Exhibit 10.1

FEDERAL DEPOSIT INSURANCE CORPORATION

WASHINGTON, D.C.

 

 

       In the Matter of   )      STIPULATION TO THE   )      ISSUANCE OF A
MOUNTAIN 1ST BANK & TRUST COMPANY   )      CONSENT ORDER HENDERSONVILLE, NORTH
CAROLINA   )        )      FDIC-09-679b (Insured State Nonmember Bank)   )     

 

  )     

Subject to the acceptance of this STIPULATION TO THE ISSUANCE OF A CONSENT ORDER
(“STIPULATION”) by the Federal Deposit Insurance Corporation (“FDIC”), it is
hereby stipulated and agreed by and between a representative of the Legal
Division of the FDIC, the North Carolina Commissioner of Banks (“Commissioner”)
and Mountain 1st Bank & Trust Company, Hendersonville, North Carolina (“Bank”),
through its board of directors, as follows.

1. The Bank has been advised of its right to receive a written Notice of Charges
and of Hearing (“Notice”) detailing the unsafe or unsound banking practices and
violations of law and/or regulations alleged to have been committed by the Bank
and of its right to a hearing on the alleged charges under section 8(b)(1) of
the Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b)(1), and the
FDIC’s Rules of Practice and Procedure (“Rules”), 12 C.F.R. Part 308, and has
waived those rights.

2. The Bank, solely for the purpose of this proceeding and without admitting or
denying any of the alleged charges of unsafe or unsound banking practices and
any violations of law and/or regulations, hereby consents and agrees to the
issuance of a CONSENT ORDER (“ORDER”) by the FDIC and the Commissioner in the
form

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attached hereto. The Bank further stipulates and agrees that such ORDER shall
become effective immediately after its issuance by the FDIC and the Commissioner
and be fully enforceable by the FDIC pursuant to the provisions of section
8(i)(1) of the Act, 12 U.S.C. § 1818(i)(1), and the Rules, and by the
Commissioner subject only to the conditions set forth in paragraph 3 of this
STIPULATION.

3. In the event the FDIC accepts this STIPULATION and issues the ORDER, it is
agreed that no action to enforce said ORDER in the United States District Court
will be taken by the FDIC unless the Bank or any “institution affiliated party”,
as such term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), has
violated or is about to violate any provision of the ORDER.

4. The Bank hereby waives:

 

  (a) the receipt of a written Notice;

 

  (b) all defenses to the charges to be set forth in the Notice;

 

  (c) a hearing for the purpose of taking evidence regarding the allegations to
be set forth in the Notice;

 

  (d) the filing of Proposed Findings of Fact and Conclusions of Law;

 

  (e) a Recommended Decision of an Administrative Law Judge; and

 

  (f) exceptions and briefs with respect to such Recommended Decision.

 

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Dated: February 22, 2010

 

FEDERAL DEPOSIT INSURANCE CORPORATION

LEGAL DIVISION

BY:

 

Barbara J. Lukes Counsel

 

NORTH CAROLINA COMMISSIONER OF BANKS BY:

 

Joseph A. Smith, Jr. Commissioner of Banks State of North Carolina

 

MOUNTAIN 1ST BANK & TRUST COMPANY

HENDERSONVILLE, NORTH CAROLINA

BY:

 

B. Lee Beason

 

William H. Burton

 

Michael D. Foster

 

James C. Kirkpatrick

 

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H. Steve McManus

 

Van F. Phillips

 

Vincent K. Rees

 

Bradley B. Schnyder

 

Catherine H. Schroader

 

John S. Sheiry THE BOARD OF DIRECTORS

 

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FEDERAL DEPOSIT INSURANCE CORPORATION

WASHINGTON, D.C.

 

 

         )      In the Matter of   )        )     
MOUNTAIN 1ST BANK & TRUST COMPANY   )      CONSENT ORDER
HENDERSONVILLE, NORTH CAROLINA   )        )      FDIC-09-679b (INSURED STATE
NONMEMBER BANK)   )     

 

  )     

The Federal Deposit Insurance Corporation (“FDIC”) is the appropriate Federal
banking agency for Mountain 1st Bank & Trust Company, Hendersonville, North
Carolina (“Bank”), under 12 U.S.C. § 1813(q).

