Bank of Louisiana
The FDIC issued a Decision and Order to Cease and Desist and Assessment of a $500,000 Civil Money Penalty in the matter of Bank of Louisiana, New Orleans, LA, following the issuance of a Recommended Decision by an Administrative Law Judge (ALJ). The FDIC Board agreed with the ALJ's findings that the bank engaged in unsafe or unsound practices and violations of laws and regulations, including the Bank Secrecy Act, Electronic Fund Transfer Act, Real Estate Settlement Procedures Act, Truth in Lending Act, National Flood Insurance Program, and the Home Mortgage Disclosure Act. The action was initiated in 2013 with a Notice of Charges and a Notice of Assessment of Civil Money Penalty, etc.The Bank challenged the imposition of the C&D and CMP..The ALJ issued his recommendations on May 17, 2016, to which the bank filed written exceptions. The FDIC Board has now issued a decision.
The bank was founded in 1958 by G. Harrison Scott and the late James Comiskey. Scott has always been the bank's board chairman, and has been president of the bank since 2005. The bank has been under some form of supervisory enforcement action for most of the last 20 years. In 2011, the bank, the FDIC and the Louisiana Office of Financial Institutions entered into an MOU in which the bank agreed to address a number of risk management issues, including the bank's high level of classified and past due loans, deficiencies in credit administration and internal loan review, low earnings and management weaknesses. Since the MOU was agreed to, examiners found that the bank:
- violated EFTA and Regulation E by failing to investigate customers' claims unless they submitted an affidavit and police report; failing to provide provisional credits within 10 business days when required; failing to keep an adequate error resolution log; making incomplete disclosures to customers; and refusing to accept oral error claims from customers
- violated RESPA by failing to provide good faith estimates within the required time period; omitting required information from the GFEs; and failing to provide complete and accurate HUD-1 forms.
- had a high error rate in tracking information required under HMDA and Regulation C (which had been a problem since 2009)
- failed to file required CTRs, and had significant deficiencies in its BSA officer and staff training
- violated TILA and Reg Z by failing to provide timely early mortgage disclosures and establish escrow accounts for HPMLs
- failed to determine whether collateral fell within a Flood Hazard Area, notify burrowers of the need for flood insurance, and force place flood insurance where necessary, in violation of the NFIP and 12 C.F.R. Part 339.
- In the face of inadequate earnings and poor asset quality, the bank refused to implement changes in management recommended in the 2011 MOU.
- Had a Board of Directors that was ineffective and unable to act to improve matters because Scott effectively ignored the Board's opinion and votes.
In the C&D order, the bank was ordered to cease specific unsafe or unsound banking practices:
- Operating the Bank without adequate supervision and direction by the Bank's Board;
- Qperating the Bank with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;
- Operating the Bank with inadequate earnings to fund growth;
- Operating the Bank with inadequate earnings to support dividend payments and augment capital;
- Operating the Bank with an excessive level of adversely classified assets;
- Operating the Bank without an effective Compliance Management System ("CMS");
- Operating the Bank without an effective Bank Secrecy Act (BSA) compliance program; and
- Operating the Bank in violation of applicable laws, regulations, regulatory guidance, and policy statements.
The bank's board was directed to get more involved in the affairs of the bank by taking over the bank's policies and objective for supervision of management. Specific matters must be discussed by the board at regular monthly meetings, get involved in the BSA compliance program. The bank was ordered to add at least one independent director, with specified qualifications as to independence.
The bank was ordered to get and retain qualified management, including a competent CEO, a new experienced senior lending officer. a new experienced and qualified chief financial officer. each with the necessary written authority to implement the FDIC's Order.
In addition, the bank must develop a strategic plan; charge-off and plan to reduce classified assets, restrict advances to classified borrowers, reduce delinquencies, correct technical deficiencies listed in its 2013 report of examination; strengthen its loan review program, review, revise and maintain its Loan Policy. improve its management of its Allowance for Losses on Loans and Lease, review and amend as needed its Call Reports filed after 2012, develop a profit plan, achieve and maintain specific capital ratios, refrain from paying cash dividends, establish an effecitve program for internal audit and control, develop, adopt and implement a revised BSA compliance plan and designate a qualified BSA Officer with appropriate authority, and plan for a look back review covering the period from December 1, 2011, to present, to identify and report any transactions that may require CTR or SAR filings.