**Exhibit10.14**

 

Consent Order

 

FEDERAL DEPOSIT INSURANCECORPORATION

 

WASHINGTON, D.C.

 

|                            | ) |          |
|---------------------------------|---|---------------|
| In the Matter of                | ) |          |
|                            | ) | CONSENT ORDER |
| COMMUNITYSOUTH BANK AND         | ) |          |
| TRUST                           | ) | FDIC-09-698b  |
| EASLEY, SOUTH CAROLINA          | ) |          |
|                            | ) |          |
| (Insured State Nonmember  Bank) | ) |          |
|                            | ) |          |

 

TheFederal Deposit Insurance Corporation (“FDIC”) is the appropriate Federalbanking agency for CommunitySouth Bank and Trust, Easley, South Carolina (“Bank”),under 12 U.S.C. § 1813(q).

 

TheBank, 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 23, 2010, that is accepted by the FDIC and the Commissionerof Banking (“Commissioner”) on behalf of the State Board of FinancialInstitutions for the State of South Carolina (“State Board”).  With the Stipulation, the Bank has consented,without admitting or denying any charges of unsafe or unsound banking practicesrelating to asset quality, capital adequacy, earnings, managementeffectiveness, and liquidity, to the issuance of this Consent Order (“ORDER”)by the FDIC and the State Board.

 

Havingdetermined that the requirements for issuance of an order under 12 U.S.C. §1818(b) and S.C. Code Ann. § 34-1-60 have been satisfied, the FDIC and theState Board hereby order that:

 

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**BOARD OF DIRECTORS**

 

1.             (a)           As of the effective date ofthis ORDER, the Board shall increase its participation in the affairs of theBank, assuming full responsibility for the approval of sound policies andobjectives and for the supervision of all of the Bank’s activities, consistentwith the role and expertise commonly expected for directors of banks ofcomparable size.  The Board shall preparein advance and follow a detailed written agenda for each meeting, includingconsideration of the actions of any committees. Nothing in the foregoing sentences shall preclude the Board fromconsidering matters other than those contained in the agenda.  This participation shall include meetings tobe held no less frequently than monthly at which, at a minimum, the followingareas shall be reviewed and approved: reports of income and expenses; new, overdue, renewal, insider,charged-off, and recovered loans; investment activity; operating policies; andindividual committee actions.  Boardminutes shall document these reviews and approvals, including the names of anydissenting directors.

 

(b)           Within 30 days from the effective date of this ORDER,the Board shall have in place a program that will provide for monitoring of theBank’s compliance with this ORDER. Following the adoption of the program, the Board shall review the Bank’scompliance with this ORDER and record its review in the minutes of eachregularly scheduled Board meeting.  Establishmentof this program does not in any way diminish the responsibility of the entireBoard to ensure compliance with the provisions of this ORDER.

 

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# **MANAGEMENT**

#  

2.             (a)           During the life of this ORDER, the Bankshall have and retain qualified management with the qualifications andexperience commensurate with assigned duties and responsibilities at theBank.  Each member of management shall beprovided appropriate written authority from the Bank’s Board to implement theprovisions of this ORDER.

 

(b)           Within 45 days from the effective date of this ORDER,the Bank shall develop and approve a written analysis and assessment of theBank’s management and staffing needs (“Management Plan”) for the purpose ofproviding qualified management for the Bank. The Management Plan shall be forwarded to the Regional Director of theFDIC’s Atlanta Regional Office (“Regional Director”) and to the Commissioner onbehalf of the State Board (collectively “Supervisory Authorities”) for reviewand comment and shall address, at a minimum, the following:

 

(i)            A review of each officer’s performance, abilities andassignments to positions within the Bank;

 

(ii)           identification of both the type and number of officerpositions needed to properly manage and supervise the affairs of the Bank;

 

(iii)          identification and establishment of such Bankcommittees as are needed to provide guidance and oversight to activemanagement;

 

(iv)          annual written evaluations of all Bank officers, andstaff members to determine whether these individuals possess the ability,experience and other qualifications required to perform present and anticipatedduties, including, but not limited to, adherence to the Bank’s establishedpolicies 

 

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and practices, andrestoration and maintenance of the Bank in a safe and sound condition;

 

(v)           a plan to recruit and hire any additional orreplacement personnel with the requisite ability, experience and otherqualifications to fill those officer or staff member positions consistent withthe needs identified in the Management Plan; and

 

(vi)          anorganizational chart.