The Bank, by and through its duly elected and acting Board of Directors
(“Board”), has executed a “Stipulation to the Issuance of a Consent Order”
(“STIPULATION”), dated February 22, 2010, that is accepted by the FDIC and the
North Carolina Commissioner of Banks (the “Commissioner”). The Commissioner may
issue an order pursuant to the provisions of N.C. Gen. Stat. § 53-107.1 (2005).

With the STIPULATION, the Bank has consented, without admitting or denying any
charges of unsafe or unsound banking practices or violations of law or
regulation relating to weaknesses in capital, asset quality, management,
earnings, and liquidity, to the issuance of this Consent Order (“ORDER”) by the
FDIC and the Commissioner.

Having determined that the requirements for issuance of an order under 12 U.S.C.
§ 1818(b) have been satisfied, the FDIC and the Commissioner hereby order that:

 

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BOARD OF DIRECTORS

1.(a) Beginning with the effective date of this ORDER, the Board shall increase
its participation in the affairs of the Bank, assuming full responsibility for
the approval of sound policies and objectives and for the supervision of all of
the Bank’s activities, consistent with the role and expertise commonly expected
for directors of banks of comparable size. The Board shall prepare in advance
and follow a detailed written agenda for each meeting, including consideration
of the actions of any committees. Nothing in the foregoing sentences shall
preclude the Board from considering matters other than those contained in the
agenda. This participation shall include meetings to be held no less frequently
than monthly at which, at a minimum, the following areas shall be reviewed and
approved: reports of income and expenses; new, overdue, renewal, insider,
charged-off, and recovered loans, including loan-to-value exceptions; investment
activity; operating policies; and individual committee actions. Board minutes
shall document these reviews and approvals, including the names of any
dissenting directors.

(b) Within 30 days from the effective date of this ORDER, the Board shall
establish a Board committee (“Directors’ Committee”), consisting of at least
four members, to oversee the Bank’s compliance with the ORDER. Three of the
members of the Directors’ Committee shall not be officers of the Bank. The
Directors’ Committee shall receive from Bank management monthly reports
detailing the Bank’s actions with respect to compliance with the ORDER. The
Directors’ Committee shall present a report detailing the Bank’s adherence to
the ORDER to the Board at each regularly scheduled Board meeting. Such report
shall be recorded in the appropriate minutes of the Board’s

 

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meeting and shall be retained in the Bank’s records. Establishment of this
committee does not in any way diminish the responsibility of the entire Board to
ensure compliance with the provisions of this ORDER.

MANAGEMENT

2. The Bank shall have and retain qualified management.

(a) Within 90 days from the effective date of this Order, each member of
management shall have the qualifications and experience commensurate with
assigned duties and responsibilities at the Bank. Each member of management
shall be provided appropriate written authority from the Bank’s Board to
implement the provisions of this ORDER. Management shall include the chief
executive officer, senior lending officer, and chief financial officer. All
management officials shall have an appropriate level of experience and expertise
that is needed to perform his or her duties.

(b) The qualifications of management shall be assessed on its ability to:

 

  (i) Comply with the requirements of this ORDER;

 

  (ii) Operate the Bank in a safe and sound manner;

 

  (iii) Comply with applicable laws and regulations; and

 

  (iv) Restore all aspects of the Bank to a safe and sound condition, including,
but not limited to, asset quality, capital adequacy, earnings, management
effectiveness, risk management, liquidity, and sensitivity to market risk.

