and monthly payments equal to the Adjusted Payment
Amount. The non- amortizing portion of the Capitalized Balance shall be the
difference between the Capitalized Balance and the amortizing portion of the
Capitalized Balance. If the amortizing portion of the Capitalized Balance is
less than 75% of the current estimated value of the collateral, then the lender
may choose not to restructure the loan. If the lender chooses to restructure
the loan, then the lender shall forbear on collecting the non-amortizing
portion of the Capitalized Balance, and such amount shall be due and payable
only upon the earlier of (i) maturity of the modified loan, (ii) a
sale of the property or (iii) a pay-off or refinancing of the loan. No
interest shall be charged on the non-amortizing portion of the Capitalized
Balance, but repayment shall be secured by a first lien on the collateral.
Special Note:
The net present value calculation used to determine whether a loan
should be modified based on the modification process above is distinct and
different from the net present value calculation used to determine the covered
loss if the loan is modified. Please refer only to the net present value
calculation described in this exhibit for the modification process, with its
separate assumptions, when determining whether to provide a modification to a
borrower. Separate assumptions may include, without limitation, Assuming Bank’s
determination of a probability of default without modification, a probability
of default with modification, home price forecasts, prepayment speeds, and
event timing. These assumptions are applied to different projected cash flows
over the term of the loan, such as the projected cash flow of the loan performing
or defaulting without modification and the projected cash flow of the loan
performing or defaulting with modification.
By contrast, the net present value for determining the covered loss is
based on a 10 year period. While the
assumptions in the net present value calculation used in the modification
process may change, the net present value calculation for determining the
covered loss remains constant.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
95
EXHIBIT 4.15B
COMMERCIAL
AND OTHER ASSETS SHARED-LOSS AGREEMENT
This agreement for reimbursement of loss sharing
expenses on certain loans and other assets (the “Commercial Shared-Loss
Agreement”) shall apply when the Assuming Bank purchases Shared-Loss Assets as
that term is defined herein. The terms hereof shall modify and supplement, as
necessary, the terms of the Purchase and Assumption Agreement to which this
Commercial Shared-Loss Agreement is attached as Exhibit 4.15B and
incorporated therein. To the extent any inconsistencies may arise between the
terms of the Purchase and Assumption Agreement and this Commercial Shared-Loss
Agreement with respect to the subject matter of this Commercial Shared-Loss
Agreement, the terms of this Commercial Shared-Loss Agreement shall control.
References in this Commercial Shared-Loss Agreement to a particular
Section shall be deemed to refer to a Section in this Commercial
Shared-Loss Agreement unless the context indicates that a Section of the
Purchase and Assumption Agreement is intended.
ARTICLE I
— DEFINITIONS
Capitalized terms used in this Commercial
Shared-Loss Agreement that are not defined in this Commercial Shared-Loss
Agreement are defined in the Purchase and Assumption Agreement In addition to
the terms defined above, defined below are certain additional terms relating to
loss-sharing, as used in this Commercial Shared-Loss Agreement.
“
AAA
”
means the
American Arbitration Association as provided in
Section 2.1(f)(iii) of this Commercial Shared-Loss Agreement.
“
Accrued Interest
”
means, with
respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan
Commitment Advance at any time, the amount of earned and unpaid interest, taxes,
credit life and/or disability insurance premiums (if any) payable by the
Obligor accrued on or with respect to such Shared-Loss Loan, Permitted Advance
or Shared-Loss Loan Commitment Advance, all as reflected on the Accounting
Records of the Failed Bank or the Assuming Bank (as applicable);
provided
,
that
Accrued Interest shall not include any amount that accrues on or
with respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan
Commitment Advance after that Asset has been placed on non-accrual or
nonperforming status by either the Failed Bank or the Assuming Bank (as
applicable).
“
Additional ORE
”
means
Shared-Loss Loans that become Other Real Estate after Bank Closing Date.
“
Affiliate
”
shall have the
meaning set forth in the Purchase and Assumption Agreement;
provided
,
that
,
for purposes of this Commercial Shared-Loss Agreement, no Third Party Servicer
shall be deemed to be an Affiliate of the Assuming Bank.
“
Applicable Anniversary
of the Commencement Date
”
means the fifth (5th)
anniversary of the Commencement Date.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
96
“
Calendar Quarter
”
means a
quarterly period (a) for the first such period, beginning on the
Commencement Date and ending on the last calendar day of either March, June,
September or December, whichever is the first to occur after the
Commencement Date, and (b) for quarterly periods thereafter, beginning on
the first calendar day of the calendar month immediately after the month that
ended the prior period and ending on the last calendar day of each successive
three-calendar-month period thereafter (i.e., each March, June,
September and December, starting in the applicable order depending on the
ending date of first such period) of any year.
“
Capitalized Expenditures
”
means those
expenditures that (i) would be capitalized under generally accepted
accounting principles, and (ii) are incurred with respect to Shared-Loss
Loans, Other Real Estate, Additional ORE or Subsidiary ORE. Capitalized
Expenditures shall not include expenses related to environmental conditions
including, but not limited to, remediation, storage or disposal of any
hazardous or toxic substances or any pollutant or contaminant.
“
Charge-Offs
”
means, with
respect to any Shared-Loss Assets for any period, an amount equal to the
aggregate amount of loans or portions of loans classified as “Loss” under the
Examination Criteria, including (a) charge-offs of (i) the principal
amount of such assets net of unearned interest (including write-downs
associated with Other Real Estate, Additional ORE, Subsidiary ORE or loan
modification(s)) (ii) Accrued Interest, and (iii) Capitalized Expenditures
plus (b) Pre-Charge-Off Expenses incurred on the respective Shared-Loss
Loans, all as effected by the Assuming Bank during such period and reflected on
the Accounting Records of the Assuming Bank;
provided
,
that
:
(i) the aggregate amount of Accrued Interest (including any reversals
thereof) for the period after Bank Closing that shall be included in
determining the amount of Charge-Offs for any Shared-Loss Loan shall not exceed
ninety (90) days’ Accrued Interest; (ii) no Charge-Off shall be taken with
respect to any anticipated expenditure by the Assuming Bank until such
expenditure is actually incurred; (iii) any financial statement
adjustments made in connection with the purchase of any Assets pursuant to this
Purchase and Assumption Agreement or any future purchase, merger, consolidation
or other acquisition of the Assuming Bank shall not constitute “Charge-Offs”;
and (iv) except for Portfolio Sales or any other sales or dispositions
consented to by the Receiver, losses incurred on the sale or other disposition
of Shared-Loss Assets to any Person (other than the sale or other disposition
of Other Real Estate, Additional ORE or Subsidiary ORE to a Person other than
an Affiliate of the Assuming Bank which is conducted in a commercially
reasonable and prudent manner) shall not constitute Charge-Offs.
“
Commencement Date
”
means the
first calendar day following Bank Closing.
“
Consumer Loans
”
means Loans to
individuals for household, family and other personal expenditures (including
United States and/or State-guaranteed student loans and extensions of credit
pursuant to a credit card plan or debit card plan).
“
Cumulative Servicing
Amount
”
means the sum of the Period Servicing Amounts for
every consecutive twelve-month period prior to and ending on the True-Up
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
97
Measurement Date in respect of each of the Shared-Loss Agreements
during which the loss-sharing provisions of the applicable Shared-Loss
Agreement is in effect.
“
Cumulative Shared-Loss
Payments
”
means (i) the aggregate of all of the payments
made or payable to the Assuming Bank under the Shared-Loss Agreements minus
(ii) the aggregate of all of the payments made or payable to the Receiver
under the Shared-Loss Agreements.
“
Environmental Assessment
”
means an
assessment of the presence, storage or release of any hazardous or toxic
substance, pollutant or contaminant with respect to the collateral securing a
Shared-Loss Loan that has been fully or partially charged off.
“
Examination Criteria
”
means the loan
classification criteria employed by, or any applicable regulations of, the
Assuming Bank’s Chartering Authority at the time such action is taken, as such
criteria may be amended from time to time.
“
Failed Bank
Charge-Offs/Write-Downs
”
means, with respect to any
Shared-Loss Asset, an amount equal to the aggregate amount of reversals or
charge-offs of Accrued Interest and charge-offs and write-downs of principal
effected by the Failed Bank with respect to that Shared-Loss Asset as reflected
on the Accounting Records of the Failed Bank.
“
Fair Value
”
means the
value of a Shared Loss MTM Asset as stated on the books and records of the
Failed Bank as of Bank Closing, inclusive of all adjustments.
“
FDIC Party
”
has the
meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss
Agreement.
“
Net Charge-Offs
”
means, with
respect to any period, an amount equal to the aggregate amount of Charge-Offs
for such period less the amount of Recoveries for such period.
“
Neutral Member
”
has the
meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss
Agreement.
“
New Shared-Loss Loans
”
means loans
that would otherwise be subject to loss sharing under this Commercial
Shared-Loss Agreement that were originated after
September 18, 2009
and before Bank Closing.
“
Notice of Dispute
”
has the
meaning provided in Section 2.1(f)(iii) of this Commercial
Shared-Loss Agreement.
“
ORE Subsidiary
”
means any
Subsidiary of the Assuming Bank that engages solely in holding, servicing,
managing or liquidating interests of a type described in clause (A) of the
definition of “Other Real Estate,” which interests have arisen from the
collection or settlement of a Shared-Loss Loan.
“
Other Real Estate
”
means all of
the following (including any of the following fully or partially charged off
the books and records of the Failed Bank or the Assuming Bank)
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
98
that (i) are owned by the Failed Bank as of Bank Closing and are
purchased pursuant to the Purchase and Assumption Agreement or (ii) have
arisen subsequent to Bank Closing from the collection or settlement by the
Assuming Bank of a Shared-Loss Loan:
(A)
all interests
in real estate (other than Bank Premises and Fixtures), including but not
limited to mineral rights, leasehold rights, condominium and cooperative
interests, air rights and development rights; and
(B)
all other
assets (whether real or personal property) acquired by foreclosure or in full
or partial satisfaction of judgments or indebtedness.
“
Period Servicing Amount
”
means, for any
twelve month period with respect to each of the Shared-Loss Agreements during
which the loss-sharing provisions of the applicable Shared-Loss Agreement are
in effect, the product of (i) the simple average of the principal amount
of Shared-Loss Loans and Shared-Loss Assets (other than the Shared-Loss
Securities) (in each case as defined in the Shared-Loss Agreements), as the
case may be, at the beginning of such period and at the end of such period
times (ii) one percent (1%).
“
Permitted Advance
”
means an advance
of funds by the Assuming Bank with respect to a Shared-Loss Loan, or the making
of a legally binding commitment by the Assuming Bank to advance funds with
respect to a Shared-Loss Loan, that (i) in the case of such an advance, is
actually made, and, in the case of such a commitment, is made and all of the
proceeds thereof actually advanced, within one (1) year after the
Commencement Date, (ii) does not cause the sum of (A) the book value
of such Shared-Loss Loan as reflected on the Accounting Records of the Assuming
Bank after any such advance has been made by the Assuming Bank
plus
(B) the unfunded amount of any such commitment made by the Assuming Bank
related thereto, to exceed 110% of the Book Value of such Shared-Loss Loan,
(iii) is not made with respect to a Shared-Loss Loan with respect to which
(A) there exists a related Shared-Loss Loan Commitment or (B) the
Assuming Bank has taken a Charge-Off and (iv) is made in good faith, is
supported at the time it is made by documentation in the Credit Files and
conforms to and is in accordance with the applicable requirements set forth in
Article III of this Commercial Shared-Loss Agreement and with the then
effective written internal credit policy guidelines of the Assuming Bank;
provided
,
that
the limitations in subparagraphs (i), (ii) and (iii) of
this definition shall not apply to any such action (other than to an advance or
commitment related to the remediation, storage or final disposal of any
hazardous or toxic substance, pollutant or contaminant) that is taken by
Assuming Bank in its reasonable discretion to preserve or secure the value of
the collateral for such Shared-Loss Loan.
“
Permitted Amendment
”
means, with
respect to any Shared-Loss Loan Commitment or Shared-Loss Loan, any amendment,
modification, renewal or extension thereof, or any waiver of any term, right,
or remedy thereunder, made by the Assuming Bank in good faith and otherwise in
accordance with the applicable requirements set forth in Article III of
this Commercial Shared-Loss Agreement and the then effective written internal
credit policy guidelines of the Assuming Bank;
provided
,
that
:
(i) with respect to a Shared-Loss Loan
Commitment or a Shared-Loss Loan that is not a
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
99
revolving line of credit, no such amendment, modification, renewal,
extension, or waiver, except as allowed under the definition of Permitted
Advance, shall operate to increase the amount of principal (A) then
remaining available to be advanced by the Assuming Bank under the Shared- Loss
Loan Commitment or (B) then outstanding under the Shared-Loss Loan;
(ii)
with respect to a
Shared-Loss Loan Commitment or a Shared-Loss Loan that is a revolving line of
credit, no such amendment, modification, renewal, extension, or waiver, except
as allowed under the definition of Permitted Advance, shall operate to increase
the maximum amount of principal authorized as of Bank Closing to be outstanding
at any one time under the underlying revolving line of credit relationship with
the debtor (regardless of the extent to which such revolving line of credit may
have been funded as of Bank Closing or may subsequently have been funded and/or
repaid); and
(iii)
no such amendment,
modification, renewal, extension or waiver shall extend the term of such
Shared-Loss Loan Commitment or Shared-Loss Loan beyond the end of the final
Shared-Loss Quarter unless the term of such Shared-Loss Loan Commitment or
Shared-Loss Loan as existed on Bank Closing was beyond the end of the final
Shared-Loss Quarter, in which event no such amendment, modification, renewal,
extension or waiver shall extend such term beyond the term as existed as of
Bank Closing.
“
Pre-Charge-Off
Expenses
”
means those
expenses incurred in the usual and prudent management of a Shared-Loss Loan
that would qualify as a Reimbursable Expense or Recovery Expense if incurred
after a Charge-Off of the related Shared-Loss Asset had occurred.
“
Quarterly Certificate
”
has the
meaning provided in Section 2.1 (a)(i) of this Commercial Shared-Loss
Agreement.
“
Recoveries
”
(I)(A) In
addition to any sums to be applied as Recoveries pursuant to subparagraph
(II) below, “Recoveries” means, with respect to any period, the sum of
(without duplication):
(i) the amount of collections during such
period by the Assuming Bank on Charge-Offs of Shared-Loss Assets effected by
the Assuming Bank prior to the end of the final Shared-Loss Quarter;
plus
(ii) the amount of collections during such
period by the Assuming Bank on Failed Bank Charge-Offs/Write-Downs;
plus
(iii) the amount of gain on any sale or other
disposition during such period by the Assuming Bank of Shared Loss Loans, Other
Real Estate, Additional ORE or Subsidiary ORE
(provided
,
that
the
amount of any such gain included in Recoveries shall not exceed the aggregate
amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken
and any related Reimbursable Expenses and Recovery Expenses);
plus
(iv) the amount of collections during such
period by the Assuming Bank of any Reimbursable Expenses or Recovery Expenses;
plus
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
100
(v) the amount of any fee or other
consideration received by the Assuming Bank during or prior to such period in
connection with any amendment, modification, renewal, extension, refinance,
restructure, commitment or other similar action taken by the Assuming Bank with
respect to a Shared-Loss Asset with respect to which there exists a Failed Bank
Charge-Off/Write-Down or a Shared-Loss Loan as to which a Charge-Off has been
effected by the Assuming Bank during or prior to such period
(provided
,
that
the amount of any such fee or other consideration included in Recoveries shall
not exceed the aggregate amount of the related Failed Bank
Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable
Expenses and Recovery Expenses).
(I)(B) For the purpose of determining the
amounts to be applied as Recoveries pursuant to subparagraph (I)(A) above,
the Assuming Bank shall apply amounts received on the Assets that are not
otherwise applied to reduce the book value of principal of a Shared-Loss Loan
(or, in the case of Other Real Estate, Additional ORE, Subsidiary ORE and
Capitalized Expenditures, that are not otherwise applied to reduce the book
value thereof) in the following order: first to Charge-Offs and Failed Bank
Charge-Offs/Write Downs; then to Reimbursable Expenses and Recovery Expenses;
then to interest income; and then to other expenses incurred by the Assuming
Bank.
(II)
If
there occurs an amendment,
modification, renewal, extension, refinance, restructure, commitment, sale or
other similar action with respect to a Shared-Loss Loan as to which there
exists a Failed Bank Charge-Off/Write Down or as to which a Charge-Off has been
effected by the Assuming Bank during or prior to such period,
and
if
,
as a result of such occurrence, the Assuming Bank recognizes any interest
income for financial accounting purposes on that Shared-Loss Loan,
then
“Recoveries”
shall also include the portion of the total amount of any such interest income
recognized by the Assuming Bank which is derived by
multiplying:
(A)
the total amount of any such
interest income recognized by the Assuming Bank during such period with respect
to that Shared-Loss Loan as described above,
by
(B)
a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or charge-offs
of Accrued Interest) of all such Failed Bank Charge-Offs/WriteDowns and
Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan
plus the principal amount of that Shared-Loss Loan that has not yet been
charged- off but has been placed on nonaccrual status, all of which occurred at
any time prior to or during the period in which the interest income referred to
in subparagraph (II)(A) immediately above was recognized, and the
denominator
of which is the total amount of principal indebtedness (including all such
prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above)
due from the Obligor on that Shared-Loss Loan as of the end of such period;
provided
,
however
,
that
the amount of any
interest income included as Recoveries for a particular Shared-Loss Loan shall
not exceed the aggregate amount of (a) Failed Bank ChargeOffs/Write-Downs,
(b) Charge-Offs effected by the Assuming Bank during or prior to the
period in which the amount of Recoveries is being determined, plus (c) any
Reimbursable Expenses and
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
101
Recovery Expenses paid to the Assuming Bank pursuant to this Commercial
Shared-Loss Agreement during or prior to the period in which the amount of
Recoveries is being determined, all with respect to that particular Shared-Loss
Loan; and,
provided
,
further
,
that
any collections on any
such Shared-Loss Loan that are
not
applied to reduce book value of
principal or recognized as interest income shall be applied pursuant to
subparagraph (I) above.
(III) Notwithstanding subparagraphs
(I) and (II) above, the term “Recoveries” shall not include:
(a) any amounts paid to the Assuming Bank by the Receiver pursuant to
Section 2.1 of this Commercial Shared-Loss Agreement, (b) amounts
received with respect to Charge-Offs effected by the Assuming Bank after the
final Shared-Loss Quarter, (c) after the final Shared- Loss Quarter,
income received by the Assuming Bank from the operation of, and any gains
recognized by the Assuming Bank on the disposition of, Other Real Estate,
Additional ORE or Subsidiary ORE (such income and gains being hereinafter
together referred to as “ORE Income”),
except
to the extent that
aggregate ORE Income exceeds the aggregate expenses paid to third parties by or
on behalf of the Assuming Bank after the final Shared-Loss Quarter to manage,
operate and maintain Other Real Estate, Additional ORE or Subsidiary ORE (such
expenses being hereinafter referred to as “ORE Expenses”). In determining the
extent aggregate ORE Income exceeds aggregate ORE Expenses for any Recovery
Quarter as set forth immediately above in subparagraph (c), the Assuming Bank
will subtract (i) ORE Expenses paid to third parties during such Recovery
Quarter (provided, that, in the case of the final Recovery Quarter only, the
Assuming Bank will subtract ORE Expenses paid to third parties from the beginning
of the final Recovery Quarter up to the date the Assuming Bank is required to
deliver the final Quarterly Certificate pursuant to this Commercial Shared-Loss
Agreement)
from
(ii) ORE Income received during such Recovery
Quarter, to calculate net ORE income (“Net ORE Income”) for that Recovery
Quarter. If the amount of Net ORE Income so calculated for a Recovery Quarter
is positive, such amount shall be reported as Recoveries on the Quarterly
Certificate for such Recovery Quarter. If the amount of Net ORE Income so
calculated for a Recovery Quarter is negative (“Net ORE Loss Carryforward”),
such amount shall be added to any ORE Expenses paid to third parties in the
next succeeding Recovery Quarter, which sum shall then be subtracted from ORE
Income for that next succeeding Recovery Quarter, for the purpose of
determining the amount of Net ORE Income (or, if applicable, Net ORE Loss
Carryforward) for that next succeeding Recovery Quarter. If, as of the end of
the final Recovery Quarter, a Net ORE Loss Carryforward exists, then the amount
of the Net ORE Loss Carryforward that does
not
exceed the aggregate
amount of Net ORE Income reported as Recoveries on Quarterly Certificates for
all
Recovery Quarters may be included as a Recovery Expense on the Quarterly Certificate
for the final Recovery Quarter.
“
Recovery Amount
”
has the
meaning provided in Section 2.1(b)(ii) of this Commercial Shared-Loss
Agreement.
“
Recovery Expenses
”
means, for any
Recovery Quarter, the amount of actual, reasonable and necessary out-of-pocket
expenses (other than Capitalized Expenditures) paid to third parties (other
than Affiliates of the Assuming Bank) by or on behalf of the Assuming Bank, as
limited by Sections 3.2(c) and (d) of Article III to this
Commercial Shared-Loss Agreement, to recover amounts owed with respect to
(i) any Shared-Loss Asset as to which a Charge-Off was effected prior to
the end of the final Shared-Loss Quarter (provided that such amounts were
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
102
incurred no earlier than the date the first Charge-Off on such
Shared-Loss Asset could have been reflected on the Accounting Records of the
Assuming Bank), and (ii) Failed Bank ChargeOffs/Write-Downs (including, in
each case, all costs and expenses related to an Environmental Assessment and
any other costs or expenses related to any environmental conditions with
respect to the Shared-Loss Assets (it being understood that any remediation
expenses for any such pollutant or contaminant are not recoverable if in excess
of $200,000 per Shared-Loss Asset, without the Assuming Bank having obtained
the prior consent of the Receiver for such expenses);
provided,
that
,
so long as income with respect to a Shared-Loss Loan is being prorated pursuant
to the arithmetical formula in subsection (II) of the definition of “Recoveries”,
the term “Recovery Expenses” shall
not
include that portion of any such
expenses paid during such Recovery Quarter to recover any amounts owed on that
Shared-Loss Loan that is derived by:
subtracting
(1) the product
derived by
multiplying:
(A)
the total amount of any such
expenses paid by or on behalf of the Assuming Bank during such Recovery Quarter
with respect to that Shared-Loss Loan,
by
(B)
a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or charge-offs
of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and
Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan
plus the principal amount of that Shared-Loss Loan that has not yet been
charged-off but has been placed on nonaccrual status, all of which occurred at
any time prior to or during the period in which the interest income referred to
in subparagraph (II)(A) of the definition of “Recoveries” was recognized,
and the
denominator
of which is the total amount of principal
indebtedness (including all such prior Failed Bank ChargeOffs/Write-Downs and
Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan
as of the end of such period;
from
(2) the total amount
of any such expenses paid during that Recovery Quarter with respect to that
Shared-Loss Loan.
“
Recovery Quarter
”
has the meaning
provided in Section 2.1 (a)(ii) of this Commercial Shared-Loss
Agreement.
“
Reimbursable Expenses
”
means, for any
Shared-Loss Quarter, the amount of actual, reasonable and necessary
out-of-pocket expenses (other than Capitalized Expenditures), paid to third
parties (other than Affiliates of the Assuming Bank) by or on behalf of the
Assuming Bank, as limited by Sections 3.2(c) and (d) of
Article III of this Commercial Shared- Loss Agreement, to:
(i) recover amounts owed with respect to any
Shared-Loss Asset as to which a Charge-Off has been effected prior to the end
of the final Shared-Loss Quarter (provided that such amounts were incurred no
earlier than the date the first Charge-Off on such Shared-Loss Asset could have
been reflected on the Accounting Records of the Assuming Bank) and recover
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
103
amounts owed with respect to Failed Bank Charge-Offs/Write-Downs
(including, in each case, all costs and expenses related to an Environmental
Assessment and any other costs or expenses related to any environmental
conditions with respect to the Shared-Loss Assets (it being understood that any
such remediation expenses for any such pollutant or contaminant are not
recoverable if in excess of $200,000 per Shared-Loss Asset, without the
Assuming Bank having obtained the prior consent of the Receiver for such
expenses);
provided,
that
, so long as income with respect to a
Shared-Loss Loan is being pro-rated pursuant to the arithmetical formula in
subsection (II) of the definition of “Recoveries”, the term “Reimbursable
Expenses” shall
not
include that portion of any such expenses paid
during such Shared-Loss Quarter to recover any amounts owed on that Shared-Loss
Loan that is derived by:
subtracting
(1) the product
derived by
multiplying:
(A)
the total amount of any such
expenses paid by or on behalf of the Assuming Bank during such Shared-Loss Quarter
with respect to that Shared-Loss Loan,
by
(B)
a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or charge-offs
of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and
Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan
plus the principal amount of that Shared-Loss Loan that has not yet been
charged-off but has been placed on nonaccrual status, all of which occurred at
any time prior to or during the period in which the interest income referred to
in subparagraph (II)(A) of the definition of “Recoveries” was recognized,
and the
denominator
of which is the total amount of principal
indebtedness (including all such prior Failed Bank ChargeOffs/Write-Downs and
Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan
as of the end of such period;
from
(2) the total amount
of any such expenses paid during that Shared-Loss Quarter with respect to that
Shared-Loss Loan; and
(ii) manage, operate or maintain Other Real
Estate, Additional ORE or Subsidiary ORE less the amount of any income received
by the Assuming Bank during such Shared-Loss Quarter with respect to such Other
Real Estate, Additional ORE or Subsidiary ORE (which resulting amount under
this clause (ii) may be negative).
“
Review Board
”
has the
meaning provided in Section 2.1 (f)(i) of this Commercial Shared-Loss
Agreement.
“
Shared-Loss Amount
”
has the
meaning provided in Section 2.1 (b)(i) of this Commercial Shared-Loss
Agreement.
“
Shared-Loss Asset
Repurchase Price
”
means, with respect to any Shared-Loss
Asset, the principal amount thereof plus any other fees or penalties due from
an Obligor (including, subject to the limitations discussed below, the amount
of any Accrued Interest) stated on the Accounting Records of the Assuming Bank,
as of the date as of which the Shared-Loss
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
104
Asset Repurchase Price is being determined (regardless, in the case of
a Shared-Loss Loan, of the Legal Balance thereof) plus all Reimbursable
Expenses and Recovery Expenses incurred up to and through the date of
consummation of purchase of such Shared-Loss Asset;
provided,
that
(i) in the case of a Shared-Loss Loan there shall be excluded from such
amount the amount of any Accrued Interest accrued on or with respect to such
Shared-Loss Loan prior to the ninety (90)-day period ending on the day prior to
the purchase date determined pursuant to Sections 2.1 (e)(i) or 2.1
(e)(iii) of this Commercial Shared-Loss Agreement, except to the extent
such Accrued Interest was included in the Book Value of such Shared-Loss Loan,
and (ii) any collections on a Shared-Loss Loan received by the Assuming
Bank after the purchase date applicable to such Shared-Loss Loan shall be
applied (without duplication) to reduce the Shared- Loss Asset Repurchase Price
of such Shared-Loss Loan on a dollar-for-dollar basis. For purposes of
determining the amount of unpaid interest which accrued during a given period
with respect to a variable-rate Shared-Loss Loan, all collections of interest
shall be deemed to be applied to unpaid interest in the chronological order in
which such interest accrued.
“
Shared-Loss Assets
”
means
Shared-Loss Loans, Other Real Estate purchased by the Assuming Bank, Additional
ORE, Subsidiary ORE and Capitalized Expenditures, but does not include Shared
Loss MTM Assets.
“
Shared-Loss Loan
Commitment
”
means:
(i)
any Commitment to make a
further extension of credit or to make a further advance with respect to an
existing Shared-Loss Loan; and
(ii)
any Shared-Loss Loan
Commitment (described in subparagraph (i) immediately preceding) with
respect to which the Assuming Bank has made a Permitted Amendment.
“
Shared-Loss Loan
Commitment Advance
”
means an advance pursuant to a Shared-Loss
Loan Commitment with respect to which the Assuming Bank has
not
made a
Permitted Advance.
“
Shared-Loss Loans
”
means:
(i)(A) Loans purchased by the Assuming Bank
pursuant to the Purchase and Assumption Agreement set forth on
Exhibit 4.15(b) to the Purchase and Assumption Agreement,
(B) New Shared-Loss Loans purchased by the Assuming Bank pursuant to the
Purchase and Assumption Agreement, (C) Permitted Advances and
(D) Shared-Loss Loan Commitment Advances, if any;
provided,
that
Shared-Loss Loans shall not include Loans, New Shared-Loss Loans, Permitted
Advances and Shared-Loss Loan Commitment Advances with respect to which an Acquired
Subsidiary, or a constituent Subsidiary thereof, is an Obligor; (E) Loans
owned by any Subsidiary which are not Shared-Loss Loans under the Single Family
Shared-Loss Agreement; and (F) Consumer Loans; and
(ii) any Shared-Loss Loans (described in subparagraph
(i) immediately preceding) with respect to which the Assuming Bank has
made a Permitted Amendment.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
105
“
Shared-Loss
MTM Assets
”
means those securities and other assets listed on
Exhibit 4.15(C).
“
Shared-Loss Payment
Trigger
”
means when the sum of the Cumulative Loss Amount
under the Single Family Shared-Loss Agreement and the cumulative Net
Charge-Offs under this Commercial Shared-Loss Agreement, exceeds the First Loss
Tranche. If the First Loss Tranche is zero or a negative number, the
Shared-Loss Payment Trigger shall be deemed to have been reached upon Bank
Closing.
“
Shared-Loss Quarter
”
has the
meaning provided in Section 2.1 (a)(i) of this Commercial Shared-Loss
Agreement.
“
Stated Threshold
”
means total
losses under the shared loss agreements in the amount of $
27,000,000.00
.
“
Subsidiary ORE
”
means all
assets owned by ORE Subsidiaries that would constitute Additional ORE if such
assets were on the books of the Assuming Bank.
“
Termination Date
”
means the
eighth (8th) anniversary of the Commencement Date.
“
Third Party Servicer
”
means any
servicer appointed from time to time by the Assuming Bank or any Affiliate of
the Assuming Bank to service the Shared-Loss Assets on behalf of the Assuming
bank, the identity of which shall be given to the Receiver prior to or
concurrent with the appointment thereof.
ARTICLE II
—
SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss Arrangement.
(a)
Quarterly Certificates.
(i) Not later than
thirty (30) days after the end of each Calendar Quarter from and including the
initial Calendar Quarter to and including the Calendar Quarter in which the
Applicable Anniversary of the Commencement Date falls (each of such Calendar
Quarters being referred to herein as a “Shared-Loss Quarter”), the Assuming
Bank shall deliver to the Receiver a certificate, signed by the Assuming Bank’s
chief executive officer and its chief financial officer, setting forth in such
form and detail as the Receiver may specify (a “Quarterly Certificate”):
(A)
the amount of
Charge-Offs, the amount of Recoveries and the amount of Net Charge-Offs (which
amount may be negative) during such Shared- Loss Quarter with respect to the
Shared-Loss Assets (and for Recoveries, with respect to the Assets for which a
charge-off was effected by the Failed Bank prior to Bank Closing); and
(B)
the aggregate
amount of Reimbursable Expenses (which amount
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
106
may be negative) during such Shared-Loss Quarter;
and
(C)
net realized
loss on the Shared Loss MTM Assets determined pursuant to FAS 115, expressed as
a positive number (MTM Net Realized Loss), or net realized gain on the Shared
Loss MTM assets, expressed as a negative number (MTM Net Realized Gain); and
(D)
any other than
temporary impairment of the Shared Loss MTM Assets, determined pursuant to FAS
115, expressed as a positive number (“OTTI Loss”) or reversals of OTTI Loss,
expressed as a negative number (for the avoidance of doubt, normal and
customary unrealized mark-to-market changes by reason of the application of
fair value accounting do not qualify for loss sharing payments).
(ii)
Not later than
thirty (30) days after the end of each Calendar Quarter from and including the
first Calendar Quarter following the final Shared-Loss Quarter to and including
the Calendar Quarter in which the Termination Date falls (each of such Calendar
Quarters being referred to herein as a “Recovery Quarter”), the Assuming Bank
shall deliver to the Receiver a Quarterly Certificate setting forth, in such
form and detail as the Receiver may specify
(A)
the amount of
Recoveries and Recovery Expenses during such Recovery Quarter. On the Quarterly
Certificate for the
first Recovery Quarter only,
the Assuming Bank may
report as a separate item, in such form and detail as the Receiver may specify,
the aggregate amount of any Reimbursable Expenses that: (a) were incurred
prior to or during the final Shared-Loss Quarter,
and
(b) had not
been included in any Quarterly Certificate for any Shared-Loss Quarter because
they had not been actually paid by or on behalf of the Assuming Bank (in
accordance with the terms of this Commercial Shared-Loss Agreement) during any
Shared-Loss Quarter
and
(c) were actually paid by or on behalf of the
Assuming Bank (in accordance with the terms of this Commercial Shared-Loss
Agreement) during the first Recovery Quarter; and
(B)
net realized
gain on the Shared Loss MTM Assets.
(b)
Payments With Respect to Shared-Loss Assets.
(i)
For purposes of this
Section 2.1(b), the Assuming Bank shall initially record the Shared-Loss
Assets on its Accounting Records at Book Value, and initially record the Shared
Loss MTM Assets on its Accounting Records at Fair Value, and adjust such
amounts as such values may change after the Bank Closing. If the amount of all
Net Charge-Offs during any Shared-Loss Quarter
plus
Reimbursable
Expenses,
plus
MTM Net Realized Gain or MTM Net Realized Loss,
plus
OTTI Loss during such Shared-Loss Quarter (the “Shared-Loss Amount”) is
positive, then, except as provided in Sections 2.1(c) and (e) below,
and subject to the provisions of Section 2.1(b)(vi) below, not later
than fifteen (15) days after the date on which the Receiver receives the
Quarterly Certificate with respect to such Shared-Loss Quarter, the Receiver
shall
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
107
pay to the Assuming Bank an amount equal to eighty percent (80%) of the
Shared-Loss Amount for such Shared-Loss Quarter. If the Shared-Loss Amount
during any Shared-Loss Quarter is negative, the Assuming Bank shall pay to the
Receiver an amount equal to eighty percent (80%) of the Shared-Loss Amount for
such Shared-Loss Quarter, which payment shall be delivered to the Receiver
together with the Quarterly Certificate for such Shared-Loss Quarter. When the
cumulative Shared-Loss Amounts for all Shared-Loss Quarters plus the Cumulative
Loss Amount under the Single Family Shared-Loss Agreement equals or exceeds the
Stated Threshold, the Receiver shall pay to the Assuming Bank an amount equal
to ninety-five percent ((95%) of the Shared-Loss Amount for each Shared-Loss
Quarter, until such time as the cumulative Shared-Loss Amount for all
Shared-Loss Quarters is less than the Stated Threshold, when the percentage
shall revert back to eighty percent (80%).
(ii)
If the amount of gross
Recoveries during any Recovery Quarter
less
Recovery Expenses during
such Recovery Quarter plus net realized gains or reversals of OTTI Loss on
Shared Loss MTM Assets (the “Recovery Amount”) is positive, then,
simultaneously with its delivery of the Quarterly Certificate with respect to
such Recovery Quarter, the Assuming Bank shall pay to the Receiver an amount
equal to eighty percent (80%) of the Recovery Amount for such Recovery Quarter.
If the Recovery Amount is negative, then such negative amount shall be
subtracted from the amount of gross Recoveries during the next succeeding
Recovery Quarter in determining the Recovery Amount in such next succeeding
Recovery Quarter;
provided
,
that
this
Section 2.1(b)(ii) shall operate successively in the event that the
Recovery Amount (after giving effect to this Section 2.1(b)(ii)) in such
next succeeding Recovery Quarter is negative. The Assuming Bank shall specify,
in the Quarterly Certificate for the final Recovery Quarter, the aggregate
amount for all Recovery Quarters only, as of the end of, and including, the
final Recovery Quarter of (A) Recoveries plus net realized gains or
reversals of OTTI Loss on Shared Loss MTM Assets (“Aggregate Recovery Period
Recoveries”), (B) Recovery Expenses (“Aggregate Recovery Expenses”), and
(C)
only
those Recovery Expenses that have been actually “offset”
against Aggregate Recovery Period Recoveries (including those so “offset” in
that final Recovery Quarter) (“Aggregate Offset Recovery Expenses”); as used in
this sentence, the term “offset” means the amount that has been applied to
reduce gross Recoveries in any Recovery Quarter pursuant to the methodology set
forth in this Section 2.1(b)(ii). If, at the end of the final Recovery
Quarter the amount of Aggregate Recovery Expenses exceeds the amount of
Aggregate Recovery Period Recoveries, the Receiver shall have no obligation to
pay to the Assuming Bank all or any portion of such excess. Subsequent to the
Assuming Bank’s calculation of the Recovery Amount (if any) for the final
Recovery Quarter, the Assuming Bank shall also show on the Quarterly
Certificate for the final Recovery Quarter the results of the following three
mathematical calculations: (i) Aggregate Recovery Period Recoveries
minus
Aggregate Offset Recovery Expenses; (ii) Aggregate Recovery Expenses
minus
Aggregate Offset Recovery Expenses; and (iii) the
lesser
of the two
amounts calculated in (i) and (ii) immediately above (“Additional
Recovery Expenses”)
multiplied by
80% (the amount so calculated in
(iii) being defined as the “Additional Recovery Expense Amount”). If the
Additional Recovery Expense Amount is greater than zero, then the Assuming Bank
may request in the Quarterly Certificate for the final Recovery Quarter that
the Receiver reimburse the Assuming Bank the amount of the Additional Recovery
Expense Amount and the Receiver shall pay to the Assuming Bank the Additional
Recovery Expense Amount within fifteen (15) days after the date on which the
Receiver receives that Quarterly
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
108
Certificate. On the Quarterly Certificate for the final Recovery
Quarter only, the Assuming Bank may include, in addition to any Recovery
Expenses for that Recovery Quarter that were paid by or on behalf of the Assuming
Bank in that Recovery Quarter, those Recovery Expenses that: (a) were
incurred prior to or during the final Recovery Quarter,
and
(b) had
not
been included in any Quarterly Certificate for any Recovery Quarter
because they had not been actually paid by or on behalf of the Assuming Bank
(in accordance with the terms of this Commercial Shared-Loss Agreement) during
any Recovery Quarter,
and
(c) were actually paid by or on behalf of
the Assuming Bank (in accordance with the terms of this Commercial Shared-Loss
Agreement) prior to the date the Assuming Bank is required to deliver that
final Quarterly Certificate to the Receiver under the terms of
Section 2.1(a)(ii).
(iii)
With respect to
each Shared-Loss Quarter and Recovery Quarter, collections by or on behalf of
the Assuming Bank on any charge-off effected by the Failed Bank prior to Bank
Closing on an Asset other than a Shared-Loss Asset or Shared-Loss MTM Assets
shall be reported as Recoveries under this Section 2.1 only to the extent
such collections exceed the Book Value of such Asset, if any. For any
Shared-Loss Quarter or Recovery Quarter in which collections by or on behalf of
the Assuming Bank on such Asset are applied to both Book Value and to a
charge-off effected by the Failed Bank prior to Bank Closing, the amount of
expenditures incurred by or on behalf of the Assuming Bank attributable to the
collection of any such Asset, that shall be considered a Reimbursable Expense
or a Recovery Expense under this Section 2.1 will be limited to a proportion
of such expenditures which is equal to the proportion derived by dividing
(A) the amount of collections on such Asset applied to a charge-off
effected by the Failed Bank prior to Bank Closing, by (B) the total
collections on such Assets.
(iv)
If the Assuming
Bank has duly specified an amount of Reimbursable Expenses on the Quarterly
Certificate for the first Recovery Quarter as described above in the last
sentence of Section 2.1 (a)(ii), then, not later than fifteen (15) days
after the date on which the Receiver receives that Quarterly Certificate, the
Receiver shall pay to the Assuming Bank an amount equal to eighty percent (80%)
(or, if the Cumulative Loss Amount under the Single Family Shared-Loss
Agreement plus the cumulative Shared-Loss Amount for all Shared-Loss Quarters
equals or exceeds the Stated Threshold, ninety-five percent (95%)) of the
amount of such Reimbursable Expenses.
(v)
If the First
Loss Tranche as determined under the Purchase and Assumption Agreement is a
positive number, Receiver has no obligation to make payment for any Shared Loss
Quarters until the Shared-Loss Payment Trigger is satisfied.
(vi)
Payments from
the Receiver with respect to this Commercial Shared-Loss Agreement are
administrative expenses of the Receiver. To the extent the Receiver needs funds
for shared-loss payments respect to this Commercial Shared-Loss Agreement, the
Receiver shall request funds under the Master Loan and Security Agreement, as
amended (“MLSA”), from FDIC in its corporate capacity. The Receiver will not
agree to any amendment of the MLSA that would prevent the Receiver from drawing
on the MLSA to fund shared-loss payments.
(c)
Limitation on Shared-Loss Payment
.
The Receiver
shall not be required to make any payments pursuant to this Section 2.1 with
respect to any Charge-Off of a Shared-
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
109
Loss Asset that the Receiver or the Corporation determines, based upon
the Examination Criteria, should not have been effected by the Assuming Bank;
provided, (x) the Receiver must provide notice to the Assuming Bank
detailing the grounds for not making such payment, (y) the Receiver must
provide the Assuming Bank with a reasonable opportunity to cure any such
deficiency and (z) (1) to the extent curable, if cured, the Receiver
shall make payment with respect to any properly effected Charge-Off and
(2) to the extent not curable, the Receiver shall make a payment as to all
Charge-Offs (or portion of Charge-Offs) that were effected which would have
been payable as a Charge-Off if the Assuming Bank had properly effected such
Charge-Off. In the event that the Receiver does not make any payments with
respect to any Charge-Off of a Shared-Loss Asset pursuant to this
Section 2.1 or determines that a payment was improperly made, the Assuming
Bank and the Receiver shall, upon final resolution, make such accounting
adjustments and payments as may be necessary to give retroactive effect to such
corrections.
(d)
Sale of, or Additional Advances or Amendments with Respect to,
Shared-Loss Loans and Administration of Related Loans
.
No Shared-Loss Loan shall be treated as a Shared-Loss Asset pursuant
to this Section 2.1 (i) if the Assuming Bank sells or otherwise
transfers such Shared-Loss Loan or any interest therein (whether with or
without recourse) to any Person, (ii) after the Assuming Bank makes any
additional advance, commitment or increase in the amount of a commitment with
respect to such Shared-Loss Loan that does not constitute a Permitted Advance
or a Shared-Loss Loan Commitment Advance, (iii) after the Assuming Bank
makes any amendment, modification, renewal or extension to such Shared-Loss Loan
that does not constitute a Permitted Amendment, or (iv) after the Assuming
Bank has managed, administered or collected any “Related Loan” (as such term is
defined in Section 3.4 of Article III of this Commercial Shared-Loss
Agreement) in any manner which would have the effect of increasing the amount
of any collections with respect to the Related Loan to the detriment of such
Shared-Loss Asset to which such loan is related;
provided,
that
any such Shared-Loss Loan that has been the subject of Charge-Offs prior to the
taking of any action described in clause (i), (ii), (iii) or (iv) of
this Section 2.1(d) by the Assuming Bank shall be treated as a
Shared-Loss Asset pursuant to this Section 2.1 solely for the purpose of
treatment of Recoveries on such Charge-Offs until such time as the amount of
Recoveries with respect to such Shared-Loss Asset equals such Charge-Offs.
(e)
Option to Purchase
.
(i)
In the event that the
Assuming Bank determines that there is a substantial likelihood that continued
efforts to collect a Shared-Loss Asset or an Asset for which a charge-off was
effected by the Failed Bank with, in either case, a Legal Balance of $500,000
or more on the Accounting Records of the Assuming Bank will result in an
expenditure, after Bank Closing, of funds by on behalf of the Assuming Bank to
a third party for a specified purpose (the expenditure of which, in its best
judgment, will maximize collections), which do not constitute Reimbursable
Expenses or Recovery Expenses, and such expenses will exceed ten percent (10%)
of the then book value thereof as reflected on the Accounting Records of the
Assuming Bank, the Assuming Bank shall (i) promptly so notify the Receiver
and (ii) request that such expenditure be treated as a Reimbursable
Expense or Recovery Expense for purposes of this Section 2.1. (Where the
Assuming Bank determines that there is a substantial likelihood that the
previously
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
110
mentioned situation exists with respect to continued efforts to collect
a Shared-Loss Asset or an Asset for which a charge-off was effected by the
Failed Bank with, in either case, a Legal Balance of less than $1,000,000 on
the Accounting Records of the Assuming Bank, the Assuming Bank may so notify
the Receiver and request that such expenditure be treated as a Reimbursable
Expense or Recovery Expense.) Within thirty (30) days after its receipt of such
a notice, the Receiver will advise the Assuming Bank of its consent or denial,
that such expenditures shall be treated as a Reimbursable Expense or Recovery
Expense, as the case may be. Notwithstanding the failure of the Receiver to
give its consent with respect to such expenditures, the Assuming Bank shall
continue to administer such Shared-Loss Asset in accordance with
Section 2.2, except that the Assuming Bank shall not be required to make
such expenditures. At any time after its receipt of such a notice and on or
prior to the Termination Date the Receiver shall have the right to purchase
such Shared-Loss Asset or Asset as provided in Section 2.1(e)(iii),
notwithstanding any consent by the Receiver with respect to such expenditure.
(ii)
During the period prior to
the Termination Date, the Assuming Bank shall notify the Receiver within
fifteen (15) days after any of the following becomes fully or partially
charged-off:
(A)
a Shared-Loss Loan having a
Legal Balance (or, in the case of more than one (1) Shared-Loss Loan made
to the same Obligor, a combined Legal Balance) of $500,000 or more in
circumstances in which the legal claim against the relevant Obligor survives;
or
(B)
a Shared-Loss Loan to a
director, an “executive officer” as defined in 12 C.F.R.215.2(d), a “principal
shareholder” as defined in 12 C.F.R. 215.2(l), or an Affiliate of the Assuming
Bank.
(iii)
If the Receiver determines
in its discretion that the Assuming Bank is not diligently pursuing collection
efforts with respect to any Shared-Loss Asset which has been fully or partially
charged-off or written-down (including any Shared-Loss Asset which is
identified or required to be identified in a notice pursuant to
Section 2.1 (e)(ii)) or any Asset for which there exists a Failed Bank Charge-Off/Write-Down,
the Receiver may at its option, exercisable at any time on or prior to the
Termination Date, require the Assuming Bank to assign, transfer and convey such
Shared-Loss Asset or Asset to and for the sole benefit of the Receiver for a
price equal to the Shared-Loss Asset Repurchase Price thereof less the Related
Liability Amount with respect to any Related Liabilities related to such
Shared-Loss Asset or Asset.
(iv)
Not later than ten
(10) days after the date upon which the Assuming Bank receives notice of
the Receiver’s intention to purchase or require the assignment of any
Shared-Loss Asset or Asset pursuant to Section 2.1 (e)(i) or (iii),
the Assuming Bank shall transfer to the Receiver such Shared-Loss Asset or
Asset and any Credit Files relating thereto and shall take all such other
actions as may be necessary and appropriate to adequately effect the transfer
of such Shared-Loss Asset or Asset from the Assuming Bank to the Receiver. Not
later than fifteen (15) days after the date upon which the Receiver receives
such Shared-Loss Asset or Asset and any Credit Files relating thereto, the
Receiver shall pay to the Assuming Bank an amount equal to the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
111
Shared-Loss Asset Repurchase Price of such Shared-Loss Asset or Asset
less the Related Liability Amount.
(v)
The Receiver shall assume
all Related Liabilities with respect to any Shared-Loss Asset or Asset set
forth in the notice described in Section 2.1 (e)(iv).
(f)
Dispute Resolution
.
(i)
(A) Any dispute as to
whether a Charge-Off of a Shared-Loss Asset was made in accordance with
Examination Criteria shall be resolved by the Assuming Bank’s Chartering
Authority. (B) With respect to any other dispute arising under the terms
of this Commercial Shared-Loss Agreement which the parties hereto cannot
resolve after having negotiated such matter, in good faith, for a thirty (30)
day period, other than a dispute the Corporation is not permitted to submit to
arbitration under the Administrative Dispute Resolution Act of 1996 (“ADRA”),
as amended, such other dispute shall be resolved by determination of a review
board (a “Review Board”) established pursuant to Section 2.1(f). Any
Review Board under this Section 2.1(f) shall follow the provisions of
the Federal Arbitration Act and shall follow the provisions of the ADRA.
(C) Any determination by the Assuming Bank’s Chartering Authority or by a
Review Board shall be conclusive and binding on the parties hereto and not
subject to further dispute, and judgment may be entered on said determination
in accordance with applicable arbitration law in any court having jurisdiction
thereof.
(ii)
A Review Board
shall consist of three (3) members, each of whom shall have such expertise
as the Corporation and the Assuming Bank agree is relevant. As appropriate, the
Receiver or the Corporation (the “FDIC Party”) will select one member, one
member will be selected by the Assuming Bank and the third member (the “Neutral
Member”) will be selected by the other two members. The member of the Review
Board selected by a party may be removed at any time by such party upon two
(2) days’ written notice to the other party of the selection of a
replacement member. The Neutral Member may be removed by unanimous action of
the members appointed by the FDIC Party and the Assuming Bank after two
(2) days’ prior written notice to the FDIC Party and the Assuming Bank of
the selection of a replacement Neutral Member. In addition, if a Neutral Member
fails for any reason to serve or continue to serve on the Review Board, the
other remaining members shall so notify the parties to the dispute and the
Neutral Member in writing that such Neutral Member will be replaced, and the
Neutral Member shall thereafter be replaced by the unanimous action of the
other remaining members within twenty (20) business days of that notification.
(iii)
No dispute may
be submitted to a Review Board by any of the parties to this Commercial
Shared-Loss Agreement unless such party has provided to the other party a
written notice of dispute (“Notice of Dispute”). During the forty-five (45)-day
period following the providing of a Notice of Dispute, the parties to the
dispute will make every effort in good faith to resolve the dispute by mutual
agreement. As part of these good faith efforts, the parties should consider the
use of less formal dispute resolution techniques, as judged appropriate by each
party in its sole discretion. Such techniques may include, but are not limited
to, mediation, settlement conference, and early neutral evaluation. If the
parties have not agreed to a resolution of the dispute by the end of such
forty-five (45)-day period, then, subject to the discretion of the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
112
Corporation and the written consent of the Assuming Bank as set forth
in Section 2.1 (f)(i)(B) above, on the first day following the end of
such period, the FDIC Party and the Assuming Bank shall notify each other of
its selection of its member of the Review Board and such members shall be
instructed to promptly select the Neutral Member of the Review Board. If the
members appointed by the FDIC Party and the Assuming Bank are unable to
promptly agree upon the initial selection of the Neutral Member, or a timely
replacement Neutral Member as set forth in Section 2.1 (f)(ii) above,
the two appointed members shall apply to the American Arbitration Association (“AAA”),
and such Neutral Member shall be appointed in accordance with the Commercial
Arbitration Rules of the AAA.
(iv)
The resolution
of a dispute pursuant to this Section 2.1(f) shall be governed by the
Commercial Arbitration Rules of the AAA to the extent that such
rules are not inconsistent with this Section 2.1(f). The Review Board
may modify the procedures set forth in such rules from time to time with
the prior approval of the FDIC Party and the Assuming Bank.
(v)
Within fifteen
(15) days after the last to occur of the final written submissions of both
parties, the presentation of witnesses, if any, and oral presentations, if any,
the Review Board shall adopt the position of one of the parties and shall
present to the parties a written award regarding the dispute. The determination
of any two (2) members of a Review Board will constitute the determination
of such Review Board.
(vi)
The FDIC Party
and the Assuming Bank will each pay the fees and expenses of the member of the
Review Board selected by it. The FDIC Party and Assuming Bank will share
equally the fees and expenses of the Neutral Member. No such fees or expenses
incurred by or on behalf of the Assuming Bank shall be subject to reimbursement
by the FDIC Party under this Commercial Shared-Loss Agreement or otherwise.
(vii)
Each party will
bear all costs and expenses incurred by it in connection with the submission of
any dispute to a Review Board. No such costs or expenses incurred by or on
behalf of the Assuming Bank shall be subject to reimbursement by the FDIC Party
under this Commercial Shared-Loss Agreement or otherwise. The Review Board
shall have no authority to award costs or expenses incurred by either party to
these proceedings.
(viii)
Any dispute
resolution proceeding held pursuant to this Section 2.1(f) shall not
be public. In addition, each party and each member of any Review Board shall
strictly maintain the confidentiality of all issues, disputes, arguments,
positions and interpretations of any such proceeding, as well as all
information, attachments, enclosures, exhibits, summaries, compilations,
studies, analyses, notes, documents, statements, schedules and other similar items
associated therewith, except as the parties agree in writing or such disclosure
is required pursuant to law, rule or regulation. Pursuant to ADRA, dispute
resolution communications may not be disclosed either by the parties or by any
member of the Review board unless:
(1)
all parties to the dispute
resolution proceeding agree in writing;
(2)
the communication has
already been made public;
(3)
the communication is
required by statute, rule or regulation to be made public; or
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
113
(4) a court determines that such testimony or
disclosure is necessary to prevent a manifest injustice, help establish a
violation of the law or prevent harm to the public health or safety, or of
sufficient magnitude in the particular case to outweigh the integrity of
dispute resolution proceedings in general by reducing the confidence of parties
in future cases that their communications will remain confidential.
(ix)
Any dispute
resolution proceeding pursuant to this Section 2.1(f) (whether as a
matter of good faith negotiations, by resort to a Review Board, or otherwise)
is a compromise negotiation for purposes of the Federal Rules of Evidence
and state rules of evidence. The parties agree that all proceedings,
including any statement made or document prepared by any party, attorney or
other participants are privileged and shall not be disclosed in any subsequent
proceeding or document or construed for any purpose as an admission against
interest. Any document submitted and any statements made during any dispute
resolution proceeding are for settlement purposes only. The parties further
agree not to subpoena any of the members of the Review Board or any documents
submitted to the Review Board. In no event will the Neutral Member voluntarily
testify on behalf of any party.
(x)
No decision,
interpretation, determination, analysis, statement, award or other
pronouncement of any Review Board shall constitute precedent as regards any
subsequent proceeding (whether or not such proceeding involves dispute resolution
under this Commercial Shared-Loss Agreement) nor shall any Review Board be
bound to follow any decision, interpretation, determination, analysis,
statement, award or other pronouncement rendered by any previous Review Board
or any other previous dispute resolution panel which may have convened in
connection with a transaction involving other failed financial institutions or
Federal assistance transactions.
(xi)
The parties may
extend any period of time in this Section 2.1(f) by mutual agreement.
Notwithstanding anything above to the contrary, no dispute shall be submitted
to a Review Board until each member of the Review Board, and any substitute
member, if applicable, agrees to be bound by the provisions of this
Section 2.1(f) as applicable to members of a Review Board. Prior to
the commencement of the Review Board proceedings, or, in the case of a
substitute Neutral Member, prior to the re-commencement of such proceedings
subsequent to that substitution, the Neutral Member shall provide a written
oath of impartiality.
(xii)
For the
avoidance of doubt, and notwithstanding anything herein to the contrary, in the
event any notice of dispute is provided to a party under this
Section 2.1(g) prior to the Termination Date, the terms of this
Commercial Shared-Loss Agreement shall remain in effect with respect to any
such items set forth in such notice until such time as any such dispute with
respect to such item is finally resolved.
(g)
Payment in
the Event Losses Fail to Reach Expected Level
. On the date
that is 45 days following the last day (such day, the “True-Up Measurement Date”)
of the calendar month in which the tenth anniversary of the calendar day
following the Bank Closing occurs, the Assuming Bank shall pay to the Receiver
fifty percent (50%) of the excess, if any, of (i) twenty percent (20%) of
the Stated Threshold less (ii) the sum of (A) twenty-five percent
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
114
(25%) of the asset premium (discount) plus (B) twenty-five percent
(25%) of the Cumulative Shared-Loss Payments plus (C) the Cumulative
Servicing Amount. The Assuming Bank shall deliver to the Receiver not later
than 30 days following the True-Up Measurement Date, a schedule, signed by an
officer of the Assuming Bank, setting forth in reasonable detail the
calculation of the Cumulative Shared-Loss Payments and the Cumulative Servicing
Amount.
2.2
Administration of Shared-Loss Assets
.
The Assuming Bank shall at all times prior to the Termination Date
comply with the Rules Regarding the Administration of Shared-Loss Assets
as set forth in Article III of this Commercial Shared-Loss Agreement.
2.3
Auditor Report; Right to Audit
.
(a)
Within ninety
(90) days after the end of each fiscal year from and including the fiscal year
during which Bank Closing falls to and including the calendar year during which
the Termination Date falls, the Assuming Bank shall deliver to the Corporation
and to the Receiver a report signed by its independent public accountants
stating that they have reviewed the terms of this Commercial Shared-Loss
Agreement and that, in the course of their annual audit of the Assuming Bank’s
books and records, nothing has come to their attention suggesting that any
computations required to be made by the Assuming Bank during such year by this
Article II were not made by the Assuming Bank in accordance herewith. In
the event that the Assuming Bank cannot comply with the preceding sentence, it
shall promptly submit to the Receiver corrected computations together with a
report signed by its independent public accountants stating that, after giving
effect to such corrected computations, nothing has come to their attention
suggesting that any computations required to be made by the Assuming Bank
during such year by this Article II were not made by the Assuming Bank in
accordance herewith. In such event, the Assuming Bank and the Receiver shall
make all such accounting adjustments and payments as may be necessary to give
effect to each correction reflected in such corrected computations, retroactive
to the date on which the corresponding incorrect computation was made. It is
the intention of this provision to align the timing of the audit required under
this Commercial Shared-Loss Agreement with the examination audit required
pursuant to 12 CFR Section 363.
(b)
The Assuming
Bank shall perform on an annual basis an internal audit of its compliance with
the provisions of this Article II and shall provide the Receiver and the
Corporation with copies of the internal audit reports and access to internal
audit workpapers related to such internal audit.
(c)
The Receiver or
the Corporation may perform an audit to determine the Assuming Bank’s
compliance with the provisions of this Commercial Shared-Loss Agreement,
including this Article II, at any time by providing not less than ten
(10) Business Days prior written notice. The scope and duration of any
such audit shall be within the discretion of the Receiver or the Corporation,
as the case may be, but shall in no event be administered in a manner that
unreasonably interferes with the operation of the Assuming Bank’s business. The
Receiver or the Corporation, as the case may be, shall bear the expense of any
such audit. In the event that any corrections are necessary as a result of such
an audit, the Assuming Bank and the Receiver shall make such accounting
adjustments and payments as may be necessary to give retroactive effect to such
corrections.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
115
2.4
Withholdings
.
Notwithstanding any other provision in this Article II, the Receiver, upon
the direction of the Director (or designee) of the Corporation’s Division of
Resolutions and Receiverships, may withhold payment for any amounts included in
a Quarterly Certificate delivered pursuant to Section 2.1, if, in its
judgment, there is a reasonable basis under the terms of this Commercial
Shared-Loss Agreement for denying the eligibility of an item for which
reimbursement or payment is sought under such Section. In such event, the
Receiver shall provide a written notice to the Assuming Bank detailing the
grounds for withholding such payment. At such time as the Assuming Bank
demonstrates to the satisfaction of the Receiver that the grounds for such
withholding of payment, or portion of payment, no longer exist or have been
cured, then the Receiver shall pay the Assuming Bank the amount withheld which
the Receiver determines is eligible for payment, within fifteen (15) Business
Days. In the event the Receiver or the Assuming Bank elects to submit the issue
of the eligibility of the item for reimbursement or payment for determination
under the dispute resolution procedures of Section 2.1(f), then
(i) if the dispute is settled by the mutual agreement of the parties in
accordance with Section 2.1(f)(iii), the Receiver shall pay the amount
withheld (to the extent so agreed) within fifteen (15) Business Days from the
date upon which the dispute is determined by the parties to be resolved by
mutual agreement, and (ii) if the dispute is resolved by the determination
of a Review Board, the Receiver shall pay the amount withheld (to the extent so
determined) within fifteen (15) Business Days from the date upon which the
Receiver is notified of the determination by the Review Board of its obligation
to make such payment. Any payment by the Receiver pursuant to this
Section 2.4 shall be made together with interest on the amount thereof
from the date the payment was agreed or determined otherwise to be due, at the
interest rate per annum determined by the Receiver to be equal to the coupon
equivalent of the three (3)-month U.S. Treasury Bill Rate in effect as of the
first Business Day of each Calendar Quarter during which such interest accrues
as reported in the Federal Reserve Board’s Statistical Release for Selected
Interest Rates H.15 opposite the caption “Auction Average - 3-Month” or, if not
so reported for such day, for the next preceding Business Day for which such
rate was so reported.
2.5
Books and Records
. The Assuming Bank shall at
all times during the term of this Commercial Shared-Loss Agreement keep books
and records which fairly present all dealings and transactions carried out in
connection with its business and affairs. Except as otherwise provided for in
the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement,
all financial books and records shall be kept in accordance with generally
accepted accounting principles, consistently applied for the periods involved
and in a manner such that information necessary to determine compliance with
any requirement of the Purchase and Assumption Agreement or this Commercial
Shared-Loss Agreement will be readily obtainable, and in a manner such that the
purposes of the Purchase and Assumption Agreement or this Commercial
Shared-Loss Agreement may be effectively accomplished. Without the prior
written approval of the Corporation, the Assuming Bank shall not make any
change in its accounting principles adversely affecting the value of the
Shared-Loss Assets except as required by a change in generally accepted accounting
principles. The Assuming Bank shall notify the Corporation of any change in its
accounting principles affecting the Shared-Loss Assets which it believes are
required by a change in generally accepted accounting principles.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
116
2.6
Information
. The Assuming Bank shall promptly provide to
the Corporation such other information, including financial statements and
computations, relating to the performance of the provisions of the Purchase and
Assumption Agreement or otherwise relating to its business and affairs or this
Commercial Shared-Loss Agreement, as the Corporation or the Receiver may
request from time to time.
2.7
Tax Ruling
.
The Assuming
Bank shall not at any time, without the Corporation’s prior written consent,
seek a private letter ruling or other determination from the Internal Revenue
Service or otherwise seek to qualify for any special tax treatment or benefits
associated with any payments made by the Corporation pursuant to the Purchase
and Assumption Agreement or this Commercial Shared-Loss Agreement.
ARTICLE III
- RULES REGARDING THE ADMINISTRATION OF SHARED-LOSS
ASSETS AND SHARED-LOSS MTM ASSETS
3.1
Agreement with Respect to Administration
.
The Assuming Bank shall (and shall cause any of its Affiliates to
which the Assuming Bank transfers any Shared-Loss Assets or Shared-Loss MTM
Assets) to, or a Third Party Servicer to, manage, administer, and collect the
Shared-Loss Assets and Shared-Loss MTM Assets while owned by the Assuming Bank
or any Affiliate thereof during the term of this Commercial Shared-Loss
Agreement in accordance with the rules set forth in this Article III
(“Rules”). The Assuming Bank shall be responsible to the Receiver and the
Corporation in the performance of its duties hereunder and shall provide to the
Receiver and the Corporation such reports as the Receiver or the Corporation
reasonably deems advisable, including but not limited to the reports required
by Section 3.3 hereof, and shall permit the Receiver and the Corporation
at all times to monitor the Assuming Bank’s performance of its duties
hereunder.
3.2
Duties of the Assuming Bank with Respect to Shared-Loss Assets
.
