EXHIBIT 10.1
 
UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
 
STATE OF SOUTH CAROLINA
BOARD OF FINANCIAL INSTITUTIONS
COLUMBIA, SOUTH CAROLINA
 
 
Written Agreement by and among
 
COMMUNITY CAPITAL CORPORATION
Greenwood, South Carolina
 
CAPITALBANK
Greenwood, South Carolina
 
FEDERAL RESERVE BANK OF RICHMOND
Richmond, Virginia
 
and
 
STATE OF SOUTH CAROLINA BOARD OF FINANCIAL INSTITUTIONS
Columbia, South Carolina
 
 
Docket Nos. 10-075 -WA/RB-HC
10-075 -WA/RB-SM

 
WHEREAS, in recognition of their common goal to maintain the financial soundness
of Community Capital Corporation, Greenwood, South Carolina (“Community
Capital”), a registered bank holding company, and its subsidiary, CapitalBank,
Greenwood, South Carolina (the “Bank”), a state-chartered bank that is a member
of the Federal Reserve System, Community Capital, the Bank, the Federal Reserve
Bank of Richmond (the “Reserve Bank”), and the Commissioner, on behalf of the
State of South Carolina Board of Financial Institutions (the “Commissioner”),
have mutually agreed to enter into this Written Agreement (the “Agreement”); and
 
 
 

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WHEREAS, on July 28, 2010, the boards of directors of Community Capital and the
Bank, at duly constituted meetings, adopted resolutions authorizing and
directing Patricia C. Hartung to enter into this Agreement on behalf of
Community Capital and the Bank, and consenting to compliance with each and every
applicable provision of this Agreement by Community Capital and the Bank, and
their institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of
the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C. §§
1813(u) and 1818(b)(3)).
 
NOW, THEREFORE, Community Capital, Bank, Reserve Bank, and the Commissioner
agree as follows:
 
Source of Strength
 
1.     The board of directors of Community Capital shall take appropriate steps
to fully utilize Community Capital’s financial and managerial resources,
pursuant to section 225.4 (a) of Regulation Y of the Board of Governors of the
Federal Reserve System (the “Board of Governors”) (12 C.F.R. § 225.4(a)), to
serve as a source of strength to the Bank, including, but not limited to, taking
steps to ensure that the Bank complies with this Agreement.
 
Credit Risk Management
 
2.     Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank and the Commissioner an acceptable, enhanced written plan to strengthen
credit risk management practices. The plan shall, at a minimum, address,
consider, and include:
 
(a) Periodic review and revision of risk exposure limits to address changes in
market conditions;
(b) strategies to minimize credit losses and reduce the level of problem assets;
 
 
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(c) enhancement of risk rating of loans to ensure changes to individual ratings
are adequately supported; and
(d) reducing, and the means by which the Bank will continue to reduce, the level
of commercial real estate concentrations, and timeframes for achieving the
reduced levels.
 
Lending and Credit Administration
 
3.     Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank and the Commissioner an acceptable enhanced written lending and credit
administration program that shall, at a minimum, address, consider, and include:
 
(a) Underwriting standards that require documented analyses of a borrower’s and
guarantor’s cash flow, including any contingent liabilities;
(b) enhancement of policies and procedures relating to the acquisition,
management, and disposition of other real estate owned (“OREO”), including
Bank-financed disposition; and
(c) the appropriate accounting treatment for costs incurred in connection with
the maintenance of collateral.
 
Asset Improvement
 
4.     The Bank shall not, directly or indirectly, extend, renew, or restructure
any credit to or for the benefit of any borrower, including any related interest
of the borrower, whose loans or other extensions of credit are criticized in the
report of examination of the Bank conducted jointly by the Reserve Bank and the
Commissioner that commenced on October 5, 2009 (the “Report of Examination”) or
in any subsequent report of examination, without the prior approval of a
majority of the full board of directors or a designated committee thereof. The
board of directors or its committee shall document in writing the reasons for
the extension of credit, renewal, or restructuring, specifically certifying
that: (i) the Bank’s risk management policies and practices for loan workout
activity are acceptable; (ii) the extension of credit is necessary to improve
and protect the Bank’s interest in the ultimate collection of the credit already
granted and maximize its potential for collection; (iii) the extension of credit
reflects prudent underwriting based on reasonable repayment terms and is
adequately secured; and all necessary loan documentation has been properly and
accurately prepared and filed; (iv) the Bank has performed a comprehensive
credit analysis indicating that the borrower has the willingness and ability to
repay the debt as supported by an adequate workout plan, as necessary; and (v)
the board of directors or its designated committee reasonably believes that the
extension of credit will not impair the Bank’s interest in obtaining repayment
of the already outstanding credit and that the extension of credit or renewal
will be repaid according to its terms. The written certification shall be made a
part of the minutes of the meetings of the board of directors or its committee,
as appropriate, and a copy of the signed certification, together with the credit
analysis and related information that was used in the determination, shall be
retained by the Bank in the borrower’s credit file for subsequent supervisory
review. For purposes of this Agreement, the term “related interest” is defined
as set forth in section 215.2(n) of Regulation O of the Board of Governors (12
C.F.R. § 215.2(n)).
 