(c) During the life of this ORDER, the Bank shall notify the Regional Director
of the FDIC’s Atlanta Regional Office (“Regional Director”) and the Commissioner
(collectively, “Supervisory Authorities”) in writing of the resignation or
termination of any of the Bank’s directors or senior executive officers. Prior
to the

 

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addition of any individual to the Board or the employment of any individual as a
senior executive officer, the Bank shall comply with the requirements of
Section 32 of the Act, 12 U.S.C. § 1831i, and Subpart F of Part 303 of the FDIC
Rules and Regulations, 12 C.F.R. §§ 303.100-303.104 and any requirement of the
State of North Carolina for prior notification and approval.

(d) While this ORDER is in effect, the Bank shall comply with the requirements
of 12 U.S.C. § 1823(k)(5) and Part 359 of the FDIC Rules and Regulations, 12
C.F.R. Part 359.

CAPITAL

3.(a) While this ORDER is in effect, the Bank shall have and maintain Tier 1
capital in such an amount as to equal or exceed eight (8%) percent of the Bank’s
total assets and total risk-based capital in such an amount as to equal or
exceed twelve (12%) percent of the Bank’s total risk-weighted assets. In the
event this ratio falls below the established minimum, the Bank shall notify the
Supervisory Authorities and shall increase capital in an amount sufficient to
comply with this paragraph within 90 days.

(b) Within 60 days from the effective date of this ORDER, the Bank shall develop
and adopt a plan for achieving and maintaining the capital levels required by
paragraph 3(a) during the life of this ORDER. The plan shall be submitted to the
Supervisory Authorities for review and approval.

(c) The level of Tier 1 capital and total risk based capital to be maintained
during the life of this ORDER pursuant to paragraph 3(a) shall be in addition to
a fully funded allowance for loan and lease losses (“ALLL”), the adequacy of
which shall be satisfactory to the Supervisory Authorities as determined at
subsequent examinations and/or visitations.

 

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(e) Any increase in Tier 1 capital necessary to meet the requirements of
paragraph 3 of this ORDER may be accomplished by the following:

 

  (i) The sale of common stock;

 

  (ii) The sale of non-cumulative perpetual preferred stock;

 

  (iii) The direct contribution of cash by the Board, shareholders;

 

  (iv) Any other means acceptable to the Supervisory Authorities; or

 

  (v) Any combination of the above means.

Any increase in Tier 1 capital necessary to meet the requirements of paragraph 3
of this ORDER may not be accomplished through a deduction from the Bank’s ALLL.

(f) If all or part of the increase in Tier 1 capital required by paragraph 3 of
this ORDER is accomplished by the sale of new securities, the Board shall adopt
and implement a plan for the sale of such additional securities, including the
voting of any shares owned or proxies held or controlled by them in favor of the
plan. Should the implementation of the plan involve a public distribution of the
Bank’s securities (including a distribution limited only to the Bank’s existing
shareholders), the Bank shall prepare offering materials fully describing the
securities being offered, including an accurate description of the financial
condition of the Bank and the circumstances giving rise to the offering, and any
other material disclosures necessary to comply with the Federal securities laws.
Prior to the implementation of the plan and, in any event, not less than 20 days
prior to the dissemination of such materials, the plan and any materials used in
the sale of the securities shall be submitted to the FDIC, Division of
Supervision and Consumer Protection, Accounting and Securities Disclosure
Section, 550 17th Street, N.W., Room F-6066, Washington, D.C. 20429 and to the
North Carolina Office of the Commissioner of Banks, 4309 Mail Service Center,
Raleigh, North Carolina 27699. Any

 

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changes requested to be made in the plan or materials shall be made prior to
their dissemination. If the increase in Tier 1 capital is provided by the sale
of non-cumulative perpetual preferred stock, then all terms and conditions of
the issue, including but not limited to those terms and conditions relative to
interest rate and convertibility factor, shall be presented to the Supervisory
Authorities for prior approval.

(g) In complying with the provisions of paragraph 3 of this ORDER, the Bank
shall provide to any subscriber and/or purchaser of the Bank’s securities, a
written notice of any planned or existing development or other changes, which
are materially different from the information reflected in any offering
materials used in connection with the sale of Bank securities. The written
notice required by this paragraph shall be furnished within 10 days from the
date such material development or change was planned or occurred, whichever is
earlier, and shall be furnished to every subscriber and/or purchaser of the
Bank’s securities who received or was tendered the information contained in the
Bank’s original offering materials.