(a) In performance of its duties under these
Rules, the Assuming Bank shall:
(i)
manage, administer, collect
and effect Charge-Offs and Recoveries with respect to each Shared-Loss Asset in
a manner consistent with (A) usual and prudent business and banking
practices; (B) the Assuming Bank’s (or, in the case a Third Party Servicer
is engaged, the Third Party Servicer’s) practices and procedures including,
without limitation, the then-effective written internal credit policy
guidelines of the Assuming Bank, with respect to the management, administration
and collection of and taking of charge-offs and write-downs with respect to
loans, other real estate and repossessed collateral that do not constitute
Shared Loss Assets;
(ii)
exercise its best business
judgment in managing, administering, collecting and effecting Charge-Offs with
respect to Shared-Loss Assets;
(iii)
use its best efforts to
maximize collections with respect to Shared-Loss Assets and, if applicable for
a particular Shared-Loss Asset, without regard to the effect of maximizing
collections on assets held by the Assuming Bank or any of its Affiliates that
are not
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
117
Shared-Loss Assets;
(iv)
adopt and implement
accounting, reporting, record-keeping and similar systems with respect to the
Shared-Loss Assets, as provided in Section 3.4 hereof;
(v)
retain sufficient staff to
perform its duties hereunder; and
(vi)
provide written notification
in accordance with Article IV of this Commercial Shared-Loss Agreement
immediately after the execution of any contract pursuant to which any third
party (other than an Affiliate of the Assuming Bank) will manage, administer or
collect any of the Shared-Loss Assets, together with a copy of that contract.
(b)
Any transaction with or
between any Affiliate of the Assuming Bank with respect to any Shared-Loss
Asset including, without limitation, the execution of any contract pursuant to
which any Affiliate of the Assuming Bank will manage, administer or collect any
of the Shared-Loss Assets, or any other action involving self-dealing, shall be
subject to the prior written approval of the Receiver or the Corporation.
(c)
The following categories of
expenses shall not be deemed to be Reimbursable Expenses or Recovery Expenses:
(i)
Federal, State, or local
income taxes and expenses related thereto;
(ii)
salaries or other compensation
and related benefits of Assuming Bank employees and the employees of its
Affiliates including, without limitation, any bonus, commission or severance
arrangements, training, payroll taxes, dues, or travel- or relocation- related
expenses,;
(iii)
the cost of space occupied
by the Assuming Bank, any Affiliate thereof and their staff, the rental of and
maintenance of furniture and equipment, and expenses for data processing
including the purchase or enhancement of data processing systems;
(iv)
except as otherwise provided
herein, fees for accounting and other independent professional consultants
(other than consultants retained to assess the presence, storage or release of
any hazardous or toxic substance, or any pollutant or contaminant with respect
to the collateral securing a Shared-Loss Loan that has been fully or partially
charged-off);
provided
,
that
for purposes of this
Section 3.2(c)(iv), fees of attorneys and appraisers engaged as necessary
to assist in collections with respect to Shared-Loss Assets shall not be deemed
to be fees of other independent consultants;
(v)
allocated portions of any
other overhead or general and administrative expense other than any fees
relating to specific assets, such as appraisal fees or environmental audit
fees, for services of a type the Assuming Bank does not normally perform
internally;
(vi)
any expense not incurred in
good faith and with the same degree of care that the Assuming Bank normally
would exercise in the collection of troubled assets in
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
118
which it alone had an interest; and
(vii)
any expense incurred for a
product, service or activity that is of an extravagant nature or design.
(d) Subject to Section 3.7,
the Assuming Bank shall not contract with third parties to provide services the
cost of which would be a Reimbursable Expense or Recovery Expense if the
Assuming Bank would have provided such services itself if the relevant
Shared-Loss Assets were not subject to the loss-sharing provisions of
Section 2.1 of this Commercial Shared-Loss Agreement.
3.3
Duties of the Assuming Bank with Respect to Shared-Loss MTM Assets
.
(a) In performance of its duties
under these Rules, the Assuming Bank shall:
(i)
manage, administer, collect
and each Shared-Loss MTM Asset in a manner consistent with (A) usual and
prudent business and banking practices; (B) the Assuming Bank’s practices
and procedures including, without limitation, the then-effective written
internal credit policy guidelines of the Assuming Bank, with respect to the
management, administration and collection of similar assets that are not
Shared-Loss MTM Assets;
(ii)
exercise its best business
judgment in managing, administering, collecting and effecting Charge-Offs with
respect to Shared-Loss MTM Assets;
(iii)
use its best efforts to
maximize collections with respect to Shared-Loss MTM Assets and, if applicable
for a particular Shared-Loss MTM Asset, without regard to the effect of
maximizing collections on assets held by the Assuming Bank or any of its
Affiliates that are not Shared-Loss MTM Assets, provided that, any sale of a
Shared-Loss MTM Asset shall only be made with the prior approval of the
Receiver or the Corporation;
(iv)
adopt and implement
accounting, reporting, record-keeping and similar systems with respect to the
Shared-Loss MTM Assets, as provided in Section 3.4 hereof;
(v)
retain sufficient staff to
perform its duties hereunder; and
(vi)
provide written notification
in accordance with Article IV of this Commercial Shared-Loss Agreement
immediately after the execution of any contract pursuant to which any third
party (other than an Affiliate of the Assuming Bank) will manage, administer or
collect any of the Shared-Loss MTM Assets, together with a copy of that
contract.
(b) Any transaction with or between any
Affiliate of the Assuming Bank with respect to any Shared-Loss MTM Asset
including, without limitation, the execution of any contract pursuant to which
any Affiliate of the Assuming Bank will manage, administer or collect any of
the Shared-Loss Assets, or any other action involving self-dealing, shall be
subject to the prior written approval of the Receiver or the Corporation.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
119
(c)
The Assuming Bank shall not
contract with third parties to provide services the cost of which would be a
Reimbursable Expense or Recovery Expense if the Assuming Bank would have
provided such services itself if the relevant Shared-Loss Assets were not
subject to the loss-sharing provisions of Section 2.1 of this Commercial
Shared-Loss Agreement.
3.4
Records and Reports
. The Assuming Bank shall
establish and maintain records on a separate general ledger, and on such
subsidiary ledgers as may be appropriate to account for the Shared-Loss Assets
and the Shared-Loss MTM Assets, in such form and detail as the Receiver or the
Corporation may require, to enable the Assuming Bank to prepare and deliver to
the Receiver or the Corporation such reports as the Receiver or the Corporation
may from time to time request regarding the Shared-Loss Assets, the Shared-Loss
MTM Assets and the Quarterly Certificates required by Section 2.1 of this
Commercial Shared-Loss Agreement.
3.5
Related Loans
.
(a)
The Assuming
Bank shall not manage, administer or collect any “Related Loan” in any manner
which would have the effect of increasing the amount of any collections with
respect to the Related Loan to the detriment of the Shared-Loss Asset to which
such loan is related. A “Related Loan” means any loan or extension of credit
held by the Assuming Bank at any time on or prior to the end of the final
Recovery Quarter that is: (i) made to the same Obligor with respect to a
Loan that is a Shared-Loss Asset or with respect to a Loan from which Other
Real Estate, Additional ORE or Subsidiary ORE derived, or
(ii) attributable to the same primary Obligor with respect to any Loan
described in clause (i) under the rules of the Assuming Bank’s
Chartering Authority concerning the legal lending limits of financial
institutions organized under its jurisdiction as in effect on the Commencement
Date, as applied to the Assuming Bank.
(b)
The Assuming
Bank shall prepare and deliver to the Receiver with the Quarterly Certificates
for the Calendar Quarters ending June 30 and December 31 for all
Shared-Loss Quarters and Recovery Quarters, a schedule of all Related Loans
which are commercial loans or commercial real estate loans with Legal Balances
of $500,000 or more on the Accounting Records of the Assuming Bank as of the
end of each such semi-annual period, and all other commercial loans or
commercial real estate loans attributable to the same Obligor on such loans of
$500,000 or more.
3.6
Legal Action; Utilization of Special Receivership Powers
. The Assuming
Bank shall notify the Receiver in writing (such notice to be given in
accordance with Article IV below and to include all relevant details)
prior to utilizing in any legal action any special legal power or right which
the Assuming Bank derives as a result of having acquired a Shared-Loss Asset
from the Receiver, and the Assuming Bank shall not utilize any such power
unless the Receiver shall have consented in writing to the proposed usage. The
Receiver shall have the right to direct such proposed usage by the Assuming
Bank and the Assuming Bank shall comply in all respects with such direction.
Upon request of the Receiver, the Assuming Bank will advise the Receiver as to
the status of any such legal action. The Assuming Bank shall immediately notify
the Receiver of any judgment in litigation involving any of the aforesaid
special powers or rights.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
120
3.7
Third Party Servicer
. The Assuming Bank may
perform any of its obligations and/or exercise any of its rights under this
Commercial Shared-Loss Agreement through or by one or more Third Party
Servicers, who may take actions and make expenditures as if any such Third
Party Servicer was the Assuming Bank hereunder (and, for the avoidance of
doubt, such expenses incurred by any such Third Party Servicer on behalf of the
Assuming Bank shall be Reimbursable Expenses or Recovery Expenses, as the case
may be, to the same extent such expenses would so qualify if incurred by the
Assuming Bank); provided, however, that the use thereof by the Assuming Bank
shall not release the Assuming Bank of any obligation or liability hereunder.
ARTICLE IV
— PORTFOLIO SALE
4.1
Assuming Bank Portfolio Sales of Remaining Shared-Loss Assets
. The Assuming
Bank shall have the right with the concurrence of the Receiver, commencing as
of the first day of the third to last Shared-Loss Quarter, to liquidate for
cash consideration, in one or more transactions, all or a portion of
Shared-Loss Assets held by the Assuming Bank (“Portfolio Sales”). If the
Assuming Bank exercises its option under this Section 4.1, it must give
thirty (30) days notice in writing to the Receiver setting forth the details
and schedule for the Portfolio Sale which shall be conducted by means of sealed
bid sales to third parties, not including any of the Assuming Bank’s
affiliates, contractors, or any affiliates of the Assuming Bank’s contractors.
4.2
Calculation of Sale Gain or Loss
. For Shared-Loss Assets
gain or loss on the sales under Section 4.1 will be calculated as the sale
price received by the Assuming Bank less the book value of the remaining
Shared-Loss Assets.
ARTICLE V
— LOSS-SHARING NOTICES GIVEN TO CORPORATION AND/OR
RECEIVER
As a supplement to the notice provisions contained
in Section 13.7 of the Purchase and Assumption Agreement, any notice,
request, demand, consent, approval, or other communication (a “Notice”) given
to the Corporation and/or the Receiver in the loss-sharing context shall be
given as follows:
5.1
With respect to
a Notice under Section 2 and Sections 3.1-3.5 of this Commercial
Shared-Loss Agreement:
Federal Deposit Insurance Corporation
Division of Resolutions and Receiverships
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Assistant Director, Franchise and Asset
Marketing
5.2
With respect to
a Notice under Section 3.6 of this Commercial Shared-Loss Agreement:
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
121
Federal Deposit Insurance Corporation Legal Division
1601 Bryan Street
Dallas, Texas 75201
Attention: Regional Counsel
with a copy to:
Federal Deposit Insurance Corporation Legal Division
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Senior Counsel (Special Issues Group)
ARTICLE VI
— MISCELLANEOUS
6.1
Expenses
. Except as otherwise expressly provided herein, all
costs and expenses incurred by a party hereto in connection with this
Commercial Shared-Loss Agreement shall be borne by such party whether or not
the transactions contemplated herein shall be consummated.
6.2
Successors and Assigns; Specific Performance
.
All terms and provisions of this Commercial Shared-Loss Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
only;
provided
,
however
, that, Receiver may assign or otherwise
transfer this Commercial Shared-Loss Agreement (in whole or in part) to the
Federal Deposit Insurance Corporation in its corporate capacity without the
consent of Assuming Bank. Notwithstanding anything to the contrary contained in
this Commercial Shared-Loss Agreement, except as is expressly permitted in this
Section 6.2, Assuming Bank may not assign or otherwise transfer this
Commercial Shared-Loss Agreement (in whole or in part) without the prior
written consent of the Receiver, which consent may be granted or withheld by
the Receiver in its sole discretion, and any attempted assignment or transfer in
violation of this provision shall be void
ab
initio.
For the avoidance of doubt, a merger or consolidation of the
Assuming Bank with and into another financial institution, the sale of all or
substantially all of the assets of the Assuming Bank to another financial
institution constitutes the transfer of this Commercial Shared-Loss Agreement
which requires the consent of the Receive; and for a period of thirty-six (36)
months after Bank Closing, a merger or consolidation shall also include the
sale by any individual shareholder, or shareholders acting in concert, of more
than 9% of the outstanding shares of the Assuming Bank, or of its holding
company, or of any subsidiary holding Shared-Loss Assets, or the sale of shares
by the Assuming Bank or its holding company or any subsidiary holding
Shared-Loss Assets, in a public or private offering, that increases the number
of shares outstanding by more than 9%, constitutes the transfer of
thisCommercial Shared-Loss Agreement which requires the consent of the Receiver.
However, no Loss shall be recognized as a result of any accounting adjustments
that are made due to any such merger, consolidation or sale consented to by the
FDIC. The FDIC’s consent shall not be required if the aggregate outstanding
principal balance of Shared-Loss Assets is less than twenty percent (20%) of
the initial aggregate balance of Shared-Loss Assets.
6.3
Governing Law
. This Commercial Shared-Loss Agreement shall
be construed in accordance with federal law, or, if there is no applicable federal
law, the laws of the State of New York, without regard to any rule of
conflict of law that would result in the application of the
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
122
substantive law of any jurisdiction other than the State of New York.
6.4
WAIVER OF JURY TRIAL
. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF
OR RELATING TO OR IN CONNECTION WITH THIS COMMERCIAL SHARED-LOSS AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
6.5
Captions
. All captions and headings contained in this
Commercial Shared-Loss Agreement are for convenience of reference only and do
not form a part of, and shall not affect the meaning or interpretation of, this
Commercial Shared-Loss Agreement.
6.6
Entire Agreement; Amendments
. This Commercial
Shared-Loss Agreement, along with the Single Family Shared-Loss Agreement and
the Purchase and Assumption Agreement, including the Exhibits and any other
documents delivered pursuant hereto, embody the entire agreement of the parties
with respect to the subject matter hereof, and supersede all prior
representations, warranties, offers, acceptances, agreements and
understandings, written or oral, relating to the subject matter herein. This
Commercial Shared-Loss Agreement may be amended or modified or any provision
thereof waived only by a written instrument signed by both parties or their
respective duly authorized agents.
6.7
Severability
. Whenever possible, each provision of this
Commercial Shared-Loss Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Commercial Shared-Loss Agreement is held to be prohibited by or invalid,
illegal or unenforceable under applicable law, such provision shall be
construed and enforced as if it had been more narrowly drawn so as not to be
prohibited, invalid, illegal or unenforceable, and the validity, legality and
enforceability of the remainder of such provision and the remaining provisions
of this Commercial Shared-Loss Agreement shall not in any way be affected or
impaired thereby.
6.8
No Third Party Beneficiary
.
This
Commercial Shared-Loss Agreement and the Exhibits hereto are for the sole and
exclusive benefit of the parties hereto and their respective permitted
successors and permitted assigns and there shall be no other third party
beneficiaries, and nothing in Commercial Shared-Loss Agreement or the Exhibits
shall be construed to grant to any other Person any right, remedy or claim under
or in respect of this Commercial Shared-Loss Agreement or any provision hereof.
6.9
Consent
. Except as otherwise provided herein, when the
consent of a party is required herein, such consent shall not be unreasonably
withheld or delayed.
6.10
Rights Cumulative
. Except as otherwise
expressly provided herein, the rights of each of the parties under this
Commercial Shared-Loss Agreement are cumulative, may be exercised as often as
any party considers appropriate and are in addition to each such party’s rights
under the Purchase and Sale Agreement and any of the related agreements or
under law. Except as otherwise expressly provided herein, any failure to
exercise or any delay in exercising
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
123
any of such rights, or any partial or defective exercise of such
rights, shall not operate as a waiver or variation of that or any other such
right.
|
Module 1 — Whole Bank w/ Loss Share — P&A
|
|
First Security National Bank
|
|
Version 1.12
|
|
Norcross, GA
|
|
November 17, 2009
|
|
|
124
EXHIBIT 2.5
PURCHASE AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL DEPOSITS
AMONG
FEDERAL DEPOSIT INSURANCE CORPORATION,
RECEIVER OF NORTH WEST BANK AND TRUST,
ACWORTH, GEORGIA
FEDERAL DEPOSIT INSURANCE CORPORATION
and
STATE BANK AND TRUST COMPANY
DATED AS OF
July 30, 2010
TABLE OF CONTENTS
|
ARTICLE I
|
DEFINITIONS
|
2
|
|
|
|
|
|
ARTICLE II
|
ASSUMPTION
OF LIABILITIES
|
9
|
|
|
|
|
|
2.1
|
Liabilities Assumed by
Assuming Institution
|
9
|
|
2.2
|
Interest on Deposit
Liabilities
|
10
|
|
2.3
|
Unclaimed Deposits
|
11
|
|
2.4
|
Employee Plans
|
11
|
|
|
|
|
|
ARTICLE III
|
PURCHASE
OF ASSETS
|
11
|
|
3.1
|
Assets Purchased by
Assuming Institution
|
11
|
|
3.2
|
Asset Purchase Price
|
12
|
|
3.3
|
Manner of Conveyance;
Limited Warranty; Nonrecourse; Etc.
|
12
|
|
3.4
|
Puts of Assets to the
Receiver
|
12
|
|
3.5
|
Assets Not Purchased by Assuming
Institution
|
15
|
|
3.6
|
Assets Essential to
Receiver
|
16
|
|
|
|
|
|
ARTICLE IV
|
ASSUMPTION
OF CERTAIN DUTIES AND OBLIGATIONS
|
17
|
|
|
|
|
|
4.1
|
Continuation of Banking
Business
|
17
|
|
4.2
|
Agreement with Respect to
Credit Card Business
|
17
|
|
4.3
|
Agreement with Respect to
Safe Deposit Business
|
18
|
|
4.4
|
Agreement with Respect to
Safekeeping Business
|
18
|
|
4.5
|
Agreement with Respect to
Trust Business
|
18
|
|
4.6
|
Agreement with Respect to
Bank Premises
|
19
|
|
4.7
|
Agreement with Respect to
Leased Data Processing Equipment
|
22
|
|
4.8
|
Agreement with Respect to
Certain Existing Agreements
|
23
|
|
4.9
|
Informational Tax
Reporting
|
24
|
|
4.10
|
Insurance
|
24
|
|
4.11
|
Office Space for Receiver
and Corporation
|
24
|
|
4.12
|
Agreement with Respect to
Continuation of Group Health Plan Coverage for Former Employees
|
25
|
|
4.13
|
Agreement with Respect to
Interim Asset Servicing
|
26
|
|
4.14
|
Reserved
|
26
|
|
4.15
|
Agreement with Respect to
Loss Sharing
|
26
|
ii
|
ARTICLE V
|
DUTIES
WITH RESPECT TO DEPOSITORS OF THE FAILED BANK
|
26
|
|
|
|
|
|
5.1
|
Payment of Checks, Drafts
and Orders
|
26
|
|
5.2
|
Certain Agreements Related
to Deposits
|
27
|
|
5.3
|
Notice to Depositors
|
27
|
|
|
|
|
|
ARTICLE VI
|
RECORDS
|
27
|
|
|
|
|
|
6.1
|
Transfer of Records
|
27
|
|
6.2
|
Delivery of Assigned
Records
|
28
|
|
6.3
|
Preservation of Records
|
28
|
|
6.4
|
Access to Records; Copies
|
28
|
|
|
|
|
|
ARTICLE VII
|
BID;
INITIAL PAYMENT
|
28
|
|
|
|
|
|
ARTICLE VIII
|
ADJUSTMENTS
|
29
|
|
|
|
|
|
8.1
|
Pro Forma Statement
|
29
|
|
8.2
|
Correction of Errors and
Omissions; Other Liabilities
|
29
|
|
8.3
|
Payments
|
29
|
|
8.4
|
Interest
|
30
|
|
8.5
|
Subsequent Adjustments
|
30
|
|
|
|
|
|
ARTICLE IX
|
CONTINUING
COOPERATION
|
30
|
|
|
|
|
|
9.1
|
General Matters
|
30
|
|
9.2
|
Additional Title Documents
|
30
|
|
9.3
|
Claims and Suits
|
30
|
|
9.4
|
Payment of Deposits
|
31
|
|
9.5
|
Withheld Payments
|
31
|
|
9.6
|
Proceedings with Respect
to Certain Assets and Liabilities
|
31
|
|
9.7
|
Information
|
32
|
|
|
|
|
|
ARTICLE X
|
CONDITION
PRECEDENT
|
32
|
|
|
|
|
|
ARTICLE XI
|
REPRESENTATIONS
AND WARRANTIES OF THE ASSUMING INSTITUTION
|
32
|
|
|
|
|
|
ARTICLE XII
|
INDEMNIFICATION
|
34
|
|
|
|
|
|
12.1
|
Indemnification of
Indemnitees
|
34
|
|
12.2
|
Conditions Precedent to
Indemnification
|
37
|
|
12.3
|
No Additional Warranty
|
38
|
|
12.4
|
Indemnification of
Corporation and Receiver
|
38
|
iii
|
12.5
|
Obligations Supplemental
|
38
|
|
12.6
|
Criminal Claims
|
39
|
|
12.7
|
Limited Guaranty of the
Corporation
|
39
|
|
12.8
|
Subrogation
|
39
|
|
|
|
|
|
ARTICLE XIII
|
MISCELLANEOUS
|
39
|
|
|
|
|
|
13.1
|
Entire Agreement
|
39
|
|
13.2
|
Headings
|
39
|
|
13.3
|
Counterparts
|
39
|
|
13.4
|
Governing Law
|
40
|
|
13.5
|
Successors
|
40
|
|
13.6
|
Modification; Assignment
|
40
|
|
13.7
|
Notice
|
40
|
|
13.8
|
Manner of Payment
|
41
|
|
13.9
|
Costs, Fees and Expenses
|
41
|
|
13.10
|
Waiver
|
41
|
|
13.11
|
Severability
|
41
|
|
13.12
|
Term of Agreement
|
41
|
|
13.13
|
Survival of Covenants, Etc.
|
42
|
|
|
|
|
|
SCHEDULES
|
|
|
|
|
|
|
|
2.1(a)
|
Excluded Deposit Liability
Accounts
|
44
|
|
3.2
|
Purchase Price of Assets
or Assets
|
45
|
|
4.15A
|
Single Family Shared-Loss
Loans
|
48
|
|
4.15B
|
Commercial Shared-Loss
Loans
|
49
|
|
4.15C
|
Shared-Loss Securities
|
50
|
|
4.15D
|
Shared-Loss Subsidiaries
|
51
|
|
6.3
|
Data Retention Catalog
|
52
|
|
7
|
Calculation of Deposit
Premium
|
54
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
|
|
2.3A
|
Final Notice Letter
|
56
|
|
2.3B
|
Affidavit of Mailing
|
58
|
|
3.2(c)
|
Valuation of Certain
Qualified Financial Contracts
|
59
|
|
4.13
|
Interim Asset Servicing
Arrangement
|
61
|
|
4.15A
|
Single Family Shared-Loss
Agreement
|
63
|
|
4.15B
|
Commercial Shared-Loss
Agreement
|
106
|
iv
PURCHASE AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL DEPOSITS
THIS
AGREEMENT
, made and entered into as of the 30th day of July,
2010, by and among the
FEDERAL DEPOSIT
INSURANCE CORPORATION, RECEIVER of NORTH WEST BANK AND TRUST
(the
“Receiver”),
STATE BANK AND TRUST COMPANY
,
organized under the laws of the state of Georgia, and having its principal
place of business in
MACON, GEORGIA
(the
“Assuming Institution”), and the
FEDERAL
DEPOSIT INSURANCE CORPORATION
, organized under the laws of the
United States of America and having its principal office in Washington, D.C.,
acting in its corporate capacity (the “Corporation”).
WITNESSETH
:
WHEREAS
, on Bank
Closing, the Chartering Authority closed
NORTH
WEST BANK AND TRUST, ACWORTH, GEORGIA
(the “Failed Bank”) pursuant
to applicable law and the Corporation was appointed Receiver thereof; and
WHEREAS
, the Assuming
Institution desires to purchase certain assets and assume certain deposit and
other liabilities of the Failed Bank on the terms and conditions set forth in
this Agreement; and
WHEREAS
, pursuant to
12 U.S.C. Section 1823(c)(2)(A), the Corporation may provide assistance to
the Assuming Institution to facilitate the transactions contemplated by this
Agreement, which assistance may include indemnification pursuant to
Article XII; and
WHEREAS
, the Board of
Directors of the Corporation (the “Board”) has determined to provide assistance
to the Assuming Institution on the terms and subject to the conditions set
forth in this Agreement; and
WHEREAS
, the Board has
determined pursuant to 12 U.S.C. Section 1823(c)(4)(A) that such
assistance is necessary to meet the obligation of the Corporation to provide
insurance coverage for the insured deposits in the Failed Bank.
NOW
THEREFORE
, in consideration of the mutual promises herein set
forth and other valuable consideration, the parties hereto agree as follows:
1
ARTICLE I
DEFINITIONS
Capitalized terms used in
this Agreement shall have the meanings set forth in this Article I, or
elsewhere in this Agreement. As used herein, words imparting the singular
include the plural and vice versa.
“
Accounting
Records
”
means the general ledger and subsidiary ledgers and
supporting schedules which support the general ledger balances.
“
Acquired
Subsidiaries
”
means Subsidiaries of the Failed Bank acquired
pursuant to Section 3.1.
“
Affiliate
”
of any Person
means any director, officer, or employee of that Person and any other Person
(i) who is directly or indirectly controlling, or controlled by, or under
direct or indirect common control with, such Person, or (ii) who is an
affiliate of such Person as the term “affiliate” is defined in Section 2
of the Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841.
“
Agreement
”
means this
Purchase and Assumption Agreement by and among the Assuming Institution, the
Corporation and the Receiver, as amended or otherwise modified from time to
time.
“
Assets
”
means all
assets of the Failed Bank purchased pursuant to Section 3.1. Assets owned
by Subsidiaries of the Failed Bank are not “Assets” within the meaning of this
definition.
“
Assumed
Deposits
”
means Deposits.
“
Bank
Closing
”
means the close of business of the Failed Bank on
the date on which the Chartering Authority closed such institution.
“
Bank
Premises
”
means the banking houses, drive-in banking
facilities, and teller facilities (staffed or automated) together with adjacent
parking, storage and service facilities and structures connecting remote
facilities to banking houses, and land on which the foregoing are located, and
unimproved land that are owned or leased by the Failed Bank and that have
formerly been utilized, are currently utilized, or are intended to be utilized
in the future by the Failed Bank as shown on the Accounting Record of the
Failed Bank as of Bank Closing.
“
Bid
Amount
”
has the meaning provided
in Article VII.
“
Bid
Valuation Date
”
means May 10, 2010.
2
“
Book
Value
”
means, with respect to any Asset and any Liability
Assumed, the dollar amount thereof stated on the Accounting Records of the
Failed Bank. The Book Value of any item shall be determined as of Bank Closing
after adjustments made by the Receiver for differences in accounts, suspense
items, unposted debits and credits, and other similar adjustments or
corrections and for setoffs, whether voluntary or involuntary. The Book Value
of a Subsidiary of the Failed Bank acquired by the Assuming Institution shall
be determined from the investment in subsidiary and related accounts on the
“bank only” (unconsolidated) balance sheet of the Failed Bank based on the
equity method of accounting. Without limiting the generality of the foregoing,
(i) the Book Value of a Liability Assumed shall include all accrued and
unpaid interest thereon as of Bank Closing, and (ii) the Book Value of a
Loan shall reflect adjustments for earned interest, or unearned interest (as it
relates to the “rule of 78s” or add-on-interest loans, as applicable), if
any, as of Bank Closing, adjustments for the portion of earned or unearned
loan-related credit life and/or disability insurance premiums, if any,
attributable to the Failed Bank as of Bank Closing, and adjustments for Failed
Bank Advances, if any, in each case as determined for financial reporting
purposes. The Book Value of an Asset shall not include any adjustment for loan
premiums, discounts or any related deferred income, fees or expenses, or
general or specific reserves on the Accounting Records of the Failed Bank. For
Shared-Loss Securities, Book Value means the value of the security provided in
the Information Package.
“
Business
Day
”
means a day other than a Saturday, Sunday, Federal
legal holiday or legal holiday under the laws of the State where the Failed
Bank is located, or a day on which the principal office of the Corporation is
closed.
“
Chartering
Authority
”
means (i) with respect to a national bank, the
Office of the Comptroller of the Currency, (ii) with respect to a Federal
savings association or savings bank, the Office of Thrift Supervision,
(iii) with respect to a bank or savings institution chartered by a State,
the agency of such State charged with primary responsibility for regulating
and/or closing banks or savings institutions, as the case may be, (iv) the
Corporation in accordance with 12 U.S.C. Section 1821(c), with regard to
self appointment, or (v) the appropriate Federal banking agency in
accordance with 12 U.S.C. 1821(c)(9).
“
Commitment
”
means the
unfunded portion of a line of credit or other commitment reflected on the books
and records of the Failed Bank to make an extension of credit (or additional
advances with respect to a Loan) that was legally binding on the Failed Bank as
of Bank Closing, other than extensions of credit pursuant to the credit card business
and overdraft protection plans of the Failed Bank, if any.
“
Credit
Documents
”
mean the agreements, instruments, certificates or
other documents at any time evidencing or otherwise relating to, governing or
executed in connection with or as security for, a Loan, including without
limitation notes, bonds, loan agreements, letter of credit applications, lease
financing contracts, banker’s acceptances, drafts, interest protection
agreements, currency exchange agreements, repurchase agreements, reverse
repurchase agreements, guarantees, deeds of trust, mortgages, assignments,
security agreements, pledges, subordination or priority agreements, lien
priority agreements, undertakings, security instruments, certificates,
documents, legal opinions, participation agreements and intercreditor
3
agreements, and all
amendments, modifications, renewals, extensions, rearrangements, and
substitutions with respect to any of the foregoing.
“
Credit
File
”
means all Credit Documents and all other credit,
collateral, or insurance documents in the possession or custody of the Assuming
Institution, or any of its Subsidiaries or Affiliates, relating to an Asset or
a Loan included in a Put Notice, or copies of any thereof.
“
Data
Processing Equipment
”
means any equipment,
computer hardware, or computer software (and the lease or licensing agreements
related thereto) other than Personal Computers, owned or leased by the Failed
Bank at Bank Closing, which is, was, or could have been used by the Failed Bank
in connection with data processing activities.
“
Deposit
”
means a
deposit as defined in 12 U.S.C. Section 1813(l), including without
limitation, outstanding cashier’s checks and other official checks and all
uncollected items included in the depositors’ balances and credited on the
books and records of the Failed Bank;
provided
,
that
the term
“Deposit” shall not include all or any portion of those deposit balances which,
in the discretion of the Receiver or the Corporation, (i) may be required
to satisfy it for any liquidated or contingent liability of any depositor
arising from an unauthorized or unlawful transaction, or (ii) may be
needed to provide payment of any liability of any depositor to the Failed Bank
or the Receiver, including the liability of any depositor as a director or
officer of the Failed Bank, whether or not the amount of the liability is or
can be determined as of Bank Closing.
“
Deposit
Secured Loan
”
means a loan in which the only collateral securing
the loan is Assumed Deposits or deposits at other insured depository
institutions
“
Electronically
Stored Information
”
means any system backup tapes, any electronic
mail (whether on an exchange or other similar system), any data on personal
computers and any data on server hard drives.
“
Failed
Bank Advances
”
means the total sums paid by the Failed Bank to
(i) protect its lien position, (ii) pay ad valorem taxes and hazard
insurance, and (iii) pay credit life insurance, accident and health
insurance, and vendor’s single interest insurance.
“
Fair
Market Value
”
means (i)(a) “Market Value” as defined in the
regulation prescribing the standards for real estate appraisals used in
federally related transactions, 12 C.F.R. § 323.2(g), and accordingly shall
mean the most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and seller
each acting prudently and knowledgeably, and assuming the price is not affected
by undue stimulus. Implicit in this definition is the consummation of a sale as
of a specified date and the passing of title from seller to buyer under
conditions whereby:
(1) Buyer
and seller are typically motivated;
(2) Both
parties are well informed or well advised, and acting in what they consider
their own best interests;
4
(3) A
reasonable time is allowed for exposure in the open market;
(4) Payment
is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable
thereto; and
(5) The
price represents the normal consideration for the property sold unaffected by
special or creative financing or sales concessions granted by anyone associated
with the sale;
as determined as of Bank
Closing by an appraiser chosen by the Assuming Institution from a list of
acceptable appraisers provided by the Receiver; any costs and fees associated
with such determination shall be shared equally by the Receiver and the
Assuming Institution, and (b) which, with respect to Bank Premises (to the
extent, if any, that Bank Premises are purchased utilizing this valuation
method), shall be determined not later than sixty (60) days after Bank Closing
by an appraiser selected by the Receiver and the Assuming Institution within
seven (7) days after Bank Closing; or (ii) with respect to property
other than Bank Premises purchased utilizing this valuation method, the price
therefore as established by the Receiver and agreed to by the Assuming
Institution, or in the absence of such agreement, as determined in accordance
with clause (i)(a) above.
“
Fixtures
” means those leasehold
improvements, additions, alterations and installations constituting all or a
part of Bank Premises and which were acquired, added, built, installed or
purchased at the expense of the Failed Bank, regardless of the holder of legal
title thereto as of Bank Closing.
“
Furniture
and Equipment
”
means the furniture and equipment (other than Safe
Deposit Boxes, motor vehicles, and Data Processing Equipment), leased or owned
by the Failed Bank and reflected on the books of the Failed Bank as of Bank
Closing and located on or at Bank Premises, including without limitation
automated teller machines, carpeting, furniture, office machinery, shelving,
office supplies, telephone, surveillance and security systems, ancillary
equipment, and artwork. Furniture and equipment located at a storage facility
not adjacent to a Bank Premises are excluded from this definition.
“
Indemnitees
”
means, except
as provided in paragraph (11) of Section 12.1(b), (i) the Assuming
Institution, (ii) the Subsidiaries and Affiliates of the Assuming
Institution
other than
any Subsidiaries or Affiliates of the Failed Bank
that are or become Subsidiaries or Affiliates of the Assuming Institution, and
(iii) the directors, officers, employees and agents of the Assuming
Institution and its Subsidiaries and Affiliates who are
not
also present
or former directors, officers, employees or agents of the Failed Bank or of any
Subsidiary or Affiliate of the Failed Bank.
“
Information
Package
”
means the most recent compilation of financial and
other data with respect to the Failed Bank, including any amendments or
supplements thereto, provided to the Assuming Institution by the Corporation on
the web site used by the Corporation to market the Failed Bank to potential
acquirers.
5
“
Initial
Payment
”
means the payment made pursuant to Article VII
(based on the best information available as of the Bank Closing Date), the
amount of which shall be either (i) if the Bid Amount is positive, the
aggregate Book Value of the Liabilities Assumed
minus
the sum of the
aggregate purchase price of the Assets and assets purchased and the positive
Bid Amount, or (ii) if the Bid Amount is negative, the sum of the aggregate
Book Value of the Liabilities Assumed and the negative Bid Amount
minus
the aggregate purchase price of the Assets and assets purchased. The Initial
Payment shall be payable by the Corporation to the Assuming Bank if
(i) the Liabilities Assumed are greater than the sum of the positive Bid
Amount and the Assets and assets purchased, or if (ii) the sum of the
Liabilities Assumed and the negative Bid Amount are greater than the Assets and
assets purchased. The Initial Payment shall be payable by the Assuming Bank to
the Corporation if (i) the Liabilities Assumed are less than the sum of
the positive Bid Amount and the Assets and assets purchased, or if
(ii) the sum of the Liabilities Assumed and the negative Bid Amount is
less than the Assets and assets purchased. Such Initial Payment shall be
subject to adjustment as provided in Article VIII.
“
Legal
Balance
”
means the amount of indebtedness legally owed by an
Obligor with respect to a Loan, including principal and accrued and unpaid
interest, late fees, attorneys’ fees and expenses, taxes, insurance premiums,
and similar charges, if any.
“
Liabilities
Assumed
”
has the meaning provided in Section 2.1.
“
Lien
”
means any
mortgage, lien, pledge, charge, assignment for security purposes, security
interest, or encumbrance of any kind with respect to an Asset, including any
conditional sale agreement or capital lease or other title retention agreement
relating to such Asset.
“
Loans
”
means all of
the following owed to or held by the Failed Bank as of Bank Closing:
(i) loans (including loans which have been charged off the
Accounting Records of the Failed Bank in whole or in part prior to and
including the Bid Valuation Date), participation agreements, interests in
participations, overdrafts of customers (including but not limited to
overdrafts made pursuant to an overdraft protection plan or similar extensions
of credit in connection with a deposit account), revolving commercial lines of
credit, home equity lines of credit, Commitments, United States and/or
State-guaranteed student loans, and lease financing contracts;
(ii) all Liens, rights (including rights of set-off), remedies,
powers, privileges, demands, claims, priorities, equities and benefits owned or
held by, or accruing or to accrue to or for the benefit of, the holder of the
obligations or instruments referred to in clause (i) above, including but
not limited to those arising under or based upon Credit Documents, casualty
insurance policies and binders, standby letters of credit, mortgagee title
insurance policies and binders, payment bonds and performance bonds at any time
and from time to time existing with respect to any of the obligations or
instruments referred to in clause (i) above; and
6
(iii) all amendments, modifications, renewals, extensions,
refinancings, and refundings of or for any of the foregoing.
“
Obligor
”
means each
Person liable for the full or partial payment or performance of any Loan,
whether such Person is obligated directly, indirectly, primarily, secondarily,
jointly, or severally.
“
Other
Real Estate
”
means all interests in real estate (other than Bank
Premises and Fixtures), including but not limited to mineral rights, leasehold
rights, condominium and cooperative interests, air rights and development
rights that are owned by the Failed Bank.
“
Payment
Date
”
means the first Business Day after the Bank Closing
Date.
“
Person
”
means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, or government or any agency or
political subdivision thereof, excluding the Corporation.
“
Personal
Computer(s)
”
means computers based on a microprocessor generally
designed to be used by one person at a time and which usually store
informational data on that computer’s internal hard drive or attached
peripheral. A personal computer can be found in various configurations such as
laptops, net books, and desktops.
“
Primary
Indemnitor
”
means any Person (other than the Assuming
Institution or any of its Affiliates) who is obligated to indemnify or insure,
or otherwise make payments (including payments on account of claims made
against) to or on behalf of any Person in connection with the claims covered
under Article XII, including without limitation any insurer issuing any
directors and officers liability policy or any Person issuing a financial
institution bond or banker’s blanket bond.
“
Pro
forma
”
means producing a balance sheet that reflects a
reasonably accurate financial statement of the Failed bank through the date of
closing. The pro forma financial statements serve as a basis for the opening
entries of both the Assuming Institution and the Receiver.
“
Put
Date
”
has the meaning provided in Section 3.4.
“
Put
Notice
”
has the meaning provided in Section 3.4.
“
Qualified
Financial Contract
”
means a qualified financial contract as
defined in 12 U.S.C. Section 1821(e)(8)(D).
“
Record
”
means any
document, microfiche, microfilm and Electronically Stored Information
(including but not limited to magnetic tape, disc storage, card forms and
printed copy) of the Failed Bank generated or maintained by the Failed Bank
that is owned by or in the possession of the Receiver at Bank Closing.
7
“
Related
Liability
”
with respect to any Asset means any liability
existing and reflected on the Accounting Records of the Failed Bank as of Bank
Closing for (i) indebtedness secured by mortgages, deeds of trust, chattel
mortgages, security interests or other liens on or affecting such Asset,
(ii) ad valorem taxes applicable to such Asset, and (iii) any other
obligation determined by the Receiver to be directly related to such Asset.
“
Related
Liability Amount
”
with respect to any Related Liability on the
books of the Assuming Institution, means the amount of such Related Liability
as stated on the Accounting Records of the Assuming Institution (as maintained
in accordance with generally accepted accounting principles) as of the date as
of which the Related Liability Amount is being determined. With respect to a
liability that relates to more than one asset, the amount of such Related
Liability shall be allocated among such assets for the purpose of determining
the Related Liability Amount with respect to any one of such assets. Such
allocation shall be made by specific allocation, where determinable, and
otherwise shall be pro rata based upon the dollar amount of such assets stated
on the Accounting Records of the entity that owns such asset.
“
Repurchase
Price
”
means, with respect to any Loan, first taking the
Book Value of the Asset at Bank Closing and either subtracting the Asset
discount or adding the Asset premium, and subsequently adjusting that total by
(i) adding any advances and interest on such Loan after Bank Closing,
(ii) subtracting the total amount received by the Assuming Institution for
such Loan after Bank Closing, regardless of how applied, and (iii) adding
total disbursements of principal made by Receiver not otherwise included in the
Book Value.
“
Safe
Deposit Boxes
”
means the safe deposit boxes of the Failed Bank, if
any, including the removable safe deposit boxes and safe deposit stacks in the
Failed Bank’s vault(s), all rights and benefits under rental agreements with
respect to such safe deposit boxes, and all keys and combinations thereto.
“
Settlement
Date
”
means the first Business Day immediately prior to
the day which is three hundred sixty-five (365) days after Bank Closing, or
such other date prior thereto as may be agreed upon by the Receiver and the
Assuming Institution. The Receiver, in its discretion, may extend the
Settlement Date.
“
Settlement
Interest Rate
”
means, for the first calendar quarter or portion
thereof during which interest accrues, the rate determined by the Receiver to
be equal to the equivalent coupon issue yield on twenty-six (26)-week United
States Treasury Bills in effect as of Bank Closing as published in
The Wall
Street Journal
;
provided
,
that
if no such equivalent coupon
issue yield is available as of Bank Closing, the equivalent coupon issue yield
for such Treasury Bills most recently published in
The Wall Street Journal
prior to Bank Closing shall be used. Thereafter, the rate shall be adjusted to
the rate determined by the Receiver to be equal to the equivalent coupon issue
yield on such Treasury Bills in effect as of the first day of each succeeding
calendar quarter during which interest accrues as published in
The Wall
Street Journal
.
“
Shared-Loss
Securities
”
means those securities and other assets listed on
Schedule 4.15C.
8
“
Subsidiary
”
has the
meaning set forth in Section 3(w)(4) of the Federal Deposit Insurance
Act, 12 U.S.C. Section 1813(w)(4), as amended.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1
Liabilities Assumed by Assuming Institution
.
The Assuming Institution
expressly assumes at Book Value (subject to adjustment pursuant to
Article VIII) and agrees to pay, perform, and discharge all of the
following liabilities of the Failed Bank as of Bank Closing, except as
otherwise provided in this Agreement (such liabilities referred to as
“Liabilities Assumed”):
(a) Assumed Deposits, except those Deposits specifically
listed on Schedule 2.1(a);
provided
,
that
as to any Deposits of
public money which are Assumed Deposits, the Assuming Institution agrees to
properly secure such Deposits with such Assets as appropriate which, prior to
Bank Closing, were pledged as security by the Failed Bank, or with assets of
the Assuming Institution, if such securing Assets, if any, are insufficient to
properly secure such Deposits;
(b) liabilities for indebtedness secured by mortgages, deeds
of trust, chattel mortgages, security interests or other liens on or affecting
any Assets, if any;
provided
,
that
the assumption of any
liability pursuant to this paragraph shall be limited to the market value of
the Assets securing such liability as determined by the Receiver;
(c) borrowings from Federal Reserve Banks and Federal Home
Loan Banks, if any,
provided
,
that
the assumption of any
liability pursuant to this paragraph shall be limited to the market value of
the assets securing such liability as determined by the Receiver; and
overdrafts, debit balances, service charges, reclamations, and adjustments to
accounts with the Federal Reserve Banks as reflected on the books and records
of any such Federal Reserve Bank within ninety (90) days after Bank Closing, if
any;
(d) ad valorem taxes applicable to any Asset, if any;
provided
,
that
the assumption of any ad valorem taxes pursuant to this paragraph
shall be limited to an amount equal to the market value of the Asset to which
such taxes apply as determined by the Receiver;
(e) liabilities, if any, for federal funds purchased,
repurchase agreements and overdrafts in accounts maintained with other
depository institutions (including any accrued and unpaid interest thereon
computed to and including Bank Closing);
provided
,
that
the
assumption of any liability pursuant to this paragraph shall be limited to the
market value of the Assets securing such liability as determined by the
Receiver;
9
(f) United States Treasury tax and loan
note option accounts, if any;
(g) liabilities for any acceptance or
commercial letter of credit
provided
,
that
the assumption of any
liability pursuant to this paragraph shall be limited to the market value of
the Assets securing such liability as determined by the Receiver;
(h) liabilities for any “standby letters
of credit” as defined in 12 C.F.R. Section 337.2(a) issued on the
behalf of any Obligor of a Loan acquired hereunder by the Assuming Institution,
but excluding any other standby letters of credit;
(i) duties and obligations assumed
pursuant to this Agreement including without limitation those relating to the
Failed Bank’s Records, credit card business, debit card business, stored value
and gift card business, overdraft protection plans, safe deposit business,
safekeeping business, or trust business, if any; and
(j) liabilities, if any, for Commitments;
(k) liabilities, if any, for amounts owed
to any Subsidiary of the Failed Bank acquired under Section 3.1;
(l) liabilities, if any, with respect to
Qualified Financial Contracts;
(m) duties and obligations under any
contract pursuant to which the Failed Bank provides mortgage servicing for
others, or mortgage servicing is provided to the Failed Bank by others,
including (i) any seller obligations, seller origination and repurchase
obligations, and (ii) any government sponsored enterprise (“GSE”) seller
or servicer obligations,
provided that
, if the Assuming Institution is
not an approved GSE servicer, or does not intend or is unable to become an
approved GSE servicer, the Assuming Institution will cooperate with Receiver
and the GSE to effect the transfer of any such servicing obligations to a GSE
approved servicer; and
(n) all asset-related offensive
litigation liabilities and all asset-related defensive litigation liabilities,
but only to the extent such liabilities relate to assets subject to a
shared-loss agreement, and provided that all other defensive litigation and any
class actions with respect to credit card business are retained by the
Receiver.
2.2
Interest on
Deposit Liabilities
.
The Assuming Institution
agrees that, from and after Bank Closing, it will accrue and pay interest on
Deposit liabilities assumed pursuant to Section 2.1 at a rate (s) it
shall determine;
provided
,
that
for non-transaction Deposit
liabilities such rate(s) shall not be less than the lowest rate offered by
the Assuming Institution to its depositors for non-transaction deposit
accounts. The Assuming Institution shall permit each depositor to withdraw,
without penalty for early withdrawal, all or any portion of such depositor’s
Deposit, whether or not the Assuming Institution elects to pay interest in
accordance
10
with any deposit agreement
formerly existing between the Failed Bank and such depositor;
and
further
provided
,
that
if such Deposit has been pledged to secure an
obligation of the depositor or other party, any withdrawal thereof shall be
subject to the terms of the agreement governing such pledge. The Assuming
Institution shall give notice to such depositors as provided in
Section 5.3 of the rate(s) of interest which it has determined to pay
and of such withdrawal rights.
2.3
Unclaimed Deposits
.
Fifteen (15) months
following the Bank Closing Date, the Assuming Institution will provide the
Receiver a listing of all deposit accounts, including the type of account, not
claimed by the depositor. The Receiver will review the list and authorize the
Assuming Institution to act on behalf of the Receiver to send a “Final Legal
Notice” in a form substantially similar to Exhibit 2.3A to the
owner(s) of the unclaimed deposits reminding them of the need to claim or
arrange to continue their account (s) with the Assuming Institution. The
Assuming Institution will send the “Final Legal Notice” to the depositors
within thirty (30) days following notification of the Receiver’s authorization.
The Assuming Institution will prepare an Affidavit of Mailing and will forward
the Affidavit of Mailing to the Receiver after mailing out the “Final Legal
Notice” in a form substantially similar to Exhibit 2.3B to the owner(s) of
unclaimed deposit accounts.
If, within eighteen (18)
months after Bank Closing, any depositor of the Failed Bank does not claim or
arrange to continue such depositor’s Deposit assumed pursuant to
Section 2.1 at the Assuming Institution, the Assuming Institution shall,
within fifteen (15) Business Days after the end of such eighteen (18) month
period, (i) refund to the Receiver the full amount of each such deposit
(without reduction for service charges), (ii) provide to the Receiver a
schedule of all such refunded Deposits in such form as may be prescribed by the
Receiver, and (iii) assign, transfer, convey, and deliver to the Receiver,
all right, title, and interest of the Assuming Institution in and to the
Records previously transferred to the Assuming Institution and other records
generated or maintained by the Assuming Institution pertaining to such
Deposits. During such eighteen (18) month period, at the request of the
Receiver, the Assuming Institution promptly shall provide to the Receiver
schedules of unclaimed deposits in such form as may be prescribed by the
Receiver.
2.4
Employee Plans
.
Except as provided in
Section 4.12, the Assuming Institution shall have no liabilities,
obligations or responsibilities under the Failed Bank’s health care, bonus, vacation,
pension, profit sharing, deferred compensation, 401K or stock purchase plans or
similar plans, if any, unless the Receiver and the Assuming Institution agree
otherwise subsequent to the date of this Agreement.
ARTICLE III
PURCHASE OF ASSETS
3.1
Assets Purchased by Assuming
Institution
. With the
exception of certain assets expressly excluded in Sections 3.5 and 3.6, the
Assuming Institution hereby purchases from the Receiver, and the Receiver
hereby sells, assigns, transfers, conveys, and delivers to the Assuming
Institution, all right, title, and interest of the Receiver in and to all of
the assets (real, personal and mixed, wherever located and however acquired)
including all subsidiaries, joint ventures, partnerships, and any and all other
business combinations or arrangements, whether
11
active, inactive, dissolved
or terminated, of the Failed Bank whether or not reflected on the books of the
Failed Bank as of Bank Closing. Assets are purchased hereunder by the Assuming
Institution subject to all liabilities for indebtedness collateralized by Liens
affecting such Assets to the extent provided in Section 2.1.
Notwithstanding Section 4.8, the Assuming Institution specifically
purchases all mortgage servicing rights and obligations of the Failed Bank.
3.2
Asset Purchase Price
.
(a) All Assets and assets of the Failed Bank subject to an
option to purchase by the Assuming Institution shall be purchased for the
amount, or the amount resulting from the method specified for determining the
amount, as specified on Schedule 3.2, except as otherwise may be provided
herein. Any Asset, asset of the Failed Bank subject to an option to purchase or
other asset purchased for which no purchase price is specified on Schedule 3.2
or otherwise herein shall be purchased at its Book Value. Loans or other assets
charged off the Accounting Records of the Failed Bank before the Bid Valuation
Date shall be purchased at a price of zero.
(b) The purchase price for securities (other than the capital
stock of any Acquired Subsidiary, Shared-Loss Securities, FRB and FHLB stock)
purchased under Section 3.1 by the Assuming Institution shall be the
market value thereof as of Bank Closing, which market value shall be (i) the
market price for each such security quoted at the close of the trading day
effective on Bank Closing as published electronically by Bloomberg, L.P., or
alternatively, at the discretion of the Receiver, IDC/Financial Times (FT)
Interactive Data; (ii)
provided
,
that
if such market price
is not available for any such security, the Assuming Institution will submit a
bid for each such security within three days of notification/bid request by the
Receiver (unless a different time period is agreed to by the Assuming Institution
and the Receiver) and the Receiver, in its sole discretion will accept or
reject each such bid; and (iii)
further
provided
in the
absence of an acceptable bid from the Assuming Institution, each such security
shall not pass to the Assuming Institution and shall be deemed to be an
excluded asset hereunder.
(c)
Qualified Financial
Contracts shall be purchased at market value determined in accordance with the
terms of Exhibit 3.2(c). Any costs associated with such valuation shall be
shared equally by the Receiver and the Assuming Institution.
3.3
Manner of Conveyance;Limited
Warranty; Nonrecourse; Etc
. THE
CONVEYANCE OF ALL ASSETS, INCLUDING REAL AND PERSONAL PROPERTY INTERESTS,
PURCHASED BY THE ASSUMING INSTITUTION UNDER THIS AGREEMENT SHALL BE MADE, AS
NECESSARY, BY RECEIVER’S DEED OR RECEIVER’S BILL OF SALE, “AS IS”, “WHERE IS”,
WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS
AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH RESPECT TO SUCH ASSETS,
EXPRESS OR IMPLIED, WITH RESPECT TO TITLE, ENFORCEABILITY, COLLECTIBILITY,
DOCUMENTATION OR FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN PART), OR
ANY OTHER MATTERS.
12
3.4
Puts of Assets to the Receiver
.
(a)
Puts Within 30 Days After Bank Closing
. During the thirty (30)-day period following
Bank Closing and only during such period (which thirty (30)-day period may be
extended
in writing
in the sole absolute discretion of the Receiver for
any Loan), in accordance with this Section 3.4, the Assuming Institution
shall be entitled to require the Receiver to purchase any Deposit Secured Loan
transferred to the Assuming Institution pursuant to Section 3.1 which is
not fully secured by Assumed Deposits or deposits at other insured depository
institutions due to either insufficient Assumed Deposit or deposit collateral
or deficient documentation regarding such collateral; provided with regard to
any Deposit Secured Loan secured by an Assumed Deposit, no such purchase may be
required until any Deposit setoff determination, whether voluntary or
involuntary, has been made; and,
at the end of the thirty
(30)-day period following Bank Closing and at that time only, in accordance
with this Section 3.4, the Assuming Institution shall be entitled to
require the Receiver to purchase any remaining overdraft transferred to the
Assuming Institution pursuant to 3.1 which both was made after the Bid
Valuation Date and was not made pursuant to an overdraft protection plan or
similar extension of credit.
Notwithstanding the
foregoing, the Assuming Institution shall
not
have the right to require
the Receiver to purchase any Loan if (i) the Obligor with respect to such
Loan is an Acquired Subsidiary, or (ii) the Assuming Institution has:
(A)
made any advance in
accordance with the terms of a Commitment or otherwise with respect to such
Loan;
(B)
taken any action that
increased the amount of a Related Liability with respect to such Loan over the
amount of such liability immediately prior to the time of such action;
(C)
created or permitted to be
created any Lien on such Loan which secures indebtedness for money borrowed or
which constitutes a conditional sales agreement, capital lease or other title
retention agreement;
(D)
entered into, agreed to
make, grant or permit, or made, granted or permitted any modification or
amendment to, any waiver or extension with respect to, or any renewal,
refinancing or refunding of, such Loan or related Credit Documents or
collateral, including, without limitation, any act or omission which diminished
such collateral; or
(E)
sold, assigned or
transferred all or a portion of such Loan to a third party (whether with or
without recourse).
The Assuming Institution
shall transfer all such Assets to the Receiver without recourse, and shall
indemnify the Receiver against any and all claims of any Person claiming by,
through or under the Assuming Institution with respect to any such Asset, as
provided in Section 12.4.
13
(b)
Puts Prior to the Settlement Date
.
During the period from the
Bank Closing Date to and including the Business Day immediately preceding the
Settlement Date, the Assuming Bank shall be entitled to require the Receiver to
purchase any Asset which the Assuming Bank can establish is evidenced by forged
or stolen instruments as of the Bank Closing Date;
provided
,
that
,
the Assuming Bank shall
not
have the right to require the Receiver to
purchase any such Asset with respect to which the Assuming Bank has taken any action
referred to in Section 3.4(a)(ii) with respect to such Asset. The
Assuming Bank shall transfer all such Assets to the Receiver without recourse,
and shall indemnify the Receiver against any and all claims of any Person
claiming by, through or under the Assuming Bank with respect to any such Asset,
as provided in Section 12.4.
(c)
Notices to the Receiver
. In the event that the Assuming Institution
elects to require the Receiver to purchase one or more Assets, the Assuming
Institution shall deliver to the Receiver a notice (a “Put Notice”) which shall
include:
(i)
a list of all Assets that
the Assuming Institution requires the Receiver to purchase;
(ii)
a list of all Related
Liabilities with respect to the Assets identified pursuant to (i) above;
and
(iii)
a statement of the estimated
Repurchase Price of each Asset identified pursuant to (i) above as of the
applicable Put Date.
Such notice shall be in the
form prescribed by the Receiver or such other form to which the Receiver shall
consent. As provided in Section 9.6, the Assuming Institution shall
deliver to the Receiver such documents, Credit Files and such additional
information relating to the subject matter of the Put Notice as the Receiver
may request and shall provide to the Receiver full access to all other relevant
books and records.
(d)
Purchase by Receiver
. The Receiver shall purchase Assets that are
specified in the Put Notice and shall assume Related Liabilities with respect
to such Assets, and the transfer of such Assets and Related Liabilities shall
be effective as of a date determined by the Receiver which date shall not be
later than thirty (30) days after receipt by the Receiver of the Put Notice
(the “Put Date”).
(e)
Purchase Price and Payment Date
. Each Asset purchased by the Receiver pursuant
to this Section 3.4 shall be purchased at a price equal to the Repurchase
Price of such Asset less the Related Liability Amount applicable to such Asset,
in each case determined as of the applicable Put Date. If the difference between
such Repurchase Price and such Related Liability Amount is positive, then the
Receiver shall pay to the Assuming Institution the amount of such difference;
if the difference between such amounts is negative, then the Assuming
Institution shall pay to the Receiver the amount of such difference. The
Assuming Institution or the Receiver, as the case may be, shall pay the
purchase price determined pursuant to this Section 3.4(d) not later
than the twentieth (20th) Business Day following the applicable Put Date, together
with interest on such amount at the Settlement Interest Rate for the period
from and
14
including such Put Date to
and including the day preceding the date upon which payment is made.
(f)
Servicing
.
The Assuming Institution shall administer
and manage any Asset subject to purchase by the Receiver in accordance with
usual and prudent banking standards and business practices until such time as
such Asset is purchased by the Receiver.
(g)
Reversals
. In the event that the Receiver purchases an
Asset (and assumes the Related Liability) that it is not required to purchase
pursuant to this Section 3.4, the Assuming Institution shall repurchase
such Asset (and assume such Related Liability) from the Receiver at a price
computed so as to achieve the same economic result as would apply if the
Receiver had never purchased such Asset pursuant to this Section 3.4.
3.5
Assets Not Purchased by Assuming
Institution
. The
Assuming Institution does not purchase, acquire or assume, or (except as
otherwise expressly provided in this Agreement) obtain an option to purchase,
acquire or assume under this Agreement:
(a) any financial institution bonds, banker’s blanket bonds,
or public liability, fire, extended coverage insurance policy, bank owned life
insurance or any other insurance policy of the Failed Bank, or premium refund,
unearned premium derived from cancellation, or any proceeds payable with
respect to any of the foregoing;
(b) any interest, right, action, claim, or judgment against
(i) any officer, director, employee, accountant, attorney, or any other
Person employed or retained by the Failed Bank or any Subsidiary of the Failed
Bank on or prior to Bank Closing arising out of any act or omission of such
Person in such capacity, (ii) any underwriter of financial institution
bonds, banker’s blanket bonds or any other insurance policy of the Failed Bank,
(iii) any shareholder or holding company of the Failed Bank, or
(iv) any other Person whose action or inaction may be related to any loss
(exclusive of any loss resulting from such Person’s failure to pay on a Loan
made by the Failed Bank) incurred by the Failed Bank;
provided
,
that
for the purposes hereof, the acts, omissions or other events giving rise to any
such claim shall have occurred on or before Bank Closing, regardless of when
any such claim is discovered and regardless of whether any such claim is made
with respect to a financial institution bond, banker’s blanket bond, or any
other insurance policy of the Failed Bank in force as of Bank Closing;
(c) prepaid regulatory assessments of the
Failed Bank, if any;
(d) legal or equitable interests in tax
receivables of the Failed Bank, if any, including any claims arising as a
result of the Failed Bank having entered into any agreement or otherwise being
joined with another Person with respect to the filing of tax returns or the
payment of taxes;
(e) amounts reflected on the Accounting
Records of the Failed Bank as of Bank Closing as a general or specific loss reserve
or contingency account, if any;
(f) leased or owned Bank Premises and
leased or owned Furniture and Equipment and Fixtures and Data Processing
Equipment located on leased or owned Bank Premises, if any;
15
provided
,
that
the Assuming Institution does obtain an option under Section 4.6,
Section 4.7 or Section 4.8, as the case may be, with respect thereto;
(g)
owned Bank
Premises which the Receiver, in its discretion, determines may contain
environmentally hazardous substances;
(h)
any “goodwill,”
as such term is defined in the instructions to the report of condition prepared
by banks examined by the Corporation in accordance with 12 C.F.R.
Section 304.3, and other intangibles;
(i)
any criminal
restitution or forfeiture orders issued in favor of the Failed Bank;
(j)
reserved;
(k)
assets
essential to the Receiver in accordance with Section 3.6;
(l)
the securities
listed on the attached Schedule 3.5(l); and
(m)
prepaid
accounts associated with any contract or agreement that the Assuming Institution
either does not directly assume pursuant to the terms of this Agreement nor has
an option to assume under Section 4.8.
3.6
Retention or Repurchase of Assets Essential to Receiver
.
(a)
The Receiver
may refuse to sell to the Assuming Institution, or the Assuming Institution
agrees, at the request of the Receiver set forth in a written notice to the
Assuming Institution, to assign, transfer, convey, and deliver to the Receiver
all of the Assuming Institution’s right, title and interest in and to, any
Asset or asset essential to the Receiver as determined by the Receiver in its
discretion (together with all Credit Documents evidencing or pertaining
thereto), which may include any Asset or asset that the Receiver determines to
be:
(i)
made to an officer,
director, or other Person engaging in the affairs of the Failed Bank, its
Subsidiaries or Affiliates or any related entities of any of the foregoing;
(ii)
the subject of any
investigation relating to any claim with respect to any item described in
Section 3.5(a) or (b), or the subject of, or potentially the subject
of, any legal proceedings;
(iii)
made to a Person who is an
Obligor on a loan owned by the Receiver or the Corporation in its corporate
capacity or its capacity as receiver of any institution;
(iv)
secured by collateral which
also secures any asset owned by the Receiver; or
16
(v)
related to any
asset of the Failed Bank not purchased by the Assuming Institution under this
Article III or any liability of the Failed Bank not assumed by the
Assuming Institution under Article II.
(b)
Each such Asset
or asset purchased by the Receiver shall be purchased at a price equal to the
Repurchase Price thereof less the Related Liability Amount with respect to any
Related Liabilities related to such Asset or asset, in each case determined as
of the date of the notice provided by the Receiver pursuant to
Section 3.6(a). The Receiver shall pay the Assuming Institution not later
than the twentieth (20th) Business Day following receipt of related Credit
Documents and Credit Files together with interest on such amount at the
Settlement Interest Rate for the period from and including the date of receipt
of such documents to and including the day preceding the day on which payment
is made. The Assuming Institution agrees to administer and manage each such
Asset or asset in accordance with usual and prudent banking standards and
business practices until each such Asset or asset is purchased by the Receiver.
All transfers with respect to Asset or assets under this Section 3.6 shall
be made as provided in Section 9.6. The Assuming Institution shall transfer
all such Asset or assets and Related Liabilities to the Receiver without
recourse, and shall indemnify the Receiver against any and all claims of any
Person claiming by, through or under the Assuming Institution with respect to
any such Asset or asset, as provided in Section 12.4.
ARTICLE IV
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS
The Assuming Institution
agrees with the Receiver and the Corporation as follows:
4.1
Continuation
of Banking Business
. For
the period commencing the first banking Business Day after Bank Closing and
ending no earlier than the first anniversary of Bank Closing, the Assuming
Institution will provide full service banking in the trade area of the Failed
Bank. Thereafter, the Assuming Institution may cease providing such banking
services in the trade area of the Failed Bank, provided the Assuming
Institution has received all necessary regulatory approvals. At the option of
the Assuming Institution, such banking services may be provided at any or all
of the Bank Premises, or at other premises within such trade area. The trade
area shall be determined by the Receiver. For the avoidance of doubt, the
foregoing shall not restrict the Assuming Institution from opening, closing or
selling branches upon receipt of the necessary regulatory approvals, if the
Assuming Institution or its successors continue to provide banking services in
the trade area. Assuming Institution will pay to the Receiver, upon the sale of
a branch or branches within the year following the date of this agreement,
fifty percent (50%) of any franchise premium in excess of the franchise premium
paid by the Assuming Institution with respect to such branch or branches.
