EXHIBIT 10.1 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

AGREEMENT BY AND BETWEEN

Franklin Community Bank, N.A.

Rocky Mount, VA

and

The Comptroller of the Currency

Franklin Community Bank, N.A., Rocky Mount, Virginia (“Bank”) and the
Comptroller of the Currency of the United States of America (“Comptroller”) wish
to protect the interests of the depositors, other customers, and shareholders of
the Bank, and, toward that end, wish the Bank to operate safely and soundly and
in accordance with all applicable laws, rules and regulations.

The Comptroller, through his National Bank Examiner, has examined the Bank and
his findings are contained in the Report of Examination (“ROE”) for the
examination commenced on November 3, 2008.

In consideration of the above premises, it is agreed, between the Bank, by and
through its duly elected and acting Board of Directors (“Board”), and the
Comptroller, through his authorized representative, that the Bank shall operate
at all times in compliance with the articles of this Agreement.

ARTICLE I

JURISDICTION

(1) This Agreement shall be construed to be a “written agreement entered into
with the agency” within the meaning of 12 U.S.C. § 1818(b)(1). This Agreement
shall be construed to be a “written agreement between such depository
institution and such agency” within the meaning of 12 U.S.C. § 181 8(e)(1) and
12 U.S.C. § 1818(i)(2).

(2) This Agreement shall be construed to be a “formal written agreement” within
the meaning of 12 C.F.R. § 5.51(c)(6)(ii). See 12 U.S.C. § 183 1i. This
Agreement shall be construed to be a “written agreement” within the meaning of
12 U.S.C. § 1818(u)(1)(A).

 

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(3) All reports or plans which the Bank or Board has agreed to submit to the
Assistant Deputy Comptroller pursuant to this Agreement shall be forwarded to:

Alan T. Young

Assistant Deputy Comptroller

Virginias Field Office

3800 Electric Road, Suite 204

Roanoke, VA 24018-0503

ARTICLE II

COMPLIANCE COMMITTEE

(1) Within fifteen (15) days of the date of this Agreement, the Board shall
appoint a Compliance Committee of at least three (3) directors, of which none
shall be an employee or controlling shareholder of the Bank or any of its
affiliates (as the term “affiliate” is defined in 12 U.S.C. § 371c(b)(1)), or a
family member of any such person. Upon appointment, the names of the members of
the Compliance Committee and, in the event of a change of the membership, the
name of any new member shall be submitted in writing to the Assistant Deputy
Comptroller. The Compliance Committee shall be responsible for monitoring and
coordinating the Bank’s adherence to the provisions of this Agreement.

(2) The Compliance Committee shall meet at least monthly.

(3) Within thirty (30) days of the date of this Agreement and quarterly
thereafter, the Compliance Committee shall submit a written progress report to
the Board setting forth in detail:

 

  (a) a description of the action needed to achieve full compliance with each
Article of this Agreement;

 

  (b) actions taken to comply with each Article of this Agreement; and

 

  (c) the results and status of those actions.

 

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(4) The Board shall forward a copy of the Compliance Committee’s report, with
any additional comments by the Board, to the Assistant Deputy Comptroller within
ten (10) days of receiving such report.

ARTICLE III

CAPITAL PLAN

(1) Within ninety (90) days of the date of this Agreement, the Board shall
develop, implement, and thereafter ensure Bank adherence to a three year capital
program. The program shall include:

 

  (a) projections for growth and capital requirements based upon a detailed
analysis of the Bank’s assets, liabilities, earnings, fixed assets, and
off-balance sheet activities;

 

  (b) projections of the sources and timing of additional capital to meet the
Bank’s current and future needs;

 

  (c) the primary source(s) from which the Bank will strengthen its capital
structure to meet the Bank’s needs;

 

  (d) contingency plans that identify alternative methods should the primary
source(s) under (c) above not be available; and

 

  (e) a dividend policy that permits the declaration of a dividend only:

 

  (i) when the Bank is in compliance with its approved capital program; and

 

  (ii) when the Bank is in compliance with 12 U.S.C. §§ 56 and 60.