 
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5.     (a) Within 60 days of this Agreement, the Bank shall submit to the
Reserve Bank and the Commissioner an acceptable written plan designed to improve
the Bank’s position through repayment, amortization, liquidation, additional
collateral, or other means on OREO, and each loan, relationship, or other asset
in excess of $750,000 that are past due as to principal or interest more than 90
days as of the date of this Agreement, are on the Bank’s problem loan list, or
were adversely classified in the Report of Examination.
 
(b) Within 30 days of the date that any additional OREO or loan, relationship,
or other asset in excess of $750,000 becomes past due as to principal or
interest for more than 90 days, is on the Bank’s problem loan list, or is
adversely classified in any subsequent report of examination of the Bank, the
Bank shall submit to the Reserve Bank and the Commissioner an acceptable written
plan to improve the Bank’s position on such loan, relationship, or asset.
 
(c) Within 30 days after the end of each calendar quarter thereafter, the Bank
shall submit a written progress report to the Reserve Bank and the Commissioner
to update each asset improvement plan, which shall include, at a minimum, the
carrying value of the loan or other asset and changes in the nature and value of
supporting collateral, along with a copy of the Bank’s current problem loan
list, a list of all loan renewals and extensions without full collection of
interest in the last quarter, and past due/non-accrual report.
 
Allowance for Loan and Lease Losses
 
6.     (a) Within 10 days of this Agreement, the Bank shall eliminate from its
books, by charge-off or collection, all assets or portions of assets classified
“loss” in the Report of Examination that have not been previously collected in
full or charged off. Thereafter the Bank shall, within 30 days from the receipt
of any federal or state report of examination, charge off all assets classified
“loss” unless otherwise approved in writing by the Reserve Bank and the
Commissioner.
 
(b) Within 60 days of this Agreement, the Bank shall review and revise its
allowance for loan and lease losses (“ALLL”) methodology consistent with
relevant supervisory guidance, including the Interagency Policy Statements on
the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and
December 13, 2006 (SR 06-17), and the findings and recommendations regarding the
ALLL set forth in the Report of Examination, and submit a description of the
revised methodology to the Reserve Bank and the Commissioner. The revised ALLL
methodology shall be designed to maintain an adequate ALLL and shall address,
consider, and include, at a minimum, the reliability of the Bank’s loan grading
system, the volume of criticized loans, concentrations of credit, the current
level of past due and nonperforming loans, past loan loss experience, evaluation
of probable losses in the Bank’s loan portfolio, including adversely classified
loans, and the impact of market conditions on loan and collateral valuations and
collectability.
 
 
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(c)  Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank
and the Commissioner an acceptable written program for the maintenance of an
adequate ALLL. The program shall include policies and procedures to ensure
adherence to the Bank’s revised ALLL methodology and provide for periodic
reviews and updates to the ALLL methodology, as appropriate. The program shall
also provide for a review of the ALLL by the board of directors on at least a
quarterly calendar basis. Any deficiency found in the ALLL shall be remedied in
the quarter it is discovered, prior to the filing of the Consolidated Reports of
Condition and Income, by additional provisions. The board of directors shall
maintain written documentation of its review, including the factors considered
and conclusions reached by the Bank in determining the adequacy of the ALLL.
During the term of this Agreement, the Bank shall submit to the Reserve Bank and
the Commissioner within 30 days after the end of each calendar quarter, a
written report regarding the board of directors’ quarterly review of the ALLL
and a description of any changes to the methodology used in determining the
amount of the ALLL for that quarter.
 