4.2
Agreement
with Respect to Credit Card Business
. The Assuming Institution agrees to honor and perform,
from and after Bank Closing, all duties and obligations with respect to the
Failed Bank’s credit card business (including issuer or merchant acquirer)
debit card business, stored value and gift card business, and/or processing
related to credit cards, if any, and assumes all outstanding extensions of
credit or balances with respect to these lines of business.
17
4.3
Agreement with Respect to Safe
Deposit Business
. The
Assuming Institution assumes and agrees to discharge, from and after Bank
Closing, in the usual course of conducting a banking business, the duties and
obligations of the Failed Bank with respect to all Safe Deposit Boxes, if any,
of the Failed Bank and to maintain all of the necessary facilities for the use
of such boxes by the renters thereof during the period for which such boxes
have been rented and the rent therefore paid to the Failed Bank, subject to the
provisions of the rental agreements between the Failed Bank and the respective
renters of such boxes;
provided
,
that
the Assuming Institution
may relocate the Safe Deposit Boxes of the Failed Bank to any office of the
Assuming Institution located in the trade area of the Failed Bank. The Safe
Deposit Boxes shall be located and maintained in the trade area of the Failed
Bank for a minimum of one year from Bank Closing. The trade area shall be
determined by the Receiver. Fees related to the safe deposit business earned
prior to the Bank Closing Date shall be for the benefit of the Receiver and
fees earned after the Bank Closing Date shall be for the benefit of the
Assuming Institution.
4.4
Agreement with Respect to
Safekeeping Business
. The
Receiver transfers, conveys and delivers to the Assuming Institution and the
Assuming Institution accepts all securities and other items, if any, held by
the Failed Bank in safekeeping for its customers as of Bank Closing. The
Assuming Institution assumes and agrees to honor and discharge, from and after
Bank Closing, the duties and obligations of the Failed Bank with respect to
such securities and items held in safekeeping. The Assuming Institution shall
be entitled to all rights and benefits heretofore accrued or hereafter accruing
with respect thereto. The Assuming Institution shall provide to the Receiver
written verification of all assets held by the Failed Bank for safekeeping
within sixty (60) days after Bank Closing. The assets held for safekeeping by
the Failed Bank shall be held and maintained by the Assuming Institution in the
trade area of the Failed Bank for a minimum of one year from Bank Closing. At
the option of the Assuming Institution, the safekeeping business may be
provided at any or all of the Bank Premises, or at other premises within such
trade area. The trade area shall be determined by the Receiver. Fees related to
the safekeeping business earned prior to the Bank Closing Date shall be for the
benefit of the Receiver and fees earned after the Bank Closing Date shall be
for the benefit of the Assuming Institution.
4.5
Agreement with Respect to Trust
Business
.
(a) The Assuming Institution shall, without further transfer,
substitution, act or deed, to the full extent permitted by law, succeed to the
rights, obligations, properties, assets, investments, deposits, agreements, and
trusts of the Failed Bank under trusts, executorships, administrations,
guardianships, and agencies, and other fiduciary or representative capacities,
all to the same extent as though the Assuming Institution had assumed the same
from the Failed Bank prior to Bank Closing;
provided
,
that
any
liability based on the misfeasance, malfeasance or nonfeasance of the Failed
Bank, its directors, officers, employees or agents with respect to the trust
business is not assumed hereunder.
(b) The Assuming Institution shall, to the full extent
permitted by law, succeed to, and be entitled to take and execute, the
appointment to all executorships, trusteeships, guardianships and other
fiduciary or representative capacities to which the Failed Bank is or may
18
be named in wills, whenever
probated, or to which the Failed Bank is or may be named or appointed by any
other instrument.
(c) In the event additional proceedings of any kind are
necessary to accomplish the transfer of such trust business, the Assuming
Institution agrees that, at its own expense, it will take whatever action is
necessary to accomplish such transfer. The Receiver agrees to use reasonable
efforts to assist the Assuming Institution in accomplishing such transfer.
(d) The Assuming Institution shall provide to the Receiver
written verification of the assets held in connection with the Failed Bank’s
trust business within sixty (60) days after Bank Closing.
4.6
Agreement with Respect to Bank
Premises
.
(a)
Option to Purchase
.
Subject to Section 3.5, the Receiver
hereby grants to the Assuming Institution an exclusive option for the period of
ninety (90) days commencing the day after Bank Closing to purchase any or all
owned Bank Premises, including all Furniture, Fixtures and Equipment located on
the Bank Premises. The Assuming Institution shall give written notice to the
Receiver within the option period of its election to purchase or not to
purchase any of the owned Bank Premises. Any purchase of such premises shall be
effective as of the date of Bank Closing and such purchase shall be consummated
as soon as practicable thereafter, and in no event later than the Settlement
Date. If the Assuming Institution gives notice of its election not to purchase one
or more of the owned Bank Premises within seven (7) days of Bank Closing,
then, not withstanding any other provision of this Agreement to the contrary,
the Assuming Institution shall not be liable for any of the costs or fees
associated with appraisals for such Bank Premises and associated Fixtures,
Furniture and Equipment.
(b)
Option to Lease
.
The Receiver hereby grants to the
Assuming Institution an exclusive option for the period of ninety (90) days
commencing the day after Bank Closing to cause the Receiver to assign to the
Assuming Institution any or all leases for leased Bank Premises, if any, which
have been continuously occupied by the Assuming Institution from Bank Closing
to the date it elects to accept an assignment of the leases with respect thereto
to the extent such leases can be assigned;
provided
,
that
the
exercise of this option with respect to any lease must be as to all premises or
other property subject to the lease. If an assignment cannot be made of any
such leases, the Receiver may, in its discretion, enter into subleases with the
Assuming Institution containing the same terms and conditions provided under
such existing leases for such leased Bank Premises or other property. The
Assuming Institution shall give notice to the Receiver within the option period
of its election to accept or not to accept an assignment of any or all leases
(or enter into subleases or new leases in lieu thereof). The Assuming
Institution agrees to assume all leases assigned (or enter into subleases or
new leases in lieu thereof) pursuant to this Section 4.6. If the Assuming
Institution gives notice of its election not to accept an assignment of a lease
for one or more of the leased Bank Premises within seven (7) days of Bank
Closing, then, not withstanding any other provision of this Agreement to the
contrary, the Assuming Institution shall not be liable for any of the costs or
fees associated with appraisals for the Fixtures, Furniture and Equipment
located on such leased Bank Premises.
19
(c)
Facilitation
.
The Receiver agrees to
facilitate the assumption, assignment or sublease of leases or the negotiation
of new leases by the Assuming Institution;
provided
,
that
neither
the Receiver nor the Corporation shall be obligated to engage in litigation,
make payments to the Assuming Institution or to any third party in connection
with facilitating any such assumption, assignment, sublease or negotiation or
commit to any other obligations to third parties.
(d)
Occupancy
.
The Assuming Institution
shall give the Receiver fifteen (15) days’ prior written notice of its
intention to vacate prior to vacating any leased Bank Premises with respect to
which the Assuming Institution has not exercised the option provided in Section 4.6(b).
Any such notice shall be deemed to terminate the Assuming Institution’s option
with respect to such leased Bank Premises.
(e)
Occupancy Costs
.
(i) The Assuming Institution agrees to pay to the Receiver,
or to appropriate third parties at the direction of the Receiver, during and
for the period of any occupancy by it of (x) owned Bank Premises the
market rental value, as determined by the appraiser selected in accordance with
the definition of Fair Market Value, and all operating costs, and (y) leased
Bank Premises, all operating costs with respect thereto and to comply with all
relevant terms of applicable leases entered into by the Failed Bank, including
without limitation the timely payment of all rent. Operating costs include,
without limitation all taxes, fees, charges, utilities, insurance and
assessments, to the extent not included in the rental value or rent. If the
Assuming Institution elects to purchase any owned Bank Premises in accordance
with Section 4.6(a), the amount of any rent paid (and taxes paid to the
Receiver which have not been paid to the taxing authority and for which the
Assuming Institution assumes liability) by the Assuming Institution with
respect thereto shall be applied as an offset against the purchase price thereof.
(ii) The Assuming Institution agrees during the period of
occupancy by it of owned or leased Bank Premises, to pay to the Receiver rent
for the use of all owned or leased Furniture and Equipment and all owned or
leased Fixtures located on such Bank Premises for the period of such occupancy.
Rent for such property owned by the Failed Bank shall be the market rental
value thereof, as determined by the Receiver within sixty (60) days after Bank
Closing. Rent for such leased property shall be an amount equal to any and all
rent and other amounts which the Receiver incurs or accrues as an obligation or
is obligated to pay for such period of occupancy pursuant to all leases and
contracts with respect to such property. If the Assuming Institution purchases
any owned Furniture and Equipment or owned Fixtures in accordance with
Section 4.6(f) or 4.6(h), the amount of any rents paid by the
Assuming Institution with respect thereto shall be applied as an offset against
the purchase price thereof.
(f)
Certain Requirements as to Furniture, Equipment and Fixtures
.
If the Assuming Institution
purchases owned Bank Premises or accepts an assignment of the lease (or enters
into a sublease or a new lease in lieu thereof) for leased Bank Premises as
provided in Section 4.6(a) or 4.6(b), or if the Assuming Institution
does not exercise such option but within twelve (12) months following Bank
Closing obtains the right to occupy such premises (whether
20
by assignment, lease, sublease,
purchase or otherwise), other than in accordance with
Section 4.6(a) or (b), the Assuming Institution shall
(i) effective as of the date of Bank Closing, purchase from the Receiver
all Furniture and Equipment and Fixtures owned by the Failed Bank at Fair
Market Value and located thereon as of Bank Closing, (ii) accept an
assignment or a sublease of the leases or negotiate new leases for all
Furniture and Equipment and Fixtures leased by the Failed Bank and located
thereon, and (iii) if applicable, accept an assignment or a sublease of
any ground lease or negotiate a new ground lease with respect to any land on
which such Bank Premises are located;
provided
,
that
the Receiver
shall not have disposed of such Furniture and Equipment and Fixtures or repudiated
the leases specified in clause (ii) or (iii).
(g)
Vacating Premises.
(i) If the Assuming Institution elects not to purchase any
owned Bank Premises, the notice of such election in accordance with
Section 4.6(a) shall specify the date upon which the Assuming
Institution’s occupancy of such premises shall terminate, which date shall not
be later than ninety (90) days after the date of the Assuming Institution’s
notice not to exercise such option. The Assuming Institution shall promptly be
responsible for relinquishing and releasing to the Receiver such premises and
the Furniture and Equipment and Fixtures located thereon which existed at the
time of Bank Closing, in the same condition as at Bank Closing and at the
premises where it was inventoried at Bank Closing, normal wear and tear
excepted. Any of the aforementioned which is missing will be charged to the
Assuming Institution at the item’s Fair Market Value as set out in accordance
with this Agreement. By occupying any such premises after the expiration of
such ninety (90)-day period, the Assuming Institution shall, at the Receiver’s
option, (x) be deemed to have agreed to purchase such Bank Premises, and
to assume all leases, obligations and liabilities with respect to leased
Furniture and Equipment and leased Fixtures located thereon and any ground
lease with respect to the land on which such premises are located, and
(y) be required to purchase all Furniture and Equipment and Fixtures owned
by the Failed Bank and located on such premises as of Bank Closing.
(ii) If the Assuming Institution elects not to accept an
assignment of the lease or sublease any leased Bank Premises, the notice of
such election in accordance with Section 4.6(b) shall specify the
date upon which the Assuming Institution’s occupancy of such leased Bank
Premises shall terminate, which date shall not be later than ninety (90) days
after the date of the Assuming Institution’s notice not to exercise such
option. Upon vacating such premises, the Assuming Institution shall be liable for
relinquishing and releasing to the Receiver such premises and the Fixtures and
the Furniture and Equipment located thereon which existed at the time of Bank
Closing, in the same condition as at Bank Closing, and at the premises where it
was inventoried at Bank closing, normal wear and tear excepted. Any of the
aforementioned which is missing will be charged to the Assuming Institution at
the item’s Fair Market Value as set out in accordance with this Agreement. By
failing to provide notice of its intention to vacate such premises prior to the
expiration of the option period specified in Section 4.6(b), or by
occupying such premises after the one hundred eighty (180)-day period specified
above in this paragraph (ii), the Assuming Institution shall, at the Receiver’s
option, (x) be deemed to have assumed all leases, obligations and
liabilities with respect to such premises (including any ground lease with
respect to the land on which premises are located), and leased Furniture and
Equipment and leased Fixtures located thereon in accordance with this
Section 4.6 (unless the Receiver
21
previously repudiated any
such lease), and (y) be required to purchase all Furniture and Equipment
and Fixtures owned by the Failed Bank at Fair Market Value and located on such
premises as of Bank Closing.
(h)
Furniture and Equipment and Certain Other Equipment
.
The Receiver hereby grants
to the Assuming Institution an option to purchase
all
Furniture and
Equipment and/or all telecommunications and check processing equipment owned by
the Failed Bank at Fair Market Value and located at any leased Bank Premises
that the Assuming Institution elects to vacate or which it could have, but did
not occupy, pursuant to this Section 4.6;
provided
,
that
,
the Assuming Institution shall give the Receiver notice of its election to
purchase such property at the time it gives notice of its intention to vacate
such Bank Premises or within ten (10) days after Bank Closing for Bank Premises
it could have, but did not, occupy.
(i)
Option to Put Bank Premises and Related Fixtures, Furniture and Equipment
.
(i) For a period of ninety (90) days following Bank
Closing, the Assuming Institution shall be entitled to require the Receiver to
purchase any Bank Premises that is owned, directly or indirectly, by an
Acquired Subsidiary and the purchase price paid by the Receiver shall be the
Fair Market Value of the Bank Premises.
(ii) If the Assuming Institution elects to require the Receiver
to purchase any Bank Premises that is owned, directly or indirectly, by an
Acquired Subsidiary, the Assuming Institution shall also have the option,
exercisable within the same ninety (90) day time period, to require the
Receiver to purchase any Fixtures, Furniture and Equipment that is owned,
directly or indirectly, by an Acquired Subsidiary and which is located on such
Bank Premises. The purchase price paid by the Receiver shall be the Fair Market
Value of the Fixtures, Furniture and Equipment.
(iii) In the event the Assuming Institution elects to exercise
its option under this subparagraph, the Assuming Institution shall pay to the
Receiver occupancy costs in accordance with Section 4.6(e) and shall
vacate the Bank Premises in accordance with Section 4.6(g)(i).
(iv) Regardless of whether the Assuming Institution exercises
any of its option under this subparagraph, the purchase price for the Acquired
Subsidiary shall be adjusted by the difference between the Fair Market Value of
the Bank Premises and Fixtures, Furniture and Equipment and their respective
Book Value as reflected of the books and records of the Acquired Subsidiary.
Such adjustment shall be made in accordance with Article VIII of this
Agreement.
4.7
Agreement with Respect to Data Processing Equipment and Leases
(a)
The Receiver
hereby grants to the Assuming Institution an exclusive option for the period of
ninety (90) days commencing the day after Bank Closing to: (i) accept an
assignment from the Receiver of all leased Data Processing Equipment and (ii) purchase
at Fair Market Value from the Receiver all owned Data Processing Equipment. The
Assuming
22
Institution’s election under
this option applies to both owned and leased Data Processing Equipment.
(b) The Assuming Institution shall (i) give written
notice to the Receiver within the option period specified in
Section 4.7(a) of its intent to accept or decline an assignment or
sublease of all leased Data Processing Equipment and promptly accept an
assignment or sublease of such Data Processing Equipment, (ii) give
written notice to the appropriate lessor (s) that it has accepted an
assignment or sublease of any such Data Processing Equipment that is subject to
a lease, and (iii) give written notice to the Receiver within the option
period specified in Section 4.7(a) of its intent to purchase all
owned Data Processing Equipment and promptly pay the Receiver for the purchase
of such Data Processing Equipment.
(c) The Receiver agrees to facilitate the assignment or
sublease of Data Processing Leases or the negotiation of new leases or license
agreements by the Assuming Institution;
provided
,
that
neither
the Receiver nor the Corporation shall be obligated to engage in litigation or
make payments to the Assuming Institution or to any third party in connection
with facilitating any such assumption, assignment, sublease or negotiation.
(d) The Assuming Institution agrees, during its period of use
of any Data Processing Equipment, to pay to the Receiver or to appropriate
third parties at the direction of the Receiver all operating costs with respect
thereto and to comply with all relevant terms of any existing data processing
leases entered into by the Failed Bank, including without limitation the timely
payment of all rent, taxes, fees, charges, utilities, insurance and
assessments.
(e) The Assuming Institution shall, not later than fifty (50)
days after giving the notice provided in Section 4.7(b), (i) relinquish
and release to the Receiver all Data Processing Equipment, in the same
condition as at Bank Closing, normal wear and tear excepted, or
(ii) accept an assignment or a sublease of any existing data processing
lease or negotiate a new lease or license agreement under this Section 4.7
with respect to leased Data Processing Equipment, and (iii) accept
ownership of all Data Processing Equipment purchased from the Receiver.
4.8
Agreement with Respect to Certain
Existing Agreements
.
(a) Subject to the provisions of Section 4.8(b), with
respect to agreements existing as of Bank Closing which provide for the
rendering of services by or to the Failed Bank, within thirty (30) days after
Bank Closing, the Assuming Institution shall give the Receiver written notice
specifying whether it elects to assume or not to assume each such agreement.
Except as may be otherwise provided in this Article IV, the Assuming
Institution agrees to comply with the terms of each such agreement for a period
commencing on the day after Bank Closing and ending on: (i) in the case of
an agreement that provides for the rendering of services by the Failed Bank,
the date which is ninety (90) days after Bank Closing, and (ii) in the
case of an agreement that provides for the rendering of services to the Failed
Bank, the date which is thirty (30) days after the Assuming Institution has
given notice to the Receiver of its election not to assume such agreement;
provided
,
that
the Receiver can reasonably make such service agreements available
to the Assuming Institution. The Assuming Institution shall be deemed by the
Receiver to have assumed agreements for which no notification is timely given.
The Receiver
23
agrees to assign, transfer,
convey, and deliver to the Assuming Institution all right, title and interest
of the Receiver, if any, in and to agreements the Assuming Institution assumes
hereunder. In the event the Assuming Institution elects not to accept an
assignment of any lease (or sublease) or negotiate a new lease for leased Bank
Premises under Section 4.6 and does not otherwise occupy such premises,
the provisions of this Section 4.8(a) shall not apply to service
agreements related to such premises. The Assuming Institution agrees, during
the period it has the use or benefit of any such agreement, promptly to pay to
the Receiver or to appropriate third parties at the direction of the Receiver
all operating costs with respect thereto and to comply with all relevant terms
of such agreement.
(b) The provisions of Section 4.8(a) regarding the
Assuming Institution’s election to assume or not assume certain agreements
shall not apply to (i) agreements pursuant to which the Failed Bank
provides mortgage servicing for others or mortgage servicing is provided to the
Failed Bank by others, (ii) agreements that are subject to Sections 4.1
through 4.7 and any insurance policy or bond referred to in
Section 3.5(a) or other agreement specified in Section 3.5, and
(iii) consulting, management or employment agreements, if any, between the
Failed Bank and its employees or other Persons. Except as otherwise expressly
set forth elsewhere in this Agreement, the Assuming Institution does not assume
any liabilities or acquire any rights under any of the agreements described in
this Section 4.8(b).
4.9
Informational Tax Reporting
. The Assuming Institution agrees to perform
all obligations of the Failed Bank with respect to Federal and State income tax
informational reporting related to (i) the Assets and the Liabilities
Assumed, (ii) deposit accounts that were closed and loans that were paid
off or collateral obtained with respect thereto prior to Bank Closing, (iii) miscellaneous
payments made to vendors of the Failed Bank, and (iv) any other asset or
liability of the Failed Bank, including, without limitation, loans not
purchased and Deposits not assumed by the Assuming Institution, as may be
required by the Receiver.
4.10
Insurance
. The Assuming Institution agrees to obtain
insurance coverage effective from and after Bank Closing, including public
liability, fire and extended coverage insurance acceptable to the Receiver with
respect to owned or leased Bank Premises that it occupies, and all owned or
leased Furniture and Equipment and Fixtures and leased data processing
equipment (including hardware and software) located thereon, in the event such
insurance coverage is not already in force and effect with respect to the
Assuming Institution as the insured as of Bank Closing. All such insurance
shall, where appropriate (as determined by the Receiver), name the Receiver as
an additional insured.
4.11
Office Space for Receiver and
Corporation
. For the
period commencing on the day following Bank Closing and ending on the one
hundred eightieth (180th) day thereafter, the Assuming Institution agrees to
provide to the Receiver and the Corporation, without charge, adequate and
suitable office space (including parking facilities and vault space),
furniture, equipment (including photocopying and telecopying machines), email
accounts, network access and technology resources (such as shared drive) and
utilities (including local telephone service and fax machines) at the Bank
Premises occupied by the Assuming Institution for their use in the discharge of
their respective functions with respect to the Failed Bank. In the event the Receiver
and the Corporation determine that the space provided is inadequate or
unsuitable, the Receiver
24
and the Corporation may
relocate to other quarters having adequate and suitable space and the costs of
relocation and any rental and utility costs for the balance of the period of
occupancy by the Receiver and the Corporation shall be borne by the Assuming
Institution. Additionally, the Assuming Institution agrees to pay such bills
and invoices on behalf of the Receiver and Corporation as the Receiver or
Corporation may direct for the period beginning on the date of Bank Closing and
ending on Settlement Date. Assuming Institution shall submit it requests for
reimbursement of such expenditures pursuant to Article VIII of this
Agreement.
4.12
Agreement with Respect to
Continuation of Group Health Plan Coverage for Former Employees of the Failed
Bank
.
(a) The Assuming Institution agrees to assist the Receiver, as
provided in this Section 4.12, in offering individuals who were employees
or former employees of the Failed Bank, or any of its Subsidiaries, and who,
immediately prior to Bank Closing, were receiving, or were eligible to receive,
health insurance coverage or health insurance continuation coverage from the
Failed Bank (“Eligible Individuals”), the opportunity to obtain health
insurance coverage in the Corporation’s FIA Continuation Coverage Plan which
provides for health insurance continuation coverage to such Eligible
Individuals who are qualified beneficiaries of the Failed Bank as defined in
Section 607 of the Employee Retirement Income Security Act of 1974, as
amended (respectively, “qualified beneficiaries” and “ERISA”). The Assuming
Institution shall consult with the Receiver and not later than five
(5) Business Days after Bank Closing shall provide written notice to the
Receiver of the number (if available), identity (if available) and addresses
(if available) of the Eligible Individuals who are qualified beneficiaries of
the Failed Bank and for whom a “qualifying event” (as defined in
Section 603 of ERISA) has occurred and with respect to whom the Failed
Bank’s obligations under Part 6 of Subtitle B of Title I of ERISA have not
been satisfied in full, and such other information as the Receiver may
reasonably require. The Receiver shall cooperate with the Assuming Institution
in order to permit it to prepare such notice and shall provide to the Assuming
Institution such data in its possession as may be reasonably required for
purposes of preparing such notice.
(b) The Assuming Institution shall take such further action to
assist the Receiver in offering the Eligible Individuals who are qualified
beneficiaries of the Failed Bank the opportunity to obtain health insurance
coverage in the Corporation’s FIA Continuation Coverage Plan as the Receiver
may direct. All expenses incurred and paid by the Assuming Institution
(i) in connection with the obligations of the Assuming Institution under
this Section 4.12, and (ii) in providing health insurance continuation
coverage to any Eligible Individuals who are hired by the Assuming Institution
and such employees’ qualified beneficiaries shall be borne by the Assuming
Institution.
(c) No later than five (5) Business Days after Bank
Closing, the Assuming Institution shall provide the Receiver with a list of all
Failed Bank employees the Assuming Institution will not hire. Unless otherwise
agreed, the Assuming Institution pays all salaries and payroll costs for all
Failed Bank Employees until the list is provided to the Receiver. The Assuming
Institution shall be responsible for all costs and expenses (i.e. salary,
benefits, etc.) associated with all other employees not on that list from
and after the date of delivery of the list to the
25
Receiver. The Assuming
Institution shall offer to the Failed Bank employees it retains employment
benefits comparable to those the Assuming Institution offers its current
employees.
(d) This Section 4.12 is for the sole and exclusive
benefit of the parties to this Agreement, and for the benefit of no other
Person (including any former employee of the Failed Bank or any Subsidiary
thereof or qualified beneficiary of such former employee). Nothing in this
Section 4.12 is intended by the parties, or shall be construed, to give
any Person (including any former employee of the Failed Bank or any Subsidiary
thereof or qualified beneficiary of such former employee) other than the
Corporation, the Receiver and the Assuming Institution any legal or equitable
right, remedy or claim under or with respect to the provisions of this Section.
4.13
Agreement with Respect to Interim
Asset Servicing
.
At any time
after Bank Closing, the Receiver may establish on its books an asset
pool(s) and may transfer to such asset pool(s) (by means of
accounting entries on the books of the Receiver) all or any assets and
liabilities of the Failed Bank which are not acquired by the Assuming
Institution, including, without limitation, wholly unfunded Commitments and
assets and liabilities which may be acquired, funded or originated by the
Receiver subsequent to Bank Closing. The Receiver may remove assets (and
liabilities) from or add assets (and liabilities) to such pool(s) at any
time in its discretion. At the option of the Receiver, the Assuming Institution
agrees to service, administer, and collect such pool assets in accordance with
and for the term set forth in Exhibit 4.13 “Interim Asset Servicing
Arrangement”.
4.14
Reserved.
4.15
Agreement
with Respect to Loss Sharing
.
The Assuming Institution shall be entitled to require reimbursement
from the Receiver for loss sharing on certain loans in accordance with the
Single Family Shared-Loss Agreement attached hereto as Exhibit 4.15A and
the Commercial Shared-Loss Agreement attached hereto as Exhibit 4.15B,
collectively, the “Shared-Loss Agreements.” The Loans that shall be subject to
the Shared-Loss Agreements are identified on the Schedules 4.15A and 4.15B, and
Schedule 4.15C, Shared-Loss Securities, attached hereto.
ARTICLE V
DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK
5.1
Payment
of Checks, Drafts and Orders
.
Subject to Section 9.5, the Assuming Institution agrees to pay
all properly drawn checks, drafts and withdrawal orders of depositors of the Failed
Bank presented for payment, whether drawn on the check or draft forms provided
by the Failed Bank or by the Assuming Institution, to the extent that the
Deposit balances to the credit of the respective makers or drawers assumed by
the Assuming Institution under this Agreement are sufficient to permit the
payment thereof, and in all other respects to discharge, in the usual course of
conducting a banking business, the duties and obligations of the Failed Bank
with respect to the Deposit balances due and owing to the depositors of the
Failed Bank assumed by the Assuming Institution under this Agreement.
26
5.2
Certain Agreements Related to
Deposits
.
Subject to
Section 2.2, the Assuming Institution agrees to honor the terms and
conditions of any written escrow or mortgage servicing agreement or other
similar agreement relating to a Deposit liability assumed by the Assuming
Institution pursuant to this Agreement.
5.3
Notice to Depositors
.
(a) Within seven (7) days after Bank Closing, the
Assuming Institution shall give notice by mail to each depositor of the Failed
Bank of (i) the assumption of the Deposit liabilities of the Failed Bank,
and (ii) the procedures to claim Deposits (the Receiver shall provide item
(ii) to Assuming Institution). The Assuming Institution shall also publish
notice of its assumption of the Deposit liabilities of the Failed Bank in a
newspaper of general circulation in the country or countries in which the
Failed Bank was located.
(b) Within seven (7) days after Bank Closing, the
Assuming Institution shall give notices by mail to each depositor of the Failed
Bank, as required under Section 2.2.
(c) If the Assuming Institution proposes to charge fees
different from those fees formerly charged by the Failed Bank, the Assuming
Institution shall include its fee schedule in its mailed notice.
(d) The Assuming Institution shall obtain approval of all
notices and publications required by this Section 5.3 from counsel for the
Receiver prior to mailing or publication.
ARTICLE VI
RECORDS
6.1
Transfer of Records
. In accordance with Sections 2.1 and 3.1, the
Receiver assigns, transfers, conveys and delivers to the Assuming Institution,
whether located on Bank Premises occupied or not occupied by the Assuming
Institution or at any other location, any and all Records of the Failed Bank,
other than the following:
(a) Records pertaining to former employees of the Failed Bank
who were no longer employed by the Failed Bank as of Bank Closing and Records
pertaining to employees of the Failed Bank who were employed by the Failed Bank
as of Bank Closing and for whom the Receiver is unable to obtain a waiver to
release such Records to the Assuming Institution;
(b) Records pertaining to (i) any asset or liability of
the Failed Bank retained by the Receiver, or (ii) any asset of the Failed
Bank acquired by the Receiver pursuant to this Agreement; and
(c) Any other Records as determined by the Receiver.
27
6.2
Delivery of Assigned Records
. The Receiver shall deliver to the Assuming
Institution all Records described in Section 6.1 as soon as practicable on
or after the date of this Agreement.
6.3
Preservation of Records
. The Assuming Institution agrees that it will
preserve and maintain for the joint benefit of the Receiver, the Corporation
and the Assuming Institution, all Records of which it has custody for such
period as either the Receiver or the Corporation in its discretion may require,
until directed otherwise,
in writing
, by the Receiver or Corporation.
The Assuming Institution shall have the primary responsibility to respond to
subpoenas, discovery requests, and other similar official inquiries and
customer requests for lien releases with respect to the Records of which it has
custody. With respect to its obligations under this Section regarding
Electronically Stored Information, the Assuming Institution will complete the
Data Retention Catalog attached hereto as Schedule 6.3 and submit it to the
Receiver for the Receiver’s approval of the Assuming Institution’s data
retention plan.
6.4
Access to Records; Copies
. The Assuming Institution agrees to permit the
Receiver and the Corporation access to all Records of which the Assuming
Institution has custody, and to use, inspect, make extracts from or request
copies of any such Records in the manner and to the extent requested, and to
duplicate, in the discretion of the Receiver or the Corporation, any Record
pertaining to Deposit account relationships;
provided
,
that
in
the event that the Failed Bank maintained one or more duplicate copies of such
Records, the Assuming Institution hereby assigns, transfers, and conveys to the
Corporation one such duplicate copy of each such Record without cost to the
Corporation, and agrees to deliver to the Corporation all Records assigned and
transferred to the Corporation under this Article VI as soon as practicable
on or after the date of this Agreement. The party requesting a copy of any
Record shall bear the cost (based on standard accepted industry charges to the
extent applicable, as determined by the Receiver) for providing such duplicate
Records. A copy of each Record requested shall be provided as soon as
practicable by the party having custody thereof.
ARTICLE VII
INITIAL PAYMENT
The Assuming Institution has
submitted to the Receiver a Deposit premium bid of 0.0% and an Asset discount
bid of $(18,800,000.00) (the “Bid Amount”). The Deposit premium bid will be
applied to the total of all Assumed Deposits except for brokered, CDARS, and
any market place or similar subscription services Deposits. On the Payment
Date, the Assuming Bank will pay to the Corporation, or the Corporation will
pay to the Assuming Bank, as the case may be, the Initial Payment, together
with interest on such amount (if the Payment Date is not the day following the
day of the Bank Closing Date) from and including the day following the Bank
Closing Date to and including the day preceding the Payment Date at the
Settlement Interest Rate.
28
ARTICLE VIII
ADJUSTMENTS
8.1
Pro Forma Statement
. The Receiver, as soon as practicable after
Bank Closing, in accordance with the best information then available, shall
provide to the Assuming Institution a pro forma statement reflecting any
adjustments of such liabilities and assets as may be necessary. Such pro forma
statement shall take into account, to the extent possible, (i) liabilities
and assets of a nature similar to those contemplated by Section 2.1 or
Section 3.1, respectively, which at Bank Closing were carried in the
Failed Bank’s suspense accounts, (ii) accruals as of Bank Closing for all
income related to the assets and business of the Failed Bank acquired by the
Assuming Institution hereunder, whether or not such accruals were reflected on
the Accounting Records of the Failed Bank in the normal course of its
operations, and (iii) adjustments to determine the Book Value of any
investment in an Acquired Subsidiary and related accounts on the “bank only”
(unconsolidated) balance sheet of the Failed Bank based on the equity method of
accounting, whether or not the Failed Bank used the equity method of accounting
for investments in subsidiaries, except that the resulting amount cannot be
less than the Acquired Subsidiary’s recorded equity as of Bank Closing as
reflected on the Accounting Records of the Acquired Subsidiary. Any Loan
purchased by the Assuming Institution pursuant to Section 3.1 which the
Failed Bank charged off during the period beginning the day after the Bid
Valuation Date to the date of Bank Closing shall be deemed not to be charged
off for the purposes of the pro forma statement, and the purchase price shall
be determined pursuant to Section 3.2.
8.2
Correction of Errors and Omissions;
Other Liabilities
.
(a) In the event any bookkeeping omissions or errors are
discovered in preparing any pro forma statement or in completing the transfers
and assumptions contemplated hereby, the parties hereto agree to correct such
errors and omissions, it being understood that, as far as practicable, all
adjustments will be made consistent with the judgments, methods, policies or
accounting principles utilized by the Failed Bank in preparing and maintaining
Accounting Records, except that adjustments made pursuant to this
Section 8.2(a) are not intended to bring the Accounting Records of
the Failed Bank into accordance with generally accepted accounting principles.
(b) If the Receiver discovers at any time subsequent to the
date of this Agreement that any claim exists against the Failed Bank which is
of such a nature that it would have been included in the liabilities assumed
under Article II had the existence of such claim or the facts giving rise
thereto been known as of Bank Closing, the Receiver may, in its discretion, at
any time, require that such claim be assumed by the Assuming Institution in a
manner consistent with the intent of this Agreement. The Receiver will make
appropriate adjustments to the pro forma statement provided by the Receiver to
the Assuming Institution pursuant to Section 8.1 as may be necessary.
8.3
Payments
. The Receiver agrees to cause to be paid to
the Assuming Institution, or the Assuming Institution agrees to pay to the
Receiver, as the case may be, on the Settlement Date, a payment in an amount
which reflects net adjustments (including any costs, expenses and fees
associated with determinations of value as provided in this Agreement) made
pursuant to
29
Section 8.1 or
Section 8.2, plus interest as provided in Section 8.4. The Receiver
and the Assuming Institution agree to effect on the Settlement Date any further
transfer of assets to or assumption of liabilities or claims by the Assuming
Institution as may be necessary in accordance with Section 8.1 or
Section 8.2.
8.4
Interest
. Any
amounts paid under Section 8.3 or Section 8.5, shall bear interest
for the period from and including the day following Bank Closing to and
including the day preceding the payment at the Settlement Interest Rate.
8.5
Subsequent Adjustments
.
In the event that the
Assuming Institution or the Receiver discovers any errors or omissions as
contemplated by Section 8.2 or any error with respect to the payment made
under Section 8.3 after the Settlement Date, the Assuming Institution and
the Receiver agree to promptly correct any such errors or omissions, make any
payments and effect any transfers or assumptions as may be necessary to reflect
any such correction plus interest as provided in Section 8.4.
ARTICLE IX
CONTINUING COOPERATION
9.1
General Matters
. The parties hereto agree that they will, in
good faith and with their best efforts, cooperate with each other to carry out
the transactions contemplated by this Agreement and to effect the purposes
hereof.
9.2
Additional Title Documents
. The Receiver, the Corporation and the
Assuming Institution each agree, at any time, and from time to time, upon the
request of any party hereto, to execute and deliver such additional instruments
and documents of conveyance as shall be reasonably necessary to vest in the
appropriate party its full legal or equitable title in and to the property
transferred pursuant to this Agreement or to be transferred in accordance
herewith. The Assuming Institution shall prepare such instruments and documents
of conveyance (in form and substance satisfactory to the Receiver) as shall be
necessary to vest title to the Assets in the Assuming Institution. The Assuming
Institution shall be responsible for recording such instruments and documents
of conveyance at its own expense.
9.3
Claims and Suits
.
(a) The Receiver shall have the right, in its discretion, to
(i) defend or settle any claim or suit against the Assuming Institution
with respect to which the Receiver has indemnified the Assuming Institution in
the same manner and to the same extent as provided in Article XII, and
(ii) defend or settle any claim or suit against the Assuming Institution
with respect to any Liability Assumed, which claim or suit may result in a loss
to the Receiver arising out of or related to this Agreement, or which existed
against the Failed Bank on or before Bank Closing. The exercise by the Receiver
of any rights under this Section 9.3(a) shall not release the
Assuming Institution with respect to any of its obligations under this
Agreement.
30
(b) In the event any action at law or in equity shall be
instituted by any Person against the Receiver and the Corporation as
codefendants with respect to any asset of the Failed Bank retained or acquired
pursuant to this Agreement by the Receiver, the Receiver agrees, at the request
of the Corporation, to join with the Corporation in a petition to remove the
action to the United States District Court for the proper district. The
Receiver agrees to institute, with or without joinder of the Corporation as
coplaintiff, any action with respect to any such retained or acquired asset or
any matter connected therewith whenever notice requiring such action shall be
given by the Corporation to the Receiver.
9.4
Payment of Deposits
. In the event any depositor does not accept
the obligation of the Assuming Institution to pay any Deposit liability of the
Failed Bank assumed by the Assuming Institution pursuant to this Agreement and
asserts a claim against the Receiver for all or any portion of any such Deposit
liability, the Assuming Institution agrees on demand to provide to the Receiver
funds sufficient to pay such claim in an amount not in excess of the Deposit
liability reflected on the books of the Assuming Institution at the time such
claim is made. Upon payment by the Assuming Institution to the Receiver of such
amount, the Assuming Institution shall be discharged from any further
obligation under this Agreement to pay to any such depositor the amount of such
Deposit liability paid to the Receiver.
9.5
Withheld Payments
. At any time, the Receiver or the Corporation
may, in its discretion, determine that all or any portion of any deposit
balance assumed by the Assuming Institution pursuant to this Agreement does not
constitute a “Deposit” (or otherwise, in its discretion, determine that it is
the best interest of the Receiver or Corporation to withhold all or any portion
of any deposit), and may direct the Assuming Institution to withhold payment of
all or any portion of any such deposit balance. Upon such direction, the
Assuming Institution agrees to hold such deposit and not to make any payment of
such deposit balance to or on behalf of the depositor, or to itself, whether by
way of transfer, set-off, or otherwise. The Assuming Institution agrees to
maintain the “withheld payment” status of any such deposit balance until
directed in writing by the Receiver or the Corporation as to its disposition.
At the direction of the Receiver or the Corporation, the Assuming Institution
shall return all or any portion of such deposit balance to the Receiver or the
Corporation, as appropriate, and thereupon the Assuming Institution shall be
discharged from any further liability to such depositor with respect to such
returned deposit balance. If such deposit balance has been paid to the
depositor prior to a demand for return by the Corporation or the Receiver, and
payment of such deposit balance had not been previously withheld pursuant to
this Section, the Assuming Institution shall not be obligated to return such
deposit balance to the Receiver or the Corporation. The Assuming Institution
shall be obligated to reimburse the Corporation or the Receiver, as the case
may be, for the amount of any deposit balance or portion thereof paid by the
Assuming Institution in contravention of any previous direction to withhold
payment of such deposit balance or return such deposit balance the payment of
which was withheld pursuant to this Section.
9.6
Proceedings with Respect to Certain
Assets and Liabilities
.
(a) In connection with any investigation, proceeding or other
matter with respect to any asset or liability of the Failed Bank retained by
the Receiver, or any asset of the Failed Bank
31
acquired by the Receiver
pursuant to this Agreement, the Assuming Institution shall cooperate to the
extent reasonably required by the Receiver.
(b) In addition to its obligations under Section 6.4, the
Assuming Institution shall provide representatives of the Receiver access at
reasonable times and locations without other limitation or qualification to
(i) its directors, officers, employees and agents and those of the
Subsidiaries acquired by the Assuming Institution, and (ii) its books and
records, the books and records of such Subsidiaries and all Credit Files, and
copies thereof. Copies of books, records and Credit Files shall be provided by
the Assuming Institution as requested by the Receiver and the costs of
duplication thereof shall be borne by the Receiver.
(c) Not later than ten (10) days after the Put Notice
pursuant to Section 3.4 or the date of the notice of transfer of any Loan
by the Assuming Institution to the Receiver pursuant to Section 3.6, the
Assuming Institution shall deliver to the Receiver such documents with respect
to such Loan as the Receiver may request, including without limitation the
following: (i) all related Credit Documents (other than certificates,
notices and other ancillary documents), (ii) a certificate setting forth
the principal amount on the date of the transfer and the amount of interest,
fees and other charges then accrued and unpaid thereon, and any restrictions on
transfer to which any such Loan is subject, and (iii) all Credit Files,
and all documents, microfiche, microfilm and computer records (including but
not limited to magnetic tape, disc storage, card forms and printed copy)
maintained by, owned by, or in the possession of the Assuming Institution or
any Affiliate of the Assuming Institution relating to the transferred Loan.
9.7
Information
. The Assuming Institution promptly shall
provide to the Corporation such other information, including financial
statements and computations, relating to the performance of the provisions of
this Agreement as the Corporation or the Receiver may request from time to
time, and, at the request of the Receiver, make available employees of the
Failed Bank employed or retained by the Assuming Institution to assist in
preparation of the pro forma statement pursuant to Section 8.1.
ARTICLE X
CONDITION PRECEDENT
The obligations of the
parties to this Agreement are subject to the Receiver and the Corporation
having received at or before Bank Closing evidence reasonably satisfactory to
each of any necessary approval, waiver, or other action by any governmental
authority, the board of directors of the Assuming Institution, or other third
party, with respect to this Agreement and the transactions contemplated hereby,
the closing of the Failed Bank and the appointment of the Receiver, the
chartering of the Assuming Institution, and any agreements, documents, matters
or proceedings contemplated hereby or thereby.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF THE ASSUMING
INSTITUTION
The Assuming Institution
represents and warrants to the Corporation and the Receiver as follows:
32
(a)
Corporate Existence and Authority
. The Assuming Institution
(i) is duly organized, validly existing and in good standing under the
laws of its Chartering Authority and has full power and authority to own and
operate its properties and to conduct its business as now conducted by it, and
(ii) has full power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The Assuming Institution has taken
all necessary corporate action to authorize the execution, delivery and performance
of this Agreement and the performance of the transactions contemplated hereby.
(b)
Third Party Consents
. No governmental authority
or other third party consents (including but not limited to approvals,
licenses, registrations or declarations) are required in connection with the
execution, delivery or performance by the Assuming Institution of this
Agreement, other than such consents as have been duly obtained and are in full
force and effect.
(c)
Execution and Enforceability
. This Agreement has been
duly executed and delivered by the Assuming Institution and when this Agreement
has been duly authorized, executed and delivered by the Corporation and the
Receiver, this Agreement will constitute the legal, valid and binding
obligation of the Assuming Institution, enforceable in accordance with its
terms.
(d)
Compliance with Law
.
(i) Neither the Assuming Institution nor
any of its Subsidiaries is in violation of any statute, regulation, order,
decision, judgment or decree of, or any restriction imposed by, the United
States of America, any State, municipality or other political subdivision or
any agency of any of the foregoing, or any court or other tribunal having
jurisdiction over the Assuming Institution or any of its Subsidiaries or any
assets of any such Person, or any foreign government or agency thereof having
such jurisdiction, with respect to the conduct of the business of the Assuming
Institution or of any of its Subsidiaries, or the ownership of the properties
of the Assuming Institution or any of its Subsidiaries, which, either
individually or in the aggregate with all other such violations, would
materially and adversely affect the business, operations or condition
(financial or otherwise) of the Assuming Institution or the ability of the Assuming
Institution to perform, satisfy or observe any obligation or condition under
this Agreement.
(ii) Neither the execution and delivery nor the performance by
the Assuming Institution of this Agreement will result in any violation by the
Assuming Institution of, or be in conflict with, any provision of any
applicable law or regulation, or any order, writ or decree of any court or
governmental authority.
(e)
Insured or Guaranteed Loans
.
If any Loans being
transferred pursuant to this Agreement, including the Shared-Loss Agreements,
are insured or guaranteed by any department or agency of any governmental unit,
federal, state or local, Assuming Institution represents that Assuming
Institution has been approved by such agency and is an approved lender or mortgagee,
as appropriate, if such approval is required. Assuming Institution further
assumes full responsibility for determining whether or not such insurance or
guarantees are in full force and effect on the date of this Agreement and with
respect to those Loans whose insurance or guaranty
33
is in full force and effect
on the date of this Agreement, Assuming Institution assumes full responsibility
for doing all things necessary to insure such insurance or guarantees remain in
full force and effect. Assuming Institution agrees to assume all of the
obligations under the contract(s) of insurance or guaranty, agrees to
cooperate with the Receiver where necessary to complete forms required by the
insuring or guaranteeing department or agency to effect or complete the
transfer to Assuming Institution.
(f)
Representations
Remain
True
. The Assuming Institution represents and
warrants that it has executed and delivered to the Corporation a Purchaser
Eligibility Certification and Confidentiality Agreement and that all
information provided and representations made by or on behalf of the Assuming
Institution in connection with this Agreement and the transactions contemplated
hereby, including, but not limited to, the Purchaser Eligibility Certification
and Confidentiality Agreement (which are affirmed and ratified hereby) are and
remain true and correct in all material respects and do not fail to state any
fact required to make the information contained therein not misleading.
ARTICLE XII
INDEMNIFICATION
12.1
Indemnification of Indemnitees
. From and after Bank Closing and subject to
the limitations set forth in this Section and Section 12.6 and
compliance by the Indemnitees with Section 12.2, the Receiver agrees to indemnify
and hold harmless the Indemnitees against any and all costs, losses,
liabilities, expenses (including attorneys’ fees) incurred prior to the
assumption of defense by the Receiver pursuant to paragraph (d) of
Section 12.2, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with claims against any Indemnitee based on
liabilities of the Failed Bank that are not assumed by the Assuming Institution
pursuant to this Agreement or subsequent to the execution hereof by the
Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution
for which indemnification is provided hereunder in (a) of this
Section 12.1, subject to certain exclusions as provided in (b) of
this Section 12.1:
(a)
(1) claims based on the rights of any shareholder
or former shareholder as such of (x) the Failed Bank, or (y) any Subsidiary or
Affiliate of the Failed Bank;
(2) claims based on the rights of any creditor as
such of the Failed Bank, or any creditor as such of any director, officer,
employee or agent of the Failed Bank, with respect to any indebtedness or other
obligation of the Failed Bank arising prior to Bank Closing;
(3) claims based on the rights of any present or
former director, officer, employee or agent as such of the Failed Bank or of
any Subsidiary or Affiliate of the Failed Bank;
(4) claims based on any action or inaction prior
to Bank Closing of the Failed Bank, its directors, officers, employees or
agents as such, or any Subsidiary or Affiliate of the
34
Failed Bank, or the
directors, officers, employees or agents as such of such Subsidiary or
Affiliate;
(5) claims based on any malfeasance, misfeasance
or nonfeasance of the Failed Bank, its directors, officers, employees or agents
with respect to the trust business of the Failed Bank, if any;
(6) claims based on any failure or alleged
failure (not in violation of law) by the Assuming Institution to continue to
perform any service or activity previously performed by the Failed Bank which
the Assuming Institution is not required to perform pursuant to this Agreement
or which arise under any contract to which the Failed Bank was a party which
the Assuming Institution elected not to assume in accordance with this
Agreement and which neither the Assuming Institution nor any Subsidiary or
Affiliate of the Assuming Institution has assumed subsequent to the execution
hereof;
(7) claims arising from any action or inaction of
any Indemnitee, including for purposes of this Section 12.1(a)(7) the
former officers or employees of the Failed Bank or of any Subsidiary or
Affiliate of the Failed Bank that is taken upon the specific written direction
of the Corporation or the Receiver,
other
than
any action or
inaction taken in a manner constituting bad faith, gross negligence or willful
misconduct; and
(8) claims based on the rights of any depositor
of the Failed Bank whose deposit has been accorded “withheld payment” status
and/or returned to the Receiver or Corporation in accordance with
Section 9.5 and/or has become an “unclaimed deposit” or has been returned
to the Corporation or the Receiver in accordance with Section 2.3;
(b)
provided
,
that
, with respect to this
Agreement, except for paragraphs (7) and (8) of Section 12.1(a),
no indemnification will be provided under this Agreement for any:
(1) judgment or fine against, or any amount paid
in settlement (without the written approval of the Receiver) by, any Indemnitee
in connection with any action that seeks damages against any Indemnitee (a
“counterclaim”) arising with respect to any Asset and based on any action or
inaction of either the Failed Bank, its directors, officers, employees or
agents as such prior to Bank Closing, unless any such judgment, fine or amount
paid in settlement exceeds the greater of (i) the Repurchase Price of such
Asset, or (ii) the monetary recovery sought on such Asset by the Assuming
Institution in the cause of action from which the counterclaim arises; and in
such event the Receiver will provide indemnification only in the amount of such
excess; and no indemnification will be provided for any costs or expenses other
than any costs or expenses (including attorneys’ fees) which, in the
determination of the Receiver, have been actually and reasonably incurred by
such Indemnitee in connection with the defense of any such counterclaim; and it
is expressly agreed that the Receiver reserves the right to intervene, in its
discretion, on its behalf and/or on behalf of the Receiver, in the defense of
any such counterclaim;
(2) claims with respect to any liability or
obligation of the Failed Bank that is expressly assumed by the Assuming
Institution pursuant to this Agreement or subsequent to the
35
execution hereof by the
Assuming Institution or any Subsidiary or Affiliate of the Assuming
Institution;
(3) claims with respect to any liability of the
Failed Bank to any present or former employee as such of the Failed Bank or of
any Subsidiary or Affiliate of the Failed Bank, which liability is expressly
assumed by the Assuming Institution pursuant to this Agreement or subsequent to
the execution hereof by the Assuming Institution or any Subsidiary or Affiliate
of the Assuming Institution;
(4) claims based on the failure of any Indemnitee
to seek recovery of damages from the Receiver for any claims based upon any
action or inaction of the Failed Bank, its directors, officers, employees or
agents as fiduciary, agent or custodian prior to Bank Closing;
(5) claims based on any violation or alleged
violation by any Indemnitee of the antitrust, branching, banking or bank
holding company or securities laws of the United States of America or any State
thereof;
(6) claims based on the rights of any present or
former creditor, customer, or supplier as such of the Assuming Institution or
any Subsidiary or Affiliate of the Assuming Institution;
(7) claims based on the rights of any present or
former shareholder as such of the Assuming Institution or any Subsidiary or
Affiliate of the Assuming Institution regardless of whether any such present or
former shareholder is also a present or former shareholder of the Failed Bank;
(8) claims, if the Receiver determines that the
effect of providing such indemnification would be to (i) expand or alter
the provisions of any warranty or disclaimer thereof provided in
Section 3.3 or any other provision of this Agreement, or (ii) create any
warranty not expressly provided under this Agreement;
(9) claims which could have been enforced against
any Indemnitee had the Assuming Institution not entered into this Agreement;
(10) claims based on any liability for taxes or
fees assessed with respect to the consummation of the transactions contemplated
by this Agreement, including without limitation any subsequent transfer of any
Assets or Liabilities Assumed to any Subsidiary or Affiliate of the Assuming
Institution;
(11) except as expressly provided in this
Article XII, claims based on any action or inaction of any Indemnitee, and
nothing in this Agreement shall be construed to provide indemnification for
(i) the Failed Bank, (ii) any Subsidiary or Affiliate of the Failed
Bank, or (iii) any present or former director, officer, employee or agent
of the Failed Bank or its Subsidiaries or Affiliates;
provided
,
that
the Receiver, in its discretion, may provide indemnification hereunder for any
present or former director, officer, employee or agent of the Failed Bank or
its
36
Subsidiaries or Affiliates
who is also or becomes a director, officer, employee or agent of the Assuming
Institution or its Subsidiaries or Affiliates;
(12) claims or actions which constitute a breach
by the Assuming Institution of the representations and warranties contained in
Article XI;
(13) claims arising out of or relating to the
condition of or generated by an Asset arising from or relating to the presence,
storage or release of any hazardous or toxic substance, or any pollutant or
contaminant, or condition of such Asset which violate any applicable Federal,
State or local law or regulation concerning environmental protection; and
(14) claims based on, related to or arising from
any asset, including a loan, acquired or liability assumed by the Assuming
Institution, other than pursuant to this Agreement.
12.2
Conditions
Precedent to Indemnification
. It shall be a condition precedent to the
obligation of the Receiver to indemnify any Person pursuant to this
Article XII that such Person shall, with respect to any claim made or
threatened against such Person for which such Person is or may be entitled to
indemnification hereunder:
(a)
give written
notice to the Regional Counsel (Litigation Branch) of the Corporation in the
manner and at the address provided in Section 13.7 of such claim as soon
as practicable after such claim is made or threatened;
provided
,
that
notice must be given on or before the date which is six (6) years from the
date of this Agreement;
(b)
provide to the
Receiver such information and cooperation with respect to such claim as the
Receiver may reasonably require;
(c)
cooperate and
take all steps, as the Receiver may reasonably require, to preserve and protect
any defense to such claim;
(d)
in the event
suit is brought with respect to such claim, upon reasonable prior notice,
afford to the Receiver the right, which the Receiver may exercise in its sole
discretion, to conduct the investigation, control the defense and effect
settlement of such claim, including without limitation the right to designate
counsel and to control all negotiations, litigation, arbitration, settlements,
compromises and appeals of any such claim, all of which shall be at the expense
of the Receiver;
provided
,
that
the Receiver shall have notified
the Person claiming indemnification in writing that such claim is a claim with
respect to which the Person claiming indemnification is entitled to
indemnification under this Article XII;
(e)
not incur any
costs or expenses in connection with any response or suit with respect to such
claim, unless such costs or expenses were incurred upon the written direction
of the Receiver;
provided
,
that
the Receiver shall not be
obligated to reimburse the amount of any such costs or expenses unless such
costs or expenses were incurred upon the written direction of the Receiver;
37
(f) not release or settle such claim or make any payment or
admission with respect thereto, unless the Receiver consents in writing
thereto, which consent shall not be unreasonably withheld;
provided
,
that
the Receiver shall not be obligated to reimburse the amount of any such
settlement or payment unless such settlement or payment was effected upon the
written direction of the Receiver; and
(g) take reasonable action as the Receiver may request in
writing as necessary to preserve, protect or enforce the rights of the
indemnified Person against any Primary Indemnitor.
12.3
No Additional Warranty
. Nothing in this Article XII shall be
construed or deemed to (i) expand or otherwise alter any warranty or
disclaimer thereof provided under Section 3.3 or any other provision of
this Agreement with respect to, among other matters, the title, value,
collectibility, genuineness, enforceability or condition of any (x) Asset,
or (y) asset of the Failed Bank purchased by the Assuming Institution
subsequent to the execution of this Agreement by the Assuming Institution or
any Subsidiary or Affiliate of the Assuming Institution, or (ii) create any
warranty not expressly provided under this Agreement with respect thereto.
12.4
Indemnification of Receiver and
Corporation
. From and
after Bank Closing, the Assuming Institution agrees to indemnify and hold
harmless the Corporation and the Receiver and their respective directors,
officers, employees and agents from and against any and all costs, losses,
liabilities, expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred in connection with any of
the following:
(a) claims based on any and all liabilities or obligations of
the Failed Bank assumed by the Assuming Institution pursuant to this Agreement
or subsequent to the execution hereof by the Assuming Institution or any
Subsidiary or Affiliate of the Assuming Institution, whether or not any such
liabilities subsequently are sold and/or transferred, other than any claim
based upon any action or inaction of any Indemnitee as provided in paragraph
(7) or (8) of Section 12.1(a); and
(b) claims based on any act or omission of any Indemnitee
(including but not limited to claims of any Person claiming any right or title
by or through the Assuming Institution with respect to Assets transferred to
the Receiver pursuant to Section 3.4 or 3.6), other than any action or
inaction of any Indemnitee as provided in paragraph (7) or (8) of
Section 12.1(a).
12.5
Obligations Supplemental
. The obligations of the Receiver, and the
Corporation as guarantor in accordance with Section 12.7, to provide
indemnification under this Article XII are to supplement any amount
payable by any Primary Indemnitor to the Person indemnified under this
Article XII. Consistent with that intent, the Receiver agrees only to make
payments pursuant to such indemnification to the extent not payable by a
Primary Indemnitor. If the aggregate amount of payments by the Receiver, or the
Corporation as guarantor in accordance with Section 12.7, and all Primary
Indemnitors with respect to any item of indemnification under this
Article XII exceeds the amount payable with respect to such item, such
Person being indemnified shall notify the Receiver thereof and, upon the
request of the Receiver, shall promptly pay to the Receiver, or the Corporation
as appropriate, the amount of the Receiver’s (or Corporation’s) payments to the
extent of such excess.
38
12.6
Criminal Claims
. Notwithstanding any provision of this
Article XII to the contrary, in the event that any Person being
indemnified under this Article XII shall become involved in any criminal
action, suit or proceeding, whether judicial, administrative or investigative,
the Receiver shall have no obligation hereunder to indemnify such Person for
liability with respect to any criminal act or to the extent any costs or
expenses are attributable to the defense against the allegation of any criminal
act, unless (i) the Person is successful on the merits or otherwise in the
defense against any such action, suit or proceeding, or (ii) such action,
suit or proceeding is terminated without the imposition of liability on such
Person.
12.7
Limited Guaranty of the Corporation
.
The Corporation hereby
guarantees performance of the Receiver’s obligation to indemnify the Assuming
Institution as set forth in this Article XII. It is a condition to the
Corporation’s obligation hereunder that the Assuming Institution shall comply
in all respects with the applicable provisions of this Article XII. The
Corporation shall be liable hereunder only for such amounts, if any, as the
Receiver is obligated to pay under the terms of this Article XII but shall
fail to pay. Except as otherwise provided above in this Section 12.7,
nothing in this Article XII is intended or shall be construed to create
any liability or obligation on the part of the Corporation, the United States
of America or any department or agency thereof under or with respect to this
Article XII, or any provision hereof, it being the intention of the
parties hereto that the obligations undertaken by the Receiver under this Article XII
are the sole and exclusive responsibility of the Receiver and no other Person
or entity.
12.8
Subrogation
.
Upon payment by the
Receiver, or the Corporation as guarantor in accordance with Section 12.7,
to any Indemnitee for any claims indemnified by the Receiver under this
Article XII, the Receiver, or the Corporation as appropriate, shall become
subrogated to all rights of the Indemnitee against any other Person to the
extent of such payment.
ARTICLE XIII
MISCELLANEOUS
13.1
Entire Agreement
. This Agreement, the Single Family Shared-Loss
Agreement, and the Commercial Shared-Loss Agreement, including the Schedules
and Exhibits thereto, embodies the entire agreement of the parties hereto in
relation to the subject matter herein and supersedes all prior understandings
or agreements, oral or written, between the parties.
13.2
Headings
. The headings and subheadings of the Table of
Contents, Articles and Sections contained in this Agreement, except the terms
identified for definition in Article I and elsewhere in this Agreement,
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
13.3
Counterparts
. This Agreement may be executed in any number
of counterparts and by the duly authorized representative of a different party
hereto on separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement.
39
13.4
GOVERNING LAW.
THIS AGREEMENT, THE SINGLE FAMILY
SHARED-LOSS AGREEMENT, AND THE COMMERCIAL SHARED-LOSS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED STATES OF AMERICA, AND IN THE
ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE
STATE IN WHICH THE MAIN OFFICE OF THE FAILED BANK IS LOCATED.
13.5
Successors.
All terms and
conditions of this Agreement shall be binding on the successors and assigns of
the Receiver, the Corporation and the Assuming Institution. Except as otherwise
specifically provided in this Agreement, nothing expressed or referred to in
this Agreement is intended or shall be construed to give any Person other than
the Receiver, the Corporation and the Assuming Institution any legal or
equitable right, remedy or claim under or with respect to this Agreement or any
provisions contained herein, it being the intention of the parties hereto that
this Agreement, the obligations and statements of responsibilities hereunder,
and all other conditions and provisions hereof are for the sole and exclusive
benefit of the Receiver, the Corporation and the Assuming Institution and for
the benefit of no other Person.
13.6
Modification; Assignment.
No amendment or other modification,
rescission, release, or assignment of any part of this Agreement, the Single
Family Shared-Loss Agreement, and the Commercial Shared-Loss Agreement shall be
effective except pursuant to a written agreement subscribed by the duly
authorized representatives of the parties hereto.
13.7
Notice.
Any notice,
request, demand, consent, approval or other communication to any party hereto
shall be effective when received and shall be given
in writing
, and
delivered in person against receipt therefore, or sent by certified mail,
postage prepaid, courier service, telex, facsimile transmission or email to
such party (with copies as indicated below) at its address set forth below or
at such other address as it shall hereafter furnish in writing to the other
parties. All such notices and other communications shall be deemed given on the
date received by the addressee.
Assuming Institution
STATE BANK AND TRUST COMPANY
Attn: J. Daniel Speight
Vice-Chairman/CFO/COO
4219 Forsyth Road
Macon, GA 31208
****
****
with a copy to: Joe Evans
40
Receiver
and Corporation
Federal Deposit Insurance
Corporation,
Receiver of
North West Bank & Trust, Acworth, Georgia
1601 Bryan Street,
Suite 1700
Dallas, Texas 75201
Attention: Settlement Agent
In
addition, with respect to notices under Article 4.6:
cc: Resolutions and Closings
Manager, ORE Department
In
addition, with respect to notice under Article XII:
cc: Regional Counsel
(Litigation Branch)
13.8
Manner of
Payment
. All payments due under this Agreement shall be in
lawful money of the United States of America in immediately available funds as
each party hereto may specify to the other parties;
provided
,
that
in the event the Receiver or the Corporation is obligated to make any payment
hereunder in the amount of $25,000.00 or less, such payment may be made by
check.
13.9
Costs, Fees and Expenses
. Except as
otherwise specifically provided herein, each party hereto agrees to pay all
costs, fees and expenses which it has incurred in connection with or incidental
to the matters contained in this Agreement, including without limitation any
fees and disbursements to its accountants and counsel;
provided
,
that
the Assuming Institution shall pay all fees, costs and expenses (other than
attorneys’ fees incurred by the Receiver) incurred in connection with the
transfer to it of any Assets or Liabilities Assumed hereunder or in accordance
herewith.
13.10
Waiver
. Each of the
Receiver, the Corporation and the Assuming Institution may waive its respective
rights, powers or privileges under this Agreement;
provided
,
that
such waiver shall be in writing;
and
further
provided
,
that
no failure or delay on the part of the Receiver, the Corporation or the
Assuming Institution to exercise any right, power or privilege under this
Agreement shall operate as a waiver thereof, nor will any single or partial
exercise of any right, power or privilege under this Agreement preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege by the Receiver, the Corporation, or the Assuming Institution under
this Agreement, nor will any such waiver operate or be construed as a future
waiver of such right, power or privilege under this Agreement.
13.11
Severability
. If any
provision of this Agreement is declared invalid or unenforceable, then, to the
extent possible, all of the remaining provisions of this Agreement shall remain
in full force and effect and shall be binding upon the parties hereto.
13.12
Term of Agreement
. This
Agreement shall continue in full force and effect until the tenth (10th)
anniversary of Bank Closing;
provided
,
that
the provisions of
Section 6.3 and 6.4 shall survive the expiration of the term of this
Agreement; and
provided further
, that the receivership of the Failed
Bank may be terminated prior to the expiration of the term of this
41
Agreement, and in such
event, the guaranty of the Corporation, as provided in and in accordance with
the provisions of Section 12.7 shall be in effect for the remainder of the
term of this Agreement. Expiration of the term of this Agreement shall not
affect any claim or liability of any party with respect to any (i) amount
which is owing at the time of such expiration, regardless of when such amount
becomes payable, and (ii) breach of this Agreement occurring prior to such
expiration, regardless of when such breach is discovered.
13.13
Survival of Covenants, Etc
.
The covenants,
representations, and warranties in this Agreement shall survive the execution
of this Agreement and the consummation of the transactions contemplated
hereunder.
