UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of
1934
Date of Report (Date of earliest event reported)
February 1, 2012
AB&T Financial Corporation
(Exact name of registrant as specified in its charter)
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North Carolina
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000-53249
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26-2588442
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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292 West Main Avenue, Gastonia, North Carolina
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28054
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(Address of principal executive offices)
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(Zip Code)
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Registrants telephone number, including area code (704) 867-5828
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (
see
General Instruction
A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01 Entry into a Material Definitive Agreement.
Alliance Bank & Trust Company (the Bank), the wholly owned subsidiary of AB&T Financial Corporation (the
Company), has entered into a Stipulation to the Issuance of a Consent Order (the Stipulation) with the Federal Deposit Insurance Corporation (the FDIC) and the North Carolina Office of the Commissioner of Banks
(the Commissioner) and the FDIC and the Commissioner have issued the related Consent Order (the Order), effective February 1, 2012. The description of the Stipulation and the Order set forth below is qualified in its
entirety by reference to the Stipulation and the Order, copies of which are filed herewith as exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.
Management.
The Bank is required to assess managements ability to (1) comply with the requirements of the Order; (2) operate the Bank in a safe and sound manner;
(3) comply with all applicable laws and regulations; and (4) improve the Banks asset quality, capital adequacy, earnings, management effectiveness, risk management, liquidity, and sensitivity to market risk. To assist with this
assessment, the Bank must retain a consultant to develop a written analysis and assessment of the Banks management needs within 30 days of the effective date of the Order. The consultants management report must be developed within 60
days from the effective date of the Order. Within 30 days from receipt of the management report, the Bank must formulate a written management plan that incorporates the findings of the management report, a plan of action in response to each
recommendation contained in the management report, and a time frame for completing each action.
Capital Requirements.
While the Order is in effect, the Bank must maintain a leverage ratio (the ratio of Tier 1 capital to total assets) of at least 8% and a total risk-based capital ratio (the ratio of qualifying total capital to risk-weighted assets) of at
least 11%. If either of these capital ratios are below the required levels as of the date of any call report or regulatory examination, the Bank must, within 30 days from receipt of a written notice of capital deficiency from its regulators, present
a plan to increase capital to meet the requirements of the Order.
Charge-Offs, Credits.
The Order requires that
the Bank eliminate from its books, by charge-off or collection, all assets or portions of assets classified loss and 50% of those assets classified doubtful. If an asset is classified doubtful, the Bank may
alternatively charge off the amount that is considered uncollectible in accordance with the Banks written analysis of loan or lease impairment. The Order also prevents the Bank from extending, directly or indirectly, any additional credit to,
or for the benefit of, any borrower who has a loan or other extension of credit from the Bank that has been charged off or classified, in whole or in part, loss or doubtful and is uncollected. The Bank may not extend,
directly or indirectly, any additional credit to any borrower who has a loan or other extension of credit from the Bank that has been classified substandard. These limitations do not apply if the Banks failure to extend further
credit to a particular borrower would be detrimental to the best interests of the Bank.
Allowance for Loan and Lease
Losses.
Within 60 days of the effective date of the Order, the board of directors must review the adequacy of the allowance for loan and lease losses (the ALLL) and establish a policy for determining the adequacy of the ALLL.
Concentrations of Credit.
Within 90 days from the effective date of the Order, the Bank must perform a risk
segmentation analysis with respect to its concentrations of credit and must develop a written plan for systematically reducing and monitoring the Banks concentration of credit in revolving 14 family residential property loans to an
amount commensurate with the Banks business strategy, management, expertise, size, and location.
Asset Growth.
While the Order is in effect, the Bank must notify its regulators at least 60 days prior to undertaking asset growth that exceeds 10% or more per year or initiating material changes in asset or liability composition. The Banks asset
growth cannot result in noncompliance with the capital maintenance provisions of the Order unless the Bank receives prior written approval from its regulators.
Restriction on Dividends and Other Payments.
While the Order is in effect, the Bank cannot declare or pay dividends, pay bonuses, or pay any form of payment outside the ordinary course of
business resulting in a reduction of capital without the prior written approval of its regulators. In addition, the Bank cannot make any distributions of interest, principal, or other sums on subordinated debentures without prior regulatory
approval.
Brokered Deposits.
The Order provides that the Bank may not accept, renew, or roll over any brokered
deposits unless it is in compliance with the requirements of the FDIC regulations governing brokered deposits.
Loan
Review.
Within 60 days from the effective date of the Order, the Bank must review and revise its internal loan review and grading system to provide for the effective periodic review of the Banks loan portfolio in order to identify and
categorize the Banks loans and other extensions of credit on the basis of credit quality. Within 90 days from the effective date of the Order, the Bank must contract for an external loan review to assess the accuracy of the Banks loan
grading system and the quality of credit underwriting and administrative practices.
HELOC Portfolio.
Within 60 days from the effective date of the Order, the Bank
must perform a comprehensive assessment of the risk posed by its home equity line of credit (HELOC) portfolio. The Bank must also develop and implement a plan to reduce the risk in the HELOC portfolio.
Call Reports.
As required by the Order, the Bank has filed amended call reports regarding the financial condition of the
Bank as of March 31, 2011.
Written Plans and Other Material Terms.
Under the terms of the Order, the Bank
is required to prepare and submit the following written plans or reports to the FDIC and the Commissioner:
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Plan to reduce assets of $250,000 or greater classified as doubtful or substandard
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Plan and comprehensive budget for all categories of income and expense for the year 2012
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Business/strategic plan covering the overall operation of the Bank
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Plan to improve liquidity, contingency funding, interest rate risk, and asset liability management
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Assessment of the Banks information technology function
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Enterprise-wide disaster recovery/business continuity plan
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Policy to provide adequate internal routines and controls within the Bank consistent with safe and sound banking practices
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Independent testing of the Banks compliance with the Bank Secrecy Act and associated regulations
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Under the Order, the Banks board of directors has agreed to increase its participation in the affairs of the Bank, including
assuming full responsibility for the approval of policies and objectives for the supervision of all of the Banks activities. The Bank must also establish a board committee to monitor and coordinate compliance with the Order.
The Order will remain in effect until modified or terminated by the FDIC and the Commissioner.
Item 9.01. Financial Statements and Exhibits
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Exhibit
No
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Description of Exhibit
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10.1
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Stipulation to the Issuance of a Consent Order
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10.2
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Consent Order issued by the Federal Deposit Insurance Corporation and the North Carolina Office of the Commissioner of Banks
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Caution About Forward-Looking Statements
This Current Report on Form 8-K (including information included or incorporated by reference herein) may contain, among other things,
certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of Registrants goals and expectations with respect to earnings,
income per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (ii) statements preceded by, followed by or that
include the words may, could, should, would, believe, anticipate, estimate, expect, intend, plan, projects,
outlook or similar expressions. These statements are based upon the current belief and expectations of Registrants management and are subject to significant risks and uncertainties that are subject to change based on various
factors (many of which are beyond Registrants control).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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AB&T Financial Corporation
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(Registrant)
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Date
February 7, 2012
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/s/ Daniel C. Ayscue
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Daniel C. Ayscue
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President and Chief Executive Officer
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EXHIBIT INDEX
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Exhibit
No
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Description of Exhibit
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10.1
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Stipulation to the Issuance of a Consent Order
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10.2
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Consent Order issued by the Federal Deposit Insurance Corporation and the North Carolina Office of the Commissioner of Banks
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