 

**CAPITAL**

 

3.             (a)           Within 90 days from the effective date ofthis ORDER the Bank shall achieve and maintain the following minimum capitallevels as defined in Part 325 of the FDIC Rules and Regulations, 12C.F.R. Part 325, after establishing an adequate allowance for loan andlease losses (“ALLL”):

 

(i)            Tier 1 capital at least equal to eight (8.0%) percentof total assets; and

 

(ii)           Total risk-based capital at least equal to ten (10.0%)percent of total risk-weighted assets.

 

(b)           Thereafter during the life of this ORDER, the Bankshall maintain Tier 1 capital in such an amount as to equal or exceed eight(8%) percent of the Bank’s total assets; and a Total risk-based capital ratioof at least ten (10%) percent as those risk based capital ratios are describedin the FDIC Statement of Policy on Risk-Based Capital contained in Appendix Ato Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325,Appendix A.

 

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(c)           Within 30 days of the lastday of each calendar quarter, the Bank shall determine, from its Reports ofCondition and Income, its capital ratios for that calendar quarter.  If any capital measure falls below theestablished minimum, within 30 days of such required determination of capitalratios, the Bank shall submit a written plan to the FDIC, describing the meansand timing by which the Bank shall increase such ratios up to or in excess ofthe established minimum.

 

**ALLOWANCEFOR LOAN AND LEASE LOSSES**

 

4.             Within 60 days from the effective date of this ORDER,the Board shall review the adequacy of the ALLL and establish a comprehensivepolicy for determining the adequacy of the ALLL.  For the purpose of this determination, theadequacy of the ALLL shall be determined after the charge-off of all loans orother items classified “Loss”.  Thepolicy shall provide for a review of the ALLL at least once each calendar quarter.  Said review shall be completed in time toproperly report the ALLL in the quarterly Reports of Condition and Income.  The review shall focus on the results of theBank’s internal loan review, loan and lease loss experience, trends ofdelinquent and non-accrual loans, an estimate of potential loss exposure ofsignificant credits, concentrations of credit, and present and prospectiveeconomic conditions.  A deficiency in theALLL shall be remedied in the calendar quarter it is discovered, prior tosubmitting the Reports of Condition and Income, by a charge to currentoperating earnings.  The minutes of theBoard meeting at which such review is undertaken shall indicate the results ofthe review.  The Bank’s policy fordetermining the adequacy of the ALLL and its implementation shall besatisfactory to the Supervisory Authorities.

 

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**REDUCTIONOF CLASSIFIED ASSETS**

 

5.             (a)           Within 60 days from the effective date ofthis ORDER, the Bank shall submit to the Supervisory Authorities, for reviewand comment, a written plan to reduce the Bank’s risk position in each asset inexcess of $250,000, which is classified “Substandard” or “Doubtful” in the FDIC’sVisitation Report dated October 26, 2009 (“Report”).  Within 10 days from the receipt of anycomment from the Supervisory Authorities, and after due consideration of anyrecommended changes, the Bank shall approve the plan, which approval shall berecorded in the minutes of a Board meeting. Thereafter, the Bank shall implement and follow this plan.

 

(b)           Thewritten plan mandated by this provision shall further require a reduction inthe aggregate balance of assets classified “Substandard” and “Doubtful” in theReport in accordance with the following schedule.  For purposes of thisparagraph, “number of days” means number of days from the effective date ofthis ORDER.

 

(i)            Within180 days, a reduction of twenty-five percent (25%) in the balance of assetsclassified “Substandard” or “Doubtful.”

 

(ii)           Within360 days, a reduction of forty-five percent (45%) in the balance of assetsclassified “Substandard” or “Doubtful.”

 

(iii)          Within540 days, a reduction of sixty-five percent (65%) in the balance of assetsclassified “Substandard” or “Doubtful.”

 

(iv)          Within720 days, a reduction of seventy-five percent (75%) in the balance of assetsclassified “Substandard” or “Doubtful.”

 

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**NOADDITIONAL CREDIT**

 

6.             (a)           As of the effective date of this ORDER,the Bank shall not extend, directly or indirectly, any additional credit to, orfor the benefit of, any borrower who has a loan or other extension of creditfrom the Bank that has been charged off or classified, in whole or in part, “Loss”or “Doubtful” and is uncollected.  Therequirements of this paragraph shall not prohibit the Bank from renewing (aftercollection in cash of interest due from the borrower) any credit alreadyextended to any borrower.