42
IN WITNESS WHEREOF
, the parties
hereto have caused this Agreement to be executed by their duly authorized
representatives as of the date first above written.
|
|
|
FEDERAL DEPOSIT INSURANCE
CORPORATION,
RECEIVER OF NORTH WEST BANK
ACWORTH, GEORGIA
|
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/ Ann G. Hill
|
|
|
|
NAME: Ann G. Hill
|
|
|
|
|
|
|
|
TITLE: Receiver in Charge
|
|
Attest:
|
|
|
|
|
|
|
|
/s/
X
|
|
|
|
|
|
|
|
|
|
FEDERAL DEPOSIT INSURANCE
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/ Ann G. Hill
|
|
|
|
NAME: Ann G. Hill
|
|
|
|
|
|
|
|
TITLE: Receiver in Charge
|
|
|
|
|
|
|
|
|
|
Attest:
|
|
|
|
/s/
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATE BANK AND TRUST COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/ J Daniel Speight
|
|
|
|
NAME: J Daniel Speight
|
|
|
|
|
|
|
|
TITLE:
|
Vice Chairman, Chief
Financial Officer, Chief Operating Officer
|
|
|
|
|
|
Attest:
|
|
|
|
/s/
X
|
|
|
|
|
|
|
|
|
43
SCHEDULE
2.1(a) - Excluded Deposit Liability Accounts
Accounts
Excluded from P&A Transaction
North
West Bank & Trust
Acworth,
GA
North West Bank &
Trust reported $20 million in deposits associated with the Depository
Organization (DO) Cede & Co as Nominee for DTC as of May 10,
2010. If similar DO funds exist at bank closing, they will not pass to the
Assuming Institution and will be excluded from the transaction as described in
section 2.1(a) of the P&A Agreement. A schedule will be updated
post-closing with data as of the actual bank closing date if such DO accounts
continue to exist at that time.
DO
BROKERED REPORT
|
OWN
TYPE
|
|
P&I
|
|
CLAIMANT NAME
|
|
ACCOUNT
|
|
BRANCH
|
|
CLAIM
|
|
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
|
|
|
|
|
****
|
|
****
|
|
****
|
|
****
|
Total P & I: $20,014,515.41
Total Accounts: 2
44
SCHEDULE 3.2 - Purchase Price of Assets or assets
|
(a)
|
|
cash and receivables from
depository institutions, including cash items in the process of collection,
plus interest thereon:
|
|
Book Value
|
|
|
|
|
|
|
|
(b)
|
|
securities (exclusive of
the capital stock of Acquired Subsidiaries, Shared-Loss Securities, FRB and
FHLB stock), plus interest thereon:
|
|
As provided in
Section 3.2(b)
|
|
|
|
|
|
|
|
(c)
|
|
federal funds sold and
repurchase agreements, if any, including interest thereon:
|
|
Book Value
|
|
|
|
|
|
|
|
(d)
|
|
Loans:
|
|
Book Value
|
|
|
|
|
|
|
|
(e)
|
|
credit card business:
|
|
Book Value
|
|
|
|
|
|
|
|
(f)
|
|
Safe Deposit Boxes and
related business, safekeeping business and trust business, if any:
|
|
Book Value
|
|
|
|
|
|
|
|
(g)
|
|
Records and other
documents:
|
|
Book Value
|
|
|
|
|
|
|
|
(h)
|
|
Other Real Estate
|
|
Book Value
|
|
|
|
|
|
|
|
(i)
|
|
boats, motor vehicles,
aircraft, trailers, fire arms, and repossessed collateral
|
|
Book Value
|
|
|
|
|
|
|
|
(j)
|
|
capital stock of any
Acquired Subsidiaries and FRB and FHLB stock:
|
|
Book Value
|
|
|
|
|
|
|
|
(k)
|
|
amounts owed to the Failed
Bank by any Acquired Subsidiary:
|
|
Book Value
|
|
|
|
|
|
|
|
(l)
|
|
assets securing Deposits
of public money, to the extent not otherwise purchased hereunder:
|
|
Book Value
|
|
|
|
|
|
|
|
(m)
|
|
Overdrafts of customers:
|
|
Book Value
|
45
|
(n)
|
|
rights, if any, with
respect to Qualified Financial Contracts.
|
|
As provided in
Section 3.2(c)
|
|
|
|
|
|
|
|
(o)
|
|
rights of the Failed Bank
to provide mortgage servicing for others and to have mortgage servicing
provided to the Failed Bank by others and related contracts.
|
|
Book Value
|
|
|
|
|
|
|
|
(p)
|
|
Shared-Loss Securities
|
|
Book Value
|
|
|
|
|
|
|
|
(q)
|
|
Personal Computers
|
|
Fair Market Value
|
assets subject
to an option to purchase:
|
(a)
|
|
Bank Premises:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(b)
|
|
Furniture and Equipment:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(c)
|
|
Fixtures:
|
|
Fair Market Value
|
|
|
|
|
|
|
|
(d)
|
|
Other Equipment:
|
|
Fair Market Value
|
46
SCHEDULE 3.5 — Excluded Assets
47
SCHEDULE 4.15A
LOANS SUBJECT TO LOSS SHARING UNDER THE
SINGLE FAMILY SHARED-LOSS AGREEMENT
48
SCHEDULE 4.15B
LOANS SUBJECT TO LOSS SHARING UNDER THE
COMMERCIAL SHARED-LOSS AGREEMENT
49
SCHEDULE 4.15C
SHARED-LOSS SECURITIES
[NONE]
50
SCHEDULE 4.15D
SHARED-LOSS SUBSIDIARIES
[NONE]
51
SCHEDULE 6.3 - Data Retention Catalog
FDIC Data Management Services (DMS)
Acquirer Data Retention Catalog
Version 2.0
Failed
Institution
Name
Data Center Address
Assuming
Institution
Name
Address
DRC
Preparation Date
DRC
Preparer’s Contact
Name
Designation
Phone
Email
Alternate
Contact for Subsequent Data Requests
(i
f different from above)
Name
Phone
Email
Instructions
1.
Provide
preparer’s contact information and Bank information on the “Cover Page” tab.
2.
Provide
point of contact and desired procedure for data requests on the “Data Request
Procedure” Tab.
3.
Provide
the requested application retention details on “Data Retention” tab of this
workbook.
a. Update provided application list with any additional
systems that were not included
b. Select the most appropriate value from the drop down list
when the list is provided with applicable column.
If
you need additional clarification while recording the information,
please call Kevin Sheehan (FDIC) at
703-562-2012
or Leslie Bowie (FDIC) at
703-562-
16262
.
Send
the final copy of this document to Leslie Daley
LDaley@FDlC.gov.
52
|
Application Classification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data exists in
the
Core Banking
|
|
Explain if
partial
data exists in
Core
Banking
|
|
|
|
Time Duration
for Application
in Operation
|
|
Time
Duration for
Online Data
|
|
Time
Duration for
Offline Data
|
|
Offline Data
|
|
|
|
|
|
|
|
Decommission
|
|
|
|
|
Application Name
|
|
Sub-Category
|
|
Business Usage
|
|
Vendor
|
|
application?
|
|
application
|
|
Hosting Platform
|
|
From
|
|
To
|
|
From
|
|
To
|
|
From
|
|
To
|
|
Details
|
|
Acquirer
Plan
|
|
Migration
Details
|
|
Schedule
|
|
Comments
|
|
|
Provide the name of the
application.
|
|
Select the
most
appropriate
category
represented
by the
application.
|
|
Describe the
business uses
and key processes
supported by the
application.
|
|
Provide
the name
of the
vendor.
|
|
Indicate
whether
the application
data also exists
in the core
banking
application
|
|
Provide an
explanation if
partial data
exist in the
core banking
application
|
|
Select the
deployment
model of the
application.
|
|
Provide the
time duration
(Month &
Year)
for which the
application is
operation.
|
|
Provide the
time duration
(Month &
Year) for
which data is
available
online.
|
|
Provide the
time
duration
(Month &
Year) for
which data is
available
offline
|
|
Select the
appropriate
mechanism
representing
the offline
data.
|
|
Select the most
appropriate option that
defines the acquirer plan
for the application.
|
|
Provide the
details of data
being
migrated
to the target
system ( type
of data,
volume
and date
range ).
|
|
Provide
details of the
data not being
migrated
to the target
system.
|
|
Select the
appropriate
timeline if
application
decommissioning
is planned in
future
|
|
Provide any
additional
comments
related to
the retention
plans
associated
with the
application’s
data
|
|
|
Core Banking Application
|
|
|
|
|
|
|
|
|
|
|
|
Insert more rows as needed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Loan Servicing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Maintaining As-is
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Loan History
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Deposit Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Migrating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Accounts Balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Active Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Customer Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Inactive Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
ACH Details
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Closed Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Wire Transfer Details
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Transaction History
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
General Ledger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Other (Provide Comments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Accounts Payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Accounts Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Not Maintaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Tape Backups
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Data With Servicer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Data Not Available
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Data Deleted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
Other (Provide Comments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applications
Category: Loans
|
|
|
|
|
|
|
|
|
|
|
|
Insert
more rows as needed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applications
Category: Deposits
|
|
|
|
|
|
|
|
|
|
|
|
Insert
more rows as needed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applications
Category: Financials
|
|
|
|
|
|
|
|
|
|
|
|
Insert
more rows as needed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applications
Category: HR
|
|
|
|
|
|
|
|
|
|
|
|
Insert
more rows as needed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applications
Category: Corporate
|
|
|
|
|
|
|
|
|
|
|
|
Insert
more rows as needed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applications
Category: Imaging
|
|
|
|
|
|
|
|
|
|
|
|
Insert
more rows as needed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applications
Category: Email
|
|
|
|
|
|
|
|
|
|
|
|
Insert
more rows as needed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tape
Backup Schedule:
<Provide
details>
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retention
Policy:
<Provide
details>
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deletion
Policy:
<Provide
details>
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applications
Category: File Shares
|
|
|
|
|
|
|
|
|
|
|
|
Insert
more rows as needed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
User Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of Business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE 7 -Accounts Excluded from Calculation of Deposit
Franchise Bid Premium
Accounts Excluded from Calculation of Deposit Franchise Bid
Premium
North West Bank & Trust
Acworth, GA
The accounts identified
below will pass to the Assuming Institution (unless otherwise noted in
subsequent amendments to the P&A agreement). When calculating the premium
to be paid on Assumed Deposits in a P&A transaction, the FDIC will exclude
the following categories of deposit accounts:
|
Category
|
|
Description
|
|
Amount
|
|
|
I
|
|
Non- DO Brokered Deposits
|
|
$
|
0
|
|
|
II
|
|
CDARS
|
|
$
|
18,041,450
|
|
|
|
|
|
|
|
|
|
III
|
|
Market Place Deposits
(e.g. QuickRate/Bank Internet CD’s)
|
|
$
|
1,536,345
|
|
|
|
|
Total deposits excluded from Calculation of premium
|
|
$
|
19,577,795
|
|
Category
Description
I Brokered
Deposits
Brokered deposit accounts
are accounts for which the “depositor of record” is an agent, nominee, or
custodian who deposits funds for a principal or principals to whom
“pass-through” deposit insurance coverage may be extended. The FDIC separates
brokered deposit accounts into 2 categories: 1) Depository Organization (DO)
Brokered Deposits and 2) Non-Depository Organization (Non-DO) Brokered
Deposits. This distinction is made by the FDIC to facilitate our role as
Receiver and Insurer. These terms will not appear on other “brokered deposit”
reports generated by the institution.
Non-DO Brokered Deposits
pass to the Assuming Bank, but are excluded from Assumed Deposits when the
deposit premium is calculated. Please see the attached “Schedule 7 Non-DO
Broker Deposit Detail Report” for a listing of these accounts. This list will
be updated post closing with balances as of Bank Closing date.
DO Brokered Deposits
(Cede & Co as Nominee for DTC), are typically excluded from Assumed
Deposits in the P&A transaction. If, however, the terms of a particular
transaction are altered and the DO Brokered Deposits pass to the Assuming Bank,
they will similarly not be included in Assumed Deposits for purposes of
calculating the deposit premium.
II CDARS
CDARS deposits pass to the
Assuming Bank, but are excluded from Assumed Deposits when the deposit premium
is calculated.
North West Bank &
Trust did participate in the CDARS program as of the date of the deposit
download and did report CDARS deposits. Please see the attached schedule for a
listing of these accounts.
III Market
Place Deposits
“Market Place Deposits” is a
description given to deposits that may have been solicited via a money desk,
internet subscription service (for example, QwickRate), or similar programs.
North West Bank &
Trust did report QwickRate and similar deposits as identified above. The
attached schedule
54
provides a snapshot of
account categories and balances as of May 10, 2010, which is the date of
the deposit download. A list will be updated post-closing with balances, if
they continue to exist, as of the bank closing date.
Non
D/OAccounts
|
|
|
|
|
|
|
|
|
Potential
|
|
|
|
|
|
|
|
|
|
|
Uninsured
|
|
|
|
|
Number of
|
|
Number of
|
|
Total P&I
|
|
Amount
|
|
|
Ownership Type
|
|
Groups
|
|
Accounts
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
D/O Brokered Accounts
|
|
—
|
|
—
|
|
—
|
|
—
|
|
CDARS
Accounts
|
ACCTNO
|
|
GLCODE
|
|
NAME1
|
|
CURRBAL
|
|
ACCRUED
INTEREST
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
6 accounts
|
|
|
|
$
|
17,937,899.02
|
|
$
|
103,550.820
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketplace
Deposits
|
ACCTNO
|
|
GLCODE
|
|
NAME1
|
|
CURRBAL
|
|
ACCRUED
INTEREST
|
|
FITYPE
|
|
RATE
|
|
BRANCH
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
****
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
14 accounts
|
|
|
|
$
|
1,535,325,37
|
|
$
|
1,019,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
EXHIBIT 2.3A
FINAL NOTICE LETTER
FINAL LEGAL NOTICE
Claiming
Requirements for Deposits
Under
12 U.S.C.1822(e)
[Name of
Unclaimed Depositor]
[Address of
Unclaimed Depositor]
[Anytown,
USA]
|
Subject:
|
[XXXXX –
Name of Bank
|
|
|
City,
State]
– In Receivership
|
Dear
[Sir/Madam]:
As you may know, on
[Date: Closing Date]
, the
[Name of Bank (“The Bank”)]
was closed and
the Federal Deposit Insurance Corporation (“FDIC”) transferred
[The Bank’s]
accounts to
[Name of Acquiring Institution].
According to federal law
under 12 U.S.C., 1822(e), on
[Date: eighteen
months from the Closing Date]
,
[Name
of Acquiring Institution]
must transfer the funds in your
account(s) back to the FDIC if you have not claimed your
account(s) with
[Name of Acquiring Institution].
Based on the records recently supplied to us by
[Name of Acquiring Institution]
, your
account(s) currently fall into this category.
This letter is your formal
Legal Notice that you have until
[Date:
eighteen months from the Closing Date]
, to claim or arrange to
continue your account(s) with
[Name of
Acquiring Institution].
There are several ways that you can claim
your account(s) at
[Name of Acquiring
Institution]
. It is only necessary for you to take any one of the
following actions in order for your account(s) at
[Name of Acquiring Institution]
to be deemed claimed. In
addition, if you have more than one account, your claim to one account will
automatically claim all accounts:
1.
Write to
[Name of Acquiring Institution]
and notify
them that you wish to keep your account(s) active with them. Please be
sure to include the name of the account(s), the account number(s), the
signature of an authorized signer on the account(s), name, and address.
[Name of Acquiring Institution]
address is:
[123 Main Street
Anytown, USA]
2.
Execute a new
signature card on your account(s), enter into a new deposit agreement with
[Name of Acquiring Institution],
change the
ownership on your account(s), or renegotiate the terms of your certificate of
deposit account(s) (if any).
3.
Provide
[Name of Acquiring Institution]
with a
change of address form.
56
4.
Make a deposit
to or withdrawal from your account(s). This includes writing a check on any
account or having an automatic direct deposit credited to or an automatic
withdrawal debited from an account.
If you do not want to
continue your account(s) with
[Name of
Acquiring Institution]
for any reason, you can withdraw your funds
and close your account(s). Withdrawing funds from one or more of your
account(s) satisfies the federal law claiming requirement. If you have
time deposits, such as certificates of deposit,
[Name of Acquiring Institution]
can advise you how to withdraw
them without being charged an interest penalty for early withdrawal.
If you do not claim
ownership of your account(s) at
[Name of
Acquiring Institution by Date: eighteen months from the Closing Date]
federal
law requires
[Name of Acquiring Institution]
to return your deposits to the FDIC, which will deliver them as unclaimed
property to the State indicated in your address in the Failed Institution’s
records. If your address is outside of the United States, the FDIC will deliver
the deposits to the State in which the Failed Institution had its main office.
12 U.S.C. § 1822(e). If the State accepts custody of your deposits, you will
have 10 years from the date of delivery to claim your deposits from the State.
After 10 years you will be permanently barred from claiming your deposits.
However, if the State refuses to take custody of your deposits, you will be
able to claim them from the FDIC until the receivership is terminated. If you
have not claimed your insured deposits before the receivership is terminated,
and a receivership may be terminated at any time, all of your rights in those
deposits will be barred.
If you have any questions or
concerns about these items, please contact
[Bank
Employee]
at
[Name of Acquiring
Institution]
by phone at
[
(XXX) XXX-XXXX].
|
|
Sincerely,
|
|
|
|
|
|
|
|
|
[Name of
Claims Specialist]
|
|
|
[Title]
|
57
EXHIBIT 2.3B
AFFIDAVIT OF MAILING
AFFIDAVIT
OF MAILING
State of
COUNTY OF
I am employed as a
[Title of Office]
by the
[Name of Acquiring Institution]
.
This will attest that on
[Date of mailing]
, I caused a true and
correct copy of the Final Legal Notice, attached hereto, to owners of unclaimed
deposits of
[Name of Failed Bank]
,
City, State, to be prepared for deposit in the mail of the United States of
America on behalf of the Federal Deposit Insurance Corporation. A list of
depositors to whom the notice was mailed is attached. This notice was mailed to
the depositor’s last address as reflected on the books and records of the
[Name of Failed Bank]
as of the date of
failure.
|
|
|
|
|
[Name]
|
|
|
[Title of
Office]
|
|
|
[Name of
Acquiring Institution]
|
Subscribed
and sworn to before me this
day
of [Month, Year].
My
commission expires:
58
EXHIBIT 3.2(c) — VALUATION OF CERTAIN
QUALIFIED FINANCIAL CONTRACTS
A.
Scope
Interest
Rate Contracts - All interest rate swaps, forward rate agreements, interest
rate futures, caps, collars and floors, whether purchased or written.
Option
Contracts - All put and call option contracts, whether purchased or written, on
marketable securities, financial futures, foreign currencies, foreign exchange
or foreign exchange futures contracts.
Foreign
Exchange Contracts - All contracts for future purchase or sale of foreign
currencies, foreign currency or cross currency swap contracts, or foreign
exchange futures contracts.
B.
Exclusions
All
financial contracts used to hedge assets and liabilities that are acquired by
the Assuming Institution but are not subject to adjustment from Book Value.
C.
Adjustment
The
difference between the Book Value and market value as of Bank Closing.
D.
Methodology
1.
The price at
which the Assuming Institution sells or disposes of Qualified Financial
Contracts will be deemed to be the fair market value of such contracts, if such
sale or disposition occurs at prevailing market rates within a predefined
timetable as agreed upon by the Assuming Institution and the Receiver.
2.
In valuing all
other Qualified Financial Contracts, the following principles will apply:
(i)
All known cash
flows under swaps or forward exchange contracts shall be present valued to the
swap zero coupon interest rate curve.
(ii)
All valuations
shall employ prices and interest rates based on the actual frequency of rate
reset or payment.
(iii)
Each tranche of
amortizing contracts shall be separately valued. The total value of such
amortizing contract shall be the sum of the values of its component tranches.
59
(iv)
For regularly
traded contracts, valuations shall be at the midpoint of the bid and ask prices
quoted by customary sources (e.g.,
The Wall Street Journal
, Telerate,
Reuters or other similar source) or regularly traded exchanges.
(v)
For all other
Qualified Financial Contracts where published market quotes are unavailable,
the adjusted price shall be the average of the bid and ask price quotes from
three (3) securities dealers acceptable to the Receiver and Assuming
Institution as of Bank Closing. If quotes from securities dealers cannot be
obtained, an appraiser acceptable to the Receiver and the Assuming Institution
will perform a valuation based on modeling, correlation analysis, interpolation
or other techniques, as appropriate.]
60
EXHIBIT 4.13
INTERIM ASSET SERVICING ARRANGEMENT
(a)
With respect to
each asset (or liability) designated from time to time by the Receiver to be
serviced by the Assuming Institution pursuant to this Arrangement, including
any Assets sold by the Receiver but with respect to which the Receiver has an
obligation to service or provide servicing support. (such being designated as
“Pool Assets”), during the term of this Arrangement, the Assuming Institution
shall:
(i) Promptly apply payments received with respect
to any Pool Assets;
(ii) Reverse and return insufficient funds checks;
(iii) Pay (A) participation payments to
participants in Loans, as and when received; and (B) tax and insurance
bills on Pool Assets as they come due, out of escrow funds maintained for
purposes;
(iv) Maintain accurate records reflecting
(A) the payment history of Pool Assets, with updated information received
concerning changes in the address or identity of the obligors and
(B) usage of data processing equipment and employee services with respect
to servicing duties;
(v) Send billing statements to obligors on Pool
Assets to the extent that such statements were sent by the Failed Bank;
(vi) Send notices to obligors who are in default
on Loans (in the same manner as the Failed Bank);
(vii) Send to the Receiver, Attn: Managing
Liquidator, at the address provided in Section 13.7 of the Agreement, or
to such other person at such address as the Receiver may designate,
via
overnight
delivery
: (A) on a weekly basis, weekly reports for the Pool
Assets, including, without limitation, reports reflecting collections and the
trial balances, transaction journals and loan histories for Pool Assets having
activity, together with copies of (1) checks received,
(2) insufficient funds checks returned, (3) checks for payment to
participants or for taxes and insurance, (4) pay-off requests,
(5) notices to defaulted obligors, and (6) data processing and
employee logs and (B) any other reports, copies or information as may be
periodically or from time to time requested;
(viii) Remit on a weekly basis to the Receiver,
Attn: Division of Finance, Cashier Unit, Operations, at the address in (vii),
via
wire
transfer
to the account designated by the Receiver, or to
such other person at such address and/or account as the Receiver may designate,
all payments received on Pool Assets managed by the Assuming Institution or at
such time and place and in such manner as may be directed by the Receiver;
61
(ix) prepare and timely file all information
reports with appropriate tax authorities, and, if required by the Receiver,
prepare and file tax returns and pay taxes due on or before the due date,
relating to the Pool Assets; and
(x) provide and furnish such other services,
operations or functions as may be required with regard to Pool Assets,
including, without limitation, as may be required with regard to any business,
enterprise or agreement which is a Pool Asset, all as may be required by the
Receiver.
Notwithstanding anything to
the contrary in this Section, the Assuming Institution shall not be required to
initiate litigation or other collection proceedings against any obligor or any
collateral with respect to any defaulted Loan. The Assuming Institution shall
promptly notify the Receiver, at the address provided above in subparagraph
(a)(vii), of any claims or legal actions regarding any Pool Asset.
(b)
The Receiver
agrees to reimburse the Assuming Institution for actual, reasonable and
necessary expenses incurred in connection with the performance of duties
pursuant to this Arrangement, including expenses of photocopying, postage and
express mail, and data processing and employee services (based upon the number
of hours spent performing servicing duties).
(c)
The Assuming
Bank shall provide the services described herein for a period of up to three
hundred sixty-five (365) days after Bank Closing.
(d)
At any time
during the term of this Arrangement, the Receiver may, upon written notice to
the Assuming Institution, remove one or more Pool Assets from the Pool, at
which time the Assuming Institution’s responsibility with respect thereto shall
terminate.
(e)
At the
expiration of this Agreement or upon the termination of the Assuming
Institution’s responsibility with respect to any Pool Asset pursuant to
paragraph (d) hereof, the Assuming Institution shall:
(i) deliver to the Receiver (or its designee) all
of the Credit Documents and Pool Records relating to the Pool Assets; and
(ii) cooperate with the Receiver to facilitate the
orderly transition of managing the Pool Assets to the Receiver (or its
designee).
(f)
At the request
of the Receiver, the Assuming Institution shall perform such transitional
services with regard to the Pool Assets as the Receiver may request.
Transitional services may include, without limitation, assisting in any due
diligence process deemed necessary by the Receiver and providing to the
Receiver or its designee(s) (x) information and data regarding the Pool
Assets, including, without limitation, system reports and data downloads
sufficient to transfer the Pool Assets to another system or systems, and
(y) access to employees of the Assuming Institution involved in the
management of, or otherwise familiar with, the Pool Assets.
62
EXHIBIT 4.15A
SINGLE FAMILY SHARED-LOSS AGREEMENT
This agreement for the
reimbursement of loss sharing on certain single family residential mortgage
loans (the “Single Family Shared-Loss Agreement”) shall apply when the Assuming
Institution purchases Single Family Shared-Loss Loans as that term is defined
herein. The terms hereof shall modify and supplement, as necessary, the terms
of the Purchase and Assumption Agreement to which this Single Family Shared-Loss
Agreement is attached as Exhibit 4.15A and incorporated therein. To the
extent any inconsistencies may arise between the terms of the Purchase and
Assumption Agreement and this Single Family Shared-Loss Agreement with respect
to the subject matter of this Single Family Shared-Loss Agreement, the terms of
this Single Family Shared-Loss Agreement shall control. References in this
Single Family Shared-Loss Agreement to a particular Section shall be
deemed to refer to a Section in this Single Family Shared-Loss Agreement,
unless the context indicates that it is intended to be a reference to a
Section of the Purchase and Assumption Agreement.
ARTICLE I — DEFINITIONS
The capitalized terms used
in this Single Family Shared-Loss Agreement that are not defined in this Single
Family Shared-Loss Agreement are defined in the Purchase and Assumption
Agreement. In addition to the terms defined above, defined below are certain
additional terms relating to loss-sharing, as used in this Single Family
Shared-Loss Agreement.
“
Accounting Records
” means the
subsidiary system of record on which the loan history and balance of each
Single Family Shared-Loss Loan is maintained; individual loan files containing
either an original or copies of documents that are customary and reasonable
with respect to loan servicing, including management and disposition of Other
Real Estate; the records documenting alternatives considered with respect to
loans in default or for which a default is reasonably foreseeable; records of
loss calculations and supporting documentation with respect to line items on
the loss calculations; and, monthly delinquency reports and other performance
reports customarily utilized by the Assuming Institution in management of loan
portfolios.
“
Accrued Interest
” means, with respect
to Single Family Shared-Loss Loans, the amount of earned and unpaid interest at
the note rate specified in the applicable loan documents, limited to 90 days.
“
Affiliate
”
shall have the
meaning set forth in the Purchase and Assumption Agreement;
provided
,
that
,
for purposes of this Single Family Shared-Loss Agreement, no Third Party
Servicer shall be deemed to be an Affiliate of the Assuming Institution.
“
Applicable
Percentage
”
means, the percentage of shared-loss the Receiver
will incur with respect to this Single Family Shared-Loss Agreement, which is
eighty percent (80%
)
,
until the Cumulative Loss Amount equals
the SF1-4 Intrinsic Loss Estimate, and
eighty
percent (80%
) thereafter.
63
“
Commencement Date
” means the first
calendar day following the Bank Closing.
“
Commercial
Shared-Loss Agreement
” means the Commercial Shared-Loss Agreement
attached to the Purchase and Assumption Agreement as Exhibit 4.15B.
“
Cumulative Loss Amount
” means the sum
of all Monthly Loss Amounts less the sum of all Recovery Amounts.
“
Customary Servicing Procedures
” means
procedures (including collection procedures) that the Assuming Institution (or,
to the extent a Third Party Servicer is engaged, the Third Party Servicer)
customarily employs and exercises in servicing and administering mortgage loans
for its own accounts and the servicing procedures established by FNMA or FHLMC
(as in effect from time to time), which are in accordance with accepted
mortgage servicing practices of prudent lending institutions.
“
Deficient Loss
”
means the determination
by a court in a bankruptcy proceeding that the value of the collateral is less
than the amount of the loan in which case the loss will be the difference
between the then unpaid principal balance (or the NPV of a modified loan that
defaults) and the value of the collateral so established.
“
Examination
Criteria
”
means the loan classification criteria employed by,
or any applicable regulations of, the Assuming Institution’s Chartering
Authority at the time such action is taken, as such criteria may be amended
from time to time.
“
Final Shared-Loss Month
” means the
calendar month in which the tenth anniversary of the Commencement Date occurs.
“
Foreclosure Loss
” means the loss
realized when the Assuming Institution has completed the foreclosure on a
Single Family Shared-Loss Loan and realized final recovery on the collateral
through liquidation and recovery of all insurance proceeds. Each Foreclosure
Loss shall be calculated in accordance with the form and methodology specified
in Exhibits 2c(1)-(3).
“
Holding Company
” means any company
owning Shares of the Assuming Institution that is a holding company pursuant to
the Bank Holding Company Act 0f 1956, 12 U.S.C. 1841
et seq
. or the Home Owner’s Loan Act, 12 U.S.C. 1461
et seq
.
“
Home Equity Loan
” means a loan or
funded or unfunded portions of a line of credit secured by a mortgage on a
one-to four-family residences or stock of cooperative housing association,
where the Failed Bank did not have a first lien on the same property as
collateral.
“
Investor-Owned Residential Loan
” means
a Loan, excluding advances made pursuant to a Home Equity Loan, that is secured
by a mortgage on a one- to four family residences or stock of cooperative
housing associations that is not owner-occupied or the borrower’s primary
residence.
“
Loss
” means a Foreclosure Loss,
Restructuring Loss, Short Sale Loss, Portfolio Loss, Modification Default Loss
or Deficient Loss.
64
“
Loss Amount
” means the dollar amount of
loss incurred and reported on the Monthly Certificate for a Shared-Loss Loan.
“
Modification Default Loss
” means the
loss calculated in Exhibits 2a(1)-(3) for single family loans previously modified
pursuant to this Single Family Shared-Loss Agreement that subsequently default
and result in a foreclosure, short sale or Deficient Loss.
“
Modification Guidelines
”
has the
meaning provided in Section 2.1(a) of this Single Family Shared-Loss
Agreement.
“
Monthly Certificate
” has the meaning
provided in Section 2.1(b) of this Single Family Shared-Loss
Agreement.
“
Monthly Loss Amount
” means the sum of
all Foreclosure Losses, Restructuring Losses, Short Sale Losses, Portfolio
Losses, Modification Default Losses and Deficient Losses realized by the
Assuming Institution for any Shared Loss Month.
“
Monthly Shared-Loss Amount
” means the
change in the Cumulative Shared-Loss Amount from the beginning of each month to
the end of each month.
“
Net
Loss Amount
”
means the sum of Cumulative Loss Amounts under this
Single Family Shared-Loss Agreement and Aggregate Net Charge-Offs under the
Commercial Shared-Loss Agreement.
“
Neutral Member
” has the meaning
provided in Section 2. 1(f)(ii) of this Single Family Shared-Loss
Agreement.
“
Portfolio Loss
” means the loss realized
on either (i) a portfolio sale of Single Family Shared-Loss Loans in
accordance with the terms of Article IV or (ii) the sale of a loan
with the consent of the Receiver as provided in Section 2.7.
“
Recovery Amount
” means, with respect to
any period prior to the Termination Date, the amount of collected funds
received by the Assuming Institution that (i) are applicable against a
Foreclosure Loss calculated in accordance with Exhibits 2c(1)-(3), or
(iii) gains realized from a Section 4.1 sale of Single Family
Shared-Loss Loans for which the Assuming Institution has previously received a
Restructuring Loss payment from the Receiver (iv) or any incentive
payments from national programs paid to an investor or borrower on loans that
have been modified or otherwise treated (short sale or foreclosure) in
accordance with Exhibit 5.
“
Related Loans
” has the meaning set
forth in Section 3.1.
“
Restructuring Loss
” means the loss on a
modified or restructured loan measured by the difference between (a) the
principal, Accrued Interest, tax and insurance advances, third party or other
fees due on a loan prior to the modification or restructuring, and (b) the
net present value of estimated cash flows on the modified or restructured loan,
discounted at the Then-Current Interest Rate. Each Restructuring Loss shall be
calculated in accordance with the form and methodology attached as Exhibits
2a(1)-(3), as applicable.
65
“
Restructured Loan
” means a Single
Family Shared-Loss Loan for which the Assuming Institution has received a
Restructuring Loss payment from the Receiver. This applies to owner occupied
and investor owned residences.
“
Servicing Officer
” has the meaning
provided in Section 2.1(b) of this Single Family Shared-Loss
Agreement.
“
SF1-4 Intrinsic Loss Estimate
”
means total
losses under this Single Family Shared-Loss Agreement in the amount of
three million dollars ($ 3,000,000.00)
.
“
Shared
Loss Loan
”
means a Single Family Shared-Loss
Loan, Investor-Owned Residential Loan, Restructured Loan or Home Equity
Loan, and any Commitment with respect to those loans.
“
Shared-Loss Month
” means each calendar
month between the Commencement Date and the last day of the month in which the
tenth anniversary of the Commencement Date occurs, provided that, the first
Shared-Loss Month shall begin on the Commencement Date and end on the last day
of that month.
“
Shares
” means common stock and any
instrument which by its terms is currently convertible into common stock, or
which may become convertible into common stock.
“
Short-Sale Loss
” means the loss
resulting from the Assuming Institution’s agreement with the mortgagor to
accept a payoff in an amount less than the balance due on the loan (including
the costs of any cash incentives to borrower to agree to such sale or to
maintain the property pending such sale), further
provided
,
that
each Short-Sale Loss shall be calculated in accordance with the form and
methodology specified in Exhibits 2b(1)-(3).
“
Single Family Shared-Loss Loan
” means a
single family one-to-four owner-occupied residential mortgage loan, excluding
Home Equity Loans, that is secured by a mortgage on a one-to four family
residence or stock of a cooperative housing association.
“
Termination Date
” means the last day of
the Final Shared-Loss Month.
“
Then-Current Interest Rate
” means the
most recently published Freddie Mac survey rate for 30-year fixed-rate loans
for Investor-Owned Loans or such other interest rate approved by the Receiver.
“
Third Party Servicer
” means any
servicer appointed from time to time by the Assuming Institution or any
Affiliate of the Assuming Institution to service the Shared-Loss Loans on
behalf of the Assuming Institution, the identity of which shall be given to the
Receiver prior to or concurrent with the appointment thereof.
“
Total
Intrinsic Loss Estimate
”
means the sum of the SF1-4
Intrinsic Loss Estimate in the Single Family Shared-Loss Agreement, and the
Commercial Intrinsic Loss Estimate in the Commercial Shared-Loss Agreement,
expressed in dollars.
66
ARTICLE II — SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss Arrangement
.
(a)
Loss Mitigation and
Consideration of Alternatives
.
(i) For each Single Family Shared-Loss Loan in
default or for which a default is reasonably foreseeable, the Assuming
Institution shall undertake reasonable and customary loss mitigation efforts,
in accordance with any of the following programs selected by Assuming
Institution in its sole discretion, Exhibit 5 (FDIC Mortgage Loan
Modification Program), the United States Treasury’s Home Affordable
Modification Program Guidelines or any other modification program approved by
the United States Treasury Department, the Corporation, the Board of Governors
of the Federal Reserve System or any other governmental agency (it being
understood that the Assuming Institution can select different programs for the
various Single Family Shared-Loss Loans) (such program chosen, the
“Modification Guidelines”). After selecting the applicable Modification
Guideline for each such Single Family Shared-Loss Loan, the Assuming
Institution shall document its consideration of foreclosure, loan restructuring
under the applicable Modification Guideline chosen, and short-sale (if
short-sale is a viable option) alternatives and shall select the alternative
the Assuming Institution believes, based on its estimated calculations, will
result in the least Loss. If unemployment or underemployment is the primary
cause for default or for which a default is reasonably foreseeable, the
Assuming Institution may consider the borrower for a temporary forbearance plan
which reduces the loan payment to an affordable level for at least six (6) months.
(ii) Losses on
Home Equity Loans shall be shared under the charge-off policies of the Assuming
Institution’s Examination Criteria as if they were Single Family Shared-Loss
Loans.
(iii) Losses on Investor-Owned Residential Loans
shall be treated as Restructured Loans, and with the consent of the Receiver
can be restructured under terms separate from the Exhibit 5 standards.
Please refer to Exhibits 2(a)(1)-(2) for guidance in Calculation of Loss
for Restructured Loans. Losses on Investor-Owned Residential Loans will be
treated as if they were Single Family Shared-Loss Loans.
(iv) The Assuming Institution shall retain its
loss calculations for the Shared Loss Loans and such calculations shall be
provided to the Receiver upon request. For the avoidance of doubt and
notwithstanding anything herein to the contrary, (x) the Assuming
Institution is not required to modify or restructure any Shared-Loss Loan on
more than one occasion and (y) the Assuming Institution is not required to
consider any alternatives with respect to any Shared-Loss Loan in the process
of foreclosure as of the Bank Closing if the Assuming Institution can document
that a loan modification is not cost effective and shall be entitled to
continue such foreclosure measures and recover the Foreclosure Loss as provided
herein, and (z) the Assuming Institution shall have a transition period of
up to 90 days after Bank Closing to implement the Modification Guidelines,
during which time, the Assuming Institution may submit claims under such
guidelines as may be in place at the Failed Bank.
(b)
Monthly
Certificates
.
67
Not later than fifteen (15)
days after the end of each Shared-Loss Month, beginning with the month in which
the Commencement Date occurs and ending in the Final Shared-Loss Month, the
Assuming Institution shall deliver to the Receiver a certificate, signed by an
officer of the Assuming Institution involved in, or responsible for, the
administration and servicing of the Shared-Loss Loans whose name appears on a
list of servicing officers furnished by the Assuming Institution to the
Receiver, (a “Servicing Officer”) setting forth in such form and detail as the
Receiver may reasonably specify (a “Monthly Certificate”):
(i)
(A) a
schedule substantially in the form of Exhibit 1 listing:
(i) each Shared-Loss
Loan for which a Loss Amount (calculated in accordance with the applicable
Exhibit) is being claimed, the related Loss Amount for each Shared-Loss Loan,
and the total Monthly Loss Amount for all Shared-Loss Loans;
(ii) each Shared-Loss
Loan for which a Recovery Amount was received, the Recovery Amount for each
Shared-Loss Loan, and the total Recovery Amount for all Shared-Loss Loans;
(iii) the total Monthly
Loss Amount for all Shared-Loss Loans minus the total monthly Recovery Amount
for all Shared-Loss Loans;
(iv) the Cumulative
Loss Amount as of the beginning and end of the month;
(v) the Monthly Shared
Loss Amount;
(vi) the result
obtained in (v) times the Applicable Percentage, which is the amount to be
paid under Section 2.1(d) of this Single Family Shared-Loss Agreement
by the Receiver to the Assuming Institution if the amount is a positive number,
or by the Assuming Institution to the Receiver if the amount is a negative number;
(ii)
for each of the
Shared-Loss Loans for which a Loss is claimed for that Shared-Loss Month, a
schedule showing the calculation of the Loss Amount using the form and
methodology shown in Exhibits 2a(1)-(3), Exhibit 2b, or Exhibits
2c(1)-(2), as applicable.
(iii)
For each of the
Restructured Loans where a gain or loss is realized in a sale under
Section 4.1 or 4.2, a schedule showing the calculation using the form and
methodology shown in Exhibits 2d(1)-(2).
(iv)
a portfolio
performance and summary schedule substantially in the form shown in
Exhibit 3.
(c)
Monthly Data Download
. Not later than fifteen
(15) days after the end of each month, beginning with the month in which the
Commencement Date occurs and ending with the Final Shared-Loss Month, Assuming
Institution shall provide Receiver:
68
(i) the servicing file in machine-readable format including
but not limited to the fields shown on Exhibit 2.1(c) for each
outstanding Single Family Shared-Loss Loan, as applicable; and
(ii) an Excel file for ORE held as a result of foreclosure on a
Single Family Shared-Loss Loan listing:
(A) Foreclosure date
(B) Unpaid loan
principal balance
(C) Appraised value or
BPO value, as applicable
(D) Projected
liquidation date
Notwithstanding the
foregoing, the Assuming Institution shall not be required to provide any of the
foregoing information to the extent it is unable to do so as a result of the
Failed Bank’s or Receiver’s failure to provide information required to produce the
information set forth in this Section 2.1(c);
provided
, that the
Assuming Institution shall, consistent with Customary Servicing Procedures seek
to produce any such missing information or improve any inaccurate information
previously provided to it.
(d)
Payments With Respect
to Shared-Loss Assets
. Not later than fifteen (15) days after
the date on which the Receiver receives the Monthly Certificate, the Receiver
shall pay to the Assuming Institution, in immediately available funds, an
amount equal to the Applicable Percentage of the Monthly Shared-Loss Amount
reported on the Monthly Certificate. If the total Monthly Shared-Loss Amount
reported on the Monthly Certificate is a negative number, the Assuming
Institution shall pay to the Receiver in immediately available funds the
Applicable Percentage of that amount.
(e)
Limitations on
Shared-Loss Payment
. The Receiver shall not be required to make
any payments pursuant to Section 2.1(d) with respect to any
Foreclosure Loss, Restructuring Loss, Short Sale Loss, Deficient Loss, or
Portfolio Loss that the Receiver determines, based upon the criteria set forth
in this Single Family Shared-Loss Agreement (including the analysis and
documentation requirements of Section 2.1(a)) or Customary Servicing Procedures,
should not have been effected by the Assuming Institution; provided, however,
(x) the Receiver must provide notice to the Assuming Institution detailing
the grounds for not making such payment, (y) the Receiver must provide the
Assuming Institution with a reasonable opportunity to cure any such deficiency
and (z) (1) to the extent curable, if cured, the Receiver shall make payment
with respect to the properly effected Loss, and (2) to the extent not
curable, shall not constitute grounds for the Receiver to withhold payment as
to all other Losses (or portion of Losses) that are properly payable pursuant
to the terms of this Single Family Shared-Loss Agreement. In the event that the
Receiver does not make any payment with respect to Losses claimed pursuant to Section 2.1(d),
the Receiver and Assuming Institution shall, upon final resolution, make the
necessary adjustments to the Monthly Shared-Loss Amount for that Monthly
Certificate and the payment pursuant to Section 2.1(d) above shall be
adjusted accordingly.
(f)
Payments by
Wire-Transfer
. All payments under this Single Family Shared-Loss
Agreement shall be made by wire-transfer in accordance with the wire-transfer
69
instructions on
Exhibit 4.
(g)
Payment in the Event
Losses Fail to Reach Expected Level
. If the asset premium
(discount) bid is less than negative five per cent [(5%)], then on the date
that is 45 days following the last day (such day, the “True-Up Measurement
Date”) of the calendar month in which the tenth anniversary of the calendar day
following the Bank Closing occurs, or upon the final disposition of all Shared
Loss Assets under this Single Family Shared-Loss Agreement at any time after
the termination of the Commercial Shared-Loss Agreement, the Assuming
Institution shall pay to the Receiver fifty
percent
(50%) of any positive amount resulting from the following calculation:
A - (B + C
+ D),
where
A equals 20% of the Total
Intrinsic Loss Estimate;
B equals 20% of the Net Loss
Amount;
C equals 25% of the asset
premium (discount) bid, expressed in dollars, of total Shared Loss Assets on
Schedules 4.15A and 4.15B at Bank Closing; and
D equals 3.5% of total
Shared Loss Assets on Schedules 4.15A and 4.15B at Bank Closing.
The Assuming Institution
shall deliver to the Receiver not later than 30 days following the True-Up
Measurement Date, a schedule, signed by an officer of the Assuming Institution,
setting forth in reasonable detail the foregoing calculation, including the
calculation of the Net Loss Amount.
(h)
Payments as
Administrative Expenses
.
Payments from the Receiver with respect
to this Single Family Shared-Loss Agreement are administrative expenses of the
Receiver. To the extent the Receiver needs funds for shared-loss payments respect
to this Single Family Shared-Loss Agreement, the Receiver shall request funds
under the Master Loan and Security Agreement, as amended (“MLSA”), from FDIC in
its corporate capacity. The Receiver will not agree to any amendment of the
MLSA that would prevent the Receiver from drawing on the MLSA to fund
shared-loss payments.
2.2
Auditor
Report; Right to Audit
.
(a) Within the time period permitted for the examination audit
pursuant to 12 CFR Section 363 after the end of each fiscal year during
which the Receiver makes any payment to the Assuming Institution under this
Single Family Shared-Loss Agreement, the Assuming Institution shall deliver to
the Receiver a report signed by its independent public accountants stating that
they have reviewed the terms of this Single Family Shared-Loss Agreement and
that, in the course of their annual audit of the Assuming Institution’s books
and records, nothing has come to their attention suggesting that any
computations required to be made by the Assuming Institution during such fiscal
year pursuant to this Article II were not made by the Assuming Institution
in accordance herewith. In the event that the Assuming Institution cannot
comply with
70
the preceding sentence, it
shall promptly submit to the Receiver corrected computations together with a
report signed by its independent public accountants stating that, after giving
effect to such corrected computations, nothing has come to their attention
suggesting that any computations required to be made by the Assuming
Institution during such year pursuant to this Article II were not made by
the Assuming Institution in accordance herewith. In such event, the Assuming
Institution and the Receiver shall make all such accounting adjustments and
payments as may be necessary to give effect to each correction reflected in
such corrected computations, retroactive to the date on which the corresponding
incorrect computation was made.
(b) The Assuming Institution shall perform on an annual basis
an internal audit of its compliance with the provisions of this Article II
and shall provide the Receiver and the Corporation with copies of the internal
audit reports and access to internal audit workpapers related to such internal
audit.
(c) The Receiver or the FDIC in its corporate capacity
(“Corporation”), its contractors and their employees, and its agents may
perform an audit or audits to determine the Assuming Institution’s compliance
with the provisions of this Single Family Shared-Loss Agreement, including this
Article II, by providing not less than ten (10) Business Days’ prior
written notice. Assuming Institution shall provide access to pertinent records
and proximate working space in Assuming Institution’s facilities. The scope and
duration of any such audit shall be within the reasonable discretion of the
Receiver or the Corporation, but shall in no event be administered in a manner
that unreasonably interferes with the operation of the Assuming Institution’s
business. The Receiver or the Corporation, as the case may be, shall bear the
expense of any such audit. In the event that any corrections are necessary as a
result of such an audit or audits, the Assuming Institution and the Receiver
shall make such accounting adjustments and payments as may be necessary to give
retroactive effect to such corrections.
2.3
Withholdings
.
Notwithstanding any other provision in this Article II, the Receiver, upon
the direction of the Director (or designee) of the Federal Deposit Insurance
Corporation’s Division of Resolutions and Receiverships, may withhold payment
for any amounts included in a Monthly Certificate delivered pursuant to
Section 2.1, if in its good faith and reasonable judgment there is a
reasonable basis under the requirements of this Single Family Shared-Loss
Agreement for denying the eligibility of an item for which reimbursement or
payment is sought under such Section. In such event, the Receiver shall provide
a written notice to the Assuming Institution detailing the grounds for
withholding such payment. At such time as the Assuming Institution demonstrates
to the satisfaction of the Receiver, in its reasonable judgment, that the
grounds for such withholding of payment, or portion of payment, no longer exist
or have been cured, then the Receiver shall pay the Assuming Institution the
amount withheld which the Receiver determines is eligible for payment, within
fifteen (15) Business Days.
2.4
Books and
Records
. The Assuming Institution shall at all times during
the term of this Single Family Shared-Loss Agreement keep books and records
sufficient to ensure and document compliance with the terms of this Single
Family Shared-Loss Agreement, including but not limited to
(a) documentation of alternatives considered with respect to defaulted
loans or loans for which default is reasonably foreseeable,
(b) documentation showing the calculation of loss for claims submitted to
the Receiver, (c) retention of documents that support each line item
71
on the loss claim forms, and
(d) documentation with respect to the Recovery Amount on loans for which
the Receiver has made a loss-share payment
2.5
Information
. The Assuming
Institution shall promptly provide to the Receiver such other information,
including but not limited to, financial statements, computations, and bank
policies and procedures, relating to the performance of the provisions of this
Single Family Shared-Loss Agreement, as the Receiver may reasonably request
from time to time.
2.6
Tax Ruling
. The Assuming
Institution shall not at any time, without the Receiver’s prior written
consent, seek a private letter ruling or other determination from the Internal
Revenue Service or otherwise seek to qualify for any special tax treatment or
benefits associated with any payments made by the Receiver pursuant to this
Single Family Shared-Loss Agreement.
2.7
Loss of
Shared-Loss Coverage on Shared-Loss Loans
. The Receiver shall be
relieved of its obligations with respect to a Shared-Loss Loan upon payment of
a Foreclosure Loss amount, or a Short Sale Loss amount with respect to such
Single Family Shared-Loss Loan, or upon the sale without FDIC consent of a
Single Family Shared-Loss Loan by Assuming Institution to a person or entity
that is not an Affiliate. The Assuming Institution shall provide the Receiver
with timely notice of any such sale. Failure to administer any Shared-Loss Loan
or Loans in accordance with Article III shall at the discretion of the
Receiver constitute grounds for the loss of shared loss coverage with respect
to such Shared-Loss Loan or Loans. Notwithstanding the foregoing, a sale of the
Single Family Shared-Loss Loan, for purposes of this Section 2.7, shall
not be deemed to have occurred as the result of (i) any change in the
ownership or control of Assuming Institution or the transfer of any or all of
the Single Family Shared-Loss Loan(s) to any Affiliate of Assuming
Institution, (ii) a merger by Assuming Institution with or into any other
entity, or (iii) a sale by Assuming Institution of all or substantially
all of its assets.
ARTICLE III - RULES REGARDING THE ADMINISTRATION OF
SHARED-LOSS LOANS
3.1
Agreement
with Respect to Administration
. The Assuming Institution
shall (and shall cause any of its Affiliates to which the Assuming Institution
transfers any Shared-Loss Loans to) manage, administer, and collect the
Shared-Loss Loans while owned by the Assuming Institution or any Affiliate
thereof during the term of this Single Family Shared-Loss Agreement in
accordance with the rules set forth in this Article III. The Assuming
Institution shall be responsible to the Receiver in the performance of its
duties hereunder and shall provide to the Receiver such reports as the Receiver
reasonably deems advisable, including but not limited to the reports required
by Sections 2.1, 2.2 and 3.3 hereof, and shall permit the Receiver to monitor
the Assuming Institution’s performance of its duties hereunder.
3.2
Duties of
the Assuming Institution
.
(a) In the performance of its duties under this
Article III, the Assuming Institution shall:
(i)
manage and
administer each Shared-Loss Loan in accordance with Assuming Institution’s
72
usual and prudent business
and banking practices and Customary Servicing Procedures;
(ii) exercise its best
business judgment in managing, administering and collecting amounts owed on the
Shared-Loss Loans;
(iii) use commercially
reasonable efforts to maximize Recoveries with respect to Losses on Shared-Loss
Loans without regard to the effect of maximizing collections on assets held by
the Assuming Institution or any of its Affiliates that are not Shared-Loss
Loans;
(iv) retain sufficient
staff (in Assuming Institution’s discretion) to perform its duties hereunder;
and
(v) other than as
provided in Section 2.1(a), comply with the terms of the Modification
Guidelines for any Single Family Shared-Loss Loans meeting the requirements set
forth therein. For the avoidance of doubt, the Assuming Institution may propose
exceptions to Exhibit 5 (the FDIC Loan Modification Program) for a group
of Loans with similar characteristics, with the objectives of
(1) minimizing the loss to the Assuming Institution and the FDIC and
(2) maximizing the opportunity for qualified homeowners to remain in their
homes with affordable mortgage payments.
(b) Any transaction with or between any Affiliate of the
Assuming Institution with respect to any Shared-Loss Loan including, without
limitation, the execution of any contract pursuant to which any Affiliate of
the Assuming Institution will manage, administer or collect any of the
Shared-Loss Loans will be provided to FDIC for informational purposes and if
such transaction is not entered into on an arm’s length basis on commercially
reasonable terms such transaction shall be subject to the prior written
approval of the Receiver.
3.3
Shared-Loss
Asset Records and Reports
. The Assuming Institution
shall establish and maintain such records as may be appropriate to account for
the Single Family Shared-Loss Loans in such form and detail as the Receiver may
reasonably require, and to enable the Assuming Institution to prepare and
deliver to the Receiver such reports as the Receiver may from time to time
request regarding the Single Family Shared-Loss Loans and the Monthly
Certificates required by Section 2.1 of this Single Family Shared-Loss
Agreement.
3.4
Related
Loans
.
(a) Assuming Institution shall use its best efforts to
determine which loans are “Related Loans,” as hereinafter defined. The Assuming
Institution shall not manage, administer or collect any “Related Loan” in any
manner that would have the effect of increasing the amount of any collections
with respect to the Related Loan to the detriment of the Shared-Loss Loan to
which such loan is related. A “Related Loan” means any loan or extension of
credit to an Obligor of a Shared-Loss Loan held by the Assuming Institution at
any time on or prior to the end of the Final Shared-Loss Month.
(b) The Assuming Institution shall prepare and deliver to the
Receiver with the Monthly Certificates for the calendar months ending June 30
and December 31, a schedule of all Related Loans on the Accounting Records of
the Assuming Institution as of the end of each such semi-annual period.
3.5
Legal
Action; Utilization of Special Receivership Powers
. The Assuming
73
Institution shall notify the
Receiver in writing (such notice to be given in accordance with Article V
below and to include all relevant details) prior to utilizing in any legal
action any special legal power or right which the Assuming Institution derives
as a result of having acquired an asset from the Receiver, and the Assuming
Institution shall not utilize any such power unless the Receiver shall have
consented in writing to the proposed usage. The Receiver shall have the right
to direct such proposed usage by the Assuming Institution and the Assuming
Institution shall comply in all respects with such direction. Upon request of
the Receiver, the Assuming Institution will advise the Receiver as to the
status of any such legal action. The Assuming Institution shall immediately
notify the Receiver of any judgment in litigation involving any of the
aforesaid special powers or rights.
3.6
Third Party Servicer
. The Assuming
Institution may perform any of its obligations and/or exercise any of its
rights under this Single Family Shared-Loss Agreement through or by one or more
Third Party Servicers, who may take actions and make expenditures as if any
such Third Party Servicer was the Assuming Institution hereunder (and, for the
avoidance of doubt, such expenses incurred by any such Third Party Servicer on
behalf of the Assuming Institution shall be included in calculating Losses to
the extent such expenses would be included in such calculation if the expenses
were incurred by Assuming Institution); provided, however, that the use thereof
by the Assuming Institution shall not release the Assuming Institution of any
obligation or liability hereunder.
ARTICLE IV – PORTFOLIO SALE
4.1
Assuming Institution Portfolio
Sales of Remaining Shared-Loss Loans
. The Assuming Institution
shall have the right, with the consent of the Receiver, to liquidate for cash
consideration, from time to time in one or more transactions, all or a portion
of Shared-Loss Loans held by the Assuming Institution at any time prior to the
Termination Date (“Portfolio Sales”). If the Assuming Institution exercises its
option under this Section 4.1, it must give sixty (60) days notice in
writing to the Receiver setting forth the details and schedule for the
Portfolio Sale, which shall be conducted by means of sealed bid sales to third
parties, not including any of the Assuming Institution’s affiliates,
contractors, or any affiliates of the Assuming Institution’s contractors. Sales
of Restructured Loans shall be sold in a separate pool from Shared-Loss Loans
that have not been restructured. Other proposals for the sale of a Shared-Loss
Loan or Shared-Loss Loans submitted by the Assuming Institution will be
considered by the Receiver on a case-by-case basis.
4.2
Assuming Institution’s Liquidation
of Remaining Shared-Loss Loans
. In the event that the
Assuming Institution does not conduct a Portfolio Sale pursuant to Section 4.1,
the Receiver shall have the right, exercisable in its sole and absolute
discretion, to require the Assuming Institution to liquidate for cash
consideration, any Shared-Loss Loans held by the Assuming Institution at any
time after the date that is six months prior to the Termination Date. If the
Receiver exercises its option under this Section 4.2, it must give notice
in writing to the Assuming Institution, setting forth the time period within
which the Assuming Institution shall be required to liquidate the Shared-Loss
Loans. The Assuming Institution will comply with the Receiver’s notice and must
liquidate the Shared-Loss Loans as soon as reasonably practicable by means of
sealed bid sales to third parties, not including any of the Assuming Institution’s
affiliates, contractors, or any affiliates of the Assuming Institution’s
contractors. The selection of
74
any financial advisor or
other third party broker or sales agent retained for the liquidation of the
remaining Shared-Loss Loans pursuant to this Section shall be subject to
the prior approval of the Receiver, such approval not to be unreasonably
withheld, delayed or conditioned.
4.3
Calculation of Sale Gain or Loss
. For
Shared-Loss Loans that are not Restructured Loans, gain or loss on the sales
under Section 4.1 or Section 4.2 will be calculated as the sale price
received by the Assuming Institution less the unpaid principal balance of the
remaining Shared-Loss Loans. For any Restructured Loan included in the sale
gain or loss on sale will be calculated as (a) the sale price received by
the Assuming Institution less (b) the net present value of estimated cash
flows on the Restructured Loan that was used in the calculation of the related
Restructuring Loss plus (c) Loan principal payments collected by the
Assuming Institution from the date the Loan was restructured to the date of
sale. (See Exhibits 2d(1)-(2) for example calculations).
ARTICLE V — LOSS-SHARING NOTICES GIVEN TO RECEIVER AND
PURCHASER
All notices, demands and
other communications hereunder shall be in writing and shall be delivered by
hand, or overnight courier, receipt requested, addressed to the parties as
follows:
|
If to Receiver, to:
|
|
Federal Deposit Insurance
Corporation as Receiver
|
|
|
|
for
North West Bank and Trust, Acworth, Georgia
|
|
|
|
Division of Resolutions
and Receiverships
|
|
|
|
550 17th Street, N.W.
|
|
|
|
Washington, D.C. 20429
|
|
|
|
Attention: Ralph Malami,
Manager, Capital Markets
|
|
|
|
|
|
with a copy to:
|
|
Federal Deposit Insurance
Corporation
|
|
|
|
as Receiver for
North West Bank and Trust,
|
|
|
|
Acworth,
Georgia
|
|
|
|
Room E 7056
|
|
|
|
3501 Fairfax Drive
|
|
|
|
|
|
|
|
Arlington, VA 22226
|
|
|
|
Attn: Special Issues Unit
|
With respect to a notice
under Section 3.5 of this Single Family Shared-Loss Agreement, copies of
such notice shall be sent to:
|
|
|
Federal Deposit Insurance
Corporation
|
|
|
|
Legal Division 1601 Bryan
St.
|
|
|
|
Dallas, Texas 75201
|
|
|
|
Attention: Regional
Counsel
|
75
If to Assuming Institution,
to:
|
|
|
STATE BANK AND TRUST COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
Attention: J. Daniel
Speight
|
|
|
|
Vice-Chairman/CFO/COO
|
|
|
|
4219 Forsyth Road
|
|
|
|
Macon, GA 31208
|
|
|
|
****
|
|
|
|
**** FAX
|
|
|
|
|
|
|
|
with a copy to: Joe Evans
|
Such Persons and addresses
may be changed from time to time by notice given pursuant to the provisions of
this Article V. Any notice, demand or other communication delivered
pursuant to the provisions of this Article V shall be deemed to have been
given on the date actually received.
ARTICLE VI
— MISCELLANEOUS
6.1.
Expenses
. Except as
otherwise expressly provided herein, all costs and expenses incurred by or on
behalf of a party hereto in connection with this Single Family Shared-Loss
Agreement shall be borne by such party whether or not the transactions contemplated
herein shall be consummated.
6.2
Successors and Assigns; Specific Performance
. This Single
Family Shared-Loss Agreement, and all of the terms and provisions hereof shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective permitted successors and assigns only. The Receiver may assign or
otherwise transfer this Single Family Shared-Loss Agreement and the rights and
obligations of the Receiver hereunder (in whole or in part) to the Federal
Deposit Insurance Corporation in its corporate capacity without the consent of
Assuming Institution. Notwithstanding anything to the contrary contained in
this Single Family Shared-Loss Agreement, except as is expressly permitted in
this Section 6.2, the Assuming Institution may not assign or otherwise
transfer this Single Family Shared-Loss Agreement or any of the Assuming
Institution’s rights or obligations hereunder (in whole or in part), or sell or
transfer of any subsidiary of the Assuming Institution holding title to Shared-Loss
Assets or Shared-Loss Securities, without the prior written consent of the
Receiver, which consent may be granted or withheld by the Receiver in its sole
and absolute discretion. An assignment or transfer of this Single Family
Shared-Loss Agreement includes:
(i) a
merger or consolidation of the Assuming Institution with or into another
company, if the shareholders of the Assuming Institution will own less than
sixty-six and two/thirds percent (66.66%) of the equity of the consolidated
entity;
76
(ii) a merger or
consolidation of the Assuming Institution’s Holding Company with or into
another company, if the shareholders of the Holding Company will own less than
sixty-six and two/thirds percent (66.66%) of the equity of the consolidated
entity;
(iii) the sale of all
or substantially all of the assets of the Assuming Institution to another
company or person; or
(iv) a sale of shares
by any one or more shareholders that will effect a change in control
of the Assuming
Institution, as determined by the Receiver with reference to the standards set
forth in the Change in Bank Control Act, 12 U.S.C. 1817(j).
For the avoidance of doubt,
any transaction under this Section 6.2 that requires the Receiver’s consent
that is made without consent of the Receiver hereunder will relieve the
Receiver of any of its obligations under this Single Family Shared-Loss
Agreement.
No Loss shall be recognized
under this Single Family Shared-Loss Agreement as a result of any accounting
adjustments that are made due to or as a result of any assignment or transfer
of this Single Family Shared-Loss Agreement or any merger, consolidation, sale
or other transaction to which the Assuming Institution, its Holding Company or
any Affiliate is a party, regardless of whether the Receiver consents to such
assignment or transfer in connection with such transaction pursuant to this
Section 6.2.
6.3
WAIVER OF JURY TRIAL
. EACH PARTY
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING
OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT
OF OR RELATING TO OR IN CONNECTION WITH THIS SINGLE FAMILY SHARED-LOSS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
6.4
No Third Party Beneficiary
. This Single
Family Shared-Loss Agreement and the Exhibits hereto are for the sole and
exclusive benefit of the parties hereto and their respective permitted
successors and permitted assigns and there shall be no other third party
beneficiaries, and nothing in this Single Family Shared-Loss Agreement or the
Exhibits shall be construed to grant to any other Person any right, remedy or
Claim under or in respect of this Single Family Shared-Loss Agreement or any
provision hereof.
6.5
Consent
. Except as
otherwise provided herein, when the consent of a party is required herein, such
consent shall not be unreasonably withheld or delayed.
6.6
Rights Cumulative
. Except as
otherwise expressly provided herein, the rights of each of the parties under
this Single Family Shared-Loss Agreement are cumulative, may be exercised as
often as any party considers appropriate and are in addition to each such
party’s rights under the Purchase and Sale Agreement and any of the related
agreements or under law. Except as otherwise expressly provided herein, any
failure to exercise or any delay in exercising any of such rights, or any
partial or defective exercise of such rights, shall not operate as a waiver or
variation of that or any other such right.
77
ARTICLE VII
DISPUTE RESOLUTION
7.1
Dispute
Resolution Procedures
.
(a)
In the event a
dispute arises about the interpretation, application, calculation of Loss, or
calculation of payments or otherwise with respect to this Single Family
Shared-Loss Agreement (“SF Shared-Loss Dispute Item”), then the Receiver and
the Assuming Institution shall make every attempt in good faith to resolve such
items within sixty (60) days following the receipt of a written description of
the SF Shared-Loss Dispute Item, with notification of the possibility of taking
the matter to arbitration (the date on which such 60-day period expires, or any
extension of such period as the parties hereto may mutually agree to in
writing, herein called the “Resolution Deadline Date”). If the Receiver and the
Assuming Institution resolve all such items to their mutual satisfaction by the
Resolution Deadline Date, then within thirty (30) days following such
resolution, any payment due as a result of such resolution shall be made
arising from the settlement of the SF Shared-Loss Dispute.