(2) Upon adoption, a copy of the plan shall be forwarded to the Assistant Deputy
Comptroller for review and prior written determination of no supervisory
objection. Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the capital
plan.

 

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ARTICLE IV

PROBLEM LOAN IDENTIFICATION

(1) Within sixty (60) days of the date of this Agreement, the Board shall
establish an effective problem loan identification program that provides for
early identification of emerging and potential problem credits, along with a
formal plan to proactively manage these assets. This includes, but is not
limited to:

 

  (a) ensuring early problem loan identification and risk rating by loan
officers and establishing loan officer accountability for accurately risk rating
loans and recognizing nonaccrual loans under their respective supervision in a
timely manner;

 

  (b) ensuring timely recognition of accrual status such that non-accrual assets
are accurately reflected prior to filing of the Consolidated Reports of
Condition and Income;

 

  (c) developing formal loan work out plans for problem credits that include the
current status of the loan, current financial condition of the borrower, accrual
status, source and date of the collateral valuation, and specific action plans
with target dates;

 

  (d) establishing an independent reporting line to the Board or its committee
for the internal loan review function; and

 

  (e) ensuring internal loan review provides quarterly reports to the Board, or
committee thereof, that shall include, at a minimum, conclusions regarding:

 

  (i) the overall quality of the loan portfolio;

 

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  (ii) the identification, type, rating, and amount of problem loans;

 

  (iii) the identification and amount of delinquent loans;

 

  (iv) credit and collateral documentation exceptions;

 

  (v) the identification and status of credit-related violations of law, rule or
regulation;

 

  (vi) the identity of the loan officer who originated each loan reported in
accordance with subparagraphs (ii) through (v) of this Article;

 

  (vii) concentrations of credit; and

 

  (viii) loans and leases to executive officers, directors, principal
shareholders (and their related interests) of the Bank.

(2) The Board shall ensure that the Bank has processes, personnel, and control
systems to ensure implementation of and adherence to the program developed
pursuant to this Article.

(3) Upon adoption, a copy of the program shall be forwarded to the Assistant
Deputy Comptroller for review and prior written determination of no supervisory
objection. Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the
program.

ARTICLE V

ALLOWANCE FOR LOAN AND LEASE LOSSES

(1) The Board shall review the adequacy of the Bank’s Allowance for Loan and
Lease Losses (“Allowance”) and shall enhance the Bank’s program for the
maintenance of an adequate Allowance. This review and enhanced program shall be
designed in light of the comments on maintaining a proper Allowance found in the
“Allowance for Loan and Lease Losses” booklet of the Comptroller’s Handbook, and
shall include, but not be limited to, the following factors:

 

  (a) results of lending officer-initiated downgrades;

 

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  (b) findings from the Bank’s internal loan review;

 

  (c) results of any applicable external loan review;

 

  (d) adjusting historical loss ratios, through the use of applicable
qualitative factors, for classified and special mention loans;

 

  (e) trends of delinquent and nonaccrual loans;

 

  (f) concentrations of credit in the Bank; and

 

  (g) present and prospective economic conditions.

(2) The program shall provide for a review of the Allowance by the Board at
least once each calendar quarter. Any deficiency in the Allowance shall be
remedied in the quarter it is discovered, prior to the filing of the
Consolidated Reports of Condition and Income, by additional provisions from
earnings. Written documentation shall be maintained indicating the factors
considered and conclusions reached by the Board in determining the adequacy of
the Allowance.

(3) The Board shall ensure that the Bank has processes, personnel, and control
systems to ensure implementation of and adherence to the program developed
pursuant to this Article.

(4) Upon adoption, a copy of the program shall be forwarded to the Assistant
Deputy Comptroller for review and prior written determination of no supervisory
objection. Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the
program.

 

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ARTICLE VI

CONCENTRATIONS OF CREDIT

(1) Within thirty (30) days of the date of this Agreement, the Board shall
adopt, implement, and thereafter ensure Bank adherence to sublimits1 for
concentrations2 in acquisition and development loans, speculative lot loans, and
speculative single-family housing construction loans.

(2) Management should report the level, trend, and performance of these
concentrations to the Board quarterly.

