1. EFFECTIVE DECISION MAKING

2.  Making decisions about the disposition of non-performing assets is very difficult:  Inadequate information on which to base decision  Fear of trouble  Fear of criticism  Fear of retribution—loss of job or position or being reprimanded  Fear of giving something away

3. Effective decision making requires three basic elements:  Clear and precise delegations of authority  Written, detailed policy and procedures  Documented approval process

4. Effective Decision Making Authority to make asset related decisions should be delegated to descending levels of management within the organization, depending on the size and magnitude of the asset and related proposed action. Routine decisions should be made routinely and by the use of individual authority Credit Review committees should be encouraged as opposed to individual decision making on large and complicated matters t

5. Delegations of Authority Relating to Closed Bank Management  Authority is delegated and re-delegated in smaller amounts to descending levels of management and responsibility  Ultimate authority with board of directors  Board delegates a certain level of authority to LPS Director  LPS Director re-delegates his authority to a committee made up of senior LPS managers  LPS separately re-delegates some of his authority to Liquidation Team Manager

6. Types of Delegations of Authority specific to asset disposition decisions:  Compromise and settlement authority  Abandon any asset  Compromise any asset  Release guarantors on any asset  Abandon collateral to any asset  Dispose or sell any asset  Approve settlement or any claim or litigation concerning any asset (in concurrence with Legal Counsel)

7. Types of Delegations of Authority specific to asset disposition decisions:  Compromise and settlement authority (cont’d)  Take all other appropriate action related to assets in closed banks  Book Value Limitation:  This authority extends only to those assets that have a book value of __________or less  However:  Regardless of the limitation above, to take any action where the amount of loss to be realized does not exceed 15% of the total of principal and accrued interest

8. Types of Delegations of Authority specific to asset disposition decisions:  Sale of Real Estate or Other Property  On an all-cash basis or on terms if the appraised value is __________or less  Regardless of the above limitation, to sell real or personal property on an all-cash basis for a minimum of 100% of appraised value  All sales shall be conducted according to the policy for sale of real and personal property

9. Types of Delegations of Authority specific to asset disposition decisions:  Disbursement of Funds  For the protection of any asset not to exceed ________per calendar year  In accordance with contractual obligations arising from loan commitments, partially funded loans, letters of credit  To remove prior liens at or prior to a senior creditor’s foreclosure sale whenever the total amount of prior liens is 60% or less of the property’s appraised value  To pay sales commissions and closing costs, provided that the total amount paid does not exceed 10% of the sales price

10. Types of Delegations of Authority specific to asset disposition decisions:  Release Collateral Security  For 80% or more of appraised value whenever such release does not compromise a claim against a borrower  Initiate Foreclosure on Collateral  Restructure Debt  Sell Loans

11. Written, Detailed Policy and Procedures:  These are the rules by which assets are managed, such as:  Financial statements required  Real estate appraisals  Listing price  Foreclosure bid amount  Broad marketing effort  Etc.

12. Documented Approval Process  I recommend a system based on the FDIC “case” memorandum system. A case is a written memorandum to the appropriate level of authority seeking approval for an action, formatted as follows:  Proposal  Description of asset and situation  Why the proposed action is the best alternative  Review of lesser alternatives  Substantiation of proposal  Citation of policy and procedure as applicable  Citation of relevant delegations of authority

13. Written case system provides:  Clear paper trail of:  Work done on asset  Financial analysis  Collateral value  Alternatives  Compliance with policy and procedure  Applicable delegation of authority for decision being made  A certain discipline in the work process