(b)
If the Receiver
and the Assuming Institution fail to resolve any outstanding SF Shared-Loss
Dispute Items by the Resolution Deadline Date, then either party may notify the
other of its intent to submit the SF Shared-Loss Dispute Item to arbitration
pursuant to the provisions of this Article VII. Failure of either party to
submit pursuant to paragraph (c) hereof any unresolved SF Shared-Loss
Dispute Item to arbitration within thirty (30) days following the Resolution
Deadline Date (the date on which such thirty (30) day period expires is herein
called the “Arbitration Deadline Date”) shall extinguish that party’s right to
submit the non-submitted SF Shared-Loss Dispute Item to arbitration, and
constitute a waiver of the submitting party’s right to dispute such
non-submitted SF Shared-Loss Dispute Item (but not a waiver of any similar
claim which may arise in the future).
(c)
If a SF
Shared-Loss Dispute Item is submitted to arbitration, it shall be governed by
the rules of the American Arbitration Association (the “AAA”), except as
otherwise provided herein. Either party may submit a matter for arbitration by
delivering a notice, prior to the Arbitration Deadline Date, to the other party
in writing setting forth:
(i) A brief description of each SF Shared-Loss Dispute Item
submitted for arbitration;
(ii) A statement of the moving party’s position with respect to
each SF Shared-Loss Dispute Item submitted for arbitration;
(iii) The value sought by the moving party, or other relief
requested regarding each SF Shared-Loss Dispute Item submitted for arbitration,
to the extent reasonably calculable; and
(iv) The name and address of the arbiter selected by the moving
party (the “Moving Arbiter”), who shall be a neutral, as determined by the AAA.
Failure to adequately
include any information above shall not be deemed to be a waiver of the parties
right to arbitrate so long as after notification of such failure the moving
78
party cures such failure as
promptly as reasonably practicable.
(d)
The non-moving
party shall, within thirty (30) days following receipt of a notice of
arbitration pursuant to this Section 7.1, deliver a notice to the moving
party setting forth:
(i) The name and address of the arbiter selected by the
non-moving party (the “Respondent Arbiter”), who shall be a neutral, as
determined by the AAA;
(ii) A statement of the position of the respondent with respect
to each Dispute Item; and
(iii) The ultimate resolution sought by the respondent or other
relief, if any, the respondent deems is due the moving party with respect to
each SF Shared-Loss Dispute Item.
Failure to adequately
include any information above shall not be deemed to be a waiver of the
non-moving party’s right to defend such arbitration so long as after
notification of such failure the non-moving party cures such failure as
promptly as reasonably practicable
(e)
The Moving
Arbiter and Respondent Arbiter shall select a third arbiter from a list
furnished by the AAA. In accordance with the rules of the AAA, the three
(3) arbiters shall constitute the arbitration panel for resolution of each
SF Loss-Share Dispute Item. The concurrence of any two (2) arbiters shall
be deemed to be the decision of the arbiters for all purposes hereunder. The
arbitration shall proceed on such time schedule and in accordance with the
Rules of Commercial Arbitration of the AAA then in effect, as modified by
this Section 7.1. The arbitration proceedings shall take place at such
location as the parties thereto may mutually agree, but if they cannot agree,
then they will take place at the offices of the Corporation in Washington, DC,
or Arlington, Virginia.
(f)
The Receiver
and Assuming Institution shall facilitate the resolution of each outstanding SF
Shared-Loss Dispute Item by making available in a prompt and timely manner to
one another and to the arbiters for examination and copying, as appropriate,
all documents, books, and records under their respective control and that would
be discoverable under the Federal Rules of Civil Procedure.
(g)
The arbiters
designated pursuant to subsections (c), (d) and (e) hereof shall
select, with respect to each Dispute Item submitted to arbitration pursuant to
this Section 7.1, either (i) the position and relief submitted by the
Assuming Institution with respect to each SF Shared-Loss Dispute Item, or
(ii) the position and relief submitted by the Receiver with respect to
each SF Shared-Loss Dispute Item, in either case as set forth in its respective
notice of arbitration. The arbiters shall have no authority to select a value
for each Dispute Item other than the determination set forth in
Section 7.1(c) and Section 7.1(d). The arbitration shall be
final, binding and conclusive on the parties.
(h)
Any amounts
ultimately determined to be payable pursuant to such award shall bear interest
at the Settlement Interest Rate from and including the date specified for the
arbiters decisions specified in this Section 7.1, without regard to any
extension of the finality of such award, to but not including the date paid.
All payments required to be made under this Section 7.1 shall be made by
wire transfer.
79
(i) For the avoidance of doubt, to the extent any notice of a
SF Shared-Loss Dispute Item(s) is provided prior to the Termination Date,
the terms of this Single Family Shared-Loss Agreement shall remain in effect
with respect to the Single Family Shared-Loss Loans that are the subject of
such SF Shared-Loss Dispute Item(s) until such time as any such dispute is
finally resolved.
7.2
Fees and Expenses of Arbiters
.
The aggregate
fees and expenses of the arbiters shall be borne equally by the parties. The
parties shall pay the aggregate fees and expenses within thirty (30) days after
receipt of the written decision of the arbiters (unless the arbiters agree in
writing on some other payment schedule).
Exhibit 1
Monthly Certificate
SEE FOLLOWING PAGE
80
CERTIFICATE
MONTHLY
SUMMARY
FOR SINGLE
FAMILY ASSETS
FDIC -
RECEIVER FOR XXXXXXX BANK
PURCHASE
AND ASSUMPTION AGREEMENT DATED: Jan 1, 2009
|
|
|
Shared-Loss Period Ended:
|
|
|
|
|
|
|
(Dollars)
|
|
|
|
Calculation of Amount Due from (to) FDIC
|
FDIC % Share
|
|
0%
|
|
80%
|
|
|
|
Total
|
|
|
Carry
forward from other types of assets:
|
|
|
|
|
|
|
|
|
|
|
1.
Cumulative losses from single family pool
|
|
0
|
|
0
|
|
|
|
0
|
|
|
2.
Cumulative losses from securities
|
|
0
|
|
0
|
|
|
|
0
|
|
|
3.
Cumulative loss from commercial and other pool
|
|
0
|
|
0
|
|
|
|
0
|
|
|
4.
Total cumulative losses at beg of period
|
|
0
|
|
0
|
|
|
|
0
|
|
|
5.
Covered single family losses (gains) during period
|
|
0
|
|
0
|
|
|
|
0
|
|
|
6.
Cumulative loss at end of period
|
|
0
|
|
0
|
|
|
|
0
|
|
|
FDIC
% Share
|
|
x
0
|
%
|
x
80
|
%
|
|
|
|
|
|
7.
Amount Due from (to) FDIC
|
|
0
|
+
|
0
|
+
|
|
=
|
—
|
|
|
Memo: threshold for recovery percentage
|
|
0
|
|
0
|
|
|
|
|
|
|
Preparer name:
|
|
|
|
|
|
|
|
Preparer signature
|
|
Preparer title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer name:
|
|
|
|
|
|
|
|
Officer signature
|
|
Officer title:
|
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
81
CERTIFICATE
MONTHLY
SUMMARY
FOR SINGLE
FAMILY ASSETS
FDIC -
RECEIVER FOR XXXXXXX BANK
PURCHASE
AND ASSUMPTION AGREEMENT DATED: Jan 1, 2009
|
|
|
Shared-Loss Period Ended:
|
|
|
|
|
|
|
(Dollars)
|
|
|
|
Calculation of Amount Due from (to) FDIC
|
FDIC % Share
|
|
0%
|
|
80%
|
|
|
|
Total
|
|
|
Carry
forward from other types of assets:
|
|
|
|
|
|
|
|
|
|
|
1.
Cumulative losses from single family pool
|
|
0
|
|
0
|
|
|
|
0
|
|
|
2.
Cumulative losses from securities
|
|
0
|
|
0
|
|
|
|
0
|
|
|
3.
Cumulative loss from commercial and other pool
|
|
0
|
|
0
|
|
|
|
0
|
|
|
4.
Total cumulative losses at beg of period
|
|
0
|
|
0
|
|
|
|
0
|
|
|
5.
Covered single family losses (gains) during period
|
|
0
|
|
0
|
|
|
|
0
|
|
|
6.
Cumulative loss at end of period
|
|
0
|
|
0
|
|
|
|
0
|
|
|
FDIC
% Share
|
|
x
0
|
%
|
x
80
|
%
|
|
|
|
|
|
7.
Amount Due from (to) FDIC
|
|
0
|
+
|
0
|
+
|
|
=
|
—
|
|
|
Memo: threshold for recovery percentage
|
|
0
|
|
0
|
|
|
|
|
|
|
Preparer name:
|
|
|
|
|
|
|
|
Preparer signature
|
|
Preparer title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer name:
|
|
|
|
|
|
|
|
Officer signature
|
|
Officer title:
|
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
82
XXXXXXXXX
Bank
FIN No.
|
Schedule
4.15B
|
Date:
|
|
|
Non-Single
Family Shared-Loss Agreement
|
|
|
|
|
Proforma Net Balance*
|
|
Unfunded
|
|
|
Schedule
4.15B as provided
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Loan
|
|
|
|
|
|
|
|
Explanation
|
|
|
Number
|
|
Name
|
|
Net Balance
|
|
Unfunded
|
|
(Loan Description)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add
the following loans currently included in Schedule 4.15A Non-Single Family
Shared-Loss Agreement:
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtract
the following loans currently included in Schedule 4.15B Single Family
Shared-Loss Agreement:
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add
the following loan not included in either Schedule 4.15A or 4.15B Asset
Detail (Must provide documentation)
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add
the following Unfunded Commitments (Must provide documentation)
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Adjustments
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 4.15B Revised Totals
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Total adjustments
should also be reflected in the Certificate filing for the quarter this form is
submitted.
*
Net Balance agrees with
amount noted on Schedule 4.15A Single Family Shared-Loss Agreement, or Revised
Totals if this form has already been submitted previously.
83
XXXXXXXXX
Bank
FIN No.
|
Schedule
4.15A
|
Date:
|
|
|
Single
Family Shared-Loss Agreement
|
|
|
|
|
Proforma Net Balance*
|
|
Unfunded
|
|
|
Schedule
4.15A as provided
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Loan
|
|
|
|
|
|
|
|
Explanation
|
|
|
Number
|
|
Name
|
|
Net Balance
|
|
Unfunded
|
|
(Loan Description)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add
the following loans currently included in Schedule 4.15B Non-Single Family
Shared-Loss Agreement:
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtract
the following loans currently included in Schedule 4.15A Single Family Shared-Loss
Agreement:
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add
the following loan not included in either Schedule 4.15A or 4.15B Asset
Detail (Must provide documentation)
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add
the following Unfunded Commitments (Must provide documentation)
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Adjustments
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 4.15A Revised Totals
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
Exhibit 2.1(c)
|
|
1
|
|
Shared-Loss Month
|
|
|
|
2
|
|
Loan ID
|
|
|
|
3
|
|
First payment date
|
|
|
|
4
|
|
Property type
|
|
|
|
5
|
|
Lien
|
|
|
|
6
|
|
Original loan amount
|
|
|
|
7
|
|
Documentation
|
|
|
|
8
|
|
Original FICO
|
|
|
|
9
|
|
Original LTV
|
|
|
|
10
|
|
Original combined LTV
|
|
|
|
11
|
|
Original front-end DTI
|
|
|
|
12
|
|
Original back-end DTI
|
|
|
|
13
|
|
Negative Amortization cap
|
|
|
|
14
|
|
Property city
|
|
|
|
15
|
|
Property state
|
|
|
|
16
|
|
Property street address
|
|
|
|
17
|
|
Property zip
|
|
|
|
18
|
|
Maturity date
|
|
|
|
19
|
|
MI Coverage
|
|
|
|
20
|
|
Occupancy
|
|
|
|
21
|
|
Interest rate type
|
|
|
|
22
|
|
Product Type
|
|
|
|
23
|
|
Loan amortization type
|
|
|
|
24
|
|
Lookback
|
|
|
|
25
|
|
Margin
|
|
|
|
26
|
|
Interest rate index
|
|
|
|
27
|
|
Interest rate cap
|
|
|
|
28
|
|
Interest rate floor
|
|
|
|
29
|
|
First interest cap
|
|
|
|
30
|
|
Periodic interest cap
|
|
|
|
31
|
|
Periodic interest floor
|
|
|
|
32
|
|
Pay Cap
|
|
|
|
33
|
|
UPB
|
|
|
|
34
|
|
Interest rate
|
|
|
|
35
|
|
Paid-to date
|
|
|
|
36
|
|
Next payment due date
|
|
|
|
37
|
|
Scheduled payment
|
|
|
|
38
|
|
Escrow payment
|
|
85
|
|
39
|
|
Escrow
balance
|
|
|
|
40
|
|
Next
interest rate reset date
|
|
|
|
41
|
|
Next
payment reset date
|
|
|
|
42
|
|
Rate
reset period
|
|
|
|
43
|
|
Payment
reset period
|
|
|
|
44
|
|
Payment
History
|
|
|
|
45
|
|
Exceptional
Loan Status
|
|
|
|
46
|
|
Valuation
date
|
|
|
|
47
|
|
Valuation
amount
|
|
|
|
48
|
|
Valuation
type
|
|
|
|
49
|
|
Household
income
|
|
|
|
50
|
|
Current
FICO
|
|
|
|
51
|
|
Maximum
Draw Amount
|
|
|
|
52
|
|
Draw
period
|
|
|
|
53
|
|
Superior
Lien Balance
|
|
86
Exhibit 2a (1)
CALCULATION OF RESTRUCTURING LOSS - HAMP or FDIC LOAN
MODIFICATION
|
1
|
|
Shared-Loss Month
|
|
20090531
|
|
|
2
|
|
Loan no:
|
|
123456
|
|
|
3
|
|
Modification Program:
|
|
HAMP
|
|
|
|
|
|
|
|
|
|
|
|
Loan before Restructuring
|
|
|
|
|
4
|
|
Unpaid
principal balance
|
|
450000
|
|
|
5
|
|
Remaining
term
|
|
298
|
|
|
6
|
|
Interest
rate
|
|
0.06500
|
|
|
7
|
|
Next
ARM reset rate (if within next 4 months)
|
|
0.00000
|
|
|
8
|
|
Interest
Paid-To-Date
|
|
20081230
|
|
|
9
|
|
Delinquency
Status
|
|
FC
|
|
|
10
|
|
Monthly
payment - P&I
|
|
3047
|
|
|
11
|
|
Monthly
payment - T&I
|
|
1000
|
|
|
|
|
Total
monthly payment
|
|
4047
|
|
|
12
|
|
Household
current annual income
|
|
95000
|
|
|
13
|
|
Valuation
Date
|
|
20090121
|
|
|
14
|
|
Valuation
Amount
|
|
425000
|
|
|
15
|
|
Valuation Type
(Interior/exterior appraisal, BPO, AVM, etc)
|
|
AVM
|
|
|
|
|
|
|
|
|
|
|
|
Terms of Modified/Restructured Loan
|
|
|
|
|
16
|
|
1st
Trial Payment Due Date
|
|
20090119
|
|
|
17
|
|
Modification
Effective Date
|
|
20090419
|
|
|
18
|
|
Net Unpaid Principal
Balance (net of forbearance & principal reduction)
|
|
467188
|
|
|
19
|
|
Principal
forbearance
|
|
0
|
|
|
20
|
|
Principal
reduction
|
|
0
|
|
|
21
|
|
Product
(fixed or step)
|
|
step
|
|
|
22
|
|
Remaining
amortization term
|
|
480
|
|
|
23
|
|
Maturity
date
|
|
20490119
|
|
|
24
|
|
Interest
rate
|
|
0.02159
|
|
|
25
|
|
Next
Payment due date
|
|
20090601
|
|
|
26
|
|
Monthly
payment - P&I
|
|
1454
|
|
|
27
|
|
Monthly
payment - T&I
|
|
1000
|
|
|
|
|
Total
monthly payment
|
|
2454
|
|
|
28
|
|
Next
reset date
|
|
20140501
|
|
|
29
|
|
Interest
rate change per adjustment
|
|
0.01000
|
|
|
30
|
|
Lifetime
interest rate cap
|
|
0.05530
|
|
|
31
|
|
Back
end DTI
|
|
0.45000
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Loss Calculation
|
|
|
|
|
|
|
|
|
|
|
|
same
as Unpaid Principal Balance before 4 above restructuring/modification
|
|
450000
|
|
|
34
|
|
Accrued
interest, limited to 90 days
|
|
7313
|
|
|
35
|
|
Attorney’s
fees
|
|
0
|
|
|
36
|
|
Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
500
|
|
|
37
|
|
Property
protection costs, maint. and repairs
|
|
0
|
|
|
38
|
|
Tax
and insurance advances
|
|
2500
|
|
|
|
|
Other
Advances
|
|
|
|
|
39
|
|
Appraisal/Broker’s
Price Opinion fees
|
|
100
|
|
|
40
|
|
Inspections
|
|
0
|
|
|
41
|
|
Other
|
|
0
|
|
|
|
|
Total
loan balance due before restructuring
|
|
460413
|
|
|
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
42
|
|
MI
contribution
|
|
0
|
|
|
43
|
|
Other
credits
|
|
0
|
|
|
44
|
|
T &
I escrow account balances, if positive
|
|
|
|
|
|
|
Total
Cash Recovery
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions
for Calculating Loss Share Amount, Restructured Loan:
|
|
|
|
|
45
|
|
Discount
rate for projected cash flows
|
|
0.05530
|
|
|
46
|
|
Loan
prepayment in full
|
|
120
|
|
|
47
|
|
NPV
of projected cash flows (see amort schd1)
|
|
386927
|
|
|
|
|
|
|
|
|
|
48
|
|
Gain/Loss Amount
|
|
73485
|
|
Line
item definitions can be found in SFR Data Submission Handbook.
87
Exhibit 2a(2)
CALCULATION OF RESTRUCTURING LOSS - 2nd FDIC MODIFICATION
|
1
|
|
Shared-Loss Month
|
|
20090531
|
|
|
2
|
|
Loan no:
|
|
123456
|
|
|
3
|
|
Modification Program:
|
|
FDIC
|
|
|
|
|
|
|
|
|
|
|
|
Loan before Restructuring
|
|
|
|
|
4
|
|
Unpaid
principal balance
|
|
450000
|
|
|
5
|
|
Remaining
term
|
|
298
|
|
|
6
|
|
Interest
rate
|
|
0.06500
|
|
|
7
|
|
Next
ARM reset rate (if within next 4 months)
|
|
0.00000
|
|
|
8
|
|
Interest
Paid-To-Date
|
|
20081230
|
|
|
9
|
|
Delinquency
Status
|
|
FC
|
|
|
10
|
|
Monthly
payment - P&I
|
|
3047
|
|
|
11
|
|
Monthly
payment - T&I
|
|
1000
|
|
|
|
|
Total
monthly payment
|
|
4047
|
|
|
12
|
|
Household
current annual income
|
|
95000
|
|
|
13
|
|
Valuation
Date
|
|
20090121
|
|
|
14
|
|
Valuation
Amount
|
|
425000
|
|
|
15
|
|
Valuation
Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
AVM
|
|
|
|
|
|
|
|
|
|
|
|
Terms of Modified/Restructured Loan
|
|
|
|
|
16
|
|
1st
Trial Payment Due Date
|
|
20090201
|
|
|
17
|
|
Modification
Effective Date
|
|
20090501
|
|
|
18
|
|
Net
Principal balance (net of forbearance & principal reduction)
|
|
467188
|
|
|
19
|
|
Principal
forbearance
|
|
0
|
|
|
20
|
|
Principal
reduction
|
|
0
|
|
|
21
|
|
Product
(fixed or step)
|
|
step
|
|
|
22
|
|
Remaining
amortization term
|
|
480
|
|
|
23
|
|
Maturity
date
|
|
20490501
|
|
|
24
|
|
Interest
rate
|
|
0.02159
|
|
|
25
|
|
Next
Payment due date
|
|
20090601
|
|
|
26
|
|
Monthly
payment - P&I
|
|
1454
|
|
|
27
|
|
Monthly
payment - T&I
|
|
1000
|
|
|
|
|
Total
monthly payment
|
|
2454
|
|
|
28
|
|
Next
reset date
|
|
20140501
|
|
|
29
|
|
Interest
rate change per adjustment
|
|
0.01000
|
|
|
30
|
|
Lifetime
interest rate cap
|
|
0.05530
|
|
|
31
|
|
Back
end DTI
|
|
0.45000
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Loss Calculation
|
|
|
|
|
32
|
|
Previous
NPV of loan modification
|
|
458740
|
|
|
33
|
|
Less:
Post modification principal payments Plus:
|
|
2500
|
|
|
35
|
|
Attorney’s
fees
|
|
0
|
|
|
36
|
|
Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
500
|
|
|
37
|
|
Property
protection costs, maint. and repairs
|
|
0
|
|
|
38
|
|
Tax
and insurance advances
|
|
2500
|
|
|
|
|
Other
Advances
|
|
|
|
|
39
|
|
Appraisal/Broker’s
Price Opinion fees
|
|
100
|
|
|
40
|
|
Inspections
|
|
0
|
|
|
41
|
|
Other
|
|
0
|
|
|
|
|
Total
loan balance due before restructuring
|
|
459340
|
|
|
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
42
|
|
MI
contribution
|
|
0
|
|
|
43
|
|
Other
credits
|
|
0
|
|
|
44
|
|
T &
I escrow account balances, if positive
|
|
|
|
|
|
|
Total
Cash Recovery
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions
for Calculating Loss Share Amount, Restructured Loan:
|
|
|
|
|
45
|
|
Discount
rate for projected cash flows
|
|
0.05530
|
|
|
46
|
|
Loan
prepayment in full
|
|
120
|
|
|
47
|
|
NPV
of projected cash flows (see amort schd 1)
|
|
386927
|
|
|
|
|
|
|
|
|
|
48
|
|
Gain/Loss Amount
|
|
72413
|
|
Line
item definitions can be found in SFR Data Submission Handbook.
88
Notes to Exhibits 2a (restructuring)
1.
The data shown
are for illustrative purpose. The figures will vary for actual restructurings.
2.
For purposes of
loss sharing, losses on restructured loans are calculated as the difference
between:
a.
The principal,
accrued interest, advances due on the loan, and allowable 3
rd
party fees prior to
restructuring (2a(1) lines 34-41, 2a(2) lines 33-41), and
b.
The Net Present
Value (NPV) of the estimated cash flows (line 47). The cash flows should assume
no default or prepayment for 10 years, followed by prepayment in full at the
end of 10 years (120 months).
3.
For
owner-occupied residential loans, the NPV is calculated using the most recently
published Freddie Mac survey rate on 30-year fixed rate loans as of the restructure
date.
4.
For investor
owned or non-owner occupied residential loans, the NPV is calculated using
commercially reasonable rate on 30-year fixed rate loans as of the restructure
date.
5.
If the new loan
is an adjustable-rate loan, interest rate resets and related cash flows should
be projected based on the index rate in effect at the date of the loan
restructuring. If the restructured loan otherwise provides for specific charges
in monthly P&I payments over the term of the loan, those changes should be
reflected in the projected cash flows. Assuming Institution must retain
supporting schedule of projected cash flows as required by Section 2.1 of
the Single Family Shared-Loss Agreement and provide it to the FDIC if requested
for a sample audit.
6.
Do not include
late fees, prepayment penalties, or any similar lender fees or charges by the
Failed Bank or Assuming Institution to the loan account, any allocation of
Assuming Institution’s servicing costs, or any allocations of Assuming
Institution’s general and administrative (G&A) or other operating costs.
7.
The amount of
accrued interest that may be added to the balance of the loan is limited to the
minimum of:
a.
90 days
b.
The number of
days that the loan is delinquent at the time of restructuring
c.
The number of
days between the resolution date and the restructuring
To
calculate accrued interest, apply the note interest rate that would have been
in effect if the loan were performing to the principal balance after
application of the last payment made by the borrower.
89
Exhibit 2b(1)
CALCULATION OF LOSS FOR SHORT SALE LOANS
Loan written down to book value prior to Loss Share
|
1
|
|
Shared-Loss
Month:
|
|
20090531
|
|
|
2
|
|
Loan
#
|
|
62201
|
|
|
|
|
|
|
|
|
|
3
|
|
Interest
Paid-to-Date
|
|
20071130
|
|
|
4
|
|
Short
Payoff Date
|
|
20090522
|
|
|
5
|
|
Note
Interest rate
|
|
0.08500
|
|
|
6
|
|
Occupancy
|
|
Owner
|
|
|
|
|
If
owner occupied:
|
|
|
|
|
7
|
|
Household
current annual income
|
|
45000
|
|
|
8
|
|
Estimated
NPV of loan mod
|
|
220000
|
|
|
9
|
|
Valuation
Date
|
|
20090121
|
|
|
10
|
|
Valuation
Amount
|
|
300000
|
|
|
11
|
|
Valuation Type
(Interior/exterior appraisal, BPO, AVM, etc)
|
|
Ext
Appraisal
|
|
|
|
|
|
|
|
|
|
|
|
Short-Sale Loss calculation
|
|
|
|
|
13
|
|
Book
Value
|
|
300000
|
|
|
14
|
|
Less:
Post closing principal payments
|
|
0
|
|
|
17
|
|
Accrued
interest, limited to 90 days
|
|
6375
|
|
|
18
|
|
Attorney’s
fees
|
|
75
|
|
|
19
|
|
Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
0
|
|
|
20
|
|
Property protection costs,
maint., repairs and any costs or expenses relating to environmental
conditions
|
|
0
|
|
|
21
|
|
Tax
and insurance advances
|
|
0
|
|
|
|
|
Other
Advances
|
|
|
|
|
22
|
|
Appraisal/Broker’s
Price Opinion fees
|
|
250
|
|
|
23
|
|
Inspections
|
|
600
|
|
|
24
|
|
Other
|
|
0
|
|
|
25
|
|
Incentive
to borrower
|
|
5000
|
|
|
|
|
|
|
|
|
|
|
|
Gross
balance recoverable by Purchaser
|
|
312300
|
|
|
|
|
|
|
|
|
|
26
|
|
Amount
accepted in Short-Sale (net proceeds)
|
|
275000
|
|
|
27
|
|
Hazard
Insurance
|
|
0
|
|
|
28
|
|
Mortgage
Insurance
|
|
0
|
|
|
29
|
|
T &
I escrow account balance, if positive
|
|
0
|
|
|
30
|
|
Other
credits, if any (itemize)
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Recovery
|
|
275000
|
|
|
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
37300
|
|
(1) Costs
with respect to environmental remediation activities are limited to $200,000
unless prior consent of the FDIC
Line item definitions
located in SF Data Submission Handbook
90
Exhibit 2b(2)
CALCULATION OF LOSS FOR SHORT SALE LOANS
No Preceeding Loan Mod under Loss Share
|
1
|
|
Shared-Loss
Month:
|
|
20090531
|
|
|
2
|
|
Loan
#
|
|
58776
|
|
|
|
|
|
|
|
|
|
3
|
|
Interest
Paid-to-Date
|
|
20080731
|
|
|
4
|
|
Short
Payoff Date
|
|
20090417
|
|
|
5
|
|
Note
Interest rate
|
|
0.07750
|
|
|
6
|
|
Occupancy
|
|
Owner
|
|
|
|
|
If
owner occupied:
|
|
|
|
|
7
|
|
Household
current annual income
|
|
38500
|
|
|
8
|
|
Estimated
NPV of loan mod
|
|
200000
|
|
|
9
|
|
Valuation
Date
|
|
20090121
|
|
|
10
|
|
Valuation
Amount
|
|
300000
|
|
|
11
|
|
Valuation Type
(Interior/exterior appraisal, BPO, AVM, etc)
|
|
Ext
Appraisal
|
|
|
|
|
|
|
|
|
|
|
|
Short-Sale Loss calculation
|
|
|
|
|
12
|
|
Loan
UPB
|
|
375000
|
|
|
17
|
|
Accrued
interest, limited to 90 days
|
|
7266
|
|
|
18
|
|
Attorney’s
fees
|
|
0
|
|
|
19
|
|
Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
400
|
|
|
20
|
|
Property protection costs,
maint., repairs and any costs or expenses relating to environmental
conditions
|
|
1450
|
|
|
21
|
|
Tax
and insurance advances
|
|
0
|
|
|
|
|
Other
Advances
|
|
|
|
|
22
|
|
Appraisal/Broker’s
Price Opinion fees
|
|
350
|
|
|
23
|
|
Inspections
|
|
600
|
|
|
24
|
|
Other
|
|
0
|
|
|
25
|
|
Incentive
to borrower
|
|
2000
|
|
|
|
|
|
|
|
|
|
|
|
Gross
balance recoverable by Purchaser
|
|
387066
|
|
|
|
|
|
|
|
|
|
26
|
|
Amount
accepted in Short-Sale (net proceeds)
|
|
255000
|
|
|
27
|
|
Hazard
Insurance
|
|
0
|
|
|
28
|
|
Mortgage
Insurance
|
|
0
|
|
|
|
|
T &
I escrow account balance, if positive
|
|
0
|
|
|
29
|
|
|
|
|
|
|
30
|
|
Other
credits, if any (itemize)
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Recovery
|
|
255000
|
|
|
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
132066
|
|
(1) Costs
with respect to environmental remediation activities are limited to $200,000
unless prior consent of the FDIC
Line item definitions
located in SF Data Submission Handbook
91
Notes to Exhibits 2b (short sale)
1.
The data shown
are for illustrative purpose. The figures will vary for actual short sales.
2.
The covered
loss is the difference between the gross balance recoverable by Purchaser and
the total cash recovery. There are two methods of calculation for covered
losses from short sales, depending upon the circumstances. They are shown
below:
a.
If the loan was
restructured when the Loss Share agreement was in place, and then the short
sale occurred, use Exhibit 2b(3). This version uses the Net Present Value
(NPV) of the modified loan as the starting point for the covered loss.
b.
Otherwise, use
Exhibit 2b(2). This version uses the unpaid balance of the loan as of the
last payment as the starting point for the covered loss.
c.
Use
Exhibit 2b(1) for loans written down to book value prior to the
shared-loss agreement.
3.
For
Exhibit 2b(2), the gross balance recoverable by the purchaser is
calculated as the sum of lines 12 – 25; it is shown after line 25. For
Exhibit 2b(3), the gross balance recoverable by the purchaser is
calculated as line 15 minus line 16 plus lines 18 – 25; it is shown after line
25.
4.
For
Exhibit 2b(2), the total cash recovery is calculated as the sum of lines
26 – 30; it is shown in line 31. For Exhibit 2b(3), the total cash
recovery is calculated as the sum of lines 26 – 30; it is shown after line 30.
5.
Reasonable and
customary third party attorney’s fees and expenses incurred by or on behalf of
Assuming Institution in connection with any enforcement procedures, or
otherwise with respect to such loan, are reported under Attorney’s fees.
6.
Do not include
late fees, prepayment penalties, or any similar lender fees or charges by the Failed
Bank or Assuming Institution to the loan account, any allocation of Assuming
Institution’s servicing costs, or any allocations of Assuming Institution’s
general and administrative (G&A) or other operating costs.
7.
If
Exhibit 2b(3) is used, then no accrued interest may be included as a
covered loss. Otherwise, the amount of accrued interest that may be included as
a covered loss is limited to the minimum of:
a.
90 days
b.
The number of
days that the loan is delinquent when the property was sold
c.
The number of
days between the resolution date and the date when the property was sold
To
calculate accrued interest, apply the note interest rate that would have been
in effect if the loan were performing to the principal balance after
application of the last payment made by the borrower.
92
Exhibit 2c(1)
CALCULATION OF FORECLOSURE LOSS
ORE or Foreclosure Occurred Prior to Loss Share Agreement
|
1
|
|
Shared-Loss Month
|
|
20090630
|
|
|
2
|
|
Loan no:
|
|
364574
|
|
|
|
|
|
|
|
|
|
3
|
|
Interest
Paid-To-Date
|
|
20071001
|
|
|
4
|
|
Foreclosure
sale date
|
|
20080202
|
|
|
5
|
|
Liquidation
date
|
|
20090412
|
|
|
6
|
|
Note
Interest rate
|
|
0.08100
|
|
|
10
|
|
Valuation
Date
|
|
20090121
|
|
|
11
|
|
Valuation
Amount
|
|
228000
|
|
|
12
|
|
Valuation Type
(Interior/exterior appraisal, BPO, AVM, etc)
|
|
Int
Appr
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
|
|
13
|
|
Book
value at date of Loss Share agreement
|
|
244900
|
|
|
14
|
|
Less:
Post closing principal payments
|
|
0
|
|
|
|
|
|
|
3306
|
|
|
|
|
Costs incurred after Loss Share agreement in place:
|
|
|
|
|
19
|
|
Attorney’s
fees
|
|
0
|
|
|
20
|
|
Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
0
|
|
|
21
|
|
Property
protection costs, maint. and repairs
|
|
6500
|
|
|
22
|
|
Tax
and insurance advances
|
|
0
|
|
|
|
|
Other
Advances
|
|
|
|
|
23
|
|
Appraisal/Broker’s
Price Opinion fees
|
|
0
|
|
|
24
|
|
Inspections
|
|
0
|
|
|
25
|
|
Other
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Gross
balance recoverable by Purchaser
|
|
254706
|
|
|
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
26
|
|
Net
liquidation proceeds (from HUD-1 settl stmt)
|
|
219400
|
|
|
27
|
|
Hazard
Insurance proceeds
|
|
0
|
|
|
28
|
|
Mortgage
Insurance proceeds
|
|
0
|
|
|
29
|
|
T &
I escrow account balances, if positive
|
|
0
|
|
|
30
|
|
Other
credits, if any (itemize)
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Recovery
|
|
219400
|
|
|
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
35306
|
|
Line
item definitions located in SF Data Submission Handbook
93
Exhibit 2c(2)
CALCULATION OF FORECLOSURE LOSS
During Term of the Agreement
No Preceeding Loan Mod under Loss
Share
|
1
|
|
Shared-Loss Month
|
|
20090531
|
|
|
2
|
|
Loan no:
|
|
292334
|
|
|
|
|
|
|
|
|
|
3
|
|
Interest
Paid-to-Date
|
|
20080430
|
|
|
4
|
|
Foreclosure
sale date
|
|
20090115
|
|
|
5
|
|
Liquidation
date
|
|
20090412
|
|
|
6
|
|
Note
Interest rate
|
|
0.08000
|
|
|
7
|
|
Occupancy
|
|
Owner
|
|
|
|
|
If
owner occupied:
|
|
|
|
|
8
|
|
Household
current annual income
|
|
42000
|
|
|
9
|
|
Estimated
NPV of loan mod
|
|
195000
|
|
|
10
|
|
Valuation
Date
|
|
20090121
|
|
|
11
|
|
Valuation
Amount
|
|
235000
|
|
|
12
|
|
Valuation Type
(Interior/exterior appraisal, BPO, AVM, etc)
|
|
Ext
BPO
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
|
|
14
|
|
Loan
Principal balance at property reversion
|
|
300000
|
|
|
|
|
Plus:
|
|
|
|
|
18
|
|
Accrued
interest, limited to 90 days
|
|
6000
|
|
|
19
|
|
Attorney’s
fees
|
|
0
|
|
|
20
|
|
Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
4000
|
|
|
21
|
|
Property
protection costs, maint. and repairs
|
|
5500
|
|
|
22
|
|
Tax
and insurance advances
|
|
1500
|
|
|
|
|
Other
Advances
|
|
|
|
|
23
|
|
Appraisal/Broker’s
Price Opinion fees
|
|
0
|
|
|
24
|
|
Inspections
|
|
50
|
|
|
25
|
|
Other
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Gross
balance recoverable by Purchaser
|
|
317050
|
|
|
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
26
|
|
Net
liquidation proceeds (from HUD-1 settl stmt)
|
|
205000
|
|
|
27
|
|
Hazard
Insurance proceeds
|
|
0
|
|
|
28
|
|
Mortgage
Insurance proceeds
|
|
0
|
|
|
29
|
|
T &
I escrow account balances, if positive
|
|
0
|
|
|
30
|
|
Other
credits, if any (itemize)
|
|
0
|
|
|
|
|
Total
Cash Recovery
|
|
205000
|
|
|
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
112050
|
|
|
|
|
|
|
|
|
|
Line
item definitions located in SF Data Submission Handbook
|
|
|
|
94
Exhibit 2c(3)
CALCULATION OF FORECLOSURE LOSS
Foreclosure after a Covered Loan Mod
|
1
|
|
Shared-Loss Month
|
|
20090531
|
|
|
2
|
|
Loan no:
|
|
138554
|
|
|
|
|
|
|
|
|
|
3
|
|
Interest
Paid-to-Date
|
|
20080430
|
|
|
4
|
|
Foreclosure
sale date
|
|
20090115
|
|
|
5
|
|
Liquidation
date
|
|
20090412
|
|
|
6
|
|
Note
Interest rate
|
|
0.04000
|
|
|
10
|
|
Valuation
Date
|
|
20081215
|
|
|
11
|
|
Valuation
Amount
|
|
210000
|
|
|
|
|
|
|
|
|
|
12
|
|
Valuation
Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
Ext
Appr
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
|
|
16
|
|
NPV
of projected cash flows at loan mod
|
|
285000
|
|
|
17
|
|
Less:
Post modification principal payments
|
|
2500
|
|
|
|
|
Plus:
|
|
|
|
|
19
|
|
Attorney’s
fees
|
|
0
|
|
|
20
|
|
Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
4000
|
|
|
21
|
|
Property
protection costs, maint. and repairs
|
|
7000
|
|
|
22
|
|
Tax
and insurance advances
|
|
2000
|
|
|
|
|
Other
Advances
|
|
|
|
|
23
|
|
Appraisal/Broker’s
Price Opinion fees
|
|
0
|
|
|
24
|
|
Inspections
|
|
0
|
|
|
25
|
|
Other
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Gross
balance recoverable by Purchaser
|
|
295500
|
|
|
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
26
|
|
Net
liquidation proceeds (from HUD-1 settl stmt)
|
|
201000
|
|
|
27
|
|
Hazard
Insurance proceeds
|
|
0
|
|
|
28
|
|
Mortgage
Insurance proceeds
|
|
0
|
|
|
29
|
|
T &
I escrow account balances, if positive
|
|
0
|
|
|
30
|
|
Other
credits, if any (itemize)
|
|
0
|
|
|
|
|
Total
Cash Recovery
|
|
201000
|
|
|
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
94500
|
|
|
|
|
|
|
|
|
|
Line
item definitions located in SF Data Submission Handbook
|
|
|
|
95
Notes to Exhibits 2c (foreclosure)
2.
The data shown
are for illustrative purpose. The figures will vary for actual restructurings.
3.
The covered
loss is the difference between the gross balance recoverable by Purchaser and
the total cash recovery. There are three methods of calculation for covered
losses from foreclosures, depending upon the circumstances. They are shown
below:
a.
If foreclosure
occurred prior to the beginning of the Loss Share agreement, use
Exhibit 2c(1). This version uses the book value of the REO as the starting
point for the covered loss.
b.
If foreclosure
occurred after the Loss Share agreement was in place, and if the loan was not
restructured when the Loss Share agreement was in place, use
Exhibit 2c(2). This version uses the unpaid balance of the loan as of the
last payment as the starting point for the covered loss.
c.
If the loan was
restructured when the Loss Share agreement was in place, and then foreclosure
occurred, use Exhibit 2c(3). This version uses the Net Present Value (NPV)
of the modified loan as the starting point for the covered loss.
4.
For
Exhibit 2c(1), the gross balance recoverable by the purchaser is
calculated as the sum of lines 13 – 25; it is shown after line 25. For
Exhibit 2c(2), the gross balance recoverable by the purchaser is
calculated as the sum of lines 14 – 25; it is shown after line 25. For
Exhibit 2c(3), the gross balance recoverable by the purchaser is
calculated as line 16 minus line 17 plus lines 17 – 25; it is shown after line
25.
5.
For
Exhibit 2c(1), the total cash recovery is calculated as the sum of lines
26 – 30; it is shown in line 31. For Exhibit 2c(2), the total cash
recovery is calculated as the sum of lines 26 – 30; it is shown in line 31. For
Exhibit 2c(3), the total cash recovery is calculated as the sum of lines
26 – 30; it is shown in line 31.
6.
Reasonable and
customary third party attorney’s fees and expenses incurred by or on behalf of
Assuming Institution in connection with any enforcement procedures, or
otherwise with respect to such loan, are reported under Attorney’s fees.
7.
Assuming
Institution’s (or Third Party Servicer’s) reasonable and customary
out-of-pocket costs paid to either a third party or an affiliate (if affiliate
is pre-approved by the FDIC) for foreclosure, property protection and
maintenance costs, repairs, assessments, taxes, insurance and similar items are
treated as part of the gross recoverable balance, to the extent they are not
paid from funds in the borrower’s escrow account. Allowable costs are limited
to amounts per Freddie Mac and Fannie Mae guidelines (as in effect from time to
time), where applicable, provided that this limitation shall not apply to costs
or expenses relating to environmental conditions.
8.
Do not include
late fees, prepayment penalties, or any similar lender fees or charges by the
Failed Bank or Assuming Institution to the loan account, any allocation of
Assuming Institution’s servicing costs, or any allocations of Assuming
Institution’s general and administrative (G&A) or other operating costs.
9.
If
Exhibit 2c(3) is used, then no accrued interest may be included as a
covered loss. The amount of accrued interest that may be included as a covered
loss on Exhibit 2c(2) is limited to the minimum of:
a.
90 days
b.
The number of
days that the loan is delinquent when the property was sold
96
c.
The number of
days between the resolution date and the date when the property was sold
To calculate accrued
interest, apply the note interest rate that would have been in effect if the
loan were performing to the principal balance after application of the last
payment made by the borrower.
97
Exhibit 2d(1)
CALCULATION OF LOSS FOR UNRELATED 2ND LIEN
CHARGE-OFF
|
1
|
|
Shared-Loss
Month:
|
|
20090531
|
|
|
2
|
|
Loan
#
|
|
58776
|
|
|
|
|
|
|
|
|
|
3
|
|
Interest
paid-to-date
|
|
20081201
|
|
|
4
|
|
Charge-Off
Date
|
|
20090531
|
|
|
5
|
|
Note
Interest rate
|
|
0.03500
|
|
|
6
|
|
Occupancy
|
|
Owner
|
|
|
|
|
If
owner occupied:
|
|
|
|
|
7
|
|
Household
current annual income
|
|
0
|
|
|
8
|
|
Valuation
Date
|
|
20090402
|
|
|
9
|
|
Valuation
Amount
|
|
230000
|
|
|
10
|
|
Valuation Type
(Interior/exterior appraisal, BPO, AVM, etc)
|
|
BPO
|
|
|
11
|
|
Balance
of superior liens
|
|
210000
|
|
|
|
|
|
|
|
|
|
|
|
Charge-Off Loss calculation
|
|
|
|
|
12
|
|
Loan
Principal balance
|
|
55000
|
|
|
13
|
|
Charge-off
amount (principal only)
|
|
55000
|
|
|
|
|
Plus:
|
|
|
|
|
14
|
|
Accrued
interest, limited to 90 days
|
|
481
|
|
|
15
|
|
Attorney’s
fees
|
|
0
|
|
|
16
|
|
Foreclosure costs,
including title search, filing fees, advertising, etc.
|
|
250
|
|
|
17
|
|
Property protection costs,
maint., repairs and any costs or expenses relating to environmental
conditions
|
|
0
|
|
|
18
|
|
Tax
and insurance advances
|
|
0
|
|
|
|
|
Other
Advances
|
|
|
|
|
19
|
|
Appraisal/Broker’s
Price Opinion fees
|
|
75
|
|
|
20
|
|
Inspections
|
|
0
|
|
|
21
|
|
Other
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Gross
balance recoverable by Purchaser
|
|
55806
|
|
|
|
|
|
|
|
|
|
22
|
|
Foreclosure
sale proceeds
|
|
0
|
|
|
23
|
|
Hazard
Insurance proceeds
|
|
0
|
|
|
24
|
|
Mortgage
Insurance proceeds
|
|
0
|
|
|
25
|
|
Tax
overage
|
|
0
|
|
|
26
|
|
Short
sale payoff
|
|
1500
|
|
|
27
|
|
Other
credits, if any (itemize)
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Recovery
|
|
1500
|
|
|
|
|
|
|
|
|
|
28
|
|
Loss Amount
|
|
54306
|
|
(1) Costs
with respect to environmental remediation activities are limited to $200,000
unless prior consent of the FDIC
Line item definitions
located in SF Data Submission Handbook
98
Exhibit 2d(2)
|
Shared-Loss
Month:
|
[input
month]
|
|
Loan no.:
|
[input
loan no.)
|
NOTE
The calculation of recovery
on a loan for which a Restructuring Loss has been paid will only apply if the
loan is sold.
|
EXAMPLE CALCULATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
Loss Information
|
|
|
|
|
|
|
Loan
principal balance before restructuring
|
|
$
|
200,000
|
|
A
|
|
|
NPV,
restructured loan
|
|
165,000
|
|
B
|
|
|
Loss
on restructured loan
|
|
$
|
35,000
|
|
A – B
|
|
|
Times
FDIC applicable loss share % (80%)
|
|
80
|
%
|
|
|
|
Loss share payment to purchaser
|
|
$
|
28,000
|
|
C
|
|
|
|
|
|
|
|
|
|
Calculation – Recovery amount due to
Receiver
|
|
|
|
|
|
|
Loan
sales price
|
|
$
|
190,000
|
|
|
|
|
NPV
of restructured loan at mod date
|
|
165,000
|
|
|
|
|
Gain
- step 1
|
|
25,000
|
|
D
|
|
|
PLUS
|
|
|
|
|
|
|
Loan
UPB after restructuring (1)
|
|
200,000
|
|
|
|
|
Loan
UPB at liquidation date
|
|
192,000
|
|
|
|
|
Gain
- step 2 (principal collections after restructuring)
|
|
8,000
|
|
E
|
|
|
Recovery
amount
|
|
33,000
|
|
D + E
|
|
|
Times
FDIC loss share %
|
|
80
|
%
|
|
|
|
Recovery due to FDIC
|
|
$
|
26,400
|
|
F
|
|
|
Net loss share paid to purchaser (C – F)
|
|
$
|
1,600
|
|
|
|
|
|
|
|
|
|
|
|
Proof Calculation
(2)
|
|
|
|
|
|
|
Loan
principal balance
|
|
$
|
200,000
|
|
G
|
|
|
|
|
|
|
|
|
|
Principal
collections on loan
|
|
8,000
|
|
|
|
|
Sales
price for loan
|
|
190,000
|
|
|
|
|
Total
collections on loan
|
|
198,000
|
|
H
|
|
|
Net
loss on loan
|
|
$
|
2,000
|
|
G – H
|
|
|
Times
FDIC applicable loss share % (80%)
|
|
80
|
%
|
|
|
|
Loss share payment to purchaser
|
|
$
|
1,600
|
|
|
|
(1)
This example
assumes that the FDIC loan modification program as shown in Exhibit 5 is
applied and the loan restructuring does not result in a reduction in the loan
principal balance due from the borrower.
(2)
This proof
calculation is provided to illustrate the concept and the Assuming Institution
is not required to provide this with its Recovery calculations.
99
Exhibit 3
Portfolio Performance and Summary Schedule
|
SHARED-LOSS LOANS
|
|
PORTFOLIO PERFORMANCE AND SUMMARY SCHEDULE
|
|
MONTH
ENDED:
|
[input
report month]
|
|
POOL SUMMARY
|
|
#
|
|
$
|
|
|
|
|
Loans at Sale Date
|
|
xx
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans as of this month-end
|
|
xx
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
Percent of Total
|
|
|
PORTFOLIO PERFORMANCE STATUS
|
|
#
|
|
$
|
|
#
|
|
|
Current
|
|
|
|
|
|
|
|
|
30 –
59 days past due
|
|
|
|
|
|
|
|
|
60 –
89 days past due
|
|
|
|
|
|
|
|
|
90 –
119 days past due
|
|
|
|
|
|
|
|
|
120
and over days past due
|
|
|
|
|
|
|
|
|
In
foreclosure
|
|
|
|
|
|
|
|
|
ORE
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo
Item:
|
|
|
|
|
|
|
|
|
Loans
in process of restructuring – total
|
|
|
|
|
|
****
|
|
|
Loans
in bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
in process of restructuring by delinquency status
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
30
- 59 days past due
|
|
|
|
|
|
|
|
|
60
- 89 days past due
|
|
|
|
|
|
|
|
|
90
- 119 days past due
|
|
|
|
|
|
|
|
|
120
and over days past due In foreclosure
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
100
List of
Loans Paid Off During Month
List of
Loans Sold During Month
101
Exhibit 4
Wire Transfer Instructions
PURCHASER WIRING INSTRUCTIONS
|
BANK
RECEIVING WIRE
|
|
|
|
|
|
9 DIGIT
ABA ROUTING NUMBER
|
|
|
|
|
|
ACCOUNT
NUMBER
|
|
|
|
|
|
NAME OF
ACCOUNT
|
|
|
|
|
|
ATTENTION
TO WHOM
|
|
|
|
|
|
PURPOSE
OF WIRE
|
|
FDIC RECEIVER WIRING INSTRUCTIONS
|
BANK
RECEIVING WIRE
|
|
|
|
|
|
SHORT
NAME
|
|
|
|
|
|
ADDRESS
OF BANK RECEIVING WIRE
|
|
|
|
|
|
9 DIGIT
ABA ROUTING NUMBER
|
|
|
|
|
|
ACCOUNT
NUMBER
|
|
|
|
|
|
NAME OF
ACCOUNT
|
|
|
|
|
|
ATTENTION
TO WHOM
|
|
|
|
|
|
PURPOSE
OF WIRE
|
|
102
EXHIBIT 5
FDIC MORTGAGE LOAN MODIFICATION PROGRAM
Objective
The objective of this FDIC
Mortgage Loan Modification Program (“Program”) is to modify the terms of certain
residential mortgage loans so as to improve affordability, increase the
probability of performance, allow borrowers to remain in their homes and
increase the value of the loans to the FDIC and assignees. The Program provides
for the modification of Qualifying Loans (as defined below) by reducing the
borrower’s monthly housing debt to income ratio (“DTI Ratio”) to no more than
31% at the time of the modification and eliminating adjustable interest rate
and negative amortization features.
Qualifying Mortgage Loans
In order for a mortgage loan
to be a Qualifying Loan it must meet all of the following criteria, which must
be confirmed by the lender:
·
The collateral
securing the mortgage loan is owner-occupied and the owner’s primary residence;
and
·
The mortgagee
has a first priority lien on the collateral; and
·
Either the
borrower is at least 60 days delinquent or a default is reasonably foreseeable.
Modification Process
The lender shall undertake a
review of its mortgage loan portfolio to identify Qualifying Loans. For each
Qualifying Loan, the lender shall determine the net present value of the
modified loan and, if it will exceed the net present value of the foreclosed
collateral upon disposition, then the Qualifying Loan shall be modified so as
to reduce the borrower’s monthly DTI Ratio to no more than 31% at the time of
the modification. To achieve this, the lender shall use a combination of
interest rate reduction, term extension and principal forbearance, as
necessary.
The borrower’s monthly DTI Ratio
shall be a percentage calculated by dividing the borrower’s monthly income by
the borrower’s monthly housing payment (including principal, interest, taxes
and insurance). For these purpose of the foregoing calculation:
(1) the borrower’s
monthly income shall be defined as the borrower’s (along with any
co-borrowers’) income amount before any payroll deductions and includes wages
and salaries, overtime pay, commissions, fees, tips, bonuses, housing
allowances, other compensation for personal services, Social Security payments,
including Social Security received by adults on behalf of minors or by minors
intended for their own support, and monthly income from annuities, insurance
policies, retirement funds, pensions, disability or death benefits, unemployment
benefits, rental income and other income. All income information must be
documented and verified. If the borrower receives public assistance or collects
unemployment, the Assuming Institution must determine whether the public
assistance or unemployment income will continue for at least nine
(9) months.
(2) the borrower’s
monthly housing payment shall be the amount required to pay monthly principal
and interest plus one-twelfth of the then current annual amount required to pay
real property taxes and homeowner’s insurance with respect to the collateral.
103
In order to calculate the
monthly principal payment, the lender shall capitalize to the outstanding
principal balance of the Qualifying Loan the amount of all delinquent interest,
delinquent taxes, past due insurance premiums, third party fees and (without
duplication) escrow advances (such amount, the “Capitalized Balance”).
In order to achieve the goal
of reducing the DTI Ratio to 31%, the lender shall take the following steps in
the following order of priority with respect to each Qualifying Loan:
1.
Reduce the
interest rate to the then current Freddie Mac Survey Rate for 30-year fixed
rate mortgage loans, and adjust the term to 30 years.
2.
If the DTI
Ratio is still in excess of 31%, reduce the interest rate further, but no lower
than 3%, until the DTI ratio of 31% is achieved.
3.
If the DTI
Ratio is still in excess of 31% after adjusting the interest rate to 3%, extend
the remaining term of the loan by 10 years.
4.
If the DTI
Ratio is still in excess of 31%, calculate a new monthly payment (the “Adjusted
Payment Amount”) that will result in the borrower’s monthly DTI Ratio not
exceeding 31%. After calculating the Adjusted Payment Amount, the lender shall
bifurcate the Capitalized Balance into two portions – the amortizing portion
and the non-amortizing portion. The amortizing portion of the Capitalized
Balance shall be the mortgage amount that will fully amortize over a 40-year
term at an annual interest rate of 3% and monthly payments equal to the
Adjusted Payment Amount. The non-amortizing portion of the Capitalized Balance
shall be the difference between the Capitalized Balance and the amortizing
portion of the Capitalized Balance. If the amortizing portion of the
Capitalized Balance is less than 75% of the current estimated value of the
collateral, then the lender may choose not to restructure the loan. If the
lender chooses to restructure the loan, then the lender shall forbear on
collecting the non-amortizing portion of the Capitalized Balance, and such
amount shall be due and payable only upon the earlier of (i) maturity of
the modified loan, (ii) a sale of the property or (iii) a pay-off or
refinancing of the loan. No interest shall be charged on the non-amortizing
portion of the Capitalized Balance, but repayment shall be secured by a first
lien on the collateral.
Special Note:
The net present value
calculation used to determine whether a loan should be modified based on the
modification process above is distinct and different from the net present value
calculation used to determine the covered loss if the loan is modified. Please
refer only to the net present value calculation described in this exhibit for
the modification process, with its separate assumptions, when determining
whether to provide a modification to a borrower. Separate assumptions may
include, without limitation, Assuming Institution’s determination of a
probability of default without modification, a probability of default with
modification, home price forecasts, prepayment speeds, and event timing. These
assumptions are applied to different projected cash flows over the term of the
loan, such as the projected cash flow of the loan performing or defaulting
without modification and the projected cash flow of the loan performing or
defaulting with modification.
By contrast, the net present
value for determining the covered loss is based on a 10 year period. While the
assumptions in the net present value calculation used in the modification
process may change, the net present value calculation for determining the
covered loss remains constant.
104
Related
Junior Lien Mortgage Loans
In cases where the lender
holds a junior lien mortgage loan that is collateralized by the same property
that collateralizes a Qualifying Loan that is modified as described above, the
junior lien mortgage loan shall also be modified to enhance overall
affordability to the borrower. At a minimum, the lender shall reduce the
interest rate on the junior lien mortgage loan to no more than 2% per annum.
Further modifications may be made at the lender’s discretion as needed to
support affordability and performance of the modified first lien Qualifying Loan.
105
EXHIBIT 4.15B
COMMERCIAL SHARED-LOSS AGREEMENT
This agreement for
reimbursement of loss sharing expenses on certain loans and other assets (the
“Commercial Shared-Loss Agreement”) shall apply when the Assuming Institution
purchases Shared-Loss Assets as that term is defined herein. The terms hereof
shall modify and supplement, as necessary, the terms of the Purchase and
Assumption Agreement to which this Commercial Shared-Loss Agreement is attached
as Exhibit 4.15B and incorporated therein. To the extent any
inconsistencies may arise between the terms of the Purchase and Assumption
Agreement and this Commercial Shared-Loss Agreement with respect to the subject
matter of this Commercial Shared-Loss Agreement, the terms of this Commercial
Shared-Loss Agreement shall control. References in this Commercial Shared-Loss
Agreement to a particular Section shall be deemed to refer to a
Section in this Commercial Shared-Loss Agreement unless the context
indicates that a Section of the Purchase and Assumption Agreement is
intended.
ARTICLE I — DEFINITIONS
Capitalized terms used in
this Commercial Shared-Loss Agreement that are not defined in this Commercial
Shared-Loss Agreement are defined in the Purchase and Assumption Agreement In
addition to the terms defined above, defined below are certain additional terms
relating to loss-sharing, as used in this Commercial Shared-Loss Agreement.
“
AAA
”
means the
American Arbitration Association as provided in Section 2.1(f)(iii) of
this Commercial Shared-Loss Agreement.
“
Accrued
Interest
”
means, with respect to any Shared-Loss Loan,
Permitted Advance or Shared-Loss Loan Commitment Advance at any time, the
amount of earned and unpaid interest, taxes, credit life and/or disability
insurance premiums (if any) payable by the Obligor accrued on or with respect
to such Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment
Advance, all as reflected on the Accounting Records of the Failed Bank or the
Assuming Institution (as applicable);
provided
,
that
Accrued
Interest shall not include any amount that accrues on or with respect to any
Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment Advance
after that Asset has been placed on non-accrual or nonperforming status by
either the Failed Bank or the Assuming Institution (as applicable).
“
Additional
ORE
”
means Shared-Loss Loans that become Other Real
Estate after Bank Closing Date.
“
Affiliate
”
shall have the
meaning set forth in the Purchase and Assumption Agreement;
provided
,
that
,
for purposes of this Commercial Shared-Loss Agreement, no Third Party Servicer
shall be deemed to be an Affiliate of the Assuming Institution.
“
Aggregate
Net Charge-Offs
”
means the total amount of Charge-Offs, less
the total amount of Recoveries, for all Shared-Loss Quarters and all Recovery
Quarters.
“
Applicable
Anniversary of the Commencement Date
”
means the
fifth (5th) anniversary of the
Commencement Date.
“
Applicable
Percentage
”
means the percentage of shared-loss the Receiver
will incur with respect to this Commercial Shared-Loss Agreement, which is
eighty percent (80%
)
until the total of Net
106
Charge-Offs equals the Commercial Intrinsic
Loss Estimate, and
eighty percent (80%
)
thereafter
.
“
Calendar
Quarter
”
means a quarterly period (a) for the first
such period, beginning on the Commencement Date and ending on the last calendar
day of either March, June, September or December, whichever is the first
to occur after the Commencement Date, and (b) for quarterly periods
thereafter, beginning on the first calendar day of the calendar month
immediately after the month that ended the prior period and ending on the last
calendar day of each successive three-calendar-month period thereafter (i. e.,
each March, June, September and December, starting in the applicable order
depending on the ending date of first such period) of any year.
“
Capitalized
Expenditures
”
means those expenditures that (i) would be
capitalized under generally accepted accounting principles, and (ii) are
incurred with respect to Shared-Loss Loans, Other Real Estate, or Additional
ORE. Capitalized Expenditures shall not include expenses related to
environmental conditions including, but not limited to, remediation, storage or
disposal of any hazardous or toxic substances or any pollutant or contaminant.
“
Charge-Offs
”
means, with
respect to any Shared-Loss Assets for any period, an amount equal to the
aggregate amount of loans or portions of loans classified as “Loss” under the
Examination Criteria, including
(a) charge-offs of
(i) the principal
amount of such assets net of unearned interest (including write-downs
associated with Other Real Estate, Additional ORE, or loan modification(s));
and
(ii) Accrued
Interest; and
(iii) Capitalized
Expenditures; plus
(b) Pre-Charge-Off
Expenses incurred on the respective Shared-Loss Loans, all as effected by the
Assuming Institution during such period and reflected on the Accounting Records
of the Assuming Institution;
provided
,
that
:
(i) the aggregate
amount of Accrued Interest (including any reversals thereof) for the period
after Bank Closing that shall be included in determining the amount of
Charge-Offs for any Shared-Loss Loan shall not exceed ninety (90) days Accrued
Interest; and
(ii) no Charge-Off
shall be taken with respect to any anticipated expenditure by the Assuming
Institution until such expenditure is actually incurred; and
(iii) any financial
statement adjustments made in connection with the purchase of any Assets
pursuant to this Purchase and Assumption Agreement or any future purchase,
merger, consolidation or other acquisition of the Assuming Institution shall
not constitute “Charge-Offs”; and
(iv) except for
Portfolio Sales, the sale or other disposition of Other Real Estate, or
Additional ORE to a Person other than an Affiliate of the Assuming Institution
conducted in a commercially reasonable and prudent manner, or any other sales
or dispositions consented to by the Receiver, losses incurred on the sale or
other disposition of Shared-Loss Assets or Shared-Loss Securities to any Person
shall not constitute Charge-Offs.
107
“
Commencement
Date
”
means the first calendar day following Bank
Closing.
“
Commercial
Intrinsic Loss Estimate
”
means total losses under
this Commercial Shared-Loss Agreement in the amount of
thirty three million dollars ($ 33,000,000.00).
“
Consumer
Loans
”
means loans to individuals for household, family
and other personal expenditures, not secured by real estate, including but not
limited to loans for (i) purchase of private automobiles, pickup trucks,
household appliances, furniture, trailers and boats; (ii) repairs or
improvements to the borrower’s residence not secured by real estate;
(iii) educational expenses, including student loans, whether or not
guaranteed by the United States or any state; (iv) medical expenses;
(v) taxes; (v) vacations; (vi) personal (non business) debt
consolidation; (vii) purchases of mobile homes not combined with real
property to be used as a residence; and (viii) other personal
expenditures. Consumer Loans can be installment loans, demand loans, single payment
time loans, regardless of size or maturity, and regardless of whether the loans
are made by the consumer loan department or by any other department within the
Failed Bank. Consumer Loans also include retail installment sales paper
purchased by the Failed Bank from merchants or dealers, finance companies and
others, and extensions of credit pursuant to a credit card plan or debit card
plan.
“
Environmental
Assessment
”
means an assessment of the presence, storage or
release of any hazardous or toxic substance, pollutant or contaminant with
respect to the collateral securing a Shared-loss Loan that has been fully or
partially charged off.
“
Examination
Criteria
”
means the loan classification criteria employed by,
or any applicable regulations of, the Assuming Institution’s Chartering
Authority at the time such action is taken, as such criteria may be amended
from time to time.
“
Failed
Bank Charge-Offs/Write-Downs
”
means, with
respect to any Asset, an amount equal to the aggregate amount of reversals or
charge-offs of Accrued Interest and charge-offs and write-downs of principal
effected by the Failed Bank with respect to that Asset as reflected on the
Accounting Records of the Failed Bank.
“
FDIC
Party
”
has the meaning provided in
Section 2.1(f)(ii) of this Commercial Shared-Loss Agreement.
“
Holding Company
” means any company
owning Shares of the Assuming Institution that is a holding company pursuant to
the Bank Holding Company Act 0f 1956, 12 U.S.C. 1841
et seq
. or the Home Owner’s Loan Act, 12 U.S.C. 1461
et seq
.
“
Net
Charge-Offs
”
means, with respect to any period, an amount equal
to the aggregate amount of Charge-Offs for such period less the amount of
Recoveries for such period.
“
Net
Loss Amount
”
means the sum
of all Aggregate Net Charge-Offs under this Commercial Shared-Loss Agreement
and the Cumulative Loss Amounts under the Single Family Shared-Loss Agreement.
“
Neutral
Member
”
has the meaning provided in
Section 2.1(f)(ii) of this Commercial Shared-Loss Agreement.
“
New
Shared-Loss Loans
”
means loans that would otherwise be subject
to loss sharing under this Commercial Shared-Loss Agreement that were
originated after the Bid Valuation Date and before
108
Bank Closing.
“
Notice
of Dispute
”
has the meaning provided in
Section 2.1(f)(iii) of this Commercial Shared-Loss Agreement.