(3) The Board should determine if actions are needed to reduce the level of
concentrations in the portfolios identified in section (1) of this Article.

 

(1)

Sublimits should be established as a percent of Tier I Risk-based Capital plus
the Allowance for Loan and Lease Losses.

(2)

For purposes of this Article, a concentration of credit is as defined in the
“Loan Portfolio Management” booklet of the Comptroller’s Handbook.

(4) The Board shall forward a copy of any analysis performed on existing or
potential concentrations of credit to the Assistant Deputy Comptroller
quarterly.

ARTICLE VII

UNDERWRITING

(1) Within sixty (60) days of the date of this Agreement, the Board shall
develop, implement, and thereafter ensure Bank adherence to a written
underwriting program that includes policies and procedures that provides for
reasonable amortization of speculative lot and speculative single-family housing
construction loans. The program shall also include:

 

  (a) procedures to ensure the SLTV report is accurately maintained on an
ongoing basis;

 

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  (b) procedures to ensure financial analyses are documented, performed at
origination and on an ongoing basis, include a global cash flow analysis of the
borrower/project, and include a global cash flow analysis of any guarantors;

(2) Within sixty (60) days, the Board shall perform a review of the loan
portfolio and ensure the Supervisory Loan-to-Value (SLTV) report accurately
reflects updated appraisal values.

(3) The Board shall ensure that the Bank continues to employ a capable financial
analyst to analyze borrower financial statements.

(4) The Board shall ensure that the Bank has processes, personnel, and control
systems to ensure implementation of and adherence to the program developed
pursuant to this Article.

(5) Upon adoption, a copy of the program shall be forwarded to the Assistant
Deputy Comptroller for review and prior written determination of no supervisory
objection. Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the
program.

ARTICLE VIII

CRITICIZED ASSETS

(1) Within sixty (60) days of the date of this Agreement, the Board shall adopt,
implement, and thereafter ensure Bank adherence to a written program designed to
eliminate the basis of criticism of assets criticized in the ROE, in any
subsequent Report of Examination, by any internal or external loan review, or in
any list provided to management by the National Bank Examiners during any
examination as “doubtful,” “substandard,” or “special mention.” This program
shall include, at a minimum:

 

  (a) an identification of the expected sources of repayment;

 

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  (b) the appraised value (including the date of the appraisal) of supporting
collateral and the position of the Bank’s lien on such collateral where
applicable;

 

  (c) an analysis of current and satisfactory credit information, including cash
flow analysis where loans are to be repaid from operations; and

 

  (d) the proposed action to eliminate the basis of criticism and the time frame
for its accomplishment.

(2) Upon adoption, a copy of the program for all criticized assets equal to or
exceeding one hundred thousand dollars ($100,000) shall be forwarded to the
Assistant Deputy Comptroller for review.

(3) The Board shall ensure that the Bank has processes, personnel, and control
systems to ensure implementation of and adherence to the program developed
pursuant to this Article.

ARTICLE IX

LIQUIDITY

(1) The Board shall take appropriate action to ensure adequate sources of
liquidity in relation to the Bank’s needs. The Board shall promptly increase the
liquidity of the Bank to a level that is sufficient to sustain the Bank’s
current operations and to withstand any anticipated or extraordinary demand
against its funding base. Such actions may include, but are not necessarily
limited to:

 

  (a) selling assets;

 

  (b) obtaining lines of credit from the Federal Reserve Bank;

 

  (c) obtaining lines of credit from correspondent banks;

 

  (d) recovering charged-off assets; and

 

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  (e) injecting additional equity capital.

(2) The Board shall review the Bank’s liquidity on a monthly basis. Such reviews
shall consider:

 

  (a) a maturity schedule of certificates of deposit, including large uninsured
deposits;

 

  (b) the volatility of demand deposits;

 

  (c) the amount and type of loan commitments and standby letters of credit;

 

  (d) an analysis of the continuing availability and volatility of present
funding sources;

 

  (e) an analysis of the impact of decreased cash flow from the Bank’s loan
portfolio resulting from delinquent and non-performing loans;

 

  (f) an analysis of the impact of decreased cash flow from the sale of loans or
loan participations; and

 

  (g) geographic disbursement of (to the extent the Bank is able to obtain
geographic disbursement information) and risk from brokered deposits.