 
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Capital Plan
 
7. Within 60 days of this Agreement, Community Capital and the Bank shall submit
to the Reserve Bank and the Commissioner an acceptable joint written plan to
maintain sufficient capital at Community Capital on a consolidated basis, and at
the Bank as a separate legal entity on a stand-alone basis. The plan shall, at a
minimum, address, consider, and include:
 
(a) Community Capital’s current and future capital requirements, including
compliance with the Capital Adequacy Guidelines for Bank Holding Companies:
Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation
Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);
 
(b) the Bank’s current and future capital requirements, including compliance
with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure
and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of
Governors (12 C.F.R. Part 208, App. A and B);
 
(c) the adequacy of the Bank’s capital, taking into account the volume of
classified assets, concentrations of credit, the adequacy of the ALLL, current
and projected asset growth, projected retained earnings, and anticipated and
contingency funding needs;
 
(d) the source and timing of additional funds to fulfill Community Capital’s and
the Bank’s future capital requirements; and
 
(e) the requirements of section 225.4(a) of Regulation Y of the Board of
Governors (12 C.F.R. § 225.4(a)) that Community Capital serve as a source of
strength to the Bank.
 
8. Community Capital and the Bank shall notify the Reserve Bank and the
Commissioner, in writing, no more than 30 days after the end of any calendar
quarter in which any of Community Capital’s consolidated capital ratios, or the
Bank’s capital ratios (total risk-based, Tier 1 risk-based, or leverage), fall
below the approved capital plan’s minimum ratios. Together with the
notification, Community Capital and the Bank shall submit an acceptable written
plan that details the steps Community Capital or the Bank, as appropriate, will
take to increase Community Capital’s or the Bank’s capital ratios to or above
the approved capital plan’s minimums.
 
 
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Liquidity/Contingency Funding
 
9.  Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank
and the Commissioner an acceptable revised written liquidity policy that
includes the establishment of an appropriate minimum liquidity ratio.
 
10. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank
and the Commissioner an acceptable revised written contingency funding plan
that, at a minimum, includes adverse scenario planning and identifies and
quantifies available sources of liquidity for each scenario.
 
Earnings Plan and Budget
 
11. (a) Within 90 days of this Agreement, the Bank shall submit to the Reserve
Bank and the Commissioner a written business plan for the remainder of 2010 to
improve the Bank’s earnings and overall condition. The plan, at a minimum, shall
provide for or describe:
 
(i) a realistic and comprehensive budget for the remainder of calendar year
2010, including income statement and balance sheet projections; and
 
(ii) a description of the operating assumptions that form the basis for, and
adequately support, major projected income, expense, and balance sheet
components.
 
 
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(b) During the term of this Agreement, a business plan and budget for each
calendar year subsequent to 2010 shall be submitted to the Reserve Bank and the
Commissioner at least 30 days prior to the beginning of that calendar year.
 
Dividends and Distributions
 
12.   (a) Community Capital and the Bank shall not declare or pay any dividends
without the prior written approval of the Reserve Bank, the Director of the
Division of Banking Supervision and Regulation of the Board of Governors (the
“Director”), and, as to the Bank, the Commissioner.
 
(b) Community Capital and its nonbank subsidiary shall not directly or
indirectly take any other form of payment representing a reduction in capital
from the Bank without the prior written approval of the Reserve Bank.
 
(c) Community Capital and its nonbank subsidiary shall not make any
distributions of interest, principal, or other sums on subordinated debentures
or trust preferred securities without the prior written approval of the Reserve
Bank and the Director.
 
(d) All requests for prior written approval shall be received at least 30 days
prior to the proposed dividend declaration date, proposed distribution on
subordinated debentures, and required notice of deferral on trust preferred
securities. All requests shall contain, at a minimum, current and projected
information, as appropriate, on Community Capital’s capital, earnings, and cash
flow; the Bank’s capital, asset quality, earnings, and ALLL needs; and
identification of the sources of funds for the proposed payment or distribution.
For requests to declare or pay dividends, Community Capital and the Bank, as
appropriate, must also demonstrate that the requested declaration or payment of
dividends is consistent with the Board of Governors’ Policy Statement on the
Payment of Cash Dividends by State Member Banks and Bank Holding Companies,
dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page
4-323).
 
 
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Debt and Stock Redemption
 
13.  (a) Community Capital and its nonbank subsidiary shall not, directly or
indirectly, incur, increase, or guarantee any debt without the prior written
approval of the Reserve Bank. All requests for prior written approval shall
contain, but not be limited to, a statement regarding the purpose of the debt,
the terms of the debt, and the planned source(s) for debt repayment, and an
analysis of the cash flow resources available to meet such debt repayment.
 
(b) Community Capital shall not, directly or indirectly, purchase or redeem any
shares of its stock without the prior written approval of the Reserve Bank.
 