“
Other
Real Estate
”
means all of the following (including any of the
following fully or partially charged off the books and records of the Failed
Bank or the Assuming Institution) that (i) are owned by the Failed Bank as
of Bank Closing and are purchased pursuant to the Purchase and Assumption
Agreement or (ii) have arisen subsequent to Bank Closing from the
collection or settlement by the Assuming Institution of a Shared-Loss Loan:
(A) all interests in real estate (other
than Bank Premises and Fixtures), including but not limited to mineral rights,
leasehold rights, condominium and cooperative interests, air rights and
development rights; and
(B) all other assets (whether real or
personal property) acquired by foreclosure or in full or partial satisfaction
of judgments or indebtedness.
“
OTTI
Adjustment
”
means any other than temporary impairment of the
Shared-Loss Securities, determined pursuant to FAS 115, expressed as a positive
number, or reversals of other than temporary impairment, expressed as a
negative number (for the avoidance of doubt, normal and customary unrealized
mark-to-market changes by reason of the application of fair value accounting do
not qualify for loss sharing payments).
“
OTTI
Loss
”
means any other
than temporary impairment of the Shared-Loss Securities, determined pursuant to
FAS 115, expressed as a positive number (for the avoidance of doubt, normal and
customary unrealized mark-to-market changes by reason of the application of
fair value accounting do not qualify for loss sharing payments).
“
Permitted
Advance
”
means an advance of funds by the Assuming
Institution with respect to a Shared-Loss Loan, or the making of a legally
binding commitment by the Assuming Institution to advance funds with respect to
a Shared-Loss Loan, that
(i) in the case of such
an advance, is actually made, and, in the case of such a commitment, is made
and all of the proceeds thereof actually advanced, within one (1) year
after the Commencement Date; and
(ii) does not cause the
sum of
(A) the book value of
such Shared-Loss Loan as reflected on the Accounting Records of the Assuming
Institution after any such advance has been made by the Assuming Institution;
plus
(B) the unfunded amount
of any such commitment made by the Assuming Institution related thereto, to
exceed 110% of the Book Value of such Shared-Loss Loan; and
(iii) is
not made with respect to a Shared-Loss Loan with respect to which
(A) there
exists a related Shared-Loss Loan Commitment; or
109
(B) the Assuming
Institution has taken a Charge-Off; and
(iv) is made in good
faith, is supported at the time it is made by documentation in the Credit Files
and conforms to and is in accordance with the applicable requirements set forth
in Article III of this Commercial Shared-Loss Agreement and with the then
effective written internal credit policy guidelines of the Assuming
Institution;
provided
,
that
the limitations in subparagraphs (i),
(ii) and (iii) of this definition shall not apply to any such action
(other than to an advance or commitment related to the remediation, storage or
final disposal of any hazardous or toxic substance, pollutant or contaminant)
that is taken by Assuming Institution in its reasonable discretion to preserve
or secure the value of the collateral for such Shared-Loss Loan.
“
Permitted
Amendment
”
means, with respect to any Shared-Loss Loan
Commitment or Shared-Loss Loan, any amendment, modification, renewal or extension
thereof, or any waiver of any term, right, or remedy thereunder, made by the
Assuming Institution in good faith and otherwise in accordance with the
applicable requirements set forth in Article III of this Commercial
Shared-Loss Agreement and the then effective written internal credit policy
guidelines of the Assuming Institution;
provided
,
that
:
(i) with respect to a
Shared-Loss Loan Commitment or a Shared-Loss Loan that is not a revolving line
of credit, no such amendment, modification, renewal, extension, or waiver,
except as allowed under the definition of Permitted Advance, shall operate to
increase the amount of principal (A) then remaining available to be
advanced by the Assuming Institution under the Shared-Loss Loan Commitment or
(B) then outstanding under the Shared-Loss Loan;
(ii) with respect to a
Shared-Loss Loan Commitment or a Shared-Loss Loan that is a revolving line of
credit, no such amendment, modification, renewal, extension, or waiver, except
as allowed under the definition of Permitted Advance, shall operate to increase
the maximum amount of principal authorized as of Bank Closing to be outstanding
at any one time under the underlying revolving line of credit relationship with
the debtor (regardless of the extent to which such revolving line of credit may
have been funded as of Bank Closing or may subsequently have been funded and/or
repaid); and
(iii) no such
amendment, modification, renewal, extension or waiver shall extend the term of
such Shared-Loss Loan Commitment or Shared-Loss Loan beyond the end of the
final Shared-Loss Quarter unless the term of such Shared-Loss Loan Commitment
or Shared-Loss Loan as existed on Bank Closing was beyond the end of the final
Shared-Loss Quarter, in which event no such amendment, modification, renewal,
extension or waiver shall extend such term beyond the term as existed as of
Bank Closing.
“
Pre-Charge-Off Expenses
”
means those expenses incurred in the
usual and prudent management of a Shared-Loss Loan that would qualify as a
Reimbursable Expense or Recovery Expense if incurred after a Charge-Off of the
related Shared-Loss Asset had occurred.
“
Quarterly
Certificate
”
has the meaning provided in
Section 2.1(a)(i) of this Commercial Shared-Loss Agreement.
“
Recoveries
”
shall mean the
following:
(i)
Generally
.
(A) In
addition to any sums to be applied as Recoveries pursuant to subparagraph
(ii) below, “Recoveries” means, with respect to any period, the sum of
(without duplication):
110
(1) the amount of
collections during such period by the Assuming Institution on Charge-Offs of
Shared-Loss Assets effected by the Assuming Institution prior to the end of the
final Shared-Loss Quarter;
plus
(2) the amount of
collections during such period by the Assuming Institution on Failed Bank
Charge-Offs/Write-Downs;
plus
(3) the amount of gain
on any sale or other disposition during such period by the Assuming Institution
of Shared Loss Loans, Other Real Estate, or Additional ORE (
provided
,
that
the amount of any such gain included in Recoveries shall not exceed the
aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and
Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses);
plus
(4) the amount of
collections during such period by the Assuming Institution of any Reimbursable
Expenses or Recovery Expenses;
plus
(5) the amount of any
fee or other consideration received by the Assuming Institution during or prior
to such period in connection with any amendment, modification, renewal,
extension, refinance, restructure, commitment or other similar action taken by
the Assuming Institution with respect to a Shared-Loss Asset with respect to
which there exists a Failed Bank Charge-Off/Write-Down or a Shared-Loss Loan as
to which a Charge-Off has been effected by the Assuming Institution during or
prior to such period (
provided
,
that
the amount of any such fee
or other consideration included in Recoveries shall not exceed the aggregate
amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken
and any related Reimbursable Expenses and Recovery Expenses).
(B)
Order of Application
.
For the purpose of determining the
amounts to be applied as Recoveries pursuant to subparagraph (A) above,
the Assuming Institution shall apply amounts received on the Assets that are
not otherwise applied to reduce the book value of principal of a Shared-Loss
Loan (or, in the case of Other Real Estate, Additional ORE, and Capitalized
Expenditures, that are not otherwise applied to reduce the book value thereof)
in the following order: first to Charge-Offs and Failed Bank Charge-Offs/Write
Downs; then to Reimbursable Expenses and Recovery Expenses; then to interest
income; and then to other expenses incurred by the Assuming Institution.
(ii)
Interest Income as Recoveries
.
If
there occurs an amendment,
modification, renewal, extension, refinance, restructure, commitment, sale or
other similar action with respect to a Shared-Loss Loan as to which there
exists a Failed Bank Charge-Off/Write Down or as to which a Charge-Off has been
effected by the Assuming Institution during or prior to such period,
and
if
, as a result of such occurrence, the Assuming Institution recognizes
any interest income for financial accounting purposes on that Shared-Loss Loan,
then
“Recoveries” shall also include the portion of the total amount of
any such interest income recognized by the Assuming Institution which is
derived by
multiplying
:
(A) the total amount of
any such interest income recognized by the Assuming Institution during such
period with respect to that Shared-Loss Loan as described above,
by
(B) a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or charge-offs
of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and
Charge-Offs effected by the Assuming Institution with respect to that
Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has
not yet been charged-off but has been placed on nonaccrual status, all of which
occurred at any time prior to or during the period in which the interest income
referred to in subparagraph (II)(A) immediately above was recognized, and
the
denominator
of which is the total
111
amount of principal
indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and
Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan
as of the end of such period;
provided
,
however
,
that
the amount of any interest income included as Recoveries for a
particular Shared-Loss Loan shall not exceed the aggregate amount of
(x) Failed Bank Charge-Offs/Write-Downs, (y) Charge-Offs effected by
the Assuming Institution during or prior to the period in which the amount of
Recoveries is being determined, plus (z) any Reimbursable Expenses and
Recovery Expenses paid to the Assuming Institution pursuant to this Commercial
Shared-Loss Agreement during or prior to the period in which the amount of
Recoveries is being determined, all with respect to that particular Shared-Loss
Loan; and,
provided
,
further
,
that
any collections on any
such Shared-Loss Loan that are
not
applied to reduce book value of
principal or recognized as interest income shall be applied pursuant to
subparagraph (i) above.
(iii)
Exceptions to Recoveries
.
Notwithstanding
subparagraphs (i) and (ii) above, the term “Recoveries” shall not
include:
(A) any amounts paid to
the Assuming Institution by the Receiver pursuant to Section 2.1 of this
Commercial Shared-Loss Agreement;
(B) amounts received
with respect to Charge-Offs effected by the Assuming Institution after the
final Shared-Loss Quarter;
(C) after the final
Shared-Loss Quarter, income received by the Assuming Institution from the
operation of, and any gains recognized by the Assuming Institution on the
disposition of, Other Real Estate, or Additional ORE (such income and gains
being hereinafter together referred to as “ORE Income”),
except
to the
extent that aggregate ORE Income exceeds the aggregate expenses paid to third
parties by or on behalf of the Assuming Institution after the final Shared-Loss
Quarter to manage, operate and maintain Other Real Estate, or Additional ORE
(such expenses being hereinafter referred to as “ORE Expenses”). In determining
the extent aggregate ORE Income exceeds aggregate ORE Expenses for any Recovery
Quarter, the Assuming Institution will subtract
(1) ORE Expenses paid
to third parties during such Recovery Quarter (provided, that, in the case of
the final Recovery Quarter only, the Assuming Institution will subtract ORE
Expenses paid to third parties from the beginning of the final Recovery Quarter
up to the date the Assuming Institution is required to deliver the final
Quarterly Certificate pursuant to this Commercial Shared-Loss Agreement),
from
(2) ORE Income received
during such Recovery Quarter, to calculate net ORE income (“Net ORE Income”)
for that Recovery Quarter. If the amount of Net ORE Income so calculated for a
Recovery Quarter is positive, such amount shall be reported as Recoveries on
the Quarterly Certificate for such Recovery Quarter.
If the amount of Net ORE
Income so calculated for a Recovery Quarter is negative (“Net ORE Loss
Carryforward”), such amount shall be added to any ORE Expenses paid to third
parties in the next succeeding Recovery Quarter, which sum shall then be
subtracted from ORE Income for that next succeeding Recovery Quarter, for the
purpose of determining the amount of Net ORE Income (or, if applicable, Net ORE
Loss Carryforward) for that next succeeding Recovery Quarter. If, as of the end
of the final Recovery Quarter, a Net ORE Loss Carryforward exists, then the
amount of the Net ORE Loss Carryforward that does
not
exceed the
aggregate amount of Net ORE Income reported as Recoveries on Quarterly Certificates
for
all
Recovery Quarters may be included as a Recovery Expense on the
Quarterly Certificate for the final Recovery Quarter.
112
“
Recovery
Amount
”
has the meaning provided in
Section 2.1(b)(ii) of this Commercial Shared-Loss Agreement.
“
Recovery
Expenses
”
means, for any Recovery Quarter, the amount of
actual, reasonable and necessary out-of-pocket expenses (other than Capitalized
Expenditures) paid to third parties (other than Affiliates of the Assuming
Institution) by or on behalf of the Assuming Institution, as limited by
Sections 3.2(c) and (d) of Article III to this Commercial
Shared-Loss Agreement, to recover amounts owed with respect to:
(i) any Shared-Loss
Asset as to which a Charge-Off was effected prior to the end of the final
Shared-Loss Quarter (provided that such amounts were incurred no earlier than
the date the first Charge-Off on such Shared-Loss Asset could have been
reflected on the Accounting Records of the Assuming Institution); and
(ii) Failed Bank
Charge-Offs/Write-Downs (including, in each case, all costs and expenses
related to an Environmental Assessment and any other costs or expenses related
to any environmental conditions with respect to the Shared-Loss Assets (it
being understood that any remediation expenses for any such pollutant or
contaminant are not recoverable if in excess of $200,000 per Shared-Loss Asset,
without the Assuming Institution having obtained the prior consent of the
Receiver for such expenses).
Provided
,
that
,
so long as income with respect to a Shared-Loss Loan is being prorated pursuant
to the arithmetical formula in subsection (ii) of the definition of
“Recoveries”, the term “Recovery Expenses” shall
not
include that
portion of any such expenses paid during such Recovery Quarter to recover any
amounts owed on that Shared-Loss Loan that is derived by:
subtracting
(1) the
product derived by
multiplying
:
(A) the total amount of
any such expenses paid by or on behalf of the Assuming Institution during such
Recovery Quarter with respect to that Shared-Loss Loan,
by
(B) a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or charge-offs
of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and
Charge-Offs effected by the Assuming Institution with respect to that
Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has
not yet been charged-off but has been placed on nonaccrual status, all of which
occurred at any time prior to or during the period in which the interest income
referred to in subparagraph (ii)(A) of the definition of “Recoveries” was
recognized, and the
denominator
of which is the total amount of
principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs
and Charge-Offs as described above) due from the Obligor on that Shared-Loss
Loan as of the end of such period;
from
(2) the
total amount of any such expenses paid during that Recovery Quarter with
respect to that Shared-Loss Loan.
“
Recovery
Quarter
”
has the meaning provided in Section 2.1
(a)(ii) of this Commercial Shared-Loss Agreement.
“
Reimbursable
Expenses
”
means, for any Shared-Loss Quarter, the amount of
actual, reasonable and necessary out-of-pocket expenses (other than Capitalized
Expenditures), paid to third parties (other than Affiliates of the Assuming
Institution) by or on behalf of the Assuming Institution, as limited by
113
Sections 3.2(c) and
(d) of Article III of this Commercial Shared-Loss Agreement, to:
(i) recover amounts
owed with respect to any Shared-Loss Asset as to which a Charge-Off has been
effected prior to the end of the final Shared-Loss Quarter (provided that such
amounts were incurred no earlier than the date the first Charge-Off on such
Shared-Loss Asset could have been reflected on the Accounting Records of the
Assuming Institution) and recover amounts owed with respect to Failed Bank
Charge-Offs/Write-Downs (including, in each case, all costs and expenses
related to an Environmental Assessment and any other costs or expenses related
to any environmental conditions with respect to the Shared-Loss Assets (it
being understood that any such remediation expenses for any such pollutant or
contaminant are not recoverable if in excess of $200,000 per Shared-Loss Asset,
without the Assuming Institution having obtained the prior consent of the
Receiver for such expenses);
provided
,
that
, so long as income
with respect to a Shared-Loss Loan is being pro-rated pursuant to the arithmetical
formula in subsection (II) of the definition of “Recoveries”, the term
“Reimbursable Expenses” shall
not
include that portion of any such
expenses paid during such Shared-Loss Quarter to recover any amounts owed on
that Shared-Loss Loan that is derived by:
subtracting
(1) the
product derived by
multiplying
:
(A) the total amount of
any such expenses paid by or on behalf of the Assuming Institution during such
Shared-Loss Quarter with respect to that Shared-Loss Loan,
by
(B) a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or charge-offs
of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and
Charge-Offs effected by the Assuming Institution with respect to that
Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has
not yet been charged-off but has been placed on nonaccrual status, all of which
occurred at any time prior to or during the period in which the interest income
referred to in subparagraph (II)(A) of the definition of “Recoveries” was
recognized, and the
denominator
of which is the total amount of
principal indebtedness (including all such prior Failed Bank
Charge-Offs/Write-Downs and Charge-Offs as described above) due from the
Obligor on that Shared-Loss Loan as of the end of such period;
from
(2) the
total amount of any such expenses paid during that Shared-Loss Quarter with
respect to that Shared-Loss Loan;
(ii) manage, operate or
maintain Other Real Estate, or Additional ORE
less
the amount of any
income received by the Assuming Institution during such Shared-Loss Quarter
with respect to such Other Real Estate, or Additional ORE (which resulting
amount under this clause (ii) may be negative);
(iii) litigation
expenses with respect to Shared-Loss Assets.
“
Review
Board
”
has the meaning provided in
Section 2.1(f)(i) of this Commercial Shared-Loss Agreement.
“
Shared-Loss
Amount
”
has the meaning provided in
Section 2.1(b)(i) of this Commercial Shared-Loss Agreement.
“
Shared-Loss
Asset Repurchase Price
”
means, with respect to any
Shared-Loss Asset, the principal amount thereof plus any other fees or
penalties due from an Obligor (including, subject to the limitations discussed
below, the amount of any Accrued Interest) stated on the Accounting Records of
the Assuming Institution, as of the date as of which the Shared-Loss Asset
Repurchase Price is being determined
114
(regardless, in the case of
a Shared-Loss Loan, of the Legal Balance thereof) plus all Reimbursable
Expenses and Recovery Expenses incurred up to and through the date of
consummation of purchase of such Shared-Loss Asset;
provided
,
that
(i) in the case of a Shared-Loss Loan there shall be excluded from such
amount the amount of any Accrued Interest accrued on or with respect to such
Shared-Loss Loan prior to the ninety (90)-day period ending on the day prior to
the purchase date determined pursuant to Sections 2.1(e)(i) or
2.1(e)(iii) of this Commercial Shared-Loss Agreement, except to the extent
such Accrued Interest was included in the Book Value of such Shared-Loss Loan,
and (ii) any collections on a Shared-Loss Loan received by the Assuming
Institution after the purchase date applicable to such Shared-Loss Loan shall
be applied (without duplication) to reduce the Shared-Loss Asset Repurchase
Price of such Shared-Loss Loan on a dollar-for-dollar basis. For purposes of
determining the amount of unpaid interest which accrued during a given period
with respect to a variable-rate Shared-Loss Loan, all collections of interest
shall be deemed to be applied to unpaid interest in the chronological order in
which such interest accrued.
“
Shared-Loss
Assets
”
means Shared-Loss Loans, Other Real Estate
purchased by the Assuming Institution, Additional ORE, Shared-Loss
Subsidiaries, and Capitalized Expenditures, but does not include Shared-Loss
Securities.
“
Shared-Loss
Loan Commitment
”
means:
(i) any Commitment to
make a further extension of credit or to make a further advance with respect to
an existing Shared-Loss Loan; and
(ii) any Shared-Loss
Loan Commitment (described in subparagraph (i) immediately preceding) with
respect to which the Assuming Institution has made a Permitted Amendment.
“
Shared-Loss
Loan Commitment Advance
”
means an advance pursuant
to a Shared-Loss Loan Commitment with respect to which the Assuming Institution
has
not
made a Permitted Advance.
“
Shared-Loss
Loans
”
means:
(i)
(A) Loans
purchased by the Assuming Institution pursuant to the Purchase and Assumption
Agreement set forth on Schedule 4.15(b) to the Purchase and Assumption
Agreement;
(B) New
Shared-Loss Loans purchased by the Assuming Institution pursuant to the
Purchase and Assumption Agreement;
(C) Permitted Advances;
(D) Shared-Loss Loan
Commitment Advances, if any;
provided
,
that
Shared-Loss Loans
shall not include Loans, New Shared-Loss Loans, Permitted Advances and
Shared-Loss Loan Commitment Advances with respect to which an Acquired
Subsidiary, or a constituent Subsidiary thereof, is an Obligor;
(E) but does not
include Consumer Loans; and
(ii) any Shared-Loss
Loans (described in subparagraph (i) immediately preceding) with respect
to which the Assuming Institution has made a Permitted Amendment.
“
Shared-Loss Securities
”
means those securities and other
assets listed on Exhibit 4.15(C).
“
Shared-Loss
Subsidiaries
”
means those
subsidiaries listed on Exhibit 4.15D.
“
Shared-Loss
Quarter
”
has the meaning provided in
Section 2.1(a)(i) of this Commercial Shared-Loss Agreement.
115
“
Shares
”
means common stock and any
instrument which by its terms is currently convertible into common stock, or
which may become convertible into common stock.
“
SLS Net
Realized Gain
”
means the net
realized gain on the sale of a Shared Loss Security determined pursuant to FAS
115, expressed as a negative number on the Quarterly Certificate.
“
SLS Net
Realized Loss
”
means the net
realized loss on the sale of a Shared Loss Security determined pursuant to FAS
115, expressed as a positive number on the Quarterly Certificate.
“
Termination
Date
”
means the eighth (8th) anniversary of the
Commencement Date.
“
Total
Intrinsic Loss Estimate
”
means the sum of the
Commercial Intrinsic Loss Estimate in this Commercial Shared-Loss Agreement and
the SF1-4 Intrinsic Loss Estimate in the Single Family Shared-Loss Agreement,
expressed in dollars.
“
Third
Party Servicer
”
means any
servicer appointed from time to time by the Assuming Institution or any
Affiliate of the Assuming Institution to service the Shared-Loss Assets on
behalf of the Assuming Institution, the identity of which shall be given to the
Receiver prior to or concurrent with the appointment thereof.
ARTICLE II
—
SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss Arrangement.
(a)
Quarterly Certificates
.
(i) Not
later than thirty (30) days after the end of each Calendar Quarter from and
including the initial Calendar Quarter to and including the Calendar Quarter in
which the Applicable Anniversary of the Commencement Date falls (each of such
Calendar Quarters being referred to herein as a “Shared-Loss Quarter”), the
Assuming Institution shall deliver to the Receiver a certificate, signed by the
Assuming Institution’s chief executive officer and its chief financial officer,
setting forth in such form and detail as the Receiver may specify (a “Quarterly
Certificate”)(an example of a Quarterly Certificate is attached as
Exhibit 1):
(A) the amount of Charge-Offs, the amount
of Recoveries and the amount of Net Charge-Offs (which amount may be negative)
during such Shared-Loss Quarter with respect to the Shared-Loss Assets (and for
Recoveries, with respect to the Assets for which a charge-off was effected by
the Failed Bank prior to Bank Closing); and
(B) the aggregate amount of Reimbursable
Expenses (which amount may be negative) during such Shared-Loss Quarter; and
(C) SLS Net Realized Loss
and SLS Net Realized Gain, if any; and
(D) any OTTI Adjustment.
(ii) Not later than thirty (30) days after the end of each
Calendar Quarter from and including the first Calendar Quarter following the
final Shared-Loss Quarter to and including the Calendar Quarter in which the
Termination Date falls (each of such Calendar Quarters being referred to herein
as a “Recovery Quarter”), the Assuming Institution shall deliver to the
Receiver a Quarterly Certificate setting forth, in such form and detail as the
Receiver may specify
116
(A)
the amount of
Recoveries and Recovery Expenses during such Recovery Quarter. On the Quarterly
Certificate for the
first Recovery Quarter only
, the Assuming
Institution may report as a separate item, in such form and detail as the
Receiver may specify, the aggregate amount of any Reimbursable Expenses that:
(a) were incurred prior to or during the final Shared-Loss Quarter,
and
(b) had
not
been included in any Quarterly Certificate for any
Shared-Loss Quarter because they had not been actually paid by or on behalf of
the Assuming Institution (in accordance with the terms of this Commercial
Shared-Loss Agreement) during any Shared-Loss Quarter
and
(c) were
actually paid by or on behalf of the Assuming Institution (in accordance with
the terms of this Commercial Shared-Loss Agreement) during the first Recovery
Quarter; and
(B) SLS Net Realized Gain, and any reversals of OTTI Loss.
(b)
Payments With Respect to Shared-Loss Assets.
(i)
For purposes of
this Section 2.1(b), the Assuming Institution shall initially record the
Shared-Loss Assets on its Accounting Records at Book Value, and initially
record the Shared-Loss Securities on its Accounting Records at Book Value, and
adjust such amounts as such values may change after the Bank Closing. If the
amount of all Net Charge-Offs during any Shared-Loss Quarter
plus
Reimbursable Expenses,
plus
SLS Net Realized Gain and SLS Net Realized
Loss,
plus
the OTTI Adjustment during such Shared-Loss Quarter (the
“Shared-Loss Amount”) is positive, then, except as provided in Sections
2.1(c) and (e) below, and subject to the provisions of
Section 2.1(b)(vi) below, not later than fifteen (15) days after the
date on which the Receiver receives the Quarterly Certificate with respect to
such Shared-Loss Quarter, the Receiver shall pay to the Assuming Institution an
amount equal to the Applicable Percentage of the Shared-Loss Amount for such
Shared-Loss Quarter. If the Shared-Loss Amount during any Shared-Loss Quarter
is negative, the Assuming Institution shall pay to the Receiver an amount equal
to the Applicable Percentage of the Shared-Loss Amount for such Shared-Loss
Quarter, which payment shall be delivered to the Receiver together with the
Quarterly Certificate for such Shared-Loss Quarter.
(ii)
(A)
If the amount
of gross Recoveries during any Recovery Quarter
less
Recovery Expenses
during such Recovery Quarter plus SLS Net Realized Gains and reversals of OTTI
Loss on Shared-Loss Securities (the “Recovery Amount”) is positive, then,
simultaneously with its delivery of the Quarterly Certificate with respect to
such Recovery Quarter, the Assuming Institution shall pay to the Receiver an
amount equal to the Applicable Percentage of the Recovery Amount for such
Recovery Quarter.
(B)
If the Recovery
Amount is negative, then such negative amount shall be subtracted from the
amount of gross Recoveries during the next succeeding Recovery Quarter in
determining the Recovery Amount in such next succeeding Recovery Quarter;
provided
,
that
this Section 2.1(b)(ii) shall operate successively in the
event that the Recovery Amount (after giving effect to this
Section 2.1(b)(ii)) in such next succeeding Recovery Quarter is negative.
(C)
The Assuming
Institution shall specify, in the Quarterly Certificate for the final Recovery
Quarter, the aggregate amount for all Recovery Quarters only, as of the end of,
and including, the final Recovery Quarter of (A) Recoveries plus SLS Net
Realized Gains and reversals of OTTI Loss on Shared-Loss Securities (“Aggregate
Recovery Period Recoveries”), (B) Recovery Expenses (“Aggregate Recovery
Expenses”), and (C)
only
those Recovery Expenses that have been
actually “offset” against Aggregate Recovery Period Recoveries (including those
so “offset” in that final Recovery Quarter) (“Aggregate Offset Recovery Expenses”);
as used in this sentence, the term “offset” means the amount that has been
applied to reduce gross Recoveries in any Recovery Quarter pursuant to the
methodology set forth
117
in this Section 2.1(b)(ii).
If, at the end of the final Recovery Quarter the amount of Aggregate Recovery
Expenses exceeds the amount of Aggregate Recovery Period Recoveries, the
Receiver shall have no obligation to pay to the Assuming Institution all or any
portion of such excess.
(D)
Subsequent to
the Assuming Institution’s calculation of the Recovery Amount (if any) for the
final Recovery Quarter, the Assuming Institution shall also show on the
Quarterly Certificate for the final Recovery Quarter the results of the following
three mathematical calculations: (i) Aggregate Recovery Period Recoveries
minus
Aggregate Offset Recovery Expenses; (ii) Aggregate Recovery Expenses
minus
Aggregate Offset Recovery Expenses; and (iii) the
lesser
of the two
amounts calculated in (i) and (ii) immediately above (“Additional
Recovery Expenses”)
multiplied by
the Applicable Percentage (the amount
so calculated in (iii) being defined as the “Additional Recovery Expense
Amount”). If the Additional Recovery Expense Amount is greater than zero, then
the Assuming Institution may request in the Quarterly Certificate for the final
Recovery Quarter that the Receiver reimburse the Assuming Institution the
amount of the Additional Recovery Expense Amount and the Receiver shall pay to
the Assuming Institution the Additional Recovery Expense Amount within fifteen
(15) days after the date on which the Receiver receives that Quarterly
Certificate.
(E)
On the
Quarterly Certificate for the final Recovery Quarter only, the Assuming
Institution may include, in addition to any Recovery Expenses for that Recovery
Quarter that were paid by or on behalf of the Assuming Institution in that
Recovery Quarter, those Recovery Expenses that: (a) were incurred prior to
or during the final Recovery Quarter,
and
(b) had
not
been
included in any Quarterly Certificate for any Recovery Quarter because they had
not been actually paid by or on behalf of the Assuming Institution (in
accordance with the terms of this Commercial Shared-Loss Agreement) during any
Recovery Quarter,
and
(c) were actually paid by or on behalf of the
Assuming Institution (in accordance with the terms of this Commercial
Shared-Loss Agreement) prior to the date the Assuming Institution is required
to deliver that final Quarterly Certificate to the Receiver under the terms of
Section 2.1(a)(ii).
(iii)
With respect to
each Shared-Loss Quarter and Recovery Quarter, collections by or on behalf of
the Assuming Institution on any charge-off effected by the Failed Bank prior to
Bank Closing on an Asset other than a Shared-Loss Asset or Shared-Loss
Securities shall be reported as Recoveries under this Section 2.1 only to
the extent such collections exceed the Book Value of such Asset, if any. For
any Shared-Loss Quarter or Recovery Quarter in which collections by or on
behalf of the Assuming Institution on such Asset are applied to both Book Value
and to a charge-off effected by the Failed Bank prior to Bank Closing, the
amount of expenditures incurred by or on behalf of the Assuming Institution
attributable to the collection of any such Asset, that shall be considered a
Reimbursable Expense or a Recovery Expense under this Section 2.1 will be
limited to a proportion of such expenditures which is equal to the proportion
derived by dividing (A) the amount of collections on such Asset applied to
a charge-off effected by the Failed Bank prior to Bank Closing, by (B) the
total collections on such Assets. With respect to Assets that were completely
charged off by the Failed Bank and had a zero Book Value at Bank Closing, for
the purpose of calculating the payments under this Section 2.1(b) for
Recoveries on those Assets for each such quarter, the Assuming Institution
shall pay an amount equal to fifty percent (50%) of the Recoveries on Failed
Bank Charge-Offs/Write-Downs with respect to such Assets, and shall separately
account for the other computations on those Recoveries under this
Section 2.1(b) using fifty percent (50%) (and not the Applicable
Percentage).
(iv)
If the Assuming
Institution has duly specified an amount of Reimbursable Expenses on the
Quarterly Certificate for the first Recovery Quarter as described above in
Section 2.1(a)(ii)(E), then, not later than fifteen (15) days after the
date on which the Receiver receives that Quarterly Certificate, the Receiver shall
pay to the Assuming Institution an amount equal to the Applicable Percentage of
the amount of such Reimbursable Expenses.
118
(v)
Payments from
the Receiver with respect to this Commercial Shared-Loss Agreement are
administrative expenses of the Receiver. To the extent the Receiver needs funds
for shared-loss payments respect to this Commercial Shared-Loss Agreement, the
Receiver shall request funds under the Master Loan and Security Agreement, as
amended (“MLSA”), from FDIC in its corporate capacity. The Receiver will not
agree to any amendment of the MLSA that would prevent the Receiver from drawing
on the MLSA to fund shared-loss payments.
(c)
Limitation on Shared-Loss Payment
.
The Receiver
shall not be required to make any payments pursuant to this Section 2.1
with respect to any Charge-Off of a Shared-Loss Asset that the Receiver or the
Corporation determines, based upon the Examination Criteria, should not have
been effected by the Assuming Institution; provided, (x) the Receiver must
provide notice to the Assuming Institution detailing the grounds for not making
such payment, (y) the Receiver must provide the Assuming Institution with
a reasonable opportunity to cure any such deficiency and (z) (1) to
the extent curable, if cured, the Receiver shall make payment with respect to
any properly effected Charge-Off and (2) to the extent not curable, the
Receiver shall make a payment as to all Charge-Offs (or portion of Charge-Offs)
that were effected which would have been payable as a Charge-Off if the
Assuming Institution had properly effected such Charge-Off. In the event that
the Receiver does not make any payments with respect to any Charge-Off of a
Shared-Loss Asset pursuant to this Section 2.1 or determines that a
payment was improperly made, the Assuming Institution and the Receiver shall,
upon final resolution, make such accounting adjustments and payments as may be
necessary to give retroactive effect to such corrections. Failure to administer
any Shared-Loss Asset or Assets, or Shared-Loss Securities, in accordance with
Article III shall at the discretion of the Receiver constitute grounds for
the loss of shared loss coverage with respect to such Shared-Loss Loan or
Loans.
(d)
Sale of, or Additional Advances or Amendments with Respect to,
Shared-Loss Loans and Administration of Related Loans
.
No Shared-Loss Loan shall be treated as a
Shared-Loss Asset pursuant to this Section 2.1(i) if the Assuming
Institution sells or otherwise transfers such Shared-Loss Loan or any interest
therein (whether with or without recourse) to any Person, (ii) after the
Assuming Institution makes any additional advance, commitment or increase in
the amount of a commitment with respect to such Shared-Loss Loan that does not
constitute a Permitted Advance or a Shared-Loss Loan Commitment Advance,
(iii) after the Assuming Institution makes any amendment, modification,
renewal or extension to such Shared-Loss Loan that does not constitute a
Permitted Amendment, or (iv) after the Assuming Institution has managed,
administered or collected any “Related Loan” (as such term is defined in
Section 3.4 of Article III of this Commercial Shared-Loss Agreement)
in any manner which would have the effect of increasing the amount of any collections
with respect to the Related Loan to the detriment of such Shared-Loss Asset to
which such loan is related;
provided
,
that
any such Shared-Loss
Loan that has been the subject of Charge-Offs prior to the taking of any action
described in clause (i), (ii), (iii) or (iv) of this
Section 2.1(d) by the Assuming Institution shall be treated as a
Shared-Loss Asset pursuant to this Section 2.1 solely for the purpose of
treatment of Recoveries on such Charge-Offs until such time as the amount of
Recoveries with respect to such Shared-Loss Asset equals such Charge-Offs.
(e)
Option to Purchase
.
(i)
In the event
that the Assuming Institution determines that there is a substantial likelihood
that continued efforts to collect a Shared-Loss Asset or an Asset for which a
charge-off was effected by the Failed Bank with, in either case, a Legal
Balance of $5,000,000 or more on the Accounting Records of the Assuming
Institution will result in an expenditure, after Bank Closing, of funds by on
behalf of the Assuming Institution to a third party for a specified purpose
(the expenditure of which, in its best judgment, will maximize collections),
which do not constitute Reimbursable Expenses or Recovery
119
Expenses, and such expenses
will exceed ten percent (10%) of the then book value thereof as reflected on
the Accounting Records of the Assuming Institution, the Assuming Institution
shall (i) promptly so notify the Receiver and (ii) request that such
expenditure be treated as a Reimbursable Expense or Recovery Expense for
purposes of this Section 2.1. (Where the Assuming Institution determines
that there is a substantial likelihood that the previously mentioned situation
exists with respect to continued efforts to collect a Shared-Loss Asset or an
Asset for which a charge-off was effected by the Failed Bank with, in either
case, a Legal Balance of less than $1,000,000 on the Accounting Records of the
Assuming Institution, the Assuming Institution may so notify the Receiver and
request that such expenditure be treated as a Reimbursable Expense or Recovery
Expense.) Within thirty (30) days after its receipt of such a notice, the
Receiver will advise the Assuming Institution of its consent or denial, that
such expenditures shall be treated as a Reimbursable Expense or Recovery
Expense, as the case may be. Notwithstanding the failure of the Receiver to
give its consent with respect to such expenditures, the Assuming Institution
shall continue to administer such Shared-Loss Asset in accordance with
Section 2.2, except that the Assuming Institution shall not be required to
make such expenditures. At any time after its receipt of such a notice and on
or prior to the Termination Date the Receiver shall have the right to purchase
such Shared-Loss Asset or Asset as provided in Section 2.1(e)(iii),
notwithstanding any consent by the Receiver with respect to such expenditure.
(ii)
During the
period prior to the Termination Date, the Assuming Institution shall notify the
Receiver within fifteen (15) days after any of the following becomes fully or
partially charged-off:
(A) a
Shared-Loss Loan having a Legal Balance (or, in the case of more than one
(1) Shared-Loss Loan made to the same Obligor, a combined Legal Balance)
of $5,000,000 or more in circumstances in which the legal claim against the
relevant Obligor survives; or
(B) a
Shared-Loss Loan to a director, an “executive officer” as defined in 12 C.F.R.
215.2(d), a “principal shareholder” as defined in 12 C.F.R. 215.2(l), or an
Affiliate of the Assuming Institution.
During the period prior to
the Termination Date, the Assuming Institution shall notify the Receiver within
fifteen (15) days after any complete or partial charge-off of a Shared-Loss
Loan to a director, an “executive officer” as defined in 12 C.F.R. 215.2(d), a
“principal shareholder” as defined in 12 C.F.R. 215.2(l), or an Affiliate of
the Assuming Institution.
(iii)
If the Receiver
determines in its discretion that the Assuming Institution is not diligently
pursuing collection efforts with respect to any Shared-Loss Asset which has
been fully or partially charged-off or written-down (including any Shared-Loss
Asset which is identified or required to be identified in a notice pursuant to
Section 2.1(e)(ii)) or any Asset for which there exists a Failed Bank
Charge-Off/Write-Down, the Receiver may at its option, exercisable at any time
on or prior to the Termination Date, require the Assuming Institution to
assign, transfer and convey such Shared-Loss Asset or Asset to and for the sole
benefit of the Receiver for a price equal to the Shared-Loss Asset Repurchase
Price thereof less the Related Liability Amount with respect to any Related
Liabilities related to such Shared-Loss Asset or Asset.
(iv)
Not later than
ten (10) days after the date upon which the Assuming Institution receives
notice of the Receiver’s intention to purchase or require the assignment of any
Shared-Loss Asset or Asset pursuant to Section 2.1(e)(i) or (iii),
the Assuming Institution shall transfer to the Receiver such Shared-Loss Asset
or Asset and any Credit Files relating thereto and shall take all such other
actions as may be necessary and appropriate to adequately effect the transfer
of such Shared-Loss Asset or Asset from the Assuming Institution to the Receiver.
Not later than fifteen (15) days after the date upon which the Receiver
receives such Shared-Loss Asset or Asset and any Credit Files relating thereto,
the Receiver shall pay to the
120
Assuming Institution an
amount equal to the Shared-Loss Asset Repurchase Price of such Shared-Loss
Asset or Asset less the Related Liability Amount.
(v)
The Receiver
shall assume all Related Liabilities with respect to any Shared-Loss Asset or
Asset set forth in the notice described in Section 2.1(e)(iv).
(f)
Dispute Resolution
.
(i) (A) Any
dispute as to whether a Charge-Off of a Shared-Loss Asset was made in
accordance with Examination Criteria shall be resolved by the Assuming
Institution’s Chartering Authority. (B) With respect to any other dispute
arising under the terms of this Commercial Shared-Loss Agreement which the
parties hereto cannot resolve after having negotiated such matter, in good
faith, for a thirty (30) day period, other than a dispute the Corporation is
not permitted to submit to arbitration under the Administrative Dispute
Resolution Act of 1996 (“ADRA”), as amended, such other dispute shall be
resolved by determination of a review board (a “Review Board”) established
pursuant to Section 2.1(f). Any Review Board under this
Section 2.1(f) shall follow the provisions of the Federal Arbitration
Act and shall follow the provisions of the ADRA. (C) Any determination by
the Assuming Institution’s Chartering Authority or by a Review Board shall be
conclusive and binding on the parties hereto and not subject to further
dispute, and judgment may be entered on said determination in accordance with
applicable arbitration law in any court having jurisdiction thereof.
(ii)
A Review Board
shall consist of three (3) members, each of whom shall have such expertise
as the Corporation and the Assuming Institution agree is relevant. As
appropriate, the Receiver or the Corporation (the “FDIC Party”) will select one
member, one member will be selected by the Assuming Institution and the third
member (the “Neutral Member”) will be selected by the other two members. The
member of the Review Board selected by a party may be removed at any time by
such party upon two (2) days’ written notice to the other party of the
selection of a replacement member. The Neutral Member may be removed by
unanimous action of the members appointed by the FDIC Party and the Assuming
Institution after two (2) days’ prior written notice to the FDIC Party and
the Assuming Institution of the selection of a replacement Neutral Member. In
addition, if a Neutral Member fails for any reason to serve or continue to
serve on the Review Board, the other remaining members shall so notify the
parties to the dispute and the Neutral Member in writing that such Neutral
Member will be replaced, and the Neutral Member shall thereafter be replaced by
the unanimous action of the other remaining members within twenty (20) business
days of that notification.
(iii)
No dispute may
be submitted to a Review Board by any of the parties to this Commercial
Shared-Loss Agreement unless such party has provided to the other party a
written notice of dispute (“Notice of Dispute”). During the forty-five (45)-day
period following the providing of a Notice of Dispute, the parties to the
dispute will make every effort in good faith to resolve the dispute by mutual
agreement. As part of these good faith efforts, the parties should consider the
use of less formal dispute resolution techniques, as judged appropriate by each
party in its sole discretion. Such techniques may include, but are not limited
to, mediation, settlement conference, and early neutral evaluation. If the
parties have not agreed to a resolution of the dispute by the end of such
forty-five (45)-day period, then, subject to the discretion of the Corporation
and the written consent of the Assuming Institution as set forth in
Section 2.1(f)(i)(B) above, on the first day following the end of
such period, the FDIC Party and the Assuming Institution shall notify each
other of its selection of its member of the Review Board and such members shall
be instructed to promptly select the Neutral Member of the Review Board. If the
members appointed by the FDIC Party and the Assuming Institution are unable to
promptly agree upon the initial selection of the Neutral Member, or a timely
replacement Neutral Member as set forth in Section 2.1(f)(ii) above,
the two appointed members shall apply to the American Arbitration Association
(“AAA”), and such Neutral Member
121
shall be appointed in
accordance with the Commercial Arbitration Rules of the AAA.
(iv)
The resolution
of a dispute pursuant to this Section 2.1(f) shall be governed by the
Commercial Arbitration Rules of the AAA to the extent that such
rules are not inconsistent with this Section 2.1(f). The Review Board
may modify the procedures set forth in such rules from time to time with
the prior approval of the FDIC Party and the Assuming Institution.
(v)
Within fifteen
(15) days after the last to occur of the final written submissions of both
parties, the presentation of witnesses, if any, and oral presentations, if any,
the Review Board shall adopt the position of one of the parties and shall
present to the parties a written award regarding the dispute. The determination
of any two (2) members of a Review Board will constitute the determination
of such Review Board.
(vi)
The FDIC Party
and the Assuming Institution will each pay the fees and expenses of the member
of the Review Board selected by it. The FDIC Party and Assuming Institution
will share equally the fees and expenses of the Neutral Member. No such fees or
expenses incurred by or on behalf of the Assuming Institution shall be subject
to reimbursement by the FDIC Party under this Commercial Shared-Loss Agreement
or otherwise.
(vii)
Each party will
bear all costs and expenses incurred by it in connection with the submission of
any dispute to a Review Board. No such costs or expenses incurred by or on
behalf of the Assuming Institution shall be subject to reimbursement by the
FDIC Party under this Commercial Shared-Loss Agreement or otherwise. The Review
Board shall have no authority to award costs or expenses incurred by either
party to these proceedings.
(viii)
Any dispute resolution
proceeding held pursuant to this Section 2.1(f) shall not be public.
In addition, each party and each member of any Review Board shall strictly
maintain the confidentiality of all issues, disputes, arguments, positions and
interpretations of any such proceeding, as well as all information,
attachments, enclosures, exhibits, summaries, compilations, studies, analyses,
notes, documents, statements, schedules and other similar items associated
therewith, except as the parties agree in writing or such disclosure is
required pursuant to law, rule or regulation. Pursuant to ADRA, dispute
resolution communications may not be disclosed either by the parties or by any
member of the Review board unless:
(1) all parties to the
dispute resolution proceeding agree in writing;
(2) the communication
has already been made public;
(3) the communication
is required by statute, rule or regulation to be made public; or
(4) a court determines
that such testimony or disclosure is necessary to prevent a manifest injustice,
help establish a violation of the law or prevent harm to the public health or
safety, or of sufficient magnitude in the particular case to outweigh the
integrity of dispute resolution proceedings in general by reducing the
confidence of parties in future cases that their communications will remain
confidential.
(ix)
Any dispute
resolution proceeding pursuant to this Section 2.1(f) (whether as a
matter of good faith negotiations, by resort to a Review Board, or otherwise)
is a compromise negotiation for purposes of the Federal Rules of Evidence
and state rules of evidence. The parties agree that all proceedings,
including any statement made or document prepared by any party, attorney or
other participants are privileged and shall not be disclosed in any subsequent
proceeding or document or construed for any purpose as an admission against
interest. Any document submitted and any statements made during any dispute
122
resolution proceeding are
for settlement purposes only. The parties further agree not to subpoena any of
the members of the Review Board or any documents submitted to the Review Board.
In no event will the Neutral Member voluntarily testify on behalf of any party.
(x)
No decision,
interpretation, determination, analysis, statement, award or other
pronouncement of any Review Board shall constitute precedent as regards any
subsequent proceeding (whether or not such proceeding involves dispute
resolution under this Commercial Shared-Loss Agreement) nor shall any Review
Board be bound to follow any decision, interpretation, determination, analysis,
statement, award or other pronouncement rendered by any previous Review Board
or any other previous dispute resolution panel which may have convened in connection
with a transaction involving other failed financial institutions or Federal
assistance transactions.
(xi)
The parties may
extend any period of time in this Section 2.1(f) by mutual agreement.
Notwithstanding anything above to the contrary, no dispute shall be submitted
to a Review Board until each member of the Review Board, and any substitute
member, if applicable, agrees to be bound by the provisions of this
Section 2.1(f) as applicable to members of a Review Board. Prior to
the commencement of the Review Board proceedings, or, in the case of a
substitute Neutral Member, prior to the re-commencement of such proceedings
subsequent to that substitution, the Neutral Member shall provide a written
oath of impartiality.
(xii)
For the
avoidance of doubt, and notwithstanding anything herein to the contrary, in the
event any notice of dispute is provided to a party under this
Section 2.1(g) prior to the Termination Date, the terms of this
Commercial Shared-Loss Agreement shall remain in effect with respect to any
such items set forth in such notice until such time as any such dispute with
respect to such item is finally resolved.
(g)
Payment in the Event Losses Fail to Reach Expected Level
. If the asset
discount bid is less than negative five per cent (5%), then on the date that is
45 days following the last day (such day, the “True-Up Measurement Date”) of
the calendar month in which the tenth anniversary of the calendar day following
the Bank Closing occurs, or upon the final disposition of all Shared Loss
Assets under the Single Family Shared-Loss Agreement at any time after the
termination of this Commercial Shared-Loss Agreement, the Assuming Institution
shall pay to the Receiver fifty
percent
(50%) of any positive amount resulting from the following calculation:
A - (B + C
+ D),
where
A equals 20% of the Total
Intrinsic Loss Estimate;
B equals 20% of the Net Loss
Amount;
C equals 25% of the asset
premium (discount) bid, expressed in dollars, of total Shared Loss Assets on
Schedules 4.15A and 4.15B at Bank Closing; and
D equals 3.5% of total
Shared Loss Assets on Schedules 4.15A and 4.15B at Bank Closing.
The Assuming Institution
shall deliver to the Receiver not later than 30 days following the True-Up
Measurement Date, a schedule, signed by an officer of the Assuming Institution,
setting forth in reasonable detail the foregoing calculation, including the
calculation of the Net Loss Amount.
2.2
Administration
of Shared-Loss Assets
.
The Assuming
Institution shall at all times prior to the Termination Date comply with the
Rules Regarding the Administration of Shared-Loss Assets as set forth in
Article III of this Commercial Shared-Loss Agreement.
123
2.3
Auditor
Report; Right to Audit.
(a)
Within the time
period permitted for the examination audit pursuant to 12 CFR Section 363
after the end of each fiscal year from and including the fiscal year during
which Bank Closing falls to and including the calendar year during which the
Termination Date falls, the Assuming Institution shall deliver to the
Corporation and to the Receiver a report signed by its independent public
accountants stating that they have reviewed the terms of this Commercial
Shared-Loss Agreement and that, in the course of their annual audit of the
Assuming Institution’s books and records, nothing has come to their attention
suggesting that any computations required to be made by the Assuming
Institution during such year by this Article II were not made by the
Assuming Institution in accordance herewith. In the event that the Assuming
Institution cannot comply with the preceding sentence, it shall promptly submit
to the Receiver corrected computations together with a report signed by its
independent public accountants stating that, after giving effect to such
corrected computations, nothing has come to their attention suggesting that any
computations required to be made by the Assuming Institution during such year
by this Article II were not made by the Assuming Institution in accordance
herewith. In such event, the Assuming Institution and the Receiver shall make
all such accounting adjustments and payments as may be necessary to give effect
to each correction reflected in such corrected computations, retroactive to the
date on which the corresponding incorrect computation was made. It is the
intention of this provision to align the timing of the audit required under
this Commercial Shared-Loss Agreement with the examination audit required
pursuant to 12 CFR Section 363.
(b)
The Assuming
Institution shall perform on an annual basis an internal audit of its
compliance with the provisions of this Article II and shall provide the
Receiver and the Corporation with copies of the internal audit reports and
access to internal audit workpapers related to such internal audit.
(c)
The Receiver or
the Corporation, their agents, contractors and their employees, may perform an
audit to determine the Assuming Institution’s compliance with the provisions of
this Commercial Shared-Loss Agreement, including this Article II, at any
time by providing not less than ten (10) Business Days prior written
notice. The scope and duration of any such audit shall be within the discretion
of the Receiver or the Corporation, as the case may be, but shall in no event
be administered in a manner that unreasonably interferes with the operation of
the Assuming Institution’s business. The Receiver or the Corporation, as the
case may be, shall bear the expense of any such audit. In the event that any
corrections are necessary as a result of such an audit, the Assuming
Institution and the Receiver shall make such accounting adjustments and
payments as may be necessary to give retroactive effect to such corrections.
2.4
Withholdings
.
Notwithstanding any other provision in this Article II,
the Receiver, upon the direction of the Director (or designee) of the
Corporation’s Division of Resolutions and Receiverships, may withhold payment
for any amounts included in a Quarterly Certificate delivered pursuant to
Section 2.1, if, in its judgment, there is a reasonable basis under the
terms of this Commercial Shared-Loss Agreement for denying the eligibility of
an item for which reimbursement or payment is sought under such Section. In
such event, the Receiver shall provide a written notice to the Assuming
Institution detailing the grounds for withholding such payment. At such time as
the Assuming Institution demonstrates to the satisfaction of the Receiver that
the grounds for such withholding of payment, or portion of payment, no longer
exist or have been cured, then the Receiver shall pay the Assuming Institution
the amount withheld which the Receiver determines is eligible for payment,
within fifteen (15) Business Days. In the event the Receiver or the Assuming
Institution elects to submit the issue of the eligibility of the item for
reimbursement or payment for determination under the dispute resolution
procedures of Section 2.1(f), then (i) if the dispute is settled by
the mutual agreement of the parties in accordance with Section 2.1(f)(iii),
the Receiver shall pay the amount withheld (to the extent so agreed) within
fifteen (15) Business Days from the date upon which the dispute is determined
by the parties to be resolved by mutual agreement, and (ii) if the dispute
is resolved by the
124
determination of a Review
Board, the Receiver shall pay the amount withheld (to the extent so determined)
within fifteen (15) Business Days from the date upon which the Receiver is
notified of the determination by the Review Board of its obligation to make
such payment. Any payment by the Receiver pursuant to this Section 2.4
shall be made together with interest on the amount thereof from the date the
payment was agreed or determined otherwise to be due, at the interest rate per
annum determined by the Receiver to be equal to the coupon equivalent of the
three (3)-month U.S. Treasury Bill Rate in effect as of the first Business Day
of each Calendar Quarter during which such interest accrues as reported in the
Federal Reserve Board’s Statistical Release for Selected Interest Rates H.15
opposite the caption “Auction Average - 3-Month” or, if not so reported for
such day, for the next preceding Business Day for which such rate was so
reported.
2.5
Books and Records
. The Assuming Institution
shall at all times during the term of this Commercial Shared-Loss Agreement
keep books and records which fairly present all dealings and transactions
carried out in connection with its business and affairs. Except as otherwise
provided for in the Purchase and Assumption Agreement or this Commercial
Shared-Loss Agreement, all financial books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied
for the periods involved and in a manner such that information necessary to
determine compliance with any requirement of the Purchase and Assumption
Agreement or this Commercial Shared-Loss Agreement will be readily obtainable,
and in a manner such that the purposes of the Purchase and Assumption Agreement
or this Commercial Shared-Loss Agreement may be effectively accomplished.
Without the prior written approval of the Corporation, the Assuming Institution
shall not make any change in its accounting principles adversely affecting the
value of the Shared-Loss Assets except as required by a change in generally
accepted accounting principles. The Assuming Institution shall notify the
Corporation of any change in its accounting principles affecting the
Shared-Loss Assets which it believes are required by a change in generally
accepted accounting principles.
2.6
Information
. The Assuming Institution shall promptly
provide to the Corporation such other information, including financial
statements and computations, relating to the performance of the provisions of
the Purchase and Assumption Agreement or otherwise relating to its business and
affairs or this Commercial Shared-Loss Agreement, as the Corporation or the
Receiver may request from time to time.
2.7
Tax Ruling
.
The Assuming Institution shall not at any time,
without the Corporation’s prior written consent, seek a private letter ruling
or other determination from the Internal Revenue Service or otherwise seek to
qualify for any special tax treatment or benefits associated with any payments
made by the Corporation pursuant to the Purchase and Assumption Agreement or
this Commercial Shared-Loss Agreement.
ARTICLE III - RULES REGARDING THE ADMINISTRATION OF
SHARED-LOSS ASSETS AND SHARED-LOSS SECURITIES
3.1
Agreement
with Respect to Administration
.
The Assuming
Institution shall (and shall cause any of its Affiliates to which the Assuming
Institution transfers any Shared-Loss Assets or Shared-Loss Securities), or
shall cause a Third Party Servicer to, manage, administer, and collect the
Shared-Loss Assets and Shared-Loss Securities while owned by the Assuming
Institution or any Affiliate thereof during the term of this Commercial
Shared-Loss Agreement in accordance with the rules set forth in this
Article III (“Rules”). The Assuming Institution shall be responsible to
the Receiver and the Corporation in the performance of its duties hereunder and
shall provide to the Receiver and the Corporation such reports as the Receiver
or the Corporation reasonably deems advisable, including but not limited to the
reports required by Section 3.3 hereof, and shall permit the Receiver and
the Corporation at all times to monitor the Assuming Institution’s performance
of its duties hereunder.
125
3.2
Duties of
the Assuming Institution with Respect to Shared-Loss Assets
.
(a) In the performance
of its duties under these Rules, the Assuming Institution shall:
(i) manage, administer,
collect and effect Charge-Offs and Recoveries with respect to each Shared-Loss
Asset in a manner consistent with (A) usual and prudent business and
banking practices; (B) the Assuming Institution’s (or, in the case a Third
Party Servicer is engaged, the Third Party Servicer’s) practices and procedures
including, without limitation, the then-effective written internal credit
policy guidelines of the Assuming Institution, with respect to the management,
administration and collection of and taking of charge-offs and write-downs with
respect to loans, other real estate and repossessed collateral that do not
constitute Shared Loss Assets;
(ii) exercise its best
business judgment in managing, administering, collecting and effecting
Charge-Offs with respect to Shared-Loss Assets;
(iii) use its best
efforts to maximize collections with respect to Shared-Loss Assets and, if
applicable for a particular Shared-Loss Asset, without regard to the effect of
maximizing collections on assets held by the Assuming Institution or any of its
Affiliates that are not Shared-Loss Assets;
(iv) adopt and implement
accounting, reporting, record-keeping and similar systems with respect to the
Shared-Loss Assets, as provided in Section 3.4 hereof;
(v) retain sufficient
staff to perform its duties hereunder; and
(vi) provide written
notification in accordance with Article IV of this Commercial Shared-Loss
Agreement immediately after the execution of any contract pursuant to which any
third party (other than an Affiliate of the Assuming Institution) will manage,
administer or collect any of the Shared-Loss Assets, together with a copy of
that contract.
(b) Any transaction
with or between any Affiliate of the Assuming Institution with respect to any
Shared-Loss Asset including, without limitation, the execution of any contract
pursuant to which any Affiliate of the Assuming Institution will manage,
administer or collect any of the Shared-Loss Assets, or any other action
involving self-dealing, shall be subject to the prior written approval of the
Receiver or the Corporation.
(c) The following
categories of expenses shall not be deemed to be Reimbursable Expenses or
Recovery Expenses:
(i) Federal, State, or
local income taxes and expenses related thereto;
(ii) salaries or other
compensation and related benefits of Assuming Institution employees and the
employees of its Affiliates including, without limitation, any bonus,
commission or severance arrangements, training, payroll taxes, dues, or travel-
or relocation-related expenses,;
(iii) the cost of space
occupied by the Assuming Institution, any Affiliate thereof and their staff,
the rental of and maintenance of furniture and equipment, and expenses for data
processing including the purchase or enhancement of data processing systems;
(iv) except as
otherwise provided herein, fees for accounting and other independent
126
professional consultants
(other than consultants retained to assess the presence, storage or release of
any hazardous or toxic substance, or any pollutant or contaminant with respect
to the collateral securing a Shared-Loss Asset that has been fully or partially
charged-off);
provided
,
that
for purposes of this
Section 3.2(c)(iv), fees of attorneys and appraisers engaged as necessary
to assist in collections with respect to Shared-Loss Assets shall not be deemed
to be fees of other independent consultants;
(v) allocated portions
of any other overhead or general and administrative expense other than any fees
relating to specific assets, such as appraisal fees or environmental audit
fees, for services of a type the Assuming Institution does not normally perform
internally;
(vi) any expense not
incurred in good faith and with the same degree of care that the Assuming
Institution normally would exercise in the collection of troubled assets in
which it alone had an interest; and
(vii) any expense
incurred for a product, service or activity that is of an extravagant nature or
design.
(d) Subject to
Section 3.7, the Assuming Institution shall not contract with third
parties to provide services the cost of which would be a Reimbursable Expense
or Recovery Expense if the Assuming Institution would have provided such
services itself if the relevant Shared-Loss Assets were not subject to the
loss-sharing provisions of Section 2.1 of this Commercial Shared-Loss
Agreement.
3.3
Duties of
the Assuming Institution with Respect to Shared-Loss Securities.
(a) In the performance
of its duties under these Rules, the Assuming Institution shall:
(i) manage, administer,
collect and each Shared-Loss Security in a manner consistent with
(A) usual and prudent business and banking practices; (B) the
Assuming Institution’s practices and procedures including, without limitation,
the then-effective written internal credit policy guidelines of the Assuming
Institution, with respect to the management, administration and collection of
similar assets that are not Shared-Loss Securities;
(ii) exercise its best
business judgment in managing, administering, collecting and effecting
Charge-Offs with respect to Shared-Loss Securities;
(iii) use its best
efforts to maximize collections with respect to Shared-Loss Securities and, if
applicable for a particular Shared-Loss Security, without regard to the effect
of maximizing collections on assets held by the Assuming Institution or any of
its Affiliates that are not Shared-Loss Securities, provided that, any sale of
a Shared-Loss Security shall only be made with the prior approval of the
Receiver or the Corporation;
(iv) adopt and
implement accounting, reporting, record-keeping and similar systems with
respect to the Shared-Loss Securities, as provided in Section 3.4 hereof;
(v) retain sufficient
staff to perform its duties hereunder; and
(vi) provide written
notification in accordance with Article IV of this Commercial Shared-Loss
Agreement immediately after the execution of any contract pursuant to which any
third party (other than an Affiliate of the Assuming Institution) will manage,
administer or collect any of the Shared-Loss Securities, together with a copy
of that contract.
127
(b) Any transaction
with or between any Affiliate of the Assuming Institution with respect to any
Shared-Loss Security including, without limitation, the execution of any
contract pursuant to which any Affiliate of the Assuming Institution will
manage, administer or collect any of the Shared-Loss Assets, or any other
action involving self-dealing, shall be subject to the prior written approval
of the Receiver or the Corporation.
(c) The Assuming
Institution shall not contract with third parties to provide services the cost
of which would be a Reimbursable Expense or Recovery Expense if the Assuming
Institution would have provided such services itself if the relevant
Shared-Loss Assets were not subject to the loss-sharing provisions of
Section 2.1 of this Commercial Shared-Loss Agreement.
3.4
Records and
Reports
. The Assuming Institution shall establish and
maintain records on a separate general ledger, and on such subsidiary ledgers
as may be appropriate to account for the Shared-Loss Assets and the Shared-Loss
Securities, in such form and detail as the Receiver or the Corporation may
require, to enable the Assuming Institution to prepare and deliver to the
Receiver or the Corporation such reports as the Receiver or the Corporation may
from time to time request regarding the Shared-Loss Assets, the Shared-Loss
Securities and the Quarterly Certificates required by Section 2.1 of this
Commercial Shared-Loss Agreement.
3.5
Related
Loans
.
(a)
The Assuming
Institution shall not manage, administer or collect any “Related Loan” in any
manner which would have the effect of increasing the amount of any collections
with respect to the Related Loan to the detriment of the Shared-Loss Asset to
which such loan is related. A “Related Loan” means any loan or extension of
credit held by the Assuming Institution at any time on or prior to the end of
the final Recovery Quarter that is: (i) made to the same Obligor with
respect to a Loan that is a Shared-Loss Asset or with respect to a Loan from
which Other Real Estate, or Additional ORE derived, or (ii) attributable
to the same primary Obligor with respect to any Loan described in clause
(i) under the rules of the Assuming Institution’s Chartering
Authority concerning the legal lending limits of financial institutions
organized under its jurisdiction as in effect on the Commencement Date, as
applied to the Assuming Institution.
(b)
The Assuming
Institution shall prepare and deliver to the Receiver with the Quarterly
Certificates for the Calendar Quarters ending June 30 and December 31
for all Shared-Loss Quarters and Recovery Quarters, a schedule of all Related
Loans which are commercial loans or commercial real estate loans with Legal
Balances of $5,000,000 or more on the Accounting Records of the Assuming
Institution as of the end of each such semi-annual period, and all other
commercial loans or commercial real estate loans attributable to the same
Obligor on such loans of $5,000,000 or more.
3.6
Legal
Action; Utilization of Special Receivership Powers
. The Assuming
Institution shall notify the Receiver in writing (such notice to be given in
accordance with Article IV below and to include all relevant details)
prior to utilizing in any legal action any special legal power or right which
the Assuming Institution derives as a result of having acquired a Shared-Loss
Asset from the Receiver, and the Assuming Institution shall not utilize any
such power unless the Receiver shall have consented in writing to the proposed
usage. The Receiver shall have the right to direct such proposed usage by the
Assuming Institution and the Assuming Institution shall comply in all respects
with such direction. Upon request of the Receiver, the Assuming Institution
will advise the Receiver as to the status of any such legal action. The
Assuming Institution shall immediately notify the Receiver of any judgment in
litigation involving any of the aforesaid special powers or rights.
128
3.7
Third Party
Servicer
. The Assuming Institution may perform any of its obligations
and/or exercise any of its rights under this Commercial Shared-Loss Agreement
through or by one or more Third Party Servicers, who may take actions and make
expenditures as if any such Third Party Servicer was the Assuming Institution
hereunder (and, for the avoidance of doubt, such expenses incurred by any such
Third Party Servicer on behalf of the Assuming Institution shall be
Reimbursable Expenses or Recovery Expenses, as the case may be, to the same
extent such expenses would so qualify if incurred by the Assuming Institution);
provided, however, that the use thereof by the Assuming Institution shall not
release the Assuming Institution of any obligation or liability hereunder.
ARTICLE IV — PORTFOLIO SALE
4.1
Assuming
Institution Portfolio Sales of Remaining Shared-Loss Assets
. The Assuming
Institution shall have the right with the consent of the Receiver, commencing
as of the first day of the third to last Shared-Loss Quarter, to liquidate for
cash consideration, in one or more transactions, all or a portion of
Shared-Loss Assets held by the Assuming Institution (“Portfolio Sales”). If the
Assuming Institution exercises its option under this Section 4.1, it must
give thirty (30) days notice in writing to the Receiver setting forth the details
and schedule for the Portfolio Sale which shall be conducted by means of sealed
bid sales to third parties, not including any of the Assuming Institution’s
affiliates, contractors, or any affiliates of the Assuming Institution’s
contractors.
