Risk Management Manual of Examination Policies - FDIC

Fiduciary Activities Assessment (Continued) 99999
EARNINGS – 0
This small department is operating primarily as a service to current customers rather than as a profit center. Due
to this aspect of the trust department’s operations, and the size of assets under management, the earnings
component is not rated.
COMPLIANCE – 2
Account administration is generally in compliance with originating documents. Potential conflicts of interest
exist from the trust department using own-bank deposits, as well as from holding stock of the parent holding
company and an affiliate in one trust account. Trust Officer Hancock surveys local deposit rates to ensure
competitive rates are being paid on deposits, but does not maintain documentation of her surveys.
Trust Officer Hancock stated she would maintain documentation of comparable rates in the future.
Regarding the trust account with holding company and affiliate stock, the party in interest of that account is
informed of the trust officer’s proxy vote and attends annual stockholder meetings; however, these facts are not
documented in the trust files.
Trust Officer Hancock indicated that since the party in interest to that account is a member of the Lincoln
family, and stockholder meeting minutes of the holding company and the affiliate could be produced should
the need arise, the risk is minimal.
ASSET MANAGEMENT – 2
Asset management practices are generally satisfactory. All account transactions, including discretionary
disbursements, are included in monthly Board reports, and the Board reviews all accounts annually. Management
should document in the annual account reviews an assessment of the needs of each applicable account and/or
beneficiary, and whether the account’s investment mix is meeting those needs. In addition, three trust accounts
use fixed income and/or equity mutual funds. Qualified staff should annually review each mutual fund’s
investment mix, performance relative to competing mutual funds, and any other related criteria. These mutual
fund reviews should also consider the ongoing needs and objectives of the respective trust accounts.
Trust Officer Hancock committed to documenting annual needs assessments for each trust account, as well as
annual mutual fund reviews.
MEETING WITH MANAGEMENT
A meeting was held on September 8, 2004, with President Lincoln and Trust Officer Hancock to discuss
examination findings in detail. An overview of these findings was also presented to the bank’s Board of
Directors at its meeting on September 18, 2004.
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