(h) For the purposes of this ORDER, the terms “Tier 1 capital,” “total
risk-based capital,” and “total assets” shall have, the meanings ascribed to
them in Part 325 of the FDIC Rules and Regulations, 12 C.F.R. §§ 325.2(v) and
325.2(x), respectively.

LIQUIDITY AND FUNDS MANAGEMENT POLICY

4.(a) Within 60 days from the effective date of this ORDER, the Bank shall adopt
and implement a written plan addressing liquidity, contingency funding, and
asset liability management. A copy of the plan shall be submitted to the
Supervisory Authorities upon its completion for review and comment. Within 30
days from the receipt of any comments from the Supervisory Authorities, the Bank
shall incorporate those recommended changes. Thereafter, the Bank shall
implement and follow the plan.

 

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Quarterly during the life of this ORDER, the Bank shall review this plan for
adequacy and, based upon such review, shall make appropriate revisions to the
plan that are necessary to strengthen funds management procedures and maintain
adequate provisions to meet the Bank’s liquidity needs.

REDUCTION OF CLASSIFIED ASSETS

5.(a) Within 60 days from the effective date of this ORDER, the Bank shall
formulate a written plan to reduce the Bank’s risk exposure in each asset in
excess of $250,000 classified Substandard or Doubtful in the Report of
Examination dated as of August 31, 2009 (“Report”). For purposes of this
paragraph, “reduce” means to collect, charge off, or improve the quality of an
asset so as to warrant its removal from adverse classification by Supervisory
Authorities. In developing the plan mandated by this paragraph, the Bank shall,
at a minimum, and with respect to each adversely classified loan or lease,
review, analyze, and document the financial position of the borrower, including
source of repayment, repayment ability, and alternative repayment sources, as
well as the value and accessibility of any pledged or assigned collateral, and
any possible actions to improve the Bank’s collateral position.

(b) In addition, the written plan mandated by this paragraph shall also include,
but not be limited to, the following:

 

  (i) A schedule for reducing the outstanding dollar amount of each adversely
classified asset, including timeframes for achieving the reduced dollar amounts
(at a minimum, the schedule for each adversely classified asset must show its
expected dollar balance on a quarterly basis);

 

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  (ii) Specific actions plans intended to reduce the Bank’s risk exposure in
each classified asset;

 

  (iii) A schedule showing, on a quarterly basis, the expected consolidated
balance of all adversely classified assets, and the ratio of the consolidated
balance to the Bank’s projected Tier 1 capital plus the ALLL;

 

  (iv) A provision for the Bank’s submission of monthly written progress reports
to its Board; and

 

  (v) A provision mandating Board review of the progress reports, with a
notation of the review recorded in the Board minutes.

(c) The plan mandated by this paragraph shall further require a reduction in the
aggregate balance of assets classified “Substandard” and “Doubtful” in the
Report in accordance with the following schedule. For purposes of this
paragraph, “number of days” means number of days from the effective date of this
ORDER.

 

  (i) Within 180 days, a reduction of fifteen percent (15%) in the balance of
assets classified “Substandard” or “Doubtful.”

 

  (ii) Within 360 days, a reduction of thirty-five percent (35%) in the balance
of assets classified “Substandard” or “Doubtful.”

 

  (iii) Within 540 days, a reduction of sixty percent (60%) in the balance of
assets classified “Substandard” or “Doubtful.”

 

  (iv) Within 720 days, a reduction of seventy-five percent (75%) in the balance
of assets classified “Substandard” or “Doubtful.”

 

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(d) The requirements of this paragraph do not represent standards for future
operations of the Bank. Following compliance with the above reduction schedule,
the Bank shall continue to reduce the total volume of adversely classified
assets.

