Order No. 2003-026

In The Matter Of:

Jerry M. Givens
Abernathy, Texas

Before The Banking Commissioner of Texas
Austin, Travis County, Texas

Order of Prohibition from Further Participation

On this day, the matter of Jerry M. Givens, Abernathy, Texas, was submitted to me, Randall S. James, Banking Commissioner of State of Texas (“banking commissioner”), for consideration and action.

I. Findings of Fact

  1. Jerry Givens (“Givens”) was President, Chairman of the Board, and Director of First State Bank, Abernathy, Texas (the “Bank”) from at least 1996, until his resignation on June 28, 2002.
  2. On July 13, 2000, Givens made loan #123991 in the amount of $20,000 to his son Michael Givens for the stated purpose of the “Payment on CRP and Plowing.”
  3. Givens deposited the proceeds from loan #123991 into account #079650, owned by Ricky Nutt (“Mr. Nutt”). Mr. Nutt used these funds to start a trucking business and for working capital for the business.
  4. The loan described in Finding of Fact 2 was renewed August 16, 2001, into loan #125841 in the amount of $20,000 for the stated purpose of “Purchase of Livestock.”
  5. Mr. Nutt’s trucking business failed before the one-year maturity of loan #125841.
  6. Actual debts owed by Ricky Nutt to the Bank had been adversely classified by examining personnel since 1995 and were charged off in 2001.
  7. On October 10, 2000, Givens made loan #124346 in the amount of $20,000 to his son Michael Givens for the stated purpose of “Purchase of Livestock and Feed.”
  8. Givens deposited the $20,000 proceeds from loan #124346 into account #76406, Michael Given’s account for his proprietorship, MTG Enterprises.
  9. Michael Givens, Tammy Givens and Carolyn Westmoreland were the authorized signatories for account #76406.
  10. On October 10, 2000, Michael Givens wrote a $20,000 check to Givens and Givens Farms, a partnership owned by Givens and his wife Pamela Givens, on account #76406.
  11. Loan #124346 was renewed November 5, 2001 into loan #126107 in the amount of $30,000 with a one year maturity for the stated purpose of “Purchase of Livestock and Feed.”
  12. On January 8, 2002, Givens made loan #126360 in the amount of $30,000 to his son Michael Givens for the stated purpose of “Purchase of Livestock and Feed.”
  13. The proceeds from loan #126360 were deposited into MTG Enterprises account #76406.
  14. Simultaneously on January 10, 2002, Givens transferred $30,000 from MGT Enterprises account #76406 to account #36528 in the name of Givens and Givens Farms
  15. On March 8, 2002, Givens paid loans #125841, #126107 and #126360, made to his son Michael Givens with check #8884 in the amount of $72,276.70 drawn on the Givens and Givens Farm account #36528.
  16. The Bank’s December 31, 2001 Report of Income initially reported a net income of $61,000.
  17. On January 2, 2002, the Bank charged off the following loans: $36,767.27 to Aaron Stark, $71,819.97 to Ricky Nutt, $95,400.30 to Cody Wages, and $79,660.81 to Troy Thomas.
  18. The loans described in Finding of Fact 17 were known to Givens to be losses in 2001 and these losses should have been charged off in 2001.
  19. Givens knowingly failed to charge off problem loans of approximately $284,000 in 2001 in order to show a positive net income of $61,000 in 2001, when the net loss for that year should have actually been $377,000 with the recognition of the loan losses and accrued interest.
  20. Givens knowingly made false entries in the books, records, and reports of the Bank and in the December 31, 2001 Report of Income. By deferring these losses the bank’s records initially reflected a net profit of $61,000, allowing Givens to receive a bonus and pay dividends
  21. Based upon the inflated Report of Income, Givens received a $17,200 bonus, and he and his family members were the recipients of over $30,000 in Bank dividends.
  22. Givens knowingly withheld or misled the Bank’s Board of Directors with regard to the purpose and/or beneficiary of loans number #125841, #126107 and #126360 and the true financial condition of the Bank.

II. Conclusions

  1. Givens committed offenses under Texas Finance Code §33.108 by knowingly making false entries in the books, records, and reports of the Bank and the December 31, 2001 Report of Income, including:
    1. making nominee loans in the name of his son Michael Givens and subsequently transferring loan proceeds to his accounts.
    2. intentionally deferring loan losses to inflate the income of the bank as reported in the December 31, 2001 Report of Income.
  2. Givens intentionally committed and participated in the commission of violations of Texas Finance Code, Title 3, Subtitle A and Section 215.4(b) of the Federal Reserve Act.
  3. Givens conducted the business of the Bank in an unsafe and unsound manner.
  4. The Bank has suffered or will probably suffer financial loss or other damage as a result of the nominee loans and falsely reporting income in the Bank’s December 31, 2001 FFIEC Report of Condition and Income.
  5. Givens received financial gain and other benefits from nominee loans on which he received the proceeds, but was not the obligor.
  6. Givens received financial gain in the form of bonuses and dividends based on the falsely reported income in the Bank’s December 31, 2001 Report of Income.
  7. The actions of making the nominee loans and falsely reporting income in the Bank’s December 31, 2001 Report of Income involved dishonesty on the part of Givens.
  8. Givens’ actions in making the nominee loans and falsely reporting income in the Bank’s Report of Income demonstrate willful and continuing disregard for the safety or soundness of the Bank.
  9. The Banking Commissioner has grounds under Section 35.003 to prohibit Givens from further participation in the affairs of a state bank, as defined by Texas Finance Code §31.002(50).

III. Order

It is ORDERED THAT Jerry M. Givens may not:

  1. serve as a director, officer, or employee of a state bank, trust company, or other entity chartered or licensed by the banking commissioner under the laws of this state (hereinafter collectively referred to as “entity”), including an interstate branch, trust office, or representative office in this state of an out-of-state state bank, trust company, or foreign bank;
  2. directly or indirectly participate in any manner in the management of an entity;
  3. directly or indirectly vote for a director of an entity;
  4. solicit, procure, transfer, attempt to transfer, vote, or attempt to vote a proxy, consent, or authorization with respect to voting rights in an entity; or
  5. serve or act as an entity-affiliated party.

IV. Effective Date

This Order will become effective 21 days after the date that the Order is mailed unless a hearing is requested in writing before the effective date. After taking effect, the Order is final, perpetual, and may not be appealed.

V. Service

This Order of Prohibition from Further Participation is served on Jerry M. Givens by certified mail, return receipt requested, and by first-class mail, sent on August 7th, 2003, to 101 Avenue N., Abernathy, Texas 79311.

Signed on this 5th day of August, 2003.

/s/ Randall S. James                                
Randall S. James
Banking Commissioner of the State of Texas