ARTICLE X

ASSET/LIABILITY MANAGEMENT

(1) Within sixty (60) days of the date of this Agreement, the Board shall adopt,
implement, and thereafter ensure Bank adherence to a written, coordinated
asset/liability management strategy. This strategy should:

 

  (a) provide for adequate management reports that enable the Board and
management to monitor the Bank’s liquidity position and maintain liquidity at an
adequate level. These reports should:

 

  (i) include compliance with all policy limits;

 

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  (ii) be presented to the Board monthly;

 

  (iii) include a prospective, rolling 30, 60, 90, 120, 150 and 180 days

Sources and Uses Report that reflects anticipated shortfalls and probable
funding sources;

 

  (iv) include a rollover risk analysis;

 

  (v) identify and quantify funding concentrations and collateral positions; and

 

  (vi) identify key, early warning indicators that would trigger a more in-
depth analysis.

 

  (b) quantify growth plans;

 

  (c) identify and prioritize funding sources, including the use of brokered
deposits;

 

  (d) establish limits for the amount of retail deposits, asset growth, and
brokered deposits as a percent of total assets;

 

  (e) revise the Asset Liability Management policy to include:

 

  (i) guidance on monitoring and reporting the items in (a) through (d) of this
Article;

 

  (ii) limits for rollover risk and collateral positions; and

 

  (iii) minimum net liquid assets to liabilities ratios.

 

  (f) review the current loan to deposit (LTD) ratio and determine if an
adjustment is needed. Any adjustments to the LTD ratio should be included in the
Asset Liability Management policy;

 

  (g) ensure Asset Liability Committee (ALCO) participation and concurrence for
funding strategy changes; and

 

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  (h) revise the Contingency Funding Plan (CFP) to:

 

  (i) identify liquidity crises that are relevant to current balance sheet
composition and strategies;

 

  (ii) ensure crisis scenarios identify trigger points for actions that should
be taken in advance of reaching the crisis; and

 

  (iii) include severity and duration components and the related impact on funds
availability.

(2) Upon adoption, a copy of the written strategy shall be forwarded to the
Assistant Deputy Comptroller for review and prior written determination of no
supervisory objection. Upon receiving a determination of no supervisory
objection from the Assistant Deputy Comptroller, the Bank shall implement and
adhere to the strategy.

(3) Copies of the liquidity reports outlined in this Article shall be forwarded
to the Assistant Deputy Comptroller in the Bank’s quarterly report.

(4) The Board shall ensure that the Bank has processes, personnel, and control
systems to ensure implementation of and adherence to the policy developed
pursuant to this Article.

ARTICLE XI

BROKERED DEPOSITS

(1) The Bank may accept Brokered Deposits (as defined by 12 C.F.R. §
337.6(a)(2)) for deposit at the Bank, up to fifteen percent (15%) of total
deposits3, without obtaining a prior written determination of no supervisory
objection from the Assistant Deputy Comptroller.

(2) The limitation of paragraph (1) of this Article shall include the
acquisition of Brokered Deposits through any transfer, purchase, or sale of
assets, including Federal funds transactions administered through a deposit
broker.

  

 

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Total deposits as reported in the most recent Consolidated Report of Condition.

 

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(3) Any request to exceed the Brokered Deposit limitation in paragraph (1) of
this Article shall be submitted in writing to the Assistant Deputy Comptroller
for written determination of no supervisory objection and shall contain, at a
minimum, the following:

 

  (a) the dollar volume, maturities, and cost of the Brokered Deposits to be
acquired;

 

  (b) the proposed use of the Brokered Deposits, i.e., short-term liquidity or
restructuring of liabilities to reduce cost;

 

  (c) alternative funding sources available to the Bank; and

 

  (d) the reasons why the Bank believes that the acceptance of the Brokered
Deposits does not constitute an unsafe and unsound practice in its particular
circumstances.