4.2
Calculation
of Sale Gain or Loss
. For Shared-Loss Assets gain or loss on the
sales under Section 4.1 will be calculated as the aggregate sales price
received by the Assuming Institution less the aggregate book value of the
remaining Shared-Loss Assets.
ARTICLE V — LOSS-SHARING NOTICES GIVEN TO CORPORATION
AND/OR RECEIVER
As a supplement to the
notice provisions contained in Section 13.7 of the Purchase and Assumption
Agreement, any notice, request, demand, consent, approval, or other
communication (a “Notice”) given to the Corporation and/or the Receiver in the
loss-sharing context shall be given as follows:
5.1
With respect to
a Notice under Section 2 and Sections 3.1-3.5 of this Commercial
Shared-Loss Agreement:
Federal Deposit Insurance
Corporation
Division of Resolutions and Receiverships
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Assistant
Director, Franchise and Asset Marketing
5.2
With respect to
a Notice under Section 3.6 of this Commercial Shared-Loss Agreement:
Federal
Deposit Insurance Corporation Legal Division
1601 Bryan Street
Dallas, Texas 75201
Attention: Regional Counsel
with
a copy to:
129
Federal Deposit Insurance
Corporation Legal Division
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Senior Counsel
(Special Issues Group)
ARTICLE VI – MISCELLANEOUS
6.1
Expenses
. Except as
otherwise expressly provided herein, all costs and expenses incurred by a party
hereto in connection with this Commercial Shared-Loss Agreement shall be borne
by such party whether or not the transactions contemplated herein shall be
consummated.
6.2
Successors
and Assigns; Specific Performance
.
This Commercial
Shared-Loss Agreement, and
all of
the terms and provisions hereof shall be binding upon and shall inure to the
benefit of the parties hereto and their respective permitted successors and
assigns only. The Receiver may assign or otherwise transfer this Commercial
Shared-Loss Agreement and the rights and obligations of the Receiver hereunder
(in whole or in part) to the Federal Deposit Insurance Corporation in its
corporate capacity without the consent of Assuming Institution. Notwithstanding
anything to the contrary contained in this Commercial Shared-Loss Agreement,
except as is expressly permitted in this Section 6.2, the Assuming
Institution may not assign or otherwise transfer this Commercial Shared-Loss
Agreement or any of the Assuming Institution’s rights or obligations hereunder
(in whole or in part), or sell or transfer of any subsidiary of the Assuming
Institution holding title to Shared-Loss Assets or Shared-Loss Securities,
without the prior written consent of the Receiver, which consent may be granted
or withheld by the Receiver in its sole and absolute discretion. An assignment
or transfer of this Commercial Shared-Loss Agreement includes:
(i) a merger or
consolidation of the Assuming Institution with or into another company, if the
shareholders of the Assuming Institution will own less than sixty-six and
two/thirds percent (66.66%) of the equity of the consolidated entity;
(ii) a merger or
consolidation of the Assuming Institution’s Holding Company with or into
another company, if the shareholders of the Holding Company will own less than
sixty-six and two/thirds percent (66.66%) of the equity of the consolidated
entity;
(iii) the sale of all
or substantially all of the assets of the Assuming Institution to another
company or person; or
(iv) a sale of shares
by any one or more shareholders that will effect a change in control
of the Assuming
Institution, as determined by the Receiver with reference to the standards set
forth in the Change in Bank Control Act, 12 U.S.C. 1817 (j).
For the avoidance of doubt,
any transaction under this Section 6.2 that requires the Receiver’s
consent that is made without consent of the Receiver hereunder will relieve the
Receiver of any of its obligations under this Commercial Shared-Loss Agreement.
No Loss shall be recognized
under this Commercial Shared-Loss Agreement as a result of any accounting adjustments
that are made due to or as a result of any assignment or transfer of this
Commercial Shared-Loss Agreement or any merger, consolidation, sale or other
transaction to which the Assuming Institution, its Holding Company or any
Affiliate is a party, regardless of whether the Receiver consents to such
assignment or transfer in connection with such transaction pursuant to this
Section 6.2.
130
6.3
WAIVER OF
JURY TRIAL
.
EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF
OR RELATING TO OR IN CONNECTION WITH THIS COMMERCIAL SHARED-LOSS AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
6.4
No Third
Party Beneficiary
.
This Commercial
Shared-Loss Agreement and the Exhibits hereto are for the sole and exclusive
benefit of the parties hereto and their respective permitted successors and
permitted assigns and there shall be no other third party beneficiaries, and
nothing in Commercial Shared-Loss Agreement or the Exhibits shall be construed
to grant to any other Person any right, remedy or claim under or in respect of
this Commercial Shared-Loss Agreement or any provision hereof.
6.
5
Consent
.
Except as otherwise provided
herein, when the consent of a party is required herein, such consent shall not
be unreasonably withheld or delayed.
6.6
Rights Cumulative
.
Except as otherwise
expressly provided herein, the rights of each of the parties under this
Commercial Shared-Loss Agreement are cumulative, may be exercised as often as
any party considers appropriate and are in addition to each such party’s rights
under the Purchase and Sale Agreement and any of the related agreements or
under law. Except as otherwise expressly provided herein, any failure to
exercise or any delay in exercising any of such rights, or any partial or
defective exercise of such rights, shall not operate as a waiver or variation
of that or any other such right.
131
Exhibit 1
For the commercial and other
pool, the FDIC reporting requirement includes the following:
·
A quarterly
loan level download for all loans in the asset pool
·
A quarterly
asset level download of commercial ORE
·
A quarterly
certificate report that includes 3 sections:
·
1: A summary
report of total covered losses for the quarter and the derivation of the FDIC
portion of the covered loss
·
2: A summary
report on the commercial and other portfolio and covered losses and recoveries
·
3: A
performance report on the outstanding commercial and other pool assets under
loss share
·
A quarterly
listing of assets with covered losses
A blank version of the
quarterly certificate report is shown below.
132
CERTIFICATE
QUARTERLY
SUMMARY
FOR COMMAND OTHER
SHARED-LOSS AGREEMENT
FDIC - RECEIVER OF
PURCHASE AND ASSUMPTION
AGREEMENT DATED:
|
Shared-Loss Quarter Ended:
|
|
|
(Dollars)
|
Calculation of Amount Due from (to) FDIC
|
FDIC % Share
|
|
0%
|
|
80%
|
|
95%
|
|
Total
|
|
|
Carry
forward from other types of assets:
|
|
|
|
|
|
|
|
|
|
|
1.
|
Cumulative losses from
single family loans
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
2.
|
Cumulative losses from
securities
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
3.
|
Cumulative loss from
non-single family
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
4.
|
Total cumulative losses at
beg of quarter
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
5.
|
Covered losses (gains)
during quarter
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
6.
|
Cumulative loss at end of
quarter
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
FDIC
% Share
|
|
x
0
|
%
|
x
80
|
%
|
x95
|
%
|
|
|
|
7.
|
Amount
Due from (to) FDIC
|
|
0
|
+
|
0
|
+
|
0
|
=
|
—
|
|
|
Memo: threshold for recovery percentage
|
|
0
|
|
0
|
|
|
|
|
|
|
Preparer name:
|
|
|
|
|
|
|
|
Preparer signature
|
|
Preparer title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer name:
|
|
|
|
|
|
|
|
Officer signature
|
|
Officer title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
1
CERTIFICATE
QUARTERLY SUMMARY
FOR COMM AND OTHER SHARED-LOSS AGREEMENT
FDIC - RECEIVER OF
BANK
BANK
PURCH AND ASSUMPTION AGREEMENT DATED:
|
|
Shared-Loss Quarter Ended:
|
|
|
|
|
(Dollars)
|
|
|
|
|
|
|
|
This Quarter
|
|
|
|
|
PART A. Opening Closing Net Shared-Loss
Asset
|
|
Cumulative at beg
|
|
Commercial Real Estate Loans
|
|
|
|
ORE & oth repo
|
|
Consumer
|
|
|
|
|
|
FDIC
|
|
Cumulative at
|
|
|
Balances
|
|
of Quarter
|
|
Constr & Dev
|
|
Other
|
|
C & I Loans
|
|
assets
|
|
Loans
|
|
Other Loans
|
|
Total
|
|
Adjustments
|
|
and of Quarter
|
|
|
1.
|
Opening
Balance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
2.
|
Adjustments:
|
a)
Transfers
|
|
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
b)
Reclassfications
|
|
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
c)
Other
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
3.
|
Adjusted
Opening Balance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
4.
|
Add:
|
a)
Assumed Commitment Advances
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
b)
Permitted Advances
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
c)
Capital Expenditures
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
d)
Recoveries
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
5.
|
Less:
|
a)
Pin Collectors (Payoffs and ament
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
b)
Sales
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
c)
Charge-Offs (excluding acct int)
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
d)
Qualifying loss on sales
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
6.
|
Net
(Reduction) Increase Amount
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
7.
|
Closing
Balance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
PART B. Charge-Offs, Recoveries &
Reimbursable Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
Charge
Offs:
|
a)
Principal (from 5c and 5d)
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
b)
Acct int (up to 90 days)
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
9.
|
Total
Charge-Offs
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
10.
|
Less:
Recoveries
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
11.
|
Net
Charge-Offs (Recoveries)
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
12.
|
Add:
Reimbursable Expenses
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
13.
|
Less:
Offsetting Income
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
14.
|
Shared-Loss
Debit (Credit) Amount
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Failed
Bank Name
Performance
Status: Commercial and Other Loans
Quarter
ending
(Dollars)
Number
of Loans / Properties
|
|
|
|
|
Delinquent
|
|
In
|
|
Repossessed
|
|
|
|
|
|
|
Performing
|
|
30-59 days
|
|
60-89 days
|
|
90+ days
|
|
Foreclosure
|
|
Assets*
|
|
Total
|
|
|
Construction & Development
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Other Comm Real Estate
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Total Comm Real Estate
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
C&I
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Consumer Loans
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Other Loans
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Total
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
$
Balance (000s)
|
|
|
|
|
Delinquent
|
|
In
|
|
Repossessed
|
|
|
|
|
|
|
Performing
|
|
30-59 days
|
|
60-89 days
|
|
90+ days
|
|
foreclosure
|
|
Assets*
|
|
Total
|
|
|
Construction & Development
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Other Comm Real Estate
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Total Comm Real Estate
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
C&I
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Consumer Loans
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Other Loans
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Total
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
*
ORE for CRE loans: other types of repossessed assets for other types of loans.
3
EXHIBIT 10.8
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT
(this “
Agreement
”), dated as of July 14, 2009
(the “
Signing Date
”), is by and among State
Bank and Trust Company, a banking corporation organized under the laws of the
State of Georgia, (the “
Bank
”),
and each of the investors identified on the signature pages hereto
(individually, a “
Purchaser
” and
collectively, the “
Purchasers
”).
WHEREAS:
A.
The Bank and
each Purchaser (severally and not jointly) is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the “
1933 Act
”), and Rule 506 of
Regulation D as promulgated by the United States Securities and Exchange
Commission (the “
Commission
”) under the 1933 Act (“
Regulation D
”).
B.
Each Purchaser,
severally and not jointly, wishes to purchase and the Bank wishes to sell, upon
the terms and conditions stated in this Agreement, shares of common stock, par
value $5.00 per share, of the Bank (the “
Common
Stock
”), in the aggregate number indicated below such Purchaser’s
name on the signature page of this Agreement (which aggregate amount for
all Purchasers together shall be 28,455,000 shares of Common Stock and shall
collectively be referred to herein as the “
Common
Shares
”).
C.
The Bank has
engaged FBR Capital Markets & Co. as its placement agent (the “
Placement Agent
”) for the offering of the Common Shares on a
“best efforts” basis.
NOW, THEREFORE
, in consideration of the mutual covenants contained in this Agreement, and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Bank and each Purchaser, severally and not
jointly, hereby agree as follows:
1.
PURCHASE AND
SALE OF COMMON SHARES
(a)
Purchase of Common Shares
.
On
the terms set forth in this Agreement and subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Bank shall
issue and sell to each Purchaser, and each Purchaser severally, but not
jointly, shall purchase from the Bank on the Closing Date (as defined below),
the number of Common Shares as indicated below such Purchaser’s name on the
signature page of this Agreement at the closing (the “
Closing
”).
The Bank, at any time, in its sole discretion, will determine whether or
not the subscription for the number of Common Shares as indicated below each
Purchaser’s name on the signature pages of this Agreement will be accepted
or rejected, in whole or in part, which may occur after the Signing Date. If a subscription is rejected in part, then
the subscription for the number of Common Shares as indicated below such
Purchaser’s name on the signature page of this Agreement automatically
will be deemed to be modified and amended to reflect the actual number of
Common Shares to be received by such Purchaser;
provided,
however
, that such
Purchaser’s
subscription may not be rejected in part after the Signing Date without such
Purchaser’s prior consent. With respect
to each subscription that is rejected, in whole or in part, the Bank will
direct the Escrow Agent (as defined below) to as promptly as practicable issue
a Federal Funds wire transfer in the amount of the rejected investment (if
rejected only in part, then the amount rejected in part only), without
interest, directly to such Purchaser in accordance with the Escrow Agreement
(as defined below) without liability of any party to any other party.
(i)
Closing
. The date of the Closing (the “
Closing Date
”) shall be the day the Bank receives
notice of the acceptance of its bid from the Federal Deposit Insurance
Corporation (“
FDIC
”)
(or
the next business day thereafter if necessary to complete the Closing process)
at the offices of Nelson Mullins Riley & Scarborough LLP, Atlantic
Station, 201 17
th
Street, Suite 1700, Atlanta, Georgia
30363, or at such other location as mutually agreed upon by the parties hereto.
(ii)
Purchase Price
. The purchase price is $10.00 per share, and
the aggregate purchase price for the Common Shares to be purchased by each such
Purchaser at the Closing (the “
Purchase Price
”)
shall be the amount indicated below such Purchaser’s name on the signature page of
this Agreement.
(b)
Form of Payment
. Prior to the Closing Date, each Purchaser
shall have either delivered the Purchase Price to the Placement Agent (i) by
means of a check payable to “Bank of New York Mellon, as Escrow Agent for State
Bank and Trust Company” or (ii) by wire transfer to the following account
at Bank of New York Mellon (the “
Escrow Agent
”): Bank of New York Mellon, ABA No. ***-***-***,
Credit: State Bank and Trust Company, Account No. *****. On the Closing Date: (x) the Escrow
Agent shall wire to the Bank the Purchase Price for each Purchaser in
accordance with the terms of the Escrow Agreement, dated July 6, 2009,
among the Escrow Agent, the Placement Agent and the Bank (the “
Escrow Agreement
”); (y) the Bank shall deliver to the
Escrow Agent, as agent for the Bank, the Common Shares with written
instructions to deliver the Common Shares to the Purchasers as set forth
therein; and (z) the Escrow Agent shall deliver to each Purchaser the
amount of Common Shares that such Purchaser is purchasing hereunder, registered
in the name of such Purchaser or its designee.
(c)
Transaction Documents
. The term “Transaction Documents” includes
this Agreement (including the Appendices attached hereto) and the Escrow
Agreement, but does not include the P&A Agreement (as defined in Section 2(e)(iii)),
the complete bid proposal submitted by the Bank to the FDIC to acquire the
assets and liabilities of the Target Banks (as defined in Section 2(e)(iii)),
or any other documents or agreements entered into in connection with the
Proposed Acquisition (as defined in Section 2(e)(iii)). Certain information related to the Proposed
Acquisition, including a summary of the bid by the Bank to acquire the Target
Banks, is set forth in an Offering Summary (as defined in
Section 2(e)(iii)), and such information shall be updated by the Bank, and
provided to the Purchasers, upon any material change thereto.
2
2.
PURCHASER’S
REPRESENTATIONS AND WARRANTIES
.
Each
Purchaser represents and warrants as of the date hereof and as of the Closing
Date (except for the representations and warranties that are as of a specific
date, which shall be made as of such date) to the Bank that:
(a)
No Public Sale or
Distribution
. Such
Purchaser understands that the Common Shares have not been registered under the
1933 Act or any applicable state securities law and is acquiring the Common
Shares as principal for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act;
provided, however
, that by making the representations
herein, such Purchaser does not agree to hold any of the Common Shares for any
minimum or other specific term and reserves the right to sell or dispose of the
Common Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act and pursuant to the applicable
terms of the Transaction Documents. Such
Purchaser is acquiring the Common Shares hereunder in the ordinary course of
its business. Such Purchaser does not
presently have any agreement or understanding, directly or indirectly, with any
Person (as defined in Section 3(u)) to distribute any of the Common
Shares.
(b)
Purchaser Status
. Such Purchaser is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D and has
provided the information in the Accredited Investor Questionnaire attached
hereto as Appendix II. Such
Purchaser is not a registered broker-dealer under Section 15 of the Securities
Exchange Act of 1934, as amended (the “
1934 Act
”) or
an unregistered broker-dealer engaged in the business of being a broker-dealer.
(c)
General Solicitation
. Such Purchaser is not purchasing the Common
Shares as a result of any advertisement, article, notice or other communication
regarding the Common Shares published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar or any
other general advertisement.
(d)
Reliance on Exemptions
. Such Purchaser understands that the Common
Shares are being offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities
laws and that the Bank is relying in part upon the truth and accuracy of, and
such Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Common Shares.
(e)
Review of Information and
Consultation with Advisors
. Such Purchaser has, either alone or through
its representatives:
(i)
consulted with
its own legal, regulatory, tax, business, investment, financial and accounting
advisers in connection herewith to the extent it has deemed necessary;
(ii)
had a
reasonable opportunity to ask such questions as it has deemed necessary of, and
to receive answers from, officers and representatives of the Bank concerning
the Bank and its financial condition and results of operations, the terms and
3
conditions of the offering of the Common Shares, and
any additional relevant information that the Bank possesses, and any such
questions have been answered to its satisfaction;
(iii)
had the
opportunity to review and evaluate the following in connection with its
investment decision in the Common Shares: (A) all publicly available
records and filings concerning the Bank, as well as all other documents,
records, filings, reports, agreements and other materials provided by the Bank
regarding its business, operations and financial condition sufficient to enable
it to evaluate its investment; (B) the offering overview, investor
presentations (as supplemented), and term sheet (collectively, the “
Offering Summary
”) that summarizes this offering, the
proposed transaction by the Bank to use the proceeds of this offering to
acquire the assets and liabilities of Security Bank of North Metro, Security
Bank of Gwinnett County, Security Bank of North Fulton, Security Bank of
Houston County, Security Bank of Jones County, and Security Bank of Bibb County
,
which institutions are in receivership (each, a “
Target Bank
,” and collectively, the “
Target Banks
”),
through the FDIC bid process for failed institutions
(the
“
Proposed Acquisition
”), and the Bank’s
proposed and final bid information to acquire the Target Banks; (C) the
publicly available records and filings concerning the Target Banks; and (D) the
FDIC’s form of purchase and assumption agreement to be entered into by the Bank
and the FDIC with respect to the Proposed Acquisition of the Target Banks (the
“
P&A Agreement
”);
(iv)
electronically
agreed to the FDIC confidentiality agreement for each Target Bank contained in
the electronic data room maintained by the FDIC for such Target Bank, and had
the opportunity to review and evaluate all documents, records, filings,
reports, agreements and other materials regarding the Target Banks’ business,
operations and financial condition, including the assets and liabilities, that
were provided by the FDIC and were made available in an electronic data room
maintained by the FDIC for each Target Bank;
(v)
had the
opportunity to review, evaluate and meet with the proposed management team that
will operate and manage the Bank after the completion of the Proposed
Acquisition and the Closing, including review of any subscription agreements,
purchase agreements, warrant agreements, lock-up agreements and employment
agreements between the Bank and the proposed management team, all of which have
been provided to such Purchaser and constitute all of the agreements,
arrangements or understandings between the Bank and the proposed new management
team as of the Closing Date; and
(vi)
made its own
investment decisions based upon its own judgment, due diligence and advice from
such advisers as it has deemed necessary and not upon any view expressed by any
Person. Neither such inquiries nor any
other due diligence investigations conducted by such Purchaser or its advisors,
if any, or its representatives shall modify, amend or affect such Purchaser’s
right to rely on the Bank’s representations and warranties contained
herein. Such Purchaser understands that
its investment in the Common Shares involves a high degree of risk and is able
to afford a complete loss of such investment.
(f)
No Reliance
. Purchaser acknowledges that the information
in the Offering Summary is as of the date thereof and may not contain all of
the terms and conditions of the offering and the Proposed Acquisition, and
understands and acknowledges that it is Purchaser’s responsibility to:
(i) conduct its own independent investigation and evaluation of the
Bank, the
4
Target
Banks and the Proposed Acquisition, including, without limitation,
(A) the information provided by the FDIC that was set forth in the
electronic data room regarding the Target Banks and (B) the business
prospects and future operations of the Bank after completion of the Proposed
Acquisition; and (ii) review and evaluate the management team proposed to
operate and manage the Bank upon completion of the Proposed Acquisition
and after the Closing. Such Purchaser is
not relying upon, and has not relied upon, any advice, statement, representation
or warranty made by any Person, including, without limitation, the Placement
Agent, except for the statements, representations and warranties of the Bank
made or contained in this Agreement.
Furthermore, such Purchaser acknowledges that: (1) the Placement
Agent has not performed any due diligence review on behalf of the Purchaser;
(2) the Purchaser has made, and has relied upon, its own independent
examination in purchasing the Common Shares, including, without limitation, of
the Bank, the Target Banks, the Proposed Acquisition and the proposed
management team that will operate and manage the Bank after the completion of
the Proposed Acquisition; (3) nothing in this Agreement or any other
materials presented by or on behalf of the Bank to the Purchaser in connection
with the purchase of the Common Shares constitutes legal, tax or investment
advice and such Purchaser has consulted such legal, tax and investment advisors
as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Common Shares; and (4) the Purchaser
received or had access to all of the information the Purchaser deemed necessary
in order to make its investment decision in the Common Shares. Purchaser acknowledges and understands that
there is no representation or warranty being made to Purchaser as to the
suitability or sufficiency of the information provided by the FDIC regarding
the Target Banks or the assets and liabilities of the Target Banks to be
acquired in the Proposed Acquisition.
Such Person, including, without limitation, the Placement Agent, is a
third-party beneficiary to this Section 2(f).
(g)
No Public Market; No
Governmental Review; Common Shares Not Insured
. Such Purchaser understands that there is no
established market for the Common Shares and that no public market for the
Common Shares may develop. Such
Purchaser understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any
recommendation or endorsement of the Common Shares or the fairness or
suitability of the investment in the Common Shares nor have such authorities
passed upon or endorsed the merits of the offering of the Common Shares. Such Purchaser understands that the Common
Shares are not deposits or other obligations of a depository institution and
are not insured by the FDIC, including the FDIC’s Deposit Insurance Fund, or
any other governmental agency.
(h)
Brokers and Finders
. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Bank, or any Purchaser, for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Purchaser.
(i)
No Conflicts
. The execution, delivery and performance by
such Purchaser of this Agreement and the consummation by such Purchaser of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents of such Purchaser, or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Purchaser
5
is
a party, or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations, assuming the correctness of the representations and warranties
made by the Bank herein) applicable to such Purchaser, except in the case of
clauses (ii) and (iii) above, for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of such Purchaser to
perform its obligations hereunder.
(j)
Investment Risk
. Such Purchaser understands that its
investment in the Common Shares involves a high degree of risk and that no
representation is being made as to the business or prospects of the Bank after
completion of the Proposed Acquisition or the future value of the Common
Shares. Such Purchaser, either alone or
together with its representatives, has the knowledge, sophistication and
experience in financial and business matters as to fully understand and be
capable of evaluating the merits and risks of an investment in the Common
Shares and has the ability to bear the economic risks of an investment in the
Common Shares and, at the present time, is able to afford a complete loss of
such investment.
(k)
Residency
. Such Purchaser has, if an entity, its
principal place of business or, if an individual, its primary residence in the
jurisdiction indicated below such Purchaser’s name on the signature pages hereto.
(l)
Organization; Authorization
. Such Purchaser is an entity duly organized,
validly existing and in good standing (to the extent such concept is
applicable) under the laws of the jurisdiction in which it is organized and has
the requisite organizational power and authority to carry on its business as
now being conducted. Such Purchaser has
the requisite organizational power and authority to enter into and perform its
obligations under this Agreement and to consummate the transactions
contemplated by the Transaction Documents to which it is a party. The execution and delivery of the Transaction
Documents by such Purchaser and performance by such Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate or, if such Purchaser is not a corporation, such
partnership, limited liability company or other applicable like action, on the
part of such Purchaser and no further consent or authorization in connection
therewith is required by such Purchaser, its Board of Directors or its
shareholders, or if such Purchaser is not a corporation, such partnership,
limited liability company or other applicable like action, on the part of such
Purchaser. This Agreement and the other Transaction
Documents to which the Purchaser is a party have been (or upon delivery will
have been) duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with terms hereof and thereof, will constitute the
legal, valid and binding obligations of such Purchaser, enforceable against it
in accordance with its respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance or transfer, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally, and to general
principles of equity, including principles of materiality, commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity) and except that rights to
indemnification and contribution thereunder may be limited by federal or state
securities laws or public policy relating thereto.
(m)
Ownership of Common Stock
and Non-Exercise of Controlling Influence
. After giving effect to the purchase of Common
Shares hereunder and assuming full exercise of the put right described in
Section 3(t) by the current shareholders of the Bank, such Purchaser,
6
either
acting alone or together with any other person or entity that may be affiliated
with such Purchaser, or deemed to be acting in concert with such Purchaser
pursuant to 12 C.F.R. Part 303, Subpart E, will not beneficially
own in excess of 9.9% of the shares of Common Stock outstanding (or 4.9% in the
event that a Purchaser is a bank, bank holding company or other “company” as
defined by 12 C.F.R. § 225.2(d)) immediately after giving effect to
the issuance of the Common Shares to all of the Purchasers hereunder. Without limiting the foregoing, Purchaser
represents and warrants that such Purchaser: (i) has no present intention
of acquiring control of the Bank, as “control” is defined in 12 C.F.R.
Part 303, Subpart E (“Control”); (ii) will not acquire Control
in the future without the prior approval of the applicable Governmental
Entities (as defined below); (iii) is not participating and has not
participated with any other Purchaser in any joint activity or parallel action
towards a common goal between or among such Purchasers of acquiring Control of
the Bank; (iv) no other person holding Common Shares of the Bank or that
presently proposes to acquire Common Shares of the Bank is (a) a member of
Purchaser’s immediate family (if Purchaser is an individual), (b) under
common Control with Purchaser, or (c) a controlling shareholder, partner,
trustee, officer, or director of Purchaser or has policy-making functions with
respect to Purchaser, unless, with regard to this clause 2(m)(iv), all such
persons together with such Purchaser would beneficially own no more than 9.9% of
the shares of Common Stock; and (v) will not, without first determining
whether the prior approval of the applicable Government Entities is required
and, if such approval is required, obtaining such approval, directly or
indirectly seek to appoint any director or executive officer to the Bank or
otherwise attempt to direct the management or policies of the Bank.
(n)
Review of Risk Factors
. Such Purchaser recognizes that the Bank is a
recently organized institution and has limited financial or operating history,
and that an investment in the Common Shares involves certain risks. Such Purchaser has read and understands the
Bank’s “Risk Factors” outlining certain, but not all, risks related to the Bank
and an investment in the Bank, a copy of which is attached hereto as
Exhibit A
.
3.
REPRESENTATIONS
AND WARRANTIES OF THE BANK
.
The
Bank hereby represents and warrants as of the date hereof and as of the Closing
Date (except for the representations and warranties that are as of a specific
date which shall be made as of that date) to each of the Purchasers that:
(a)
Organization and
Qualification
.
(i)
The Bank has
been duly incorporated and is validly existing as a banking corporation in good
standing under the laws of the State of Georgia, with the requisite corporate
power and authority to carry on its business as now being conducted, and as
will be conducted following the closing of the Proposed Acquisition, and has
been duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in which it
owns or leases properties, or conducts its business in a manner or to an extent
that would require such qualification, other than such failures to be so
qualified or in good standing as, individually or in the aggregate, would not
reasonably be expected to have a Bank Material Adverse Effect. The Bank is an insured depository institution
pursuant to the provisions of the Federal Deposit Insurance Act, as amended,
and all premiums and assessments required to be paid in connection therewith
have been paid when due.
7
(ii)
As used in this
Agreement, “
Bank Material Adverse Effect
”
means any material adverse effect on the business, results of operation,
prospects or financial condition of the Bank or on the transactions
contemplated by this Agreement, the other Transaction Documents and by the
P&A Agreement or by the transactions, agreements and instruments to be
entered into in connection herewith or therewith (including, without
limitation, the Proposed Acquisition and the proposed new management team to
manage and operate the Bank after the completion of the Proposed Acquisition),
or on the authority or ability of the Bank to perform its obligations under the
Transaction Documents or the P&A Agreement;
provided,
however
, that Bank Material Adverse Effect shall not be deemed to
include the effects of (A) changes after the Signing Date in general
business, economic or market conditions (including changes generally in
prevailing interest rates, credit availability and liquidity, currency exchange
rates and price levels or trading volumes in the United States or foreign
securities or credit markets), or any outbreak or escalation of hostilities,
declared or undeclared acts of war or terrorism, in each case generally
affecting the industries in which the Bank operates, (B) changes or
proposed changes after the Signing Date in generally accepted accounting
principles in the United States (“
GAAP
”) or
regulatory accounting requirements, or authoritative interpretations thereof,
(C) changes or proposed changes after the Signing Date in securities,
banking and other laws of general applicability or related policies or
interpretations of any federal or state agency charged with the supervision or
regulation of depository institutions or holding companies of depository
institutions, or engaged in the insurance of depository institution deposits,
or any court, administrative agency or commission or other governmental agency,
authority or instrumentality having supervisory or regulatory authority with
respect to the Bank (each a “
Governmental Entity
”
and collectively, “
Governmental Entities
”)
(in the case of each of these clauses (A), (B) and (C), other than changes
or occurrences to the extent that such changes or occurrences have or would
reasonably be expected to have a disproportionate adverse effect on the Bank
relative to comparable U.S. banking or financial services organizations), or
(D) changes in the market price or trading volume of the Common Stock or
any other equity, equity-related or debt securities of the Bank (it being
understood and agreed that the exception set forth in this clause (D) does
not apply to the underlying reason giving rise to or contributing to any such
change).
(b)
Subsidiaries
. The Bank has no direct or indirect
subsidiaries. The Bank does not,
directly or indirectly, own any joint venture or similar entity or capital
stock or hold any equity or similar interests.
(c)
Authorization; Enforcement;
Validity
. The Bank
has the requisite corporate power and authority to enter into and perform its
obligations under: (i) the Transaction
Documents and to issue the Common Shares in accordance with the terms
hereof and thereof and (ii) the P&A Agreement and the transactions
contemplated thereby. The execution and
delivery of the Transaction Documents and the P&A Agreement by the Bank and
the consummation by the Bank of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Common Shares, have
been duly authorized by the Bank’s Board of Directors and no further consent or
authorization in connection therewith is required by the Bank, its Board of
Directors or its shareholders. This
Agreement, the other Transaction Documents and the P&A Agreement to which
the Bank is a party have been duly executed and delivered by the Bank, and
constitute the legal, valid and binding obligations of the Bank, enforceable
against the Bank in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent
8
conveyance
or transfer, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally, and to general principles of equity, including
principles of materiality, commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except that rights to indemnification and contribution thereunder
may be limited by federal or state securities laws or public policy relating
thereto.
(d)
Issuance of Common Shares
. The Common Shares are duly authorized and,
upon issuance in accordance with the terms of the Transaction Documents, shall
be validly issued and free from all preemptive or similar rights, taxes, liens
and charges with respect to the issuance thereof, and the Common Shares shall
be fully paid and nonassessable with the holders being entitled to all rights
accorded to a holder of Common Stock.
The offer and issuance by the Bank of the Common Shares is exempt from
registration under the 1933 Act.
(e)
Adequate Capitalization
. As of June 30, 2009, the Bank meets or
exceeds the standards necessary to be considered “adequately capitalized” under
the FDIC’s regulatory framework for prompt corrective action and is in
compliance with all regulatory capital requirements of the State of Georgia.
(f)
No Conflicts
. The execution, delivery and performance of
the Transaction Documents to which it is a party and the P&A Agreement by
the Bank and the consummation by the Bank of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Common
Shares) will not (i) result in a violation of the Articles of Incorporation
(the “
Articles of Incorporation
”), the Bylaws
(“
Bylaws
”) or the capital stock of the
Bank or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) in any respect
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Bank is a
party, except, in each case in this clause (ii), for such conflicts, defaults
or events of default which would not, individually or in the aggregate,
reasonably be expected to have a Bank Material Adverse Effect or (iii) except
as would not reasonably be expected to result in a Bank Material Adverse
Effect, result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations, assuming
the correctness of the representations and warranties made by the Purchasers
herein) applicable to the Bank or by which any property or asset of the Bank is
bound or affected.
(g)
Consents
. Except for any report or notice required
under Regulation D or any applicable state securities laws, the Bank is
not required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under the
Transaction Documents to which it is a party and the P&A Agreement, in each
case, in accordance with the terms hereof or thereof. The Bank is unaware of any facts or
circumstances that might prevent the Bank from obtaining or effecting any of
the registration, application or filings pursuant to the preceding sentence
required to be obtained or effected.
(h)
Acknowledgment Regarding
Purchaser’s Purchase of Common Shares
. The Bank acknowledges and agrees that each
Purchaser is acting solely in the capacity of an
9
arm’s
length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Purchaser is (i) an officer or
director of the Bank, (ii) to the knowledge of the Bank, an “affiliate” of
the Bank (as defined in Rule 144 of the 1933 Act) or (iii) to the
knowledge of the Bank, a “beneficial owner” of more than 10% of the Common
Stock (as defined for purposes of Rule 13d-3 of the 1934 Act). The Bank further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Bank (or in any
similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a
Purchaser or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Purchaser’s purchase of the Common Shares. The Bank further represents to each Purchaser
that the Bank’s decision to enter into the Transaction Documents has been based
solely on an independent evaluation by the Bank and its representatives.
(i)
No General Solicitation;
Placement Agent’s Fees
.
Neither the Bank nor any of its affiliates, nor, to the Bank’s
knowledge, any Person acting on its or their behalf, has engaged in any form of
“general solicitation” or “general advertising” (within the meaning of
Regulation D) in connection with the offer or sale of the Common
Shares. The Bank shall be responsible for
the payment of any placement agent’s fees, financial advisory fees, or brokers’
commissions (other than fees or commissions of persons engaged by any Purchaser
or its investment advisor) relating to or arising out of the transactions
contemplated hereby. Other than the
Placement Agent, the Bank has not engaged any placement agent or other agent in
connection with the sale of the Common Shares.
(j)
Ownership
. The Bank acknowledges, represents, warrants
and agrees that after giving effect to the purchase of the Common Shares
hereunder, and giving effect to the exercise of the put right described in
Section 3(t) by the current shareholders of the Bank, that no
Purchaser will be issued more than 9.9% of the shares of Common Stock
outstanding immediately after giving effect to the issuance of the Common
Shares to all of the Purchasers hereunder.
The Bank acknowledges that each Purchaser is relying on the
capitalization information in the Offering Summary, as supplemented, that has
been provided by the Bank in order for such Purchaser to determine its ownership
of the Common Shares as of the Closing.
(k)
No Integrated Offering
. Neither the Bank nor any of its affiliates,
nor any Person acting on its or their behalf, has, directly or indirectly, at
any time within the past six months made any offers or sales of any Bank
security or solicited any offers to buy any security, under circumstances that
would require registration of the issuance of any of the Common Shares under
the 1933 Act, whether through integration with prior offerings or otherwise, or
cause this offering of the Common Shares to require approval of shareholders of
the Bank for purposes of any applicable shareholder approval provisions. None of the Bank, its affiliates and any
Person acting on their behalf will take any action or steps referred to in the
preceding sentence that would require registration of the issuance of any of
the Common Shares under the 1933 Act or shareholder approval under applicable
shareholder approval provisions.
(l)
Regulatory Enforcement
Matters; Distributions
. Neither the Bank nor any of its respective
officers, directors, employees or representatives, is subject or is party to,
or has received any notice from any Governmental Agency that any of them shall
become subject or
10
party
to any investigation with respect to any cease-and-desist order, agreement,
civil monetary penalty, consent agreement, memorandum of understanding or other
regulatory enforcement action, proceeding or order with or by, or is a party to
any commitment letter or similar undertaking to, or is subject to any directive
by, or has been a recipient of any supervisory letter from, or has adopted any
board resolutions at the request or suggestion of, any Governmental Agency
that, in any such case, currently restricts in any material respect the conduct
of their business or that in any manner relates to their capital adequacy,
their credit policies, their management or their business (each, a “
Regulatory Action
”), nor has the Bank been advised by any
Governmental Agency that it is considering issuing or requesting any such
Regulatory Action; and there is no unresolved material violation, criticism or
exception by any Governmental Agency with respect to any report or statement
relating to any examinations of the Bank.
The Bank has no knowledge of any facts and
circumstances, and has no reason to believe that any facts or circumstances
exist, that would cause it (i) to be deemed not to be in satisfactory
compliance with the Community Reinvestment Act and the regulations promulgated
thereunder or to be assigned a CRA rating by federal or state banking
regulators of lower than “satisfactory”; (ii) to be deemed to be operating
in violation, in any material respect, of the Bank Secrecy Act, the Patriot
Act, any order issued with respect to anti-money laundering by the U.S.
Department of the Treasury’s Office of Foreign Assets Control, or any other
anti-money laundering statute, rule or regulation; or (iii) to be
deemed not to be in satisfactory compliance, in any material respect, with all
applicable privacy of customer information requirements contained in any
federal and state privacy laws and regulations.
Except as would not reasonably be expected to have,
individually or in the aggregate, a Bank Material Adverse Effect, the Bank has
properly administered all accounts for which it acts as a fiduciary, including
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents, applicable federal and state law and
regulation and common law. None of the
Bank or any director, officer or employee of the Bank has committed any breach
of trust or fiduciary duty with respect to any such fiduciary account that
would reasonably be expected to have, individually or in the aggregate, a Bank
Material Adverse Effect and, except as would not reasonably be expected to
have, individually or in the aggregate, a Bank Material Adverse Effect, the
accountings for each such fiduciary account are true and correct and accurately
reflect the assets of such fiduciary account.
(m)
Bank Secrecy Act, Anti-Money
Laundering and OFAC and Customer Information
. The Bank is not aware of, has not been
advised of, and, to the Bank’s knowledge, has no reason to believe that any
facts or circumstances exist, which would cause it to be deemed to be not
(i) operating in compliance, in all material respects, with the Bank
Secrecy Act of 1970, as amended, the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (also known as the USA PATRIOT Act), any order issued by the U.S.
Department of the Treasury’s Office of Foreign Assets Control, or any other
applicable anti-money laundering statute, rule or regulation; and
(ii) operating in compliance in all material respects with the applicable
privacy and customer information requirements contained in any federal and
state privacy laws and regulations, including, without limitation, in Title V
of the Gramm-Leach-Bliley Act of 1999 and the regulations promulgated
thereunder.
11
The
Bank is not aware of any facts or circumstances that would cause it to believe
that any non-public customer information has been disclosed to or accessed by
an unauthorized third party in a manner that would cause it to undertake any
material remedial action. The Bank’s
Board of Directors has adopted and implemented an anti-money laundering program
that contains adequate and appropriate customer identification verification
procedures that comply with the USA PATRIOT Act and such anti-money laundering
program meets the requirements in all material respects of Section 352 of
the USA PATRIOT Act and the regulations thereunder, and it has complied in all
respects with any requirements to file reports and other necessary documents as
required by the USA PATRIOT Act and the regulations thereunder.
(n)
Questionable Payments
. Neither the Bank, nor any directors,
officers, nor to the Bank’s knowledge, employees, agents or other persons
acting at the direction of or on behalf of the Bank has, in the course of its
actions for, or on behalf of, the Bank:
(a) directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
foreign or domestic political activity; (b) made any direct or indirect
unlawful payments to any foreign or domestic governmental officials or
employees or to any foreign or domestic political parties or campaigns from
corporate funds; (c) violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (d) made any other unlawful bribe,
rebate, payoff, influenced payment, kickback or other material unlawful payment
to any foreign or domestic government official or employee.
(o)
Financial Statements
. From and after December 31, 2007, all
financial statements of the Bank complied as to form in all material respects
with applicable accounting requirements, and have been prepared in accordance
with GAAP, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the
notes thereto and (ii) in the case of unaudited interim financial statements,
to the extent they may exclude footnotes, may be subject to customary year-end
adjustments or may be condensed or summary statements) and fairly present in
all material respects the financial position of the Bank as of the dates
thereof and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(p)
Absence of Certain Changes
. Since December 31, 2008, (i) there
has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Bank Material Adverse Effect,
(ii) the Bank has not incurred any material liabilities (contingent or
otherwise) other than trade payables, accrued expenses, and other liabilities
incurred in the ordinary course of business consistent with past practice,
(iii) the Bank has not altered its critical accounting policies or the
identity of its auditors, (iv) the Bank has not
purchased,
redeemed or made any agreements (except for the put right described in
Section 3(t)) to purchase or redeem any shares of its capital stock, and
(v) the Bank has not issued any equity securities to any officer, director
or affiliate (except for equity securities described in the Offering Summary).
(q)
No Undisclosed Events,
Liabilities, Developments or Circumstances
. Other than the impact of completion of the
Proposed Acquisition and the events disclosed in the Offering Summary, there
are no obligations or liabilities of the Bank that, individually or in the
aggregate, would reasonably be expected to have a Bank Material Adverse Effect.
12
(r)
Conduct of Business;
Regulatory Permits
. The Bank is
not in violation of any term or provision of its Articles of Incorporation or
Bylaws. The Bank is not in violation in
any material respect of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Bank. The Bank possesses all material certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct its business as presently conducted and as is proposed to
be conducted following consummation of the Proposed Acquisition. The Bank has not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
(s)
Transactions With Affiliates
. None of the officers, directors or employees
of the Bank, or any of the officers, directors or employees of the Bank
proposed in connection with the Proposed Acquisition, is, directly or
indirectly, presently a party to any transaction with the Bank (other than for
ordinary course services as employees, officers or directors), which is, taken
individually or in the aggregate with other unreported transactions, material,
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or any corporation, partnership, trust or other
entity in which any such officer, director, or employee has a substantial
interest or is an officer, director, trustee or partner.
(t)
Equity Capitalization
. The authorized capital stock of the Bank
consists of 100,000,000 shares of Common Stock, of which 767,437 shares are
issued and outstanding, and 2,000,000 shares of preferred stock, $1.00 par
value per share, of which no shares of preferred stock are issued and
outstanding. Additionally, the Bank has
entered into subscription agreements with certain individuals (including
members of proposed new management team) to purchase up to 800,000 shares
of Common Stock and, upon such acquisitions of Common Stock, warrants to
purchase up to 2,202,605 shares of Common Stock. All of such outstanding shares have been, or
upon issuance will be, validly issued and are fully paid and
nonassessable. None of the Bank’s
capital stock is subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Bank. Except as disclosed in this
Section 3(t), there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Bank, or contracts, commitments, understandings
or arrangements by which the Bank is or may become bound to issue additional
shares of capital stock of the Bank or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Bank. There are no
agreements or arrangements under which the Bank is obligated to register the
sale of any of their securities under the 1933 Act. There are no outstanding securities or
instruments of the Bank which contain any redemption or similar provisions, and,
except for a put right whereby, within 90 days after regulatory approval,
shareholders of the Bank who held shares immediately prior to the Closing have
the right to cause the Bank to repurchase only the shares held by them prior to
the Closing (for a total of 767,437 shares) for $11.00 per share, there
are no contracts, commitments, understandings or arrangements by which the Bank
is or may become bound to redeem a security of the Bank. There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Common Shares. The Bank
does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement.
13
(u)
Indebtedness and Other
Contracts
. The Bank
(i) does not have any outstanding Indebtedness (as defined below),
(ii) is not a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument would result in a Bank Material Adverse
Effect, or (iii) is not in violation of any term of or in default under
any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Bank Material Adverse Effect.
For purposes of this Agreement: (x) “
Indebtedness
” of any Person means, without duplication
(A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services,
including (without limitation) “capital leases” in accordance with GAAP (other
than trade payables entered into in the ordinary course of business),
(C) all reimbursement or payment obligations with respect to letters of
credit, surety bonds and other similar instruments, (D) all obligations
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as a
financing, in either case, with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under
any leasing or similar arrangement which, in connection with GAAP, consistently
applied for the periods covered thereby, is classified as a capital lease,
(G) all indebtedness referred to in clauses (A) through
(F) above secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) “
Contingent Obligation
” means, as to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to any Indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the holders
of such liability will be protected (in whole or in part) against loss with
respect thereto; and (z) “
Person
”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(v)
Absence of Litigation
. Except as in the ordinary course of the Bank’s
business, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Bank, threatened against or
affecting the Bank, the Common Stock or any of the Bank’s officers or
directors.
(w)
Insurance
. The Bank is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Bank believes to be prudent and customary in the businesses
and location in which the Bank is engaged.
The Bank has not been refused any insurance coverage sought or applied
for, and the
14
Bank
does not have any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Bank Material Adverse Effect.
(x)
Employee Relations
.
(i)
No material labor dispute
exists or, to the Bank’s knowledge, is imminent with respect to any of the
employees of the Bank that would have, or reasonably be expected to have, a
Bank Material Adverse Effect. The Bank
is not a party to any collective bargaining agreement and does not employ any
member of a union. The Bank believes
that its relations with its employees are satisfactory. Other than in connection with changes
resulting from the introduction of the proposed new management team after the
completion of the Proposed Acquisition, no executive officer of the Bank has
notified the Bank that such officer intends to leave the Bank or otherwise
terminate such officer’s employment with the Bank. Other than new employment agreements that
will be entered into with the proposed new management team, including Joseph W.
Evans, J. Daniel Speight, and Kim Michael Childers, in connection with the
Proposed Acquisition, as of the Closing Date, the Bank has not entered into any
employment agreements with any of its employees or any other agreement that
would require the Bank to provide severance payments or similar payments upon
termination. In addition, the Bank may
retain certain of the current employees, including the current chief financial
officer, after the completion of the Proposed Acquisition.
(ii)
The Bank is in compliance
with all federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices and benefits, terms and conditions
of employment and wages and hours, except where failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to
result in a Bank Material Adverse Effect.
(y)
Title
. The Bank has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it, in each case free and clear of all liens, encumbrances
and defects, except for liens and encumbrances which do not materially affect
the value of such property and do not interfere with the use made and proposed
to be made of such property by the Bank.
Any real property and facilities held under lease by the Bank are valid,
subsisting and enforceable leases with such exceptions that are not material
and do not interfere with the use made and proposed to be made of such property
and buildings by the Bank.
(z)
Intellectual Property Rights
. The Bank owns or possesses adequate rights or
licenses to use all trademarks, service marks and all applications and
registrations therefor, trade names, patents, patent rights, copyrights,
original works of authorship, inventions, trade secrets and other intellectual
property rights (“
Intellectual Property
Rights
”) necessary to conduct its business as conducted on the
Signing Date. To the knowledge of the
Bank, no product or service of the Bank infringes the Intellectual Property
Rights of others. Except as would not
reasonably be expected to have a Bank Material Adverse Effect, the Bank has not
received notice of any claim being made or brought, or, to the knowledge of the
Bank, being threatened, against the Bank regarding (i) its Intellectual
Property Rights, or (ii) that the products
15
or
services of the Bank infringe the Intellectual Property Rights of others. The Bank is not aware of any facts or
circumstances which might give rise to any of the foregoing claims.
(aa)
Environmental Laws
. To the Bank’s knowledge, the Bank (i) is
in compliance with any and all Environmental Laws (as hereinafter defined),
(ii) has received all permits, licenses or other approvals required of it
under applicable Environmental Laws to conduct its business and (iii) is
in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Bank Material Adverse Effect.
The term “
Environmental Laws
”
means all federal, state or local laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes
into
the environment.
(bb)
Tax Status
. The Bank (i) has prepared and filed all
foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and required
to be filed through the Signing Date, subject to permitted extensions,
(ii) has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and
(iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply, except in the case of clauses
(i) and (ii) above, where the failure to so pay or file any such tax,
assessment, charge or return would not result in a Bank Material Adverse
Effect. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Bank know of no reasonable basis for any such claim.
(cc)
Internal
Accounting and Disclosure Controls
. The Bank maintains a system of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. During the 24 months prior
to the date hereof, the Bank has not received any notice or correspondence from
any accountant relating to any material weakness in any part of the system of
internal accounting controls of the Bank.
(dd)
Off Balance
Sheet Arrangements
. There is no
transaction, arrangement, or other relationship between the Bank and an
unconsolidated or other off-balance sheet entity.
(ee)
Investment
Company Status
. The Bank is
not, and upon consummation of the sale of the Common Shares will not be, an “investment
company,” a company controlled by an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter”
16
of, an “investment company,”
as such terms are defined in the Investment Company Act of 1940, as amended.
(ff)
Transfer Taxes
. On the Closing Date, all stock transfer or
other taxes (other than income or similar taxes) which are required to be paid
in connection with the sale and transfer of the Common Shares to be sold to
each Purchaser hereunder will be, or will have been, fully paid or provided for
by the Bank, and all laws imposing such taxes will be or will have been
complied with.
(gg)
Disclosure
. The Bank understands and confirms that each
of the Purchasers will rely on the foregoing representations and warranties in
purchasing the Common Shares. All
disclosure provided to the Purchasers regarding the Bank, its business and the
transactions contemplated hereby (including, without limitation, the Proposed
Acquisition), furnished by or on behalf of the Bank on or prior to the Signing
Date, including without limitation, all disclosure contained in the Offering
Summary, when taken as a whole, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. Any forward
looking information contained in such disclosure was prepared on the basis of
assumptions that the Bank reasonably believed in good faith at the time of
preparation to be reasonable and the Bank has no knowledge of any fact or
information that would lead it to believe that such assumptions are incorrect
or misleading in any material respect.
The Bank expressly does not make any representation or warranty as to
any of the information provided by or made available by the FDIC regarding the
Target Banks or that relates to the Proposed Acquisition or the assets and
liabilities of the Target Banks that the Bank intends to acquire in the
Proposed Acquisition.
4.
COVENANTS
.
(a)
Reasonable Best Efforts
. Subject to the terms and conditions of this
Agreement and acceptance by the FDIC of the Bank’s bid for the Target Banks,
each of the parties shall use its reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or desirable, or advisable under applicable laws, so as to permit
consummation of the issuance of the Common Shares as promptly as practicable
and otherwise to enable consummation of the transactions contemplated hereby
and shall use its reasonable best efforts to cooperate with the other party to
that end.
(b)
Notice Filings
. The Bank agrees to timely file any notices
and other filings that may be required under applicable federal and state
securities laws, and to provide copies thereof to Patton Boggs LLP, counsel to
the Placement Agent, after such filing.
(c)
Filing of Registration
Statement and Listing of Common Stock
.
(i)
On or before
April 1, 2010 (the “
First
Filing Deadline
”), the Bank, or any newly formed holding
company of the Bank as a result of a Holding Company Reorganization (as defined
below), shall file a registration statement on Form 10, or any successor
form thereto (“
Registration Statement
”), with the
appropriate federal regulatory agency (whether the FDIC or the Commission), to
register the Common Shares (or any securities
17
received in exchange for the Common Shares as a
result of a Holding Company Reorganization) under Section 12 of the
Exchange Act. The Bank, or any newly
formed holding company of the Bank as a result of a Holding Company
Reorganization, shall use its commercially reasonable efforts to cause such
Registration Statement to be declared effective as soon as practicable after
the initial filing thereof, but no later than December 31, 2010 (the “
Effectiveness Deadline
”).
The Bank (or the holding company formed in the Holding Company
Reorganization) shall pay the costs and expenses related to its preparation of
the Registration Statement and the filing and effectiveness thereof.
(ii)
The Bank, or
any newly formed holding company of the Bank as a result of a Holding Company
Reorganization, shall use its reasonable best efforts to enlist a market maker
(who meets the eligibility requirements under applicable Financial Industry
Regulatory Authority, Inc. (“
FINRA
”) rules)
to file an application with FINRA to register and quote the Common Shares (or
any securities received in exchange for the Common Shares as a result of a
Holding Company Reorganization) on the Over-the-Counter Bulletin Board Service
as soon as possible following the filing of the Registration Statement, but in
no event more than thirty (30) days after the Registration Statement is
declared effective. In addition, after
the Registration Statement is declared effective, the Bank will use its
reasonable best efforts to file an initial listing application to list the
Common Shares (or any securities received in exchange for the Common Shares as
a result of a Holding Company Reorganization) on a national securities exchange
within thirty (30) days after the initial listing standards and corporate
governance requirements for such national securities exchange are satisfied by
the Bank, or any newly formed holding company of the Bank as a result of a
Holding Company Reorganization. The Bank
shall take all actions necessary to comply with any such listing standards or
corporate governance requirements that are within its control.
(d)
Holding Company
Reorganization
. The Bank
may, within a reasonable period of time after the Closing and the consummation
of the Proposed Acquisition, and prior to the First Filing Deadline, form a
bank holding company in accordance with applicable requirements of the bank
holding company regulations and the laws of the State of Georgia. Under current Georgia law, the formation of a
bank holding company will require a vote of the shareholders of the Bank and
any shareholders voting against the plan of reorganization shall be entitled to
the rights and remedies of a dissenting shareholder under Georgia corporate
law. To the extent the Bank completes a
reorganization prior to the First Filing Deadline or the Effectiveness
Deadline, as the case may be, where the Common Shares are exchanged for
securities of a newly formed holding company of the Bank (“
Holding
Company Reorganization
”), the obligations of the Bank pursuant to
Sections 4(c), 4(e) and 4(f) shall then become the obligations
of the newly formed holding company of the Bank.
(e)
First Registration Default;
Reduction of Bonus Compensation
. If the Bank, or any newly formed holding
company of the Bank as a result of a Holding Company Reorganization, has not
filed a Registration Statement with the appropriate federal regulatory agency
by the First Filing Deadline, other than as a result of a delay caused by such
federal regulatory agency being unable to accept such filings on such date
(whereupon the First Filing Deadline will then be the next date such filings
are accepted by the appropriate federal regulatory agency) (a “
First Registration Default
”),
then for each day that a First Registration Default continues, Joseph W.
Evans, J. Daniel Speight, Jr., and Kim Childers (the “
Executives
”), shall
18
each
forfeit 1.0% of any bonus that would otherwise be payable by the Bank and/or
any newly formed holding company of the Bank as a result of a Holding Company
Reorganization to each Executive for the 2010 fiscal year (or to which he
became entitled as a result of performance during the 2010 fiscal year),
whether under an employment agreement, a bonus plan or any other bonus
arrangement, including any bonus compensation for which payment would otherwise
be deferred until after 2010. No
bonuses, compensation, awards, equity compensation or other amounts shall be
paid or granted in lieu of or to make such Executive whole for any such
forfeited bonuses. The total amount
forfeited by each Executive may amount to up to 100% of Executive’s bonus for
the 2010 fiscal year. The requirements
of this Section 4(e) shall be incorporated into any employment
agreement, bonus plan or other compensation arrangement between the Bank and/or
any newly formed holding company of the Bank as a result of a Holding Company
Reorganization, and each Executive. The
Bank shall provide each Purchaser with notice in writing of the occurrence of a
First Registration Default within a reasonable period of time after the
occurrence of the First Registration Default.
(f)
Second Registration and
Effectiveness Default; Special Election Meeting
.
(i)
(A) If the
Bank, or any newly formed holding company of the Bank as a result of a Holding
Company Reorganization, has not filed a Registration Statement with the
appropriate federal regulatory agency by September 15, 2010 ( the “
Second Filing Deadline
”), other than as a result of a delay
caused by such federal regulatory agency being unable to accept such filings on
such date (whereupon the Second Filing Deadline will then be the next date such
filings are accepted by the appropriate federal regulatory agency) (“
Second Registration Default
”)
or
(B) if the
Registration Statement is not declared effective on or prior to the
Effectiveness Deadline by the appropriate federal regulatory agency (“
Effectiveness Default
”), then upon the occurrence of either
(A) or (B), the President and/or Chief Executive Officer of the Bank, or
the President and/or Chief Executive Officer of any newly formed holding company
of the Bank as a result of a Holding Company Reorganization, shall promptly
call a special meeting of shareholders (the “
Special
Election Meeting
”) in accordance with the Bylaws of the Bank, or any
newly formed holding company of the Bank as a result of a Holding Company
Reorganization, for the purposes set forth in Section 4(f)(ii). The Special Election Meeting shall occur as
soon as possible following the date of the Second Registration Default or the Effectiveness
Default, as applicable, but in no event more than sixty (60) days
after such date. The
Bank shall provide each Purchaser with notice in writing of the occurrence of a
Second Registration Default or an Effectiveness Default within a reasonable
period of time after the occurrence of the Second Registration Default or
Effectiveness Default, as applicable.
(ii)
The Special
Election Meeting shall be called solely for the purposes of:
(A) considering and voting upon proposals to remove up to a majority
of the then-serving directors of the Bank (whether or not
cause exists), or up to a majority
of the
then-serving
directors of any newly formed
holding company of the Bank as a result of a Holding Company Reorganization
(whether or not cause exists); and (B) electing such number of directors
as there are then vacancies on the Board of Directors of the Bank, or any newly
formed holding company of the Bank as a result of a Holding Company
Reorganization (including any vacancies created by the removal of any director
pursuant to this Section 4(f)(ii)(A)).
Any removal of directors or appointment of new directors pursuant to
this Section 4(f), subject to applicable regulatory approvals, shall be
effective immediately upon the receipt of the final
19
report of the Inspector of Elections for the Special
Election Meeting of the result of the vote on such proposals. To the extent a Holding Company
Reorganization is completed prior to a Second Registration Default or an
Effectiveness Default, the provisions of this Section 4(f) providing
for removal of directors and appointment of new directors following a Second
Registration Default or an Effectiveness Default, as the case may be, will
apply to the board of directors of such newly formed holding company of the
Bank; provided, however, that subject to any required prior approval from a
Governmental Entity, all the necessary corporate action shall be taken
immediately after the Special Election Meeting to change the directors serving
on the Board of Directors of the Bank to be identical to those directors
serving on the board of directors of the newly formed holding company of the
Bank following the Special Election Meeting.
(iii)
In order for a
proposal to remove up to a majority
of the then-serving directors of the Bank, or the holding company in the
case of a Holding Company Reorganization, as the case may be, to be considered
at the Special Election Meeting, and subject to any applicable regulatory
approvals, shareholders of the applicable entity representing not less than 25%
of
the votes entitled to be cast at the Special Election Meeting must submit a
written notice to the Secretary of the Bank, or the Secretary of any successor
as a result of a Holding Company Reorganization, as the case may be, not later
than 5:00 p.m., Eastern Time, on the 10
th
day after
delivery of notice to the Purchasers of the Second Registration Default or the
Effectiveness Default, as applicable (“
Removal Notice
”). The Removal Notice shall include and shall
specify:
(A)
the name(s) of
the director(s) that such shareholder or shareholders is seeking to remove
from the Board of Directors of the Bank, or the holding company in the
case of a Holding Company Reorganization, as the case may be;
(B)
an affirmative
statement requesting that a proposal be included in the Special Election
Meeting agenda for shareholders to consider and vote upon the removal of
such director(s); and
(C)
as to each
shareholder giving a Removal Notice, an attestation and evidence of the number
of all shares of Common Stock of the Bank, or any newly formed holding company
of the Bank as a result of a Holding Company Reorganization, that are owned by
such shareholder beneficially or of record.
(iv)
All
shareholders that submit a Removal Notice pursuant to Section 4(f)(iii) shall
also timely submit a Nomination Notice (as defined in Section 4(f)(vi))
nominating an equal number of Nominees (as defined in Section 4(f)(v)), to
serve as replacement directors in accordance with Sections 4(f)(v) and
4(f)(vi) hereof.
(v)
Nominations of
individuals for election to the Board of Directors of the Bank, or any newly formed holding company of the Bank
as a result of a Holding Company Reorganization, at the Special Election
Meeting may only be made upon receipt by the applicable entity of written
notice of shareholders of such entity entitled to cast, or direct the casting
of, not less than 25% of the votes entitled to be cast at the Special Election
Meeting and containing the information specified by Section 4(f)(vi) hereof. Each individual whose
20
nomination is made in accordance with this
Section 4(f)(v) is hereinafter referred to as a “
Nominee
.”
(vi) For nominations of individuals for election to the Board of
Directors to be properly brought before the Special Election Meeting by a
shareholder or shareholders of the Bank, or the holding company in the case of
a Holding Company Reorganization, as the case may be, a shareholder or
shareholders must have given notice thereof in writing to the Secretary of such
entity not later than 5:00 p.m., Eastern Time, on the 10
th
day after the date of the Second Registration
Default or the Effectiveness Default, as applicable
(“
Nomination Notice
”).
The Nomination Notice shall include and shall specify:
(A) a writing executed by a proposed Nominee that provides his
or her written consent to serve as a director, if elected;
(B) as to each proposed Nominee, the name, age, business
address and residence address of such proposed Nominee, as well as the type of
information relating to such proposed Nominee that would be required in Items
401(a), (d), (e) and (f) and 404(a) of Regulation S-K (or any
successor provisions); and
(C) as to each shareholder giving a Nomination Notice, an
attestation and evidence of the number of all shares of Common Stock of the
Bank, or any newly formed holding company of the Bank as a result of a Holding
Company Reorganization, that are owned by such shareholder beneficially or of
record.
(vii) Not less than ten (10) nor more than fifty (50) days
before the Special Election Meeting, the Secretary of the Bank, or the
Secretary of any newly formed holding company of the Bank as a result of a
Holding Company Reorganization, shall give to each shareholder entitled to vote
at, or to receive notice of, such meeting at such shareholder’s address as it
appears in the share transfer records of such entity, notice in writing setting
forth: (A) the date, time and place of the Special Election Meeting; (B) the
agenda as well as each proposal to be voted upon at the Special Election
Meeting; and (C) the information about each Nominee that was provided in
the Nomination Notice, as well as information in the Removal Notice about any
director for which a proposal has been submitted for removal.
(viii) The Board of Directors of the Bank, or
any newly formed holding company of the Bank as a result of a Holding Company
Reorganization, shall take all necessary action to call the Special Election
Meeting in accordance with the provisions of this Section 4(f), the
Articles of Incorporation and Bylaws of such entity and applicable state
corporate and banking laws. The
shareholder vote required to approve the removal of directors from the Board of
Directors of the Bank, or any newly formed holding company of the Bank as a
result of a Holding Company Reorganization, shall be the affirmative vote of
shareholders entitled to cast at least a majority of the votes which all
shareholders would be entitled to cast at the Special Election Meeting or such
different vote requirement as may be required under applicable state corporate
and banking laws to the extent that the law is changed after the date
hereof. The shareholder vote required to
appoint new directors to the Board of Directors of the Bank, or any newly
formed holding company of the Bank as a result of a Holding Company
Reorganization, shall be the affirmative vote of a majority of the total votes
that are represented at the Special
21
Election Meeting or such different vote requirement
as may be required under applicable state corporate and banking laws to the
extent that the law is changed after the date hereof. Only proposals submitted by shareholders
pursuant to this Section 4(f) shall be considered and voted upon at
the Special Election Meeting.
(ix) The Articles of Incorporation and the Bylaws of the Bank
do not, and the governing documents of any newly formed holding company of the
Bank as a result of a Holding Company Reorganization will not, prevent or be
inconsistent with the procedures set forth in this Section 4(f).
(x) The rights of each shareholder of the Bank, or the
holding company in the case of a Holding Company Reorganization, as the case
may be, under this Section 4(f) shall inure to the benefit of any
purchaser or transferee of the Common Shares without the need for an express
assignment or assumption by any such subsequent holders of the Common Shares
after such purchase and/or transfer.