Compliance with Laws and Regulations
 
14. In appointing any new director or senior executive officer, or changing the
responsibilities of any senior executive officer so that the officer would
assume a different senior executive officer position, Community Capital and the
Bank shall comply with the notice provisions of section 32 of the FDI Act (12
U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors. Such
notice shall also be provided to the Commissioner.
 
15. Community Capital and the Bank shall comply with the restrictions on
indemnification and severance payments of section 18(k) of the FDI Act (12
U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s
regulations (12 C.F.R. Part 359).
 
Compliance with the Agreement
 
16.  (a) Within 10 days of this Agreement, Community Capital’s and the Bank’s
boards of directors shall appoint a joint committee (the “Compliance Committee”)
to monitor and coordinate Community Capital’s and the Bank’s compliance with the
provisions of this Agreement. The Compliance Committee shall consist of a
majority of outside directors who are not executive officers of Community
Capital and the Bank as defined in sections 215.2(e)(1) and 215.2(m)(1) of
Regulation O of the Board of Governors (12 C.F.R. §§ 215.2(e)(1) and
215.2(m)(1)). The Compliance Committee shall meet at least monthly, keep
detailed minutes of each meeting, and report its findings to Community Capital’s
and the Bank’s boards of directors.
 
 
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(b) Within 30 days after the end of each calendar quarter following the date of
this Agreement, Community Capital and the Bank shall submit to the Reserve Bank
and the Commissioner joint written progress reports detailing the form and
manner of all actions taken to secure compliance with this Agreement and the
results thereof.
 
Approval and Implementation of Plans, Programs, and Policy
 
17.  (a) The Bank and, as applicable, Community Capital shall submit written
plans, programs, and a policy that are acceptable to the Reserve Bank and the
Commissioner within the applicable time periods set forth in paragraphs 2, 3,
5(a), 5(b), 6(c), 7, 8, 9, and 10 of this Agreement.
 
(b) Within 10 days of approval by the Reserve Bank and the Commissioner, the
Bank and, as applicable, Community Capital, shall adopt the approved plans,
programs, and policy. Upon adoption, the Bank and, as applicable, Community
Capital shall promptly implement the approved plans, programs, and policy, and
thereafter fully comply with them.
 
(c) During the term of this Agreement, the approved plans, program, and policy
shall not be amended or rescinded without the prior written approval of the
Reserve Bank and the Commissioner.
 
 
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Communications
 
18.  All communications regarding this Agreement shall be sent to:
 

 
(a)
A. Linwood Gill, III
Vice President
Federal Reserve Bank of Richmond
P.O. Box 27622
Richmond, Virginia 23261-7622

 

 
(b)
Louie A. Jacobs
Commissioner of Banking
State of South Carolina
Board of Financial Institutions
1205 Pendleton Street, Suite 305
Columbia, South Carolina 29201

 

 
(c)
William G. Stevens
President and Chief Executive Officer
Community Capital Corporation CapitalBank
109 Montague Avenue
Greenwood, South Carolina 29648

 
Miscellaneous
 
 19. Notwithstanding any provision of this Agreement, the Reserve Bank and the
Commissioner may, in their sole discretion, grant written extensions of time to
Community Capital and the Bank to comply with any provision of this Agreement.
 
20.The provisions of this Agreement shall be binding upon Community Capital and
the Bank and their institution-affiliated parties, in their capacities as such,
and their successors and assigns.
 
21.Each provision of this Agreement shall remain effective and enforceable until
stayed, modified, terminated, or suspended in writing by the Reserve Bank and
the Commissioner.
 
 
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22. The provisions of this Agreement shall not bar, estop, or otherwise prevent
the Board of Governors, the Reserve Bank, the Commissioner or any other federal
or state agency from taking any other action affecting Community Capital and the
Bank or any of their current or former institution-affiliated parties and their
successors and assigns.
 
23. Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement
is enforceable by the Board of Governors under section 8 of the FDI Act (12
U.S.C. § 1818).
 
 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the 28th of July, 2010.
 

OMMUNITY CAPITAL CORPORATION   FEDERAL RESERVE BANK OF RICHMOND              
By:  /s/ Patricia C. Hartung   By:
/s/ A. Linwood Gill, III
    Patricia C. Hartung    
A. Linwood Gill, III
    Chairman     Vice President  

 

CAPITALBANK   STATE OF SOUTH CAROLINA BOARD OF FINANCIAL INSTITUTIONS          
    By:  /s/ Patricia C. Hartung   By:
/s/ Louie A. Jacobs
    Patricia C. Hartung    
Louie A. Jacobs
    Chairman     Commissioner of Banking  

 
 
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