Exhibit 10.1
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.

         
 
)      
In the Matter of
)      
 
)      
 
)     STIPULATION AND CONSENT TO THE
BANK OF GRANITE
)     ISSUANCE OF AN ORDER TO
GRANITE FALLS, NORTH CAROLINA
)     CEASE AND DESIST
 
)      
(INSURED STATE NONMEMBER BANK) 
)     FDIC-09-358b )    
 
       

     Subject to the acceptance of this STIPULATION AND CONSENT TO THE ISSUANCE
OF AN ORDER TO CEASE AND DESIST (“CONSENT AGREEMENT”) 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 (the “Commissioner”), and BANK OF GRANITE, Granite Falls,
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 an ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC and
the Commissioner in the form attached hereto. The Bank further stipulates and
agrees that such ORDER shall become immediately upon its

 

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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 CONSENT AGREEMENT.
     3. In the event the FDIC accepts this CONSENT AGREEMENT 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.
Dated: August 12, 2009
FEDERAL DEPOSIT INSURANCE CORPORATION
LEGAL DIVISION
BY:

     
/s/ David A. Groveman
   
 
David A. Groveman
   
Senior Attorney
   

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NORTH CAROLINA COMMISSIONER OF BANKS
BY:

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

BANK OF GRANITE
GRANITE FALLS, NORTH CAROLINA
BY:

     
/s/ R. Scott Anderson
   
 
R. Scott Anderson
   
 
   
/s/ John N. Bray
   
 
John N. Bray
   
 
   
/s/ Joseph D. Crocker
 
Joseph D. Crocker
   
 
   
/s/ Leila N. Erwin
 
Leila N. Erwin
   
 
   
/s/ Paul M. Fleetwood, III
 
   
Paul M. Fleetwood, III
   
 
   
/s/ Hugh R. Gaither
 
   
Hugh R. Gaither
   
 
   
/s/ James Y. Preston
 
   
James Y. Preston
   
 
   
/s/ Boyd C. Wilson, Jr.
 
Boyd C. Wilson, Jr.
   

THE BOARD OF DIRECTORS

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Exhibit 10.1
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.

       
 
)    
In the Matter of
)    
 
)   ORDER TO
BANK OF GRANITE
)   CEASE AND DESIST
GRANITE FALLS, NORTH CAROLINA
)    
 
)    

)   FDIC-09-358b (INSURED STATE NONMEMBER BANK) )       )    

     Bank of Granite, Granite Falls, North Carolina (“Bank”), having been
advised of its right to a Notice of Charges and of Hearing 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 having waived those rights, entered into a STIPULATION
AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST (“CONSENT
AGREEMENT”) with a representative for the Legal Division of the Federal Deposit
Insurance Corporation (“FDIC”), and the North Carolina Commissioner of Banks
(the “Commissioner”), dated August 12, 2009, whereby solely for the purpose of
this proceeding and without admitting or denying the alleged charges of unsafe
or unsound banking practices and violations of law and/or regulations, the Bank
consented to the issuance of an ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC
and the Commissioner.
     The FDIC and the Commissioner considered the matter and determined that
they had reason to believe that the Bank had engaged in unsafe or unsound
banking practices and had committed violations of law and/or regulations. The
Commissioner may issue an order to cease and desist pursuant to N.C. Gen. Stat.
§ 53-107.1 (2005).

 

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     The FDIC and the Commissioner, therefore, accepted the CONSENT AGREEMENT
and issued the following:
ORDER TO CEASE AND DESIST
     IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as
that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its
successors and assigns cease and desist from the following unsafe and unsound
banking practices and violations:

  (a)   Operating with a board of directors (“Board”) that has failed to provide
adequate supervision over and direction to the management of the Bank;     (b)  
Operating with management whose policies and practices are detrimental to the
Bank and jeopardize the safety of its deposits;     (c)   Operating with
inadequate equity capital in relation to the volume and quality of assets held
by the Bank;     (d)   Operating with inadequate liquidity in light of the
Bank’s asset and liability mix;     (e)   Operating with a large volume of poor
quality loans;
    (f)   Operating with an inadequate loan policy;     (g)   Operating with a
business strategy that has resulted in unprofitable operations and poor asset
quality; and     (h)   Violating laws and regulations, as identified on pages
15-16 of the Joint Report of Examination of the Bank dated February 2, 2009
(“ROE”).