Subsequent holders of the Common Shares shall have the right to enforce
such agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights hereunder.
(g)
Waiver
. Each of the obligations set forth in (c), (e) and
(f) of this Section 4 may be waived, including by written consent, by
the holders of a majority of the shares of Common Stock issued and outstanding.
(h)
Information
for Shareholders and Shareholder Calls
.
Until the Registration Statement is declared effective by the
appropriate federal regulatory agency, and beginning no earlier than
approximately six months after the Closing Date, the Bank shall hold, within a
reasonable time after the financial information contained in the Bank’s
quarterly Call Reports is filed with the FDIC and upon reasonable notice to the
Purchasers and the Bank’s other existing shareholders (either by mail or
e-mail, by posting on the Bank’s website, or by press release), a quarterly
shareholder conference call to discuss such financial information, which call
may, but is not required to, include an opportunity to ask questions of
management with regard to such financial statements. In addition, if for some reason the
Registration Statement is not filed by the First Filing Deadline or the
requirements for filing a registration statement as set forth in
Section 4(c) are not met, the Bank shall provide the Purchasers with
annual audited financial statements.
(i)
Expenses
. Unless otherwise provided in this Agreement,
each of the parties hereto will bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated under this
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants and counsel.
(j)
Right
of First Offer
. Up until, but not
including, an initial public offering by the Bank or until the Bank begins
trading on a national securities exchange and, subject to the terms and
conditions of this Section 4(j) and applicable securities laws, if
the Bank, or any newly formed holding company of the Bank as a result of a
Holding Company Reorganization, proposes to offer or sell any of its equity
securities, as well as rights, options, or warrants to purchase such equity
securities, securities that may become, convertible or exchangeable into or
exercisable for such equity securities or any debt securities (collectively, “
New Securities
”), the
22
Bank,
or any newly formed holding company of the Bank as a result of a Holding
Company Reorganization, shall first offer such New Securities to each
Purchaser, in the amount set forth in Section 4(j)(ii).
(i)
Notification of Offer
. The Bank, or any newly formed holding company
of the Bank as a result of a Holding Company Reorganization, shall give notice
(the “
Offer Notice
”) to each Purchaser,
stating (i) its bona fide intention to offer such New Securities, (ii) the
number of such New Securities to be offered, and (iii) the price and
terms, if any, upon which it proposes to offer such New Securities.
(ii)
Election to Exercise
. By notification to the Bank, or any newly
formed holding company of the Bank as a result of a Holding Company
Reorganization, within 10 calendar days after the Offer Notice is given (the “
Acceptance Period
”), each Purchaser may elect to purchase or
otherwise acquire, at the price and on the terms specified in the Offer Notice,
up to that portion of such New Securities which equals the proportion that the
Common Stock issued and held by such Purchaser bears to the total number of
shares of Common Stock of the Bank, or any newly formed holding company of the
Bank as a result of a Holding Company Reorganization, outstanding on the date
of the Offer Notice. The closing of any
sale pursuant to this Section 4(j) shall occur within the later of 90 days of (i) the date that the Offer
Notice is given, or (ii) the date of the initial sale of New Securities
pursuant to Section 4(j)(iii).
(iii)
Sale of Unsubscribed Portion
. If all New Securities referred to in the
Offer Notice are not elected to be purchased or acquired within the Acceptance
Period as provided in Section 4(j)(ii), the Bank, or any newly formed
holding company of the Bank as a result of a Holding Company Reorganization,
may, during the 90 day period following the expiration of the Acceptance
Period, offer and sell the remaining unsubscribed portion of such New
Securities to any Person or Persons at a price not less than that specified in
the Offer Notice. If the Bank, or any
newly formed holding company of the Bank as a result of a Holding Company
Reorganization, does not enter into an agreement for the sale of the New
Securities within such period, or if such agreement is not consummated within
30 days of the execution thereof, the right provided hereunder shall be deemed
to be revived and such New Securities shall not be offered unless first
reoffered to the Purchasers in accordance with this Section 4(j).
(iv)
Exclusions
. The
provisions of Section 4(j) shall not apply to (i) any issuance of securities upon the
conversion of any warrant, option, or other convertible security outstanding as
of the time of the Closing Date, (ii) any offer and sale of New Securities
in a registered public offering, (iii) up to 850,000 shares of Common
Stock to parties not purchasing in this Offering at a price not less than the
Purchase Price for a period of six months following the Closing Date, or (iv) shares
(or options to purchase shares) issued or issuable to employees or directors
of, or consultants to, the Bank, or any newly formed holding company of the
Bank as a result of a Holding Company Reorganization, pursuant to any equity
incentive plan approved by the Board of Directors.
(k)
Delivery
of Final Bids
. The Bank shall have
posted to its electronic data room on or before July 14, 2009, a summary
of the aggregate final bids to be submitted by the Bank to the FDIC for the
Proposed Acquisition (“
Final Bid Summary
”),
which will be an accurate and complete summary of the aggregate final bids, and
such final bids submitted to the
23
FDIC
will not deviate in any material respect from the information contained in the
Final Bid Summary.
5.
TRANSFER AGENT
INSTRUCTIONS
.
(a)
Transfer
Agent Instructions
. Subject to the
provisions of Section 2(a), no instruction will be given by the Bank to
its transfer agent restricting the transfer of the Common Shares, and the
Common Shares shall be freely transferable on the books and records of the
Bank. If a Purchaser effects a sale,
assignment or transfer of the Common Shares, the Bank shall, in accordance with
applicable securities laws, permit the transfer and shall promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Purchaser to effect such sale, transfer or
assignment.
6.
CONDITIONS TO
THE BANK’S OBLIGATION TO SELL
.
The
obligation of the Bank hereunder to issue and sell the Common Shares to each
Purchaser at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Bank’s sole benefit and may be waived by the Bank at any
time in its sole discretion by providing each Purchaser with prior written
notice thereof:
(a) Each
Purchaser shall have duly executed each of the Transaction Documents to which
it is a party and delivered the same to the Bank.
(b) Each
Purchaser shall have duly executed a fully completed Book Entry and Wire
Information Questionnaire and Accredited Investor Questionnaire in the forms
attached hereto as Appendix I and Appendix II, respectively.
(c) The
FDIC shall have accepted the Bank’s bid to acquire the Target Banks and, with
respect to the Target Banks, shall have entered into the P&A Agreement with
the Bank.
(d) The
Escrow Agent shall have delivered to the Bank the Purchase Price for the Common
Shares being purchased by each of the Purchasers at the Closing, as indicated
below such Purchaser’s name on the signature page of this Agreement, by
wire transfer of immediately available funds pursuant to the wire instructions
provided by the Bank.
(e) The
representations and warranties of each Purchaser contained in Section 2 of
this Agreement shall be true and correct in all material respects (except for
those representations and warranties that are qualified by materiality or Bank
Material Adverse Effect, which shall be true and correct in all respects) as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date,
which shall be true and correct as of such specified date), and each Purchaser
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by the Transaction Documents to
be performed, satisfied or complied with by each Purchaser at or prior to the
Closing Date.
24
7.
CONDITIONS TO
EACH PURCHASER’S OBLIGATION TO PURCHASE
.
The
obligation of each Purchaser to purchase the Common Shares at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Purchaser’s
sole benefit and may be waived by such Purchaser at any time in its sole
discretion by providing the Bank with prior written notice thereof:
(a) The
Bank shall have duly executed and delivered to such Purchaser each of the
Transaction Documents.
(b) Such
Purchaser shall have received an opinion of Dinur and DeLuca, LLP, counsel for
the Bank, dated the Closing Date, in substantially the form of
Exhibit B
attached hereto.
(c) The
Bank shall have delivered to such Purchaser a certificate evidencing the
incorporation and good standing of the Bank as of a date within ten business
days before the Closing Date.
(d) The
Bank shall have delivered to such Purchaser a certificate, executed by the
Secretary of the Bank and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Bank’s
Board of Directors, (ii) the Articles of Incorporation of the Bank and
(iii) the Bylaws of the Bank, each as in effect at the Closing, in the
form attached hereto as
Exhibit C
.
(e) The
representations and warranties of the Bank contained in Section 3 of this
Agreement shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Bank
Material Adverse Effect, which shall be true and correct in all respects) as of
the Signing Date and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date, which
shall be true and correct as of such specified date), and the Bank shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents and the P&A
Agreement (and by the FDIC and Georgia Department of Banking and Finance, if
any) to be performed, satisfied or
complied with by the Bank at or prior to the Closing Date. Such Purchaser shall have received a
certificate, executed by the Senior Vice President of the Bank, dated as of the
Closing Date, to the foregoing effect in the form attached hereto as
Exhibit D
.
(f) The
Bank shall have obtained any third party consents and approvals, if any,
necessary for the completion of the Proposed Acquisition.
(g) The
Bank shall have delivered or cause to have delivered to each Purchaser the
number of the Common Shares indicated below such Purchaser’s name on the
signature page to this Agreement, subject to the conditions set forth in
Section 1(a), registered in the name of such Purchaser.
(h) The
Bank shall have raised an aggregate amount of at least $284,550,000 in the
Offering, and the FDIC shall have accepted the Bank’s bid to acquire the Target
Banks, as
25
demonstrated
by the FDIC’s adoption of a resolution to enter into the P&A Agreement (to
the extent legally required by FDIC laws and regulations), on terms not less favorable
to the Bank, the Purchasers or its shareholders than set forth in the Final Bid
Summary, and, with respect to the Target Banks, shall have entered into the
P&A Agreement with the Bank.
(i) The
Bank shall have: (i) entered into the employment agreements with the
proposed new management team and (ii) delivered or cause to have delivered
the Common Stock and warrants to the proposed new management team as set forth
in their amended and restated subscription agreements, dated April 1,
2009, with the Bank.
(j) The
Bank shall have delivered to such Purchaser such other documents relating to
the purchase and sale of the Common Shares contemplated by this Agreement as
such Purchaser or its counsel may reasonably request.
8.
TERMINATION
. In the event that the Closing shall not have
occurred with respect to a Purchaser on or before July 31, 2009 for any
reason, including but not limited to the Bank’s or such Purchaser’s failure to
satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching
party’s failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement with respect to such
breaching party at the close of business on such date without liability of any
party to any other party;
provided, however
,
that in addition to the foregoing, if the Bank does not win its bid submitted
to the FDIC to acquire the assets and liabilities of the Target Banks, and the
Proposed Acquisition is not completed, then the Bank will immediately terminate
the offering of the Common Shares and take all such action necessary, including
providing specific instructions to the Escrow Agent no later than one business
day after the bid rejection, to return each Purchaser’s full investment,
without interest, in accordance with the Escrow Agreement without liability of
any party to any other party.
9.
MISCELLANEOUS
.
(a)
Governing
Law; Jurisdiction; Jury Trial
. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in New York, of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law.
26
(b)
Counterparts
. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party;
provided
that a
facsimile signature shall be considered due execution and shall be binding upon
the signatory thereto with the same force and effect as if the signature were
an original, not a facsimile signature.
(c)
Headings
. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d)
Severability
. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e)
Entire
Agreement; Amendments
. This
Agreement and the other Transaction Documents, together with the Appendixes and
Exhibits thereto, supersede all other prior oral or written agreements between
the Purchasers, the Bank, their affiliates and Persons acting on their behalf
with respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein and therein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Bank nor any Purchaser makes any representation, warranty, covenant
or undertaking with respect to such matters.
No amendment to this Agreement may limit the right of a Purchaser to
waive any provision which they have the right to waive, and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Bank and the Purchasers listed on the signature pages hereto as being
obligated to purchase at least 66-2/3%
of the amount
of the Common Shares to be sold hereunder; provided that no such amendment to
this Agreement that would disproportionately impact a Purchaser may be made
without the consent of such Purchaser; and provided further that no amendment
to Section 2, Section 4(k), Section 7 or Section 8 may be
made without the express written consent of each Purchaser. No provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification
of any provision of any of the Transaction Documents unless the same
consideration also is offered to all of the parties to the Transaction
Documents. The Bank has not, directly or
indirectly, made any agreements with any Purchasers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents,
except as set forth in the Transaction Documents, nor has any other agreement
or arrangement been made by the Bank with any other Purchaser outside of the
Transaction Documents. Without limiting
the foregoing, the Bank confirms that, except as set forth in this Agreement,
no Purchaser has made any commitment or promise or has any other obligation to
provide any financing to the Bank or otherwise.
(f)
Notices
. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after
deposit with an
27
overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers
for such communications shall be:
If
to the Bank:
STATE
BANK AND TRUST COMPANY
321 Fullington Avenue
Pinehurst, Georgia 31070
Telephone: (478)
627-3970
Facsimile: (478)
627-3971
Attention: Marvin
Ragan, Senior Vice President
with
a copy (for informational purposes only) to:
NELSON
MULLINS RILEY & SCARBOROUGH, LLP
Atlantic
Station
201
17
th
Street, Suite 1700
Atlanta,
Georgia 30363
Telephone: (404) 322-6218
Facsimile: (404)
817-6041
Attention: J. Brennan Ryan, Esq.
and
DINUR
AND DELUCA, LLP
One
Lakeside Commons
990
Hammond Drive, Suite 760
Atlanta,
Georgia 30328
Telephone: (770) 395-3170
Facsimile: (770)
395-3171
Attention: Daniel D. Dinur
If
to a Purchaser, to its address and facsimile number set forth under such
Purchaser’s name on the signature page hereto, with copies to such
Purchaser’s representative as set forth under such Purchaser’s name on the
signature page hereto, or to such other address and/or facsimile number
and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date,
recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service, shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clause (A), (B) or (C) above,
respectively.
(g)
Successors
and Assigns
. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective successors
and assigns, including any purchasers of the Common Shares. The Bank shall not assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
holders of at least two-thirds of the aggregate
28
number
of Common Shares issued hereunder. A
Purchaser may assign some or all of its rights hereunder without the consent of
the Bank if in compliance with this Agreement and applicable law, in which
event such assignee shall be deemed to be a Purchaser hereunder with respect to
such assigned rights and shall be bound by the terms and conditions of this
Agreement that apply to “Purchasers.”
(h)
No
Third Party Beneficiaries
. Except as
expressly set forth herein, this Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
(i)
Survival
. Unless this Agreement is terminated under
Section 8, all representations and warranties of the Purchasers and the
Bank contained in Sections 2 and 3, and the agreements and covenants set forth
in Sections 4, 5 and 9 shall survive the Closing. Each Purchaser shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
(j)
Further
Assurances
. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as any other party may reasonably request in order
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(k)
Indemnification
. In consideration of each Purchaser’s
execution and delivery of the Transaction Documents and acquiring the Common
Shares thereunder, and in addition to all of the Bank’s other obligations under
the Transaction Documents, the Bank shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of the Common Shares and all of
their shareholders, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing Persons’ agents or other
representatives (collectively, the “
Indemnitees
”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements incurred by any Indemnitee as a result of, or
arising out of, or relating to any misrepresentation or breach of any
representation, warranty, covenant or agreement of the Bank contained in the
Transaction Documents.
(l)
No
Strict Construction
. The language
used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will
be applied against any party.
(m)
Rescission
and Withdrawal Right
.
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) the Transaction Documents, whenever any
Purchaser exercises a right, election, demand or option under a Transaction
Document and the Bank does not timely perform its related obligations within
the periods therein provided, then such Purchaser may rescind or withdraw, in
its sole discretion
29
from
time to time upon written notice to the Bank, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and rights
(n)
Payment
Set Aside
. To the extent that the
Bank makes a payment or payments to the Purchasers hereunder or pursuant to any
of the other Transaction Documents or the Purchasers enforce or exercise their
rights hereunder or thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Bank, a
trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, foreign, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
(o)
Independent
Nature of Purchasers’ Obligations and Rights
. The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under any Transaction
Document. The decision of each Purchaser
(other than those Purchasers that are affiliates of each other) to purchase the
Common Shares pursuant to the Transaction Documents has been made by such
Purchaser independently of any other non-affiliated Purchaser and independently
of any information, materials, statements or opinions as to the business,
affairs, operations, assets, properties, liabilities, results of operations,
condition (financial or otherwise) or prospects of the Bank, which may have
been made or given by any other non-affiliated Purchaser or by any agent or
employee of any other non-affiliated Purchaser, and no Purchaser and any of its
agents or employees shall have any liability to any other Purchaser (or any
other Person) relating to or arising from any such information, materials,
statement or opinions. Nothing contained
herein or in any other Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group, and the Bank will not assert any such claim with respect
to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser (other than
those Purchasers that are affiliates of each other) confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors and no other
non-affiliated Purchaser has acted as agent for such Purchaser in connection
with making its investment hereunder and that no non-affiliated Purchaser will
be acting as agent of such Purchaser (and its affiliates) in connection with
monitoring its investment in the Common Shares or enforcing its rights under
the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
(p)
Publicity
. Except as may be required by applicable law,
neither the Bank nor any representative of the Bank (including the Placement
Agent) will issue any press release or public statement that identifies any
Purchaser or any investment advisor to a Purchaser, or
30
otherwise
makes any public statement with respect to any Purchaser or any investment
advisor to a Purchaser hereby without the prior written consent of such
Purchaser. Any such press release or
public statement required by applicable law shall only be made by the Bank
after reasonable notice and opportunity for review by the Purchasers.
[Signatures appear on the
following pages.]
31
IN WITNESS WHEREOF
, the parties have executed
this Agreement as of the date first written above.
|
|
STATE
BANK AND TRUST COMPANY
|
|
|
|
|
|
By:
|
/s/
Marvin Ragan
|
|
|
|
Marvin
Ragan
|
|
|
|
Senior
Vice President
|
[Remainder of page intentionally
left blank.]
[Signature pages for
Purchasers appear on the following pages.]
Bank Signature Page to Agreement
|
|
NAME OF PURCHASER:
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
Address:
|
|
|
|
|
|
|
|
|
|
Contact
Name:
|
|
|
|
|
|
|
|
|
|
Telephone:
|
|
|
|
|
|
|
|
|
|
Facsimile:
|
|
|
|
|
|
|
|
|
|
E-mail:
|
|
|
|
|
|
|
|
|
|
Number
of Common Shares:
|
|
|
|
|
|
|
|
|
|
Purchase
Price Per Share: $10.00
|
|
|
|
|
|
|
|
|
|
Aggregate
Purchase Price: $
|
|
|
|
|
|
|
|
|
|
Tax
ID No.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal
Representative Address:
|
|
|
|
|
|
Attn:
|
|
|
|
Title:
|
|
|
|
Address:
|
|
|
|
Telephone:
|
|
|
|
Facsimile:
|
|
|
|
E-mail:
|
|
|
Purchaser Signature Page to Agreement
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(To be read in conjunction with the entire
preceding Agreement
)
A.
Complete the
following items on the Agreement:
1.
Signature
page: Provide the information requested
on the signature page.
2.
Provide the
information requested in the Book Entry and Wire Information Questionnaire
attached hereto as Appendix I, including wire instructions for the return of
funds if the Agreement is terminated pursuant to Section 8.
3.
Provide the information
requested by the Accredited Investor Questionnaire attached hereto as Appendix
II.
B.
Please e-mail
to dfarrell@fbr.com or fax to (703) 469-1131 the properly completed and signed
Agreement, including the properly completed Appendix I and Appendix II. Please send the originals to:
FBR
Capital Markets & Co.
1001
Nineteenth Street North
Arlington,
Virginia 22209
Attention: Dawn Farrell
C.
Instructions
regarding the transfer of funds for the purchase of Common Shares will be sent
by facsimile to the Purchaser by the Placement Agent at a later date.
Summary Instruction
Sheet for Purchaser
APPENDIX I
STATE BANK AND TRUST COMPANY
BOOK ENTRY AND WIRE INFORMATION QUESTIONNAIRE
Please
provide us with the following information:
|
A. DTC INFORMATION:
|
|
|
|
Name
of DTC Participant:
|
|
|
|
|
|
Participant’s
DTC Account Number:
|
|
|
|
|
|
Investor’s
Account Number with Participant:
|
|
|
Provide
the following information for regarding the Contact Person at DTC Participant:
|
Name:
|
|
|
|
|
|
Address
|
|
|
|
|
|
Telephone
Number:
|
|
|
|
|
|
Fax
Number:
|
|
|
|
|
|
E-mail:
|
|
B. RETURN WIRE INSTRUCTION INFORMATION:
Purchaser’s
wire instructions for return of funds invested if the Stock Purchase Agreement
is terminated pursuant to Section 8 is as follows:
|
Bank
Name:
|
|
|
|
|
|
Bank
Address
|
|
|
|
|
|
Account
Number:
|
|
|
|
|
|
ABA
Number:
|
|
APPENDIX II
STATE BANK AND TRUST COMPANY
ACCREDITED INVESTOR QUESTIONNAIRE
Note to Purchasers
:
For Corporations,
Partnerships, Trusts, Foundations, Joint Purchasers (other than married
couples) and Other Entities, please provide the information requested by
Appendix II-1
.
For
Individuals (including married couples), please provide the information
requested by
Appendix II-2
.
APPENDIX II-1
Accredited
Investor Questionnaire
for
Corporations, Partnerships, Trusts, Foundations,
Joint Purchasers (other than married couples) and Other Entities
If
the undersigned is a corporation, partnership, trust, pension plan, foundation,
joint purchaser (other than a married couple) or other entity, an authorized
officer, partner, or trustee must complete, date and sign this Certificate.
Capitalized
terms not defined herein have the meaning ascribed to them in the Stock
Purchase Agreement.
CERTIFICATE
The
undersigned certifies that the representations and responses below are true and
accurate:
(a)
The undersigned has been
duly formed and is validly existing and has full power and authority to invest
in the Bank. The person signing on behalf of the undersigned has the authority
to execute and deliver the Stock Purchase Agreement on behalf of the
undersigned and to take other actions with respect thereto.
(b)
Indicate the
form of entity of the undersigned:
o
Limited
Partnership
o
General Partnership
o
Corporation
o
Revocable Trust
(identify each grantor and indicate under what circumstances the trust is
revocable by the grantor):
|
|
|
|
|
|
|
|
|
|
|
(Continue
on a separate piece of paper, if necessary.)
|
o
Other Type of
Trust (indicate type of trust and, for trusts other than pension trusts, name
the grantors and beneficiaries):
|
|
|
|
|
|
|
|
|
|
|
(Continue
on a separate piece of paper, if necessary.)
|
1
o
Other form of
organization (indicate form of organization):
(c)
Indicate the approximate
date the undersigned entity was formed:
(d)
In order for the Bank to
offer and sell the Common Shares in conformance with state and federal
securities laws, the following information must be obtained regarding your
investor status. Please
initial each category
applicable to you as a Purchaser of the Common Shares of
the Bank.
o
(1)
A bank as defined in
Section 3(a)(2) of the 1933 Act, or any savings and loan association
or other institution pursuant to Section 3(a)(5)(A) of the 1933 Act
whether acting in its individual or fiduciary capacity;
o
(2)
A broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934;
o
(3)
An insurance company as
defined in Section 2(13) of the 1933 Act;
o
(4)
An investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that act;
o
(5)
A Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958;
o
(6)
A plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of $5,000,000;
o
(7)
An employee benefit plan
within the meaning of the Employee Retirement Income Security Act of 1974, if
the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors;
o
(8)
A business development
company as defined in Section 202(a)(22) of the Investment Advisers Act of
1940;
o
(9)
An organization described in
Section 501(c)(3) of the Internal Revenue Code, a corporation,
Massachusetts or similar business trust, or partnership,
2
not formed for the specific
purpose of acquiring the Common Shares, with total assets in excess of
$5,000,000;
o
(10)
A trust, with total assets
in excess of $5,000,000, not formed for the specific purpose of acquiring the
Common Shares, whose purchase is directed by a sophisticated person who has
such knowledge and experience in financial and business matters that such
person is capable of evaluating the merits and risks of investing in the Bank;
o
(11)
An entity in which all of
the equity owners qualify under any of the above subparagraphs. If the
undersigned belongs to this investor category only, list the equity owners of
the undersigned, and the investor category which each such equity owner
satisfies:
|
|
|
|
|
|
|
|
|
|
|
(Continue
on a separate piece of paper, if necessary.)
|
|
Dated:
,
2009
|
|
|
|
|
|
|
|
|
|
Name
of Purchaser:
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
|
An
Authorized Officer, Partner or Trustee
|
|
|
|
|
|
3
APPENDIX II-2
Accredited Investor Questionnaire
for
Individuals (including married couples)
If
the undersigned is an Individual (or married couple), the undersigned must
complete, date and sign this Certificate.
CERTIFICATE
I
certify that the representations and responses below are true and accurate:
(a)
In order for
the Bank to offer and sell the Common Shares in conformance with state and
federal securities laws, the following information must be obtained regarding
your investor status. Please
initial each category
applicable to you as
a Purchaser of the Common Shares of the Bank.
o
(1)
A natural
person whose individual net worth, or joint net worth with that person’s
spouse, at the time of his or her purchase exceeds $1,000,000;
o
(2)
A natural
person who had an individual income in excess of $200,000 in each of the two
most recent years, or joint income with that person’s spouse in excess of
$300,000, in each of those years, and has a reasonable expectation of reaching
the same income level in the current year;
o
(3)
An executive
officer or director of the Bank.
(b)
Set forth in
the space provided below the state(s), if any, in the U.S. in which you
maintained your residence during the past two years and the dates during which
you resided in each state:
|
Dated:
,
2009
|
|
|
|
|
|
Name(s) of
Purchaser:
|
|
|
|
|
|
|
|
Signature:
|
|
|
|
|
|
|
|
Signature:
|
|
|
|
|
(If
joint ownership, both individuals must execute this
|
|
|
|
Certificate.)
|
|
|
|
|
|
|
1
EXHIBITS
|
Exhibit A
|
Risk
Factors
|
|
Exhibit B
|
Form of
Counsel Opinion for the Bank
|
|
Exhibit C
|
Form of
Secretary’s Certificate
|
|
Exhibit D
|
Form of
Officer’s Certificate
|
EXHIBIT A
RISK FACTORS
There are many risks and uncertainties related to the Bank’s business
and operations and an investment in the Common Shares. Before making an investment decision, the
Purchaser should read carefully and consider the risk factors below relating to
the Bank and this offering of the Common Shares. The Purchaser should carefully consider the
risks and uncertainties described below together with all other information
provided with regard to evaluating the offering of the Common Shares and the
Proposed Acquisition, including, but not limited to, the Offering Summary. The risks and uncertainties described below
are not the only ones the Bank faces.
Additional risks and uncertainties not presently known to the Bank or
that may be deemed currently immaterial also may adversely affect the Bank’s
business, financial condition and operations.
Any of the following risks could negatively affect its business,
financial condition and results of operations.
The risks discussed below also include forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, and
actual results may differ substantially from those discussed. Such projections and information are based on
assumptions about future events that are inherently uncertain and subjective,
and they may change. No representation
or warranty is made about whether projected events or results will occur or
will be obtained.
The future results of the Bank could be affected by subsequent events
and could differ materially from those expressed in forward-looking
statements. If future events and actual
performance differ from the Bank’s assumptions, the actual results could vary
significantly from the performance projected in the forward-looking statements.
The Bank cautions readers not to place
undue reliance on any forward-looking statements.
Risks
Specifically Related to the Bank’s Proposed Acquisition
The Bank’s current opportunity to acquire the Target Banks from the
FDIC may present challenges, and the Bank may incur unanticipated losses
related to the assets and liabilities of such financial institutions.
The
Bank is evaluating an opportunity to acquire the Target Banks from the
FDIC. It will use the proceeds of this
offering to acquire the assets and liabilities of certain Target Banks that are
in receivership through the FDIC bid process for failed institutions. Such an acquisition will require the Bank to
enter into the P&A Agreement with the FDIC.
The P&A Agreement is a form document prepared by the FDIC, and the
ability to negotiate the terms of this agreement is limited or
non-existent. As a result, the P&A
Agreement provides for limited disclosure about, and limited indemnification
for, risks associated with, the Target Banks and is only that which is provided
for by the FDIC. There is a risk that
such disclosure regarding, and indemnification for, the Target Banks will not
be sufficient and the Bank will incur unanticipated losses.
A-1
The success of the Proposed Acquisition
will depend on the Bank’s ability to successfully combine the Target Banks’
business with the Bank’s business, and, if the Bank experiences difficulties
with the integration process, the anticipated benefits of the acquisition may
not be realized fully or at all or may take longer to realize than expected.
The
success of the Proposed Acquisition will depend, in part, on the Bank’s ability
to successfully combine the Target Banks’ business with the Bank’s
business. As with any acquisition
involving financial institutions, there may be business disruptions that result
in the loss of customers or cause customers to remove their accounts and move
their business to competing financial institutions. It is possible that the integration process
could result in the disruption of ongoing business or inconsistencies in
standards, controls, procedures and policies that adversely affect the Bank’s
ability to maintain relationships with clients, customers, depositors and
employees or to achieve the anticipated benefits of the acquisition. Integration efforts, including integration of
the Target Banks’ systems into the Bank’s current systems, will also divert the
Bank’s management’s attention and resources.
If the Bank experiences difficulties with the integration process, the
anticipated benefits of the acquisition may not be realized fully or at all or
may take longer to realize than expected.
The Bank has made certain assumptions regarding the potential losses it
will incur in connection with its acquisition of the assets and liabilities of
the Target Banks from the FDIC; if these assumptions are inaccurate, or if the
loss share provisions provided for in the P&A agreement are administered
improperly or, in the future, the FDIC interprets such provisions in a way
different from what the Bank anticipates, then the Bank’s losses could
increase.
The
Bank is seeking to acquire the assets and liabilities of certain Target Banks
that are in receivership through the FDIC bid process for failed
institutions. In conjunction with the
acquisitions, the Bank will be discounting portions of the acquired loan
portfolios based on its estimates of remaining credit losses related to
credit-impaired loans. In addition, the
Bank will enter into a loss sharing agreement with the FDIC, pursuant to which
the FDIC will retain 80% of the loan losses incurred in connection with the
Target Banks’ loans, up to an agreed upon maximum threshold amount of aggregate
losses, and will assume 95% of any additional loan losses above such threshold
amount. Through the loss sharing
arrangement, the FDIC absorbs a significant portion of the loss from the Target
Banks’ asset portfolios, and the asset management and disposition incentives of
the Bank and the FDIC become more aligned as both parties are sharing in the
loss. If the loss share provisions
provided for in the loss sharing agreement are administered improperly or, in
the future, the FDIC interprets such provisions in a way different from what
the Bank anticipates, then the Bank’s losses could increase.
The
Bank will establish its bid to the FDIC for the Target Banks to cover its
anticipated losses, as shown in “Preliminary Bid Calculations,” on page 17
of the Offering Summary. However, there
is no assurance that loans the Bank will acquire will not further deteriorate
in value, below the Bank’s estimates, such estimates being reflected in the
“Management Loss Assumption Analysis of Target Bank Loans,” set forth on
page 16 of the Offering Summary. As
a result, if the Bank is required to take additional markdowns on the acquired
loan portfolios or on the other assets it acquires, the Bank will incur its pro
rata portion of additional losses under the loss sharing agreement, which could
materially and adversely affect its business, financial
A-2
condition
and results of operations and which could cause a material negative deviation
from the results projected in “Model Summary,” on page 18 of the Offering
Summary (the “
Model Summary
”).
The Bank’s success is dependent upon the new management team, which may
be unable to successfully implement their proposed business strategy.
The
Bank’s success is expected to be largely dependent upon its proposed new
management team consisting of Joseph W. Evans, who will serve as the
Bank’s Chairman and Chief Executive Officer, J. Daniel Speight, who will
serve as the Bank’s Vice Chairman, Chief Operating Officer and Chief Financial
Officer, and Kim Michael Childers, who will serve as the Bank’s President
and Chief Credit Officer. The proposed
new management team intends to adopt a traditional, community-focused
commercial banking strategy.
See
“State Bank and Trust Company Plan for Target Bank,” on
page 11 of the Offering Summary. In
order to execute this new business strategy, the new management team will need
to, among other things:
·
attract
sufficient retail and commercial deposits;
·
attract
and maintain business banking relationships with businesses in the Bank’s
market area;
·
attract
and retain experienced commercial and community bankers;
·
identify
and pursue suitable opportunities for opening new branches in the Bank’s market
area;
·
maintain
adequate regulatory capital and comply with applicable federal and state
regulations;
·
attract
sufficient loans, including correspondent and purchased loans that meet prudent
credit standards; and
·
maintain
expenses in line with their current projections.
Failure
to achieve these strategic goals could adversely affect the Bank’s ability to
successfully implement the new management team’s business strategies, as well
as the Bank’s business, financial condition and results of operations, and,
therefore, could cause a material negative deviation from the results projected
in the Model Summary.
No assurance can be made that the Bank’s proposed new management team’s
strategies for the enhancement of shareholder value will be accomplished or
that other strategies may be undertaken.
The
Bank’s proposed new management team contemplates taking certain actions after
completion of this offering in order to enhance shareholder value, including
closing various branches, opening a new branch in Atlanta, consolidating
operation centers, reviewing personnel, assembling a team for correspondent
banking and purchasing performing loans from the FDIC and others, beginning a
special asset division, strategically repricing deposits, and continuing to
review FDIC assisted deals on a whole bank and deposit only basis. There is no assurance that
A-3
any
or all of the actions discussed above will be accomplished, that other such
strategies will be undertaken, or that enhanced shareholder value will be
realized.
Risks
Generally Related to the Bank’s Future Business
Recent negative developments in the financial industry and the current
economic environment pose significant challenges for the Bank and its industry
and could adversely affect the Bank’s business, financial condition and results
of operations
.
The
Bank is, and will be, operating in a challenging and uncertain economic
environment, including generally uncertain national and local conditions. Negative developments in the global credit
and securitization markets during 2008 have resulted in uncertainty in the
financial markets in general, with the expectation of the general economic
downturn continuing in 2009. As a result of this “credit crunch,” commercial as
well as consumer loan portfolio performances have deteriorated at many
institutions and the competition for deposits and quality loans has increased
significantly. Global securities
markets, and bank holding company stock prices in particular, have been
negatively affected, as has the ability of banks and bank holding companies to
raise capital or borrow in the debt markets.
Financial
institutions like the Bank have been, and may continue to be, affected by sharp
declines in the real estate market, including falling home prices and
increasing delinquencies, foreclosures and increased unemployment. Concerns over the stability of the financial
markets and the economy have resulted in decreased lending by financial
institutions to their customers and to each other with such concerns leading to
increased commercial and consumer deficiencies, lack of customer confidence,
increased market volatility and widespread reduction in general business activity. The Bank does not expect these difficult
conditions to improve in the near future.
A worsening of these conditions would likely exacerbate the adverse
effects on the Bank.
As
a result, the Bank may face the following risks:
·
Economic
conditions that negatively affect housing prices and the job market may
continue to cause the credit quality of the Bank’s loan portfolios to
deteriorate;
·
Market
developments that affect consumer confidence may cause adverse changes in
payment patterns by the Bank’s customers, causing increases in delinquencies
and default rates on loans and other credit facilities;
·
The
processes that the Bank uses to estimate its allowance for loan losses and
reserves may no longer be reliable because they rely on judgments such as
forecasts of economic conditions, that may no longer be capable of accurate
estimation;
·
The
value of the Bank’s securities portfolio may decline; and
·
The
Bank may face increased regulation of its industry, and the costs of compliance
with such regulation may increase.
A-4
These
conditions or similar ones may continue to persist or worsen, causing the Bank
to experience continuing or increased adverse effects on its business, financial
condition, results of operations and the price of the Common Stock.
The banking industry is heavily regulated, and that regulation could
limit or restrict the Bank’s activities and adversely affect its financial
results
.
The
Bank operates in a highly regulated industry and is subject to examination,
supervision, and comprehensive regulation by various federal and state
agencies, including the Federal Deposit Insurance Corporation (the “
FDIC
”) and the State of Georgia Department of Banking and Finance. The Bank’s compliance with these regulations
is costly and restricts some of its activities, including payment of dividends,
mergers and acquisitions, investments, loans and interest rates and locations
of offices. The Bank is also subject to
capitalization guidelines established by its regulators, which require the Bank
to maintain adequate capital to support its business.
In
light of current conditions in the global financial markets and the global
economy, regulators have increased their focus on the regulation of the
financial services industry. Most
recently, governments in the U.S. and abroad have intervened on an
unprecedented scale. Proposals for
legislation, including a comprehensive overhaul of the financial regulatory
system in the U.S., have been, and are expected to be, introduced in the U.S.
Congress, in state legislatures and around the world. These proposals are likely to alter standards
used to measure regulatory compliance and to determine the adequacy of
liquidity, risk management and other operational practices for financial
services companies. The Bank is unable
to predict whether any of these legislative and regulatory initiatives will
succeed, which form they will take, or whether any additional changes to
statutes or regulations, including the interpretation or implementation of
those statutes or regulations, will occur in the future. Any action of that nature could affect the
Bank in substantial and unpredictable ways and could have an adverse effect on
its business, financial condition, results of operations and the price of the
Common Stock.
Changes in monetary policy and interest rates could adversely affect
the Bank’s profitability
.
The
Bank’s results of operations are affected by credit policies of monetary
authorities, particularly the Board of Governors of the Federal Reserve System
(the “
Federal Reserve
”). The Bank’s profitability depends to a
significant extent on the Bank’s net interest income. Net interest income is the difference between
interest income on interest-earning assets, such as loans and investments, and
interest expense on interest-bearing liabilities, such as deposits and
borrowings. Interest rates are highly
sensitive to many factors that are beyond the Bank’s control, including general
economic conditions and policies of various governmental and regulatory
agencies. Changes in monetary policy,
including changes in interest rates, could influence not only the interest the
Bank receives on loans and securities and the interest it pays on deposits and
borrowings, but those changes could also affect its ability to originate loans
and obtain deposits.
A-5
The
Bank’s net interest income will be adversely affected if market interest rates
change such that the interest it pays on deposits and borrowings increases
faster than the interest earned on loans and investments. Changes in interest rates could also
adversely affect the income of some of the Bank’s noninterest income
sources. For example, if mortgage
interest rates increase, the demand for residential mortgage loans will likely
decrease, which will have an adverse effect on the Bank’s mortgage loan fee
income. Continuing declines in security
values could further reduce trust and investment income.
In
light of changing conditions in the national economy and in the financial
markets, particularly the uncertain economic environment, the continuing threat
of terrorist acts and the current military operations in the Middle East, the
Bank cannot predict possible future changes in interest rates, which may
negatively affect its deposit levels, loan demand and its business and
earnings. Furthermore, the actions of
the United States and other governments in response to ongoing economic crises
may result in currency fluctuations, exchange controls, market disruption and
other adverse effects.
Changes in local economic conditions where the Bank operates could have
a negative effect
.
The
Bank’s success depends significantly on growth, or lack thereof, in population,
income levels, deposits and housing starts in the geographic markets it serves
in the State of Georgia. The local
economic conditions in these areas have a significant impact on the Bank’s
commercial, real estate and construction loans, the ability of borrowers to
repay these loans, and the value of the collateral securing these loans. Adverse changes in, and further deterioration
of, the economic conditions of the Southeastern United States in general or any
one or more of the Bank’s local markets could negatively affect the Bank’s
financial condition, results of operations and the Bank’s profitability. A continuing deterioration in economic
conditions could result in the following consequences, any of which could have
a material adverse effect on the Bank’s business:
·
loan
delinquencies may increase;
·
problem
assets and foreclosures may increase;
·
demand
for the Bank’s products and services may decline; and
·
collateral
for loans that the Bank makes, especially real estate, may decline in value, in
turn reducing a customer’s borrowing power, and reducing the value of assets
and collateral associated with the Bank’s loans.
The Bank will face strong competition from
other financial services providers.
The
Bank has and will continue to operate in highly competitive markets for the
products and services it offers. The
competition among financial services providers to attract and retain customers
is strong. Customer loyalty can be
easily influenced by a competitor’s new products, especially offerings that
could provide cost savings or a higher return to the customer. Some of the Bank’s competitors may be better
able to provide a wider range of products and services over a greater
geographic area. The Bank has and will
continue to compete with commercial banks, credit unions, savings and loan
associations, mortgage banking firms, consumer finance
A-6
companies,
securities brokerage firms, insurance companies, money market funds, and other
mutual funds, as well as other regional, super-regional, national and
international financial institutions that operate offices in the Bank’s market
and elsewhere. Moreover, this highly
competitive industry could become even more competitive as a result of
legislative, regulatory and technological changes and continued consolidation.
Some
of the Bank’s competitors may have fewer regulatory constraints, lower cost
structures and higher lending limits. In
terms of lending limits, the Bank’s legally mandated lending limits are and
would be lower than those of some of its competitors because it will have less
capital than such competitors. The
Bank’s lower lending limits may discourage borrowers with lending needs that exceed
those limits from doing business with it.
While the Bank may try to serve these borrowers by selling loan
participations to other financial institutions, this strategy may not succeed
in this current market because the number of institutions that are willing to
act as loan participants is decreasing.
While
the Bank believes it can and does successfully compete with these other
financial institutions in its market areas, it may face a competitive
disadvantage as a result of its relatively smaller size, lack of geographic
diversification beyond the State of Georgia and inability to spread its
marketing costs across a broader market.
Future growth or operating results may require the Bank to raise
additional capital, but that capital may not be available or may be dilutive.
Although
the Bank expects to raise approximately $250 million in this offering, to the
extent that its future operating results erode capital, or if it elects to
expand through loan growth, the Bank may be required to raise additional
capital. In addition, the Bank is required
by federal and state regulatory authorities to maintain adequate levels of
capital to support its operations.
The
Bank’s ability to raise capital will depend on conditions in the capital
markets, which are outside of the Bank’s control and largely do not depend on
the Bank’s financial performance.
Accordingly, the Bank cannot be assured of its ability to raise capital
when needed or on favorable terms. If
the Bank cannot raise additional capital when needed, it will be subject to
increased regulatory supervision and the imposition of restrictions on its
growth and business. These restrictions
could negatively affect the Bank’s ability to operate or further expand its
operations through loan growth, acquisitions or the establishment of additional
branches and may result in increases in operating expenses and reductions in
revenues that could have a material adverse effect on the Bank’s financial
condition, results of operations and the price of Common Stock.
Liquidity needs could adversely affect the Bank’s results of operations
and financial condition
.
The
Bank’s primary sources of funds are customer deposits and loan repayments. Deposit levels may be affected by a number of
factors, including rates paid by competitors, general interest rate levels,
returns available to customers on alternative investments and general economic
conditions. Moreover, upon completion of
the assumption of the Target Banks’
A-7
deposit
liabilities from the FDIC, the Bank intends to reprice some or all of the
acquired deposits to conform with current market conditions. If the Bank reprices these liabilities too
aggressively, the affected depositors could choose to withdraw their deposits,
which could result in a need for new funding sources to replace these lost
deposits. Scheduled loan repayments are
a relatively stable source of funds; however, they are subject to the ability
of borrowers to repay the loans. The
ability of borrowers to repay loans can be adversely affected by a number of
factors outside of the Bank’s control, including changes in economic
conditions, adverse trends or events affecting business industry groups,
reductions in real estate values or markets, business closings or lay-offs,
inclement weather, natural disasters and international instability. Accordingly, the Bank may be required from
time to time to rely on secondary sources of liquidity to meet withdrawal
demands or otherwise fund operations.
Those sources may include Federal Home Loan Bank (“
FHLB
”)
advances, brokered deposits and federal funds lines of credit from
correspondent banks. While the Bank
believes that these sources are currently adequate, there can be no assurance
they will be sufficient to meet future liquidity demands, particularly if the
Bank experiences atypical deposit withdrawal demands or increased loan demand
or if regulatory decisions should limit available funding sources such as
brokered deposits. The Bank may be
required to slow or discontinue loan growth, capital expenditures or other
investments or liquidate assets should those sources not be adequate.
The Bank will face risks with respect to
future expansion and acquisitions or mergers.
In
the future, the Bank may seek to acquire other financial institutions or parts
of those institutions, including additional purchases from the FDIC. However, the Bank may not have the
opportunity to make suitable acquisitions on favorable terms, which could
negatively impact the growth of its business.
The Bank expects that other banking and financial companies, many of
which have significantly greater resources, will compete with it to acquire
compatible businesses. This competition
could increase prices for acquisitions that the Bank would likely pursue. Also, acquisitions of regulated businesses
such as banks are subject to various regulatory approvals. If the Bank fails to receive the appropriate
regulatory approvals, it will not be able to consummate an acquisition that it
believes is in its best interests.
The Bank’s financial condition may be affected negatively by the costs
of litigation.
The
Bank may be involved from time to time in a variety of litigation,
investigations or similar matters arising out of its business. The Bank’s insurance may not cover all claims
that may be asserted against it, and any claims asserted against it, regardless
of merit or eventual outcome, may harm the Bank’s reputation. Should the ultimate judgments or settlements
in any litigation or investigation significantly exceed the Bank’s insurance
coverage, they could have a material adverse effect on its business, financial
condition and results of operations. In
addition, the Bank may not be able to obtain appropriate types or levels of
insurance in the future, nor may it be able to obtain adequate replacement
policies with acceptable terms, if at all.
The Bank may be required to pay significantly higher FDIC premiums in
the future.
Recent
insured institution failures, as well as deterioration in banking and economic
conditions, have significantly increased the loss provisions of the FDIC,
resulting in a decline in
A-8
the
designated reserve ratio to historical lows.
The FDIC expects a higher rate of insured institution failures in the
next few years compared to recent years.
Therefore, the reserve ratio may continue to decline. Additionally, the Emergency Economic
Stabilization Act temporarily increased the limit on FDIC coverage to $250,000
through December 31, 2009, which was extended to December 13, 2019 on
May 20, 2009.
These
developments have caused the premiums assessed by the FDIC to increase. Specifically, beginning April 1, 2009,
the deposit insurance assessment increased to 22 basis points per $100 of
deposits for institutions in Risk Category II, which is the category into which
the Bank is likely to fall.
Additionally, on May 22, 2009, the FDIC announced a final
rule imposing a 5 basis point special emergency assessment on
June 30, 2009, payable September 30, 2009. The amount of the assessment will be $0.05
for each $100 of assets, less Tier 1 capital, as of June 30, 2009, but the
amount of the assessment is capped at 10 basis points of domestic
deposits. The final rule also
allows the FDIC to impose additional special emergency assessments on or after
September 30, 2009, of up to 5 basis points per quarter, if necessary to
maintain public confidence in FDIC insurance.
The FDIC has indicated that a second assessment is probable. These higher FDIC assessment rates and
special assessments will have an adverse impact on the Bank’s results of
operations and financial condition.
Changes in accounting policies and practices, as may be adopted by the
regulatory agencies, the Financial Accounting Standards Board, or other
authoritative bodies, could materially impact the Bank’s financial statements.
The
Bank’s accounting policies and methods are fundamental to how it records and
reports its financial condition and results of operations. From time to time, the regulatory agencies,
the Financial Accounting Standards Board, and other authoritative bodies change
the financial accounting and reporting standards that govern the preparation of
the Bank’s financial statements. These
changes can be difficult to predict and can materially impact how the Bank
records and reports its financial condition and results of operations.
The Bank must respond to rapid
technological changes, and these changes may be more difficult or expensive
than anticipated.
The
Bank will have to respond to future technological changes. Specifically,
if the Bank’s competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, then the
Bank’s existing product and service offerings, technology and systems may be
impaired or become obsolete. Further, if
the Bank fails to adopt or develop new technologies or to adapt its products
and services to emerging industry standards, then the Bank may lose current and
future customers, which could have a material adverse effect on its business,
financial condition and results of operations.
The financial services industry is changing rapidly and in order to
remain competitive, the Bank must continue to enhance and improve the
functionality and features of its products, services and technologies. These changes may be more difficult or
expensive than the Bank anticipates.
A-9
Risks
Related to Investing in the Common Stock
There is no public market for the Common Stock.
There
is no public market for the Bank’s Common Stock and, as none should be expected
to develop in the foreseeable future, a Purchaser may be unable to liquidate
his, her, or its investment and should be prepared to bear the economic risk of
an investment for an indefinite period.
The Bank cannot predict the extent to which an active public market for
the Common Stock will develop or be sustained after this Proposed
Acquisition. In recent years, the stock
market has experienced a high level of price and volume volatility, and market
prices for the stock of many companies have experienced wide price fluctuations
that have not necessarily been related to operating performance.
The
Bank cannot predict the effect of future sales of the Common Stock in the
market, the availability of the Common Stock for sale in the market, or the
market price of the Common Stock.
Therefore, the Bank cannot assure the Purchaser that sales of
substantial amounts of the Common Stock in the market, or the potential for
large amounts of market sales, would not cause the price of the Common Stock to
decline or impair the Bank’s ability to raise capital. Following the Proposed Acquisition, the Bank
expects to have approximately 25,767,437 shares of Common Stock
outstanding.
The Purchaser’s funds that are being held
in escrow in the amount of such Purchaser’s Purchase Price will not be
available to the Purchaser for a period of time, and
the
Purchaser may not revoke his, her or its subscription
.
All
subscription funds will be held in an escrow account maintained by the Escrow
Agent
until the earlier of the
Closing, the rejection of the subscription or the termination of this offering
pursuant to Section 8 of the Agreement.
During such time, the Purchaser may not revoke his, her or its
subscription. The Purchaser will not
earn interest on its investment or have use of its funds during such period,
even if the Bank ultimately does not accept such Purchaser’s subscription or if
the offering is terminated.
If the Bank’s stock price fluctuates after this offering, the Purchaser
could lose a significant part of its investment.
The
market price of the Bank’s stock may be influenced by many factors, some of
which are beyond the Bank’s control, including those described above in this
Exhibit A and the following:
·
general
economic and stock market conditions;
·
risks
related to the Bank’s business and the Bank’s industry, including those
discussed above;
·
changes
in conditions or trends in the Bank’s industry, markets or customers;
·
strategic
actions by the Bank or the Bank’s competitors;
A-10
·
announcements
by the Bank or the Bank’s competitors of significant contracts, acquisitions,
joint marketing relationships, joint ventures or capital commitments;
·
variations
in the Bank’s quarterly operating results and those of the Bank’s competitors;
·
future
sales of the Common Stock or other securities;
·
investor
perceptions of the investment opportunity associated with the Common Stock
relative to other investment alternatives; and
·
continuing
threats of terrorist acts.
As
a result of these factors, investors in the Common Stock may not be able to
resell their shares at or above the offering price or may not be able to resell
them at all. These broad market and
industry factors may materially reduce the market price of the Common Stock,
regardless of the Bank’s operating performance.
In addition, price volatility may be greater if the public float and
trading volume of the Common Stock is low.
The market price of the Common Stock may decline after the stock
offering.
The
Bank is currently offering for sale 25,000,000 shares of the Common Stock. The possibility that substantial amounts of
shares of the Common Stock may be sold in the public market may cause market
prices for the Common Stock to decrease.
Additionally, because stock prices generally fluctuate over time, there
is no assurance that Purchasers of the Common Shares will be able to sell
shares after the offering at a price equal to or greater than the actual
purchase price. Purchasers should
consider these possibilities in determining whether to purchase the Common
Shares and the timing of any sale of shares of the Common Stock.
The Common Stock is illiquid, and the transfer of
the Common Shares purchased in this offering may be restricted.
The
Bank is offering the Common Shares pursuant to exemptions from registration
under applicable federal and state securities laws, and any transfer of the
Common Shares purchased in this offering may be restricted unless exemptions
from such registration provisions are applicable to the transfer or unless the
transfer of the Common Stock is registered pursuant to applicable federal and
state securities laws. Therefore,
holders of the Common Shares may be required to bear the economic risk of this
investment for an indefinite period of time.
The Bank’s new management team will have
broad discretion over the use of the proceeds of this offering.
All
of the estimated net proceeds from this offering will be allocated to acquire
the assets and liabilities of the Target Banks and for general corporate
purposes, including the put right to the shareholders that held shares prior to
the Closing. Although this is the intended
use of the proceeds, the Bank’s new management team will have broad discretion
as to the application of such proceeds.
A-11
The offering price for the Common Shares
has been established arbitrarily and may not reflect current or future value of
the Common Shares.
The
offering price for the Common Shares offered hereby was arbitrarily determined
and is unrelated to any specific investment criteria and may not reflect
current or future value of the Common Shares.
There can be no assurance that the Bank’s future valuation will be equal
to or higher than the valuation reflected in the Common Shares in this
offering, and indeed such future valuation could be lower.
The Bank does not anticipate declaring
dividends in the foreseeable future
.
Holders
of the Common Stock are not entitled to receive dividends unless declared by
its Board of Directors. Since the Bank’s
inception, it has not paid any dividends on the Common Stock and does not
intend to pay dividends in the foreseeable future. Even if the Bank decides to pay dividends,
its ability to do so will be limited by regulatory restrictions, its financial
condition, results of operation, capital requirements, level of indebtedness,
and such other factors as the Bank’s Board of Directors deems relevant. The ability of the Bank to pay dividends is
limited by its obligations to maintain sufficient capital and by other
restrictions on its dividends that are applicable to banks. If the Bank does not satisfy these regulatory
requirements, it will be unable to pay dividends on the Common Stock.
An entity holding as little as a 5% interest in the Bank’s outstanding
Common Stock could, under certain circumstances, be subject to regulation as a “bank
holding company.”
Any
entity, including a “group” composed of natural persons, owning or controlling
with the power to vote 25% or more of the Bank’s outstanding Common Stock, or
5% or more if the holder otherwise exercises a “controlling influence” over the
Bank, may be subject to regulation as a “bank holding company” in accordance
with the Bank Holding Company Act of 1956, as amended (the “
BHC Act
”). In
addition, (i) any bank holding company or foreign bank with a U.S.
presence may be required to obtain the approval of the Federal Reserve under
the BHC Act to acquire or retain 5% or more of the Bank’s outstanding Common
Stock and (ii) any person not otherwise defined as a company by the BHC
Act and its implementing regulations may be required to obtain the approval of
the Federal Reserve under the Change in Bank Control Act to acquire or retain
10% or more of the Bank’s outstanding Common Stock. Becoming a bank holding company imposes
statutory and regulatory restrictions and obligations, such as providing
managerial and financial strength for any bank subsidiaries. Regulation as a bank holding company could
require the holder to divest all or a portion of the holder’s investment in the
Common Stock or those nonbanking investments that may be deemed impermissible
or incompatible with bank holding company status, such as a material investment
in a company unrelated to banking.
Anti-takeover provisions in the Bank’s charter documents could
discourage, delay or prevent a change of control of the Bank and diminish the
value of the Common Stock.
Some
of the provisions of the Bank’s articles of incorporation and bylaws could make
it difficult for the Bank’s shareholders to change the composition of the Bank’s
Board of Directors,
A-12
preventing
them from changing the composition of management. In addition, the same provisions may
discourage, delay or prevent a merger or acquisition that the Bank’s
shareholders may consider favorable.
These
provisions include:
·
authorizing
the Bank’s Board of Directors to issue preferred shares without shareholder
approval;
·
no
preemptive rights; and
·
pursuant
to the Georgia Business Corporation Code § 14-2-728, no cumulative voting.
These
anti-takeover provisions could impede the ability of the Bank’s common
shareholders to benefit from a change of control and, as a result, could have a
material adverse effect the market price of the Common Stock and the Purchasers’
ability to realize any potential change-in-control premium.
The Bank’s securities are not FDIC insured.
The
Bank’s securities, including the Common Stock, are not savings or deposit
accounts or other obligations of the Bank, and are not insured by the Deposit
Insurance Fund, the FDIC or any other governmental agency and are subject to
investment risk, including the possible loss of principal.
The price of the Common Shares is not a guarantor of future value.
The
price of the Common Shares may not indicate the market price for the Common
Stock after the Proposed Acquisition is completed or at any future time. The price of the Common Shares was determined
by considering a variety of factors, including, among other things, the prices
at which the Common Stock has most recently been sold, the history of, and
prospects for, the banking industry in the Bank’s market area, the price to
earnings and price to book value multiples represented by the price, the prices
of Common Stock of comparable companies, and the Bank’s historical and
prospective cash flow and earnings and those of comparable companies in recent
periods.
The Bank’s future capital needs could
result in dilution of the Purchasers’ investment.
The
Bank’s Board of Directors may determine from time to time that there is a need
to obtain additional capital through the issuance of additional shares of the
Common Stock or other securities.
Particularly given the current depressed market for financial stocks,
these issuances would likely dilute the ownership interests of the Purchasers
and may dilute the per share book value of the Common Stock. New investors may also have rights,
preferences, and privileges senior to the Bank’s current shareholders who may
be adversely impacted by the new investors.
A-13
EXHIBIT B
FORM OF OPINION OF COUNSEL FOR THE BANK
The
opinion of Dinur and DeLuca, LLP, counsel for State Bank and Trust Company (the
“
Bank
”), to be delivered pursuant to
Section 7(b) of the Stock Purchase Agreement dated July 14, 2009
by and among the Bank and each of the Purchasers named therein (the “
Purchase Agreement
”) shall be to the effect that:
(A) The
Bank (a) has been duly incorporated and is validly existing as a banking
corporation in good standing under the laws of the State of Georgia and
(b) has the corporate power to own its property, to conduct the business
in which it is engaged and which it is proposed to be engaged immediately after
the consummation of the Proposed Acquisition, to execute and deliver each of
the Transaction Documents (as defined in the Purchase Agreement) and the
P&A Agreement to which it is a party and to perform its obligations
thereunder.
(B) The
Bank is duly qualified to transact business and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
assets or properties (owned, leased or licensed) or the nature of its
businesses makes such qualification necessary, except for such jurisdictions
where the failure to so qualify, individually or in the aggregate, would not
have a Bank Material Adverse Effect (as defined in the Purchase Agreement).
(C) The
Bank has duly authorized, executed and delivered each of the Transaction
Documents and the P&A Agreement, and each Transaction Document and the
P&A Agreement constitutes the legal, valid and binding obligation of the
Bank and is enforceable against the Bank in accordance with its terms, except
as the enforcement hereof may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization, receivership, conservatorship or other similar laws
relating to or affecting the enforcement of creditors’ rights or
(ii) general equity principles, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(D) The
Common Shares (as defined in the Purchase Agreement) have been duly authorized
and, when issued and delivered in accordance with the terms of the Purchase
Agreement, will be validly issued, fully paid and non-assessable. Except as provided for in the Agreement, the
issuance of the Common Shares will not be subject to any preemptive or similar
rights.
(E) To
such counsel’s knowledge, the Bank is not in breach of, or in default under
(nor has any event occurred which with notice, lapse of time, or both would
constitute a breach of, or default under), any license, indenture, mortgage,
deed of trust, bank loan or any other agreement or instrument to which the Bank
is a party or by which its respective properties may be bound or affected or
under any law, regulation or rule or any decree, judgment or order
applicable to the Bank, which breach or default would have a Bank Material
Adverse Effect.
(F) The
execution, delivery and performance of the Transaction Documents and the
P&A Agreement by the Bank and the consummation of the transactions
contemplated thereby (including, without limitation, the issuance and sale of
the Common Shares) do not and will not (i) conflict with or result in a
breach of any of the terms and provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would constitute a default)
under, or
B-1
result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Bank pursuant to, any indenture, mortgage, deed of
trust, loan agreement or any other agreement, instrument, franchise, license or
permit known to such counsel to which the Bank is a party or by which any of
the Bank or its respective properties or assets may be bound, except for such
violations as would not, individually or in the aggregate, have a Bank Material
Adverse Effect, (ii) violate the Articles of Incorporation or Bylaws of
the Bank or (iii) violate any provision of any federal or state law,
statute, rule or regulation which applies to the Bank.
(G) Based
upon the representations, warranties and agreements of the Purchasers in
Section 2 of the Purchase Agreement, it is not necessary in connection
with the offer, sale and delivery of the Common Shares to the Purchasers under
the Purchase Agreement to register the Common Shares under the Securities Act
of 1933, as amended, it being understood that no opinion is expressed as to any
subsequent resale of any Common Shares.
(H) To
our knowledge, after having made inquiry of officers of the Bank but without
having made any other investigation, the Bank is not a party to any action,
suit or proceeding.
(I) The
Bank has received approval from the Bank’s primary regulators regarding the
appointment of the proposed management team after the completion of the
Proposed Acquisition.
(1)
(1)
This opinion will be based upon a certificate
from the management team that includes a copy of confirmation in writing from
the FDIC and Georgia Department of Banking and Finance with regard to the
Interagency Notice of Change in Control that the management team filed with
such regulators.
B-2
EXHIBIT C
STATE BANK AND TRUST COMPANY
SECRETARY’S CERTIFICATE
July , 2009
I,
Marvin Ragan, Corporate Secretary of State Bank and Trust Company, a Georgia
banking corporation (the “
Bank
”),
hereby certify that:
(a) The Bank’s records indicate that the
total number of shares of the common stock of the Bank issued and outstanding
immediately prior to the closing of the transactions contemplated by that
certain Stock Purchase Agreement, dated as of July 14, 2009, by and among
the Bank and the Purchasers set forth therein (the “
Agreement
”),
was 767,437 shares of common stock, and, as of the date hereof, after giving
effect to the issuance of 28,455,000 shares pursuant to the terms of the
Agreement and the issuance of 800,000 shares pursuant to certain other
agreements, the total number of shares of common stock of the Bank outstanding
will be 30,022,437 shares;
(b) Attached hereto as Annex A is a true
and complete copy of the Articles of Incorporation of the Bank, as in full
force and effect as of the date hereof;
(c) Attached hereto as Annex B is a true
and complete copy of the Bylaws of the Bank, as in full force and effect as of
the date hereof;
(d) Attached hereto as Annex C is a true,
complete and correct copy of all resolutions of the Board of Directors and of
each committee, if any, thereof, of the Bank adopted by unanimous written
consent or at a meeting called at which a quorum was present and acting
throughout, relating either directly or indirectly to the Transaction Documents
and the P&A Agreement (each as such term is defined in the Agreement) and
all transactions in connection therewith, all of which resolutions have not
been amended, modified or rescinded and are in full force and effect on the
date hereof and which resolutions are the only resolutions adopted by the Board
of Directors or any committee, if any, thereof relating either directly or
indirectly to the Transaction Documents, the P&A Agreement and the transactions
contemplated in connection therewith.
Capitalized
terms that are not defined herein have the meanings ascribed to them in the
Agreement.
Signature appears on the following page.
C-1
IN WITNESS WHEREOF
, I have hereunto
signed my name as of the date first written above.
|
|
STATE BANK AND TRUST COMPANY
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
Marvin
Ragan
|
|
|
|
Corporate
Secretary
|
C-2
EXHIBIT D
STATE BANK AND TRUST COMPANY
OFFICER’S CERTIFICATE
July , 2009
The
undersigned, Marvin Ragan, Senior Vice President of State Bank and Trust
Company (the “
Bank
”), does hereby certify that I
am the duly appointed, qualified and acting Senior Vice President of the
Bank. For purposes of this Certificate,
the terms used and not defined herein shall have the respective meanings
specified in that certain Stock Purchase Agreement, dated as of July 14,
2009 (the “
Agreement
”), by and among the Bank
and the Purchasers set forth therein.
Pursuant
to Section 7(e) of the Agreement, the undersigned certifies as of the
date of this Certificate that (i) the representations and warranties of
the Bank contained in Section 3 of the Agreement were true and correct in
all material respects (except for those representations and warranties that are
qualified by materiality or Bank Material Adverse Effect, which were true and
correct in all respects) as of the date of the Agreement and as of the Closing
Date as though made at that time (except that representations and warranties
that speak as of a specific date shall be true and correct as of such specified
date), and (ii) the Bank has performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by the
Transaction Documents and the P&A Agreement (and by the FDIC and Georgia
Department of Banking and Finance, if any) to be performed, satisfied or
complied with by the Bank at or prior to the Closing Date.
Capitalized
terms that are not defined herein have the meanings ascribed to them in the
Agreement.
Signature appears on the following page.
D-1
IN WITNESS WHEREOF
, I have hereunto
signed my name as of the date first written above.
|
|
STATE BANK AND TRUST COMPANY
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
Marvin
Ragan
|
|
|
|
Senior
Vice President
|
D-2