(e) Within 60 days from the effective date of this ORDER, the Bank shall submit
the written reduction plan to the Supervisory Authorities for review and
comment. Within 30 days from receipt of any comment from the Supervisory
Authorities, and after due consideration of any recommended changes, the Bank
shall approve the plan, which approval shall be recorded in the minutes of the
meeting of the Board. Thereafter, the Bank shall implement and fully comply with
the plan. Such plans shall be monitored and progress reports thereon shall be
submitted to the Supervisory Authorities at 90-day intervals concurrently with
the other reporting requirements set forth in this ORDER.

ALLOWANCE FOR LOAN AND LEASE LOSSES

6.(a) Immediately upon the entry of this ORDER, the Board shall make a provision
to replenish the ALLL which is underfunded as set forth in the Report.

(b) Within 60 days from the effective date of this ORDER, the Board shall review
the ALLL and establish a comprehensive policy for determining the adequacy of
the Allowance. For the purpose of this determination, the adequacy of the ALLL
shall be determined after the charge-off of all loans or other items classified
“Loss”. The policy shall provide for a review of the ALLL at least once each
calendar quarter. Said review shall be completed in time to properly report the
ALLL in the quarterly Reports of Condition and of Income. The review shall focus
on the results of the Bank’s internal loan review, loan and lease loss
experience, trends of delinquent and non-accrual loans, an estimate of potential
loss exposure of significant credits, concentrations of credit, and present and
prospective economic conditions. A deficiency in the ALLL shall be

 

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remedied in the calendar quarter it is discovered, prior to submitting the
Reports of Condition and Income, by a charge to current operating earnings. The
minutes of the Board meeting at which such review is undertaken shall indicate
the results of the review. The Bank’s policy for determining the adequacy of the
ALLL and its implementation shall be satisfactory to the Supervisory
Authorities.

SPECIAL MENTION

7. Within 90 days from the effective date of this ORDER, the Bank shall correct
the cited deficiencies in the loans listed for “Special Mention” in the Report.

REDUCTION OF CONCENTRATIONS OF CREDIT

8. Within 30 days from the effective date of this ORDER, the Bank shall perform
a risk segmentation analysis with respect to the Concentrations of Credit listed
on the Concentration page of the Report. Concentrations should be identified by
product type, geographic distribution, underlying collateral or other asset
groups, which are considered economically related and in the aggregate represent
a large portion of the Bank’s Tier 1 capital. The Bank shall provide a copy of
this analysis to the Supervisory Authorities. The Bank shall develop a plan to
reduce any segment of the portfolio which the Supervisory Authorities deem to be
an undue concentration of credit in relation to the Bank’s Tier 1 capital. The
plan and its implementation shall be in a form and manner acceptable to the
Supervisory Authorities.

CHARGE-OFF

9.(a) Within 30 days from the effective date of this ORDER, the Bank shall
eliminate from its books, by charge-off or collection, all assets or portions of
assets classified “Loss” and 50 percent of those assets classified “Doubtful” in
the Report that have not been previously collected or charged-off. If an asset
classified “Doubtful” is a

 

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loan or lease, the Bank may, in the alternative, increase its ALLL by an amount
equal to 50 percent of the loan or lease classified “Doubtful”. Elimination of
any of these assets through proceeds of other loans made by the Bank is not
considered collection for purposes of this paragraph.

(b) Additionally, while this ORDER remains in effect, the Bank shall, within 30
days from the receipt of any official Report of Examination of the Bank from the
FDIC or the Commissioner, eliminate from its books, by collection, charge-off,
or other proper entries, the remaining balance of any asset classified “Loss”
and 50 percent of the those classified “Doubtful” unless otherwise approved in
writing by the Supervisory Authorities.

NO ADDITIONAL CREDIT

10.(a) As of the effective date of this ORDER, the Bank shall not extend,
directly or indirectly, any additional credit to, or for the benefit of, any
borrower who has a loan or other extension of credit from the Bank that has been
charged off or classified, in whole or in part, “Loss” or “Doubtful” and is
uncollected. The requirements of this paragraph shall not prohibit the Bank from
renewing (after collection in cash of interest due from the borrower) any credit
already extended to any borrower.