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     IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties,
and its successors and assigns take affirmative action as follows:
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 ninety (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 addition of any

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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.
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 30 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 ALLL, the adequacy of which shall be satisfactory to
the Supervisory Authorities as determined at subsequent examinations and/or
visitations.
     (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; or
          (ii) The sale of non-cumulative perpetual preferred stock; or

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

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     (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” and “total
assets” shall have, the meanings ascribed to them in Part 325 of the FDIC’s
Rules and Regulations, 12 C.F.R. §§ 325.2(v) and 325.2(x), respectively.
LIQUIDITY AND FUNDS MANAGEMENT POLICY
4. (a) Within 45 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. 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.

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     (b) The initial plan shall include, at a minimum:

  (i)   A limitation on the ratio of the Bank’s total loans to assets;     (ii)
  A limitation of the ratio of the Bank’s total loans to core deposits;    
(iii)   Identification of a desirable range and measurement of dependence on
non-core funding;     (iv)   Development of reliable forecasting tools to
anticipate likely sources and uses of funds;     (v)   Establishment of lines of
credit that would allow the Bank to borrow funds to meet depositor demands if
the Bank’s other provisions for liquidity proved inadequate;     (vi)   A
requirement for retention of sufficient investments that can be promptly
liquidated to ensure the maintenance of the Bank’s liquidity posture at a level
consistent with short-term and long-term objectives;     (vii)   Establishment
of contingency plans to restore liquidity to that amount called for in the
Bank’s liquidity policy;     (viii)   Requirements for monitoring and control of
interest rate risk, including validation of modeling programs and assumptions;
and     (ix)   Establishment of limits for borrowing federal funds and other
funds, including limits on dollar amounts, maturities, and specified
sources/lenders.

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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 ROE. 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);     (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;

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  (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 ROE 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 twenty percent (20%) in the balance of
assets classified “Substandard” or “Doubtful.”     (ii)   Within 360 days, a
reduction of forty percent (40%) in the balance of assets classified
“Substandard” or “Doubtful.”     (iii)   Within 540 days, a reduction of
sixty-five percent (65%) 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.”

     (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

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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.
REDUCTION OF CONCENTRATIONS OF CREDIT
6. 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 page 12 of the ROE. 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
7. (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 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.

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     (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
8. (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 8(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 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:

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  (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
9. Within 60 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 on
pages 3, 4 and 10 of the ROE. 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.
WRITTEN STRATEGIC PLAN
10. 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.

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PLAN TO IMPROVE EARNINGS/BUDGET
11. (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 remainder of the current year. 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 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.
BROKERED DEPOSITS
12. Beginning with the effective date of this ORDER, and so long as this ORDER
is in effect, the Bank shall not accept, renew, or rollover brokered deposits
without obtaining a brokered deposit waiver approved by the FDIC pursuant to
section 29 of the

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Act, 12 U.S.C. § 1831f. For purposed of this ORDER, brokered deposits are
defined as described in section 337.6(a)(2) of the FDIC’s Rules and Regulations,
12 C.F.R. § 337.6(a)(2) to include any deposits funded by third party agents or
nominees for depositors, including depositors managed by a trustee or custodian
when each individual beneficial interest is entitled to a right to federal
deposit insurance. The Bank shall comply with the restrictions on the effective
yields on deposits prescribed in 12 C.F.R. § 337.6, as approved May 29, 2009.
CASH DIVIDENDS
13. The Bank shall not pay cash dividends without the prior written consent of
the Supervisory Authorities.
VIOLATIONS OF LAW AND REGULATION
14. 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 ROE. 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
15. During the life of this ORDER, the Bank shall limit asset growth to no more
than five percent per annum and in no event shall asset growth result in
noncompliance with the capital maintenance provisions of this ORDER without
receiving prior written approval of the Supervisory Authorities.
PROGRESS REPORTS
16. 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

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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 Report of Condition and
the Bank’s Report 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
17. Following the issuance of this ORDER, the Bank shall provide to its
shareholders or otherwise furnish a description of this ORDER (i) in conjunction
with the Bank’s next shareholder communication or (ii) 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 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 changes required
by the Supervisory Authorities prior to dissemination of the description,
communication, notice, or statement.
     This ORDER shall become effective immediately on the date of its 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

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effective and enforceable except to the extent that, and until such time as, any
provisions of this ORDER shall have been modified, terminated, suspended, or set
aside by the FDIC and the Commissioner.
     Pursuant to delegated authority.
     Dated at Atlanta, Georgia, this 27th day of August, 2009.

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

     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 17th day of August, 2009.

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

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