 

(b)           Additionally, as of the effective date of this ORDER,the Bank shall not extend, directly or indirectly, any additional credit to, orfor the benefit of, any borrower who has a loan or other extension of creditfrom the Bank that has been classified, in whole or part, “Substandard” and isuncollected.

 

(c)           Paragraph 6(b) shall not apply if the Bank’sfailure to extend further credit to a particular borrower would be detrimentalto the best interests of the Bank.  Priorto the extending of any additional credit pursuant to this paragraph, either inthe form of a renewal, extension, or further advance of funds, such additionalcredit shall be approved by a majority of the Board or a designated committeethereof, who shall certify in writing as follows:

 

(i)            whythe failure of the Bank to extend such credit would be detrimental to the bestinterests of the Bank;

 

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

 

(iii)          howthe Bank’s position would be improved.

 

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

 

**REDUCE CONCENTRATIONS OF CREDIT**

 

7.             Within 45 days from theeffective date of this ORDER, the Bank shall perform a risk segmentationanalysis with respect to the Concentrations of Credit discussed in theReport.  Concentrations should beidentified by product type, geographic distribution, underlying collateral orother asset groups, which are considered economically related and in theaggregate represent a large portion of the Bank’s Tier 1 Capital.  The Bank shall develop a written planapproved by its Board and acceptable to the Supervisory Authorities tosystematically reduce any segment of the portfolio which the Supervisory Authoritiesdeems to be an undue concentration of credit in relation to the Bank’s Tier 1Capital.  At a minimum the plan mustprovide for written procedures for the ongoing measurement and monitoring ofthe concentrations of credit, and a limit on concentrations commensurate withthe Bank’s capital position, safe and sound banking practices, and the overallrisk profile of the Bank.

 

## ***INTERNALLOAN REVIEW***

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8.             Within 60 days from the effective date of this ORDER,the Bank shall adopt an effective internal loan review and grading system toprovide for the periodic review of the Bank’s loan portfolio in order toidentify and categorize the Bank’s loans, and other extensions of credit whichare carried on the Bank’s books as loans, on the basis of credit quality.  Such system and its implementation shall besatisfactory to the Supervisory 

 

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

 

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

 

(b)           application of loan grading standards and criteria tothe Bank’s loan portfolio;

 

(c)           categorization of the Bank’s loans into groupingsbased on the varying degrees of credit and other risks that may be presentedunder the applicable grading standards and criteria, but in no case, will aloan be assigned a rating higher than that assigned by examiners at the last visitationand/or examination of the Bank without prior written notification to theSupervisory Authorities;

 

(d)           assessment of the likelihood that each loan exhibitingcredit and other risks will not be repaid according to its terms andconditions;

 

(e)           identification of any loan that is not in conformancewith the Bank’s loan policy;

 

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

 

(g)           requirement of a written report to be made to theBoard, not less than quarterly after the effective date of this ORDER.  The report shall identify the status of thoseloans that exhibit credit and other risks under the applicable gradingstandards/criteria and the prospects for full collection and/or strengtheningof the quality of any such loans; and

 

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

 

**PLAN FOR EXPENSES/PROFITABILITY**

 

9.             (a)           Within 60 days from theeffective date of this ORDER, the Bank shall formulate and implement a writtenprofit plan and a realistic, comprehensive budget for all categories of incomeand expense.  This plan shall beforwarded to the Supervisory Authorities for review and comment and shalladdress, at a minimum, the following:

 

(i)            goals and strategies forimproving and sustaining the earnings of the Bank;

 

(ii)           the major areas in, andmeans by which the Bank will seek to improve the Bank’s operating performance;and

 

(iii)          the operating assumptionsthat form the basis for, and adequately support, major projected income andexpense components.

 

(b)           Following the end of eachcalendar quarter, the Board shall evaluate the Bank’s actual performance inrelation to the plan required by this paragraph and shall record the results ofthe evaluation, and any actions taken by the Bank in the minutes of the Boardmeeting at which such evaluation is undertaken.

