bank under "cease and desist" order, currently maintains profit sharing plan. considering a leveraged esop or ksop.

[Lori H]

a bank has maintained a psp since 1987 and it was updated in 2003. current assets are right at 1 million, annual contributions are appx. 100,000 and some new HCE's will become eligible this year.

the bank is currently under a "cease and desist" order from the federal examiners and has been in work out mode for about one year. prior management has been released, new management is in place and progress has been made.

a few questions: 1) could the bank make use of the current profit sharing plan to purchase bank stock as a plan asset? would there be any limits to manage these purchases? 2) they are also exploring as an option a leveraged ESOP or KSOP, would the "cease and desist" negatively impact the options under this type of plan, especially since it would be leveraged?

basically the bank officers and the board want to establish a mechanism to issue and control voting rights for the controlling interest shares of the bank. the current number of shares outstanding is 200,000; 16,250 shares are currently owned by the board members; the current share value is $65; book value is $62.25; number of shares needed to maintain control of the bank by the board via the plan is 51% of the 200,000.

thanks.

[Kirk Maldonado]

The bank needs to hire a competent ESOP attorney. The client shold not attempt to resolve issues of this magnitude on this forum.

[Demosthenes]

I'd have to agree completely with the previous post but just as a side note;

You have a bank with State or OCC regulators crawling all over them whose entrenched board now wants to use the employee's retirement benefits to cement their control of the bank?

Look under "train wreck" in the dictionary....

[david rigby]

And some might think of the word "fraud".

[Lori H]

thank you. i have refered this case to a esop specialist.

[BeckyMiller]

I am so glad!