(b) Additionally, during the life of this ORDER, the Bank shall not extend,
directly or indirectly, any additional credit to, or for the benefit of, any
borrower who has a loan or other extension of credit from the Bank that has been
classified, in whole or part, “Substandard” or is listed for “Special Mention”
and is uncollected.

(c) Paragraph 10(b) shall not apply if the Bank’s failure to extend further
credit to a particular borrower would be detrimental to the best interests of
the Bank. Prior to the extending of any additional credit pursuant to this
paragraph, either in the

 

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form of a renewal, extension, or further advance of funds, such additional
credit shall be approved by a majority of the Board or a designated committee
thereof, who shall certify in writing:

 

  (i) Why the failure of the Bank to extend such credit would be detrimental to
the best interests of the Bank;

 

  (ii) That the Bank’s position would be improved thereby; and

 

  (iii) How the Bank’s position would be improved.

(d) The signed certification shall be made a part of the minutes of the Board or
its designated committee and a copy of the signed certification shall be
retained in the borrower’s credit file.

LENDING AND COLLECTION POLICIES

11. Within 90 days from the effective date of this ORDER, the Bank shall ensure
the full implementation of its written lending and collection policy to provide
effective guidance and control over the Bank’s lending function, which
implementation shall include the resolution of those exceptions enumerated in
the Report. In addition, the Bank shall obtain adequate and current
documentation for all loans in the Bank’s loan portfolio. Such policy and its
implementation shall be in a form and manner acceptable to the Supervisory
Authorities.

INTERNAL LOAN REVIEW

12. Within 90 days from the effective date of this ORDER, the Bank shall adopt
an effective internal loan review and grading system to provide for the periodic
review of the Bank’s loan portfolio in order to identify and categorize the
Bank’s loans, and other extensions of credit which are carried on the Bank’s
books as loans, on the basis of credit quality. Such system and its
implementation shall be satisfactory to the Supervisory

 

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Authorities as determined at their initial review and at subsequent examinations
and/or visitations. At a minimum, the grading system shall provide for the
following:

(a) Specification of standards and criteria for assessing the credit quality of
the Bank’s loans;

(b) Application of loan grading standards and criteria to the Bank’s loan
portfolio;

(c) Categorization of the Bank’s loans into groupings based on the varying
degrees of credit and other risks that may be presented under the applicable
grading standards and criteria, but in no case, will a loan be assigned a rating
higher than that assigned by examiners at the last examination of the Bank
without prior written notification to the Supervisory Authorities;

(d) Assessment of the likelihood that each loan exhibiting credit and other
risks will not be repaid according to its terms and conditions;

(e) Identification of any loan that is not in conformance with the Bank’s loan
policy;

(f) Identification of any loan which presents any unsafe or unsound banking
practice or condition or is otherwise in violation of any applicable State or
Federal law, regulation, or statement of policy;

(g) Requirement of a written report to be made to the Board and Audit Committee,
not less than quarterly after the effective date of this ORDER. The report shall
identify the status of those loans that exhibit credit and other risks under the
applicable grading standards/criteria and the prospects for full collection
and/or strengthening of the quality of any such loans; and

 

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(h) Specific policies governing Bank charge-offs of loans and underlying
collateral taken to repay loans.

WRITTEN STRATEGIC PLAN

13. Within 90 days from the effective date of this ORDER, the Bank shall prepare
and submit to the Supervisory Authorities its written strategic plan consisting
of long-term goals designed to improve the condition of the Bank and its
viability and strategies for achieving those goals. The plan shall be in a form
and manner acceptable to the Supervisory Authorities, but at a minimum shall
cover three years and provide specific objectives for asset growth, market
focus, earnings projections, capital needs, and liquidity position.