 

**FUNDSMANAGEMENT PLAN**

 

10.           Within 60 days from the effective date of this ORDER,the Bank shall adopt and implement a written plan addressing liquidity,contingent funding, and asset liability management.  A copy of the plan shall be submitted to theSupervisory Authorities upon its completion for review and comment.  Within 30 days from the receipt of anycomments from the Supervisory Authorities, the Bank shall incorporate thoserecommended changes.  Thereafter, theBank shall implement and follow the plan. 

 

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Annually during the lifeof this ORDER, the Bank shall review this plan for adequacy and, based uponsuch review, shall make appropriate revisions to the plan that are necessary tostrengthen funds management procedures and maintain adequate provisions to meetthe Bank’s liquidity needs.

 

**BROKERED DEPOSITS**

 

11.           (a)           Throughout the life of thisORDER, the Bank shall not accept, renew, or rollover any brokered deposit, asdefined by 12 C.F.R. § 337.6(a)(2), unless it is in compliance with therequirements of 12 C.F.R. § 337.6(b), governing solicitation and acceptance ofbrokered deposits by insured depository institutions.

 

(b)           Within 30 days of theeffective date of this ORDER, the Bank shall submit a written plan foreliminating its reliance on brokered deposits to the FDIC for review andcomment.  The plan shall detail thecurrent composition of brokered deposits by maturity and explain the means bywhich such deposits will be paid.  Within30 days of receipt of all such comments from the FDIC, and after considerationof all such comments, the Bank shall approve the revised plan, which approvalshall be recorded in the minutes of the Board meeting.  Thereafter, the Bank shall implement andfully comply with the plan.

 

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

 

**ASSET GROWTH LIMITATIONS**

 

12.           During the life of thisORDER, the Bank shall limit asset growth to ten percent (10.0%) per annum andin no event shall asset growth result in noncompliance with the capitalmaintenance provisions of this ORDER without receiving prior written approval 

 

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ofthe Supervisory Authorities.  In no eventshall asset growth result in noncompliance with the capital maintenanceprovisions of this ORDER unless the Bank receives prior written approval fromthe Supervisory Authorities.

 

**RESTRICTIONSON CERTAIN PAYMENTS**

 

13.           (a)           While this ORDER is in effect, the Bank shall not declare orpay dividends or bonuses without the prior written approval of the SupervisoryAuthorities.  All requests for priorapproval shall be received at least 30 days prior to the proposed dividenddeclaration date (at least 5 days with respect to any request filed within thefirst 30 days after the date of this ORDER) and shall contain, but not belimited to, an analysis of the impact such dividend or bonus payment would haveon the Bank’s capital, income, and/or liquidity positions.  The Supervisory Authorities will approve adividend or any other form of payment representing a reduction in capitalprovided that the Supervisory Authorities determine that such dividend orpayment will not have an unacceptable impact on the Bank’s capital position,cash flow, concentrations of credit, asset quality and ALLL needs.

 

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

 

**DISCLOSURE**

 

14.           Following the effective dateof this ORDER, the Bank shall send to its shareholders or otherwise furnish adescription of this ORDER in conjunction with the Bank’s next shareholdercommunication and also in conjunction with its notice or proxy statementpreceding the Bank’s next shareholder meeting. The description shall fully describe the ORDER in all materialrespects.  The description and anyaccompanying 

 

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communication,statement or notice shall be sent to the FDIC, Division of Supervision and ConsumerProtection, Accounting and Securities Disclosure Section, 550 17th Street, N.W., Room F-6066, Washington,D.C. 20429 and to the Commissioner for the State Board, 1205 Pendleton Street, Suite 305,Columbia, SC 29201, at least fifteen (15) days prior to dissemination toshareholders.  Any changes requested tobe made by the Supervisory Authorities shall be made prior to dissemination ofthe description, communication, notice, or statement.

 

**PROGRESSREPORTS**

 

15.           Within 45 days from the end of the first quarterfollowing the effective date of this ORDER, and within 45 days of the end ofeach quarter thereafter, the Bank shall furnish written progress reports to theSupervisory Authorities detailing the form and manner of any actions taken tosecure compliance with this ORDER and the results thereof.  Such reports shall include a copy of the Bank’sReports of Condition and of Income.  Suchreports may be discontinued when the corrections required by this ORDER havebeen accomplished and the Supervisory Authorities have released the Bank inwriting from making further reports.  Allprogress reports and other written responses to this ORDER shall be reviewed bythe Board and made a part of the minutes of the appropriate Board meeting.