(4) The Assistant Deputy Comptroller may require the submission of such
additional information as necessary to make an informed decision. Upon
consideration of the Bank’s application, the Assistant Deputy Comptroller will
determine whether the proposed acquisition of Brokered Deposits may be
accomplished in a safe and sound manner and may condition the Bank’s acquisition
as the Assistant Deputy Comptroller shall deem appropriate.

ARTICLE XII

CLOSING

(1) Although the Board has agreed to submit certain programs and reports to the
Assistant Deputy Comptroller for review, the Board has the ultimate
responsibility for proper and sound management of the Bank.

 

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(2) It is expressly and clearly understood that if, at any time, the Comptroller
deems it appropriate in fulfilling the responsibilities placed upon him/her by
the several laws of the United States of America to undertake any action
affecting the Bank, nothing in this Agreement shall in any way inhibit, estop,
bar, or otherwise prevent the Comptroller from so doing.

(3) Any time limitations imposed by this Agreement shall begin to run from the
effective date of this Agreement. Such time requirements may be extended in
writing by the Assistant Deputy Comptroller for good cause upon written
application by the Board.

(4) The provisions of this Agreement shall be effective upon execution by the
parties hereto and its provisions shall continue in full force and effect unless
or until such provisions are amended in writing by mutual consent of the parties
to the Agreement or excepted, waived, or terminated in writing by the
Comptroller.

(5) In each instance in this Agreement in which the Board is required to ensure
adherence to, and undertake to perform certain obligations of the Bank, it is
intended to mean that the Board shall:

 

  (a) authorize and adopt such actions on behalf of the Bank as may be necessary
for the Bank to perform its obligations and undertakings under the terms of this
Agreement;

 

  (b) require the timely reporting by Bank management of such actions directed
by the Board to be taken under the terms of this Agreement;

 

  (c) follow-up on any non-compliance with such actions in a timely and
appropriate manner; and

 

  (d) require corrective action be taken in a timely manner of any noncompliance
with such actions.

(6) This Agreement is intended to be, and shall be construed to be, a
supervisory

 

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“written agreement entered into with the agency” as contemplated by 12 U.S.C. §
181 8(b)(1), and expressly does not form, and may not be construed to form, a
contract binding on the Comptroller or the United States. Notwithstanding the
absence of mutuality of obligation, or of consideration, or of a contract, the
Comptroller may enforce any of the commitments or obligations herein undertaken
by the Bank under his supervisory powers, including 12 U.S.C. § 181 8(b)( 1),
and not as a matter of contract law. The Bank expressly acknowledges that
neither the Bank nor the Comptroller has any intention to enter into a contract.
The Bank also expressly acknowledges that no officer or employee of the Office
of the Comptroller of the Currency has statutory or other authority to bind the
United States, the U.S. Treasury Department, the Comptroller, or any other
federal bank regulatory agency or entity, or any officer or employee of any of
those entities to a contract affecting the Comptroller’s exercise of his
supervisory responsibilities. The terms of this Agreement, including this
paragraph, are not subject to amendment or modification by any extraneous
expression, prior agreements or prior arrangements between the parties, whether
oral or written.

IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller, has
hereunto set his hand on behalf of the Comptroller.

 

/s/ Alan T. Young

     Date: April 16, 2009 Alan T. Young      Assistant Deputy Comptroller     
Virginias Field Office     

 

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IN TESTIMONY WHEREOF, the undersigned, as the duly elected and acting Board of
Directors of the Bank, have hereunto set their hands on behalf of the Bank.

 

 

  

 

/s/ Al N. Angle    Date: April 16, 2009

 

  

 

/s/ Lee D. Arrington    Date: April 16, 2009

 

  

 

/s/ W. Kelvin Bowles    Date: April 16, 2009

 

  

 

/s/ Larry A. Heaton    Date: April 16, 2009

 

  

 

/s/ Wesley W. Naff III    Date: April 16, 2009

 

  

 

/s/ Danny M. Perdue    Date: April 16, 2009

 

  

 

/s/ Joel R. Shepherd    Date: April 16, 2009

 

  

 

/s/ Richard L. Shively    Date: April 16, 2009

 

  

 

/s/ Michael A. Turner    Date: April 16, 2009

 

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