PLAN TO IMPROVE EARNINGS/BUDGET

14.(a) Within 90 days from the effective date of this ORDER, the Bank shall
formulate and fully implement a written plan and a comprehensive budget for all
categories of income and expense for the calendar year ending 2010. The plan and
budget shall include formal goals and strategies, consistent with sound banking
practices and taking into account the Bank’s other written policies, to improve
the Bank’s net interest margin, increase interest income, reduce discretionary
expenses, and improve and sustain earnings of the Bank. The plan shall include a
description of the operating assumptions that form the basis for and adequately
support major projected income and expense components. Thereafter, the Bank
shall formulate such a plan and budget by November 30 preceding each subsequent
budget year.

(b) The plan and budget and any subsequent modification thereto shall be
submitted to the Supervisory Authorities for review and comment. Within 30 days
after the receipt of any comment from the Supervisory Authorities, the Board
shall approve the

 

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plan and budget or subsequent modification thereto, which approval shall be
recorded in the minutes of the meeting of the Board.

(c) Following the end of each calendar quarter, the Board shall evaluate the
Bank’s actual performance in relation to the plan and budget and shall record
the results of the evaluation, and any actions taken by the Bank, in the minutes
of the Board meeting at which such evaluation is undertaken.

POLICY FOR INTERNAL ROUTINE AND CONTROL

15. Within 90 days from the effective date of this ORDER, the Bank shall adopt
and implement a policy for the operation of the Bank in such a manner as to
provide adequate internal routine and controls within the Bank consistent with
safe and sound banking practices. Such policy and its implementation shall, at a
minimum, eliminate and/or correct all internal routine and control deficiencies
as more fully set forth in the Report and shall be satisfactory to the
Supervisory Authorities.

AUDITS

16. Within 90 days from the effective date of this ORDER, the Bank shall adopt
and implement a comprehensive written audit program. A copy of the audit program
shall be submitted to the Supervisory Authorities upon its completion for review
and comment. Within 30 days from the receipt of any comments from the
Supervisory Authorities, the Bank shall incorporate those recommended changes.
The Bank shall thereafter implement and enforce an effective system of internal
and external audits. The internal auditor shall make written monthly reports of
audit findings directly to the Board. The minutes of the meetings of the Board
shall reflect consideration of these reports and describe any action taken as a
result thereof.

 

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OTHER REAL ESTATE

17. Within 90 days from the effective date of this ORDER, the Board shall
develop a written policy for managing the Other Real Estate of the Bank. The
Bank shall submit the policy to the Supervisory Authorities for review and
comment. Within 30 days from receipt of any comment from the Supervisory
Authorities, and after due consideration of any recommended changes, the Bank
shall approve the policy, which approval shall be recorded in the minutes of the
Board meeting. Thereafter, the Bank shall implement and fully comply with the
policy.

BROKERED DEPOSITS

18.(a) Throughout the effective life of this ORDER, the Bank shall not accept,
renew, rollover any brokered deposit, as defined by 12 C.F.R. § 337.6(a)(2),
unless it is in compliance with the requirements of 12 C.F.R. § 337.6(b),
governing solicitation and acceptance of brokered deposits by insured depository
institutions.

(b) The Bank shall comply with the restrictions on the effective yields on
deposits as described in 12 C.F.R. § 337.6.

RESTRICTIONS ON CERTAIN PAYMENTS

19.(a) While this ORDER is in effect, the Bank shall not declare or pay
dividends or bonuses without the prior written approval of the Supervisory
Authorities. All requests for prior approval shall be received at least 30 days
prior to the proposed dividend declaration date (at least 5 days with respect to
any request filed within the first 30 days after the date of this ORDER) and
shall contain, but not be limited to, an analysis of the impact such dividend or
bonus payment would have on the Bank’s capital, income, and/or liquidity
positions.

 

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(b) During the term of this ORDER, the Bank shall not make any distributions of
interest, principal or other sums on subordinated debentures, if any, without
the prior written approval of the Supervisory Authorities.

CONFLICTS OF INTEREST

20. Within 30 days from the effective date of this ORDER, the Bank shall
develop, adopt, and implement written policies and procedures designed to bring
to the attention of each member of the Board conflicts of interest which may
exist in approving loans or other transactions in which officers, directors or
principal shareholders of the Bank (“Insiders”) are involved. Such policies and
procedures shall, at a minimum, ensure that each member of the Board has been
apprised of any potential conflict prior to making a decision, or acting
specifically on any loan or other transaction in which Insiders and/or their
business associates are, directly or indirectly, involved. The results of any
deliberations by the Board regarding potential conflicts shall be reflected in
the minutes of its meetings.

VIOLATIONS OF LAW AND REGULATION

21. Within 60 days from the effective date of this ORDER, the Bank shall
eliminate and/or correct all violations of law and regulation as well as all
contraventions of statements of policy that are contained in the Report. In
addition, the Bank shall take all necessary steps to ensure future compliance
with all applicable laws, regulations, and statements of policy.

ASSET GROWTH LIMITATIONS

22. During the life of this ORDER, the Bank shall limit asset growth to no more
than ten percent (10%) per annum and in no event shall asset growth result in
noncompliance

 

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with the capital maintenance provisions of this ORDER without receiving prior
written approval of the Supervisory Authorities.

PROGRESS REPORTS

23. Within 30 days from the end of the first quarter following the effective
date of this ORDER, and within 30 days of the end of each quarter thereafter,
the Bank shall furnish written progress reports to the Supervisory Authorities
detailing the form and manner of any actions taken to secure compliance with
this ORDER and the results thereof. Such reports shall include a copy of the
Bank’s Reports of Condition and of Income. Such reports may be discontinued when
the corrections required by this ORDER have been accomplished and the
Supervisory Authorities have released the Bank in writing from making further
reports. All progress reports and other written responses to this ORDER shall be
reviewed by the Board and made a part of the minutes of the appropriate Board
meeting.

DISCLOSURE

24. Following the issuance of this ORDER, the Bank shall provide to its
shareholders or otherwise furnish a description of this ORDER in conjunction
with the Bank’s next shareholder communication or in conjunction with its notice
or proxy statement preceding the Bank’s next shareholder meeting. The
description shall fully describe the ORDER in all material respects. The
description and any accompanying communication, statement, or notice shall be
sent to the FDIC, Division of Supervision and Consumer Protection, Accounting
and Securities Disclosure Section, 550 17th Street, N.W., Room F-6066,
Washington, D.C. 20429 and to the North Carolina Office of the Commissioner of
Banks, 4309 Mail Service Center, Raleigh, North Carolina 27699-4309, to review
at least twenty (20) days prior to dissemination to shareholders. The Bank shall
make any

 

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changes required by the Supervisory Authorities prior to dissemination of the
description, communication, notice, or statement.

The provisions of this ORDER shall not bar, estop, or otherwise prevent the
FDIC, the Commissioner, or any other federal or state agency or department from
taking any other action against the Bank or any of the Bank’s current or former
institution-affiliated parties.

This ORDER shall be effective on the date of issuance.

The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.

The provisions of this ORDER shall remain effective and enforceable except to
the extent that and until such time as any provision has been modified,
terminated, suspended, or set aside in writing.

Issued Pursuant to Delegated Authority.

Dated this      day of February, 2010.

 

 

Doreen R. Eberley Acting Regional Director Atlanta Region Federal Deposit
Insurance Corporation

 

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The North Carolina Commissioner of Banks having duly approved the foregoing
ORDER, and the Bank, through its Board, agree that the issuance of the said
ORDER by the Federal Deposit Insurance Corporation shall be binding as between
the Bank and the Commissioner to the same degree and legal effort that such
ORDER would be binding on the Bank if the Commissioner had issued a separate
ORDER that included and incorporated all of the provisions of the foregoing
ORDER pursuant to the provisions of N.C. Stat. § 53-107.1(2005).

Dated this      day of             , 2010.

 

 

Joseph A. Smith, Jr. Commissioner of Banks State of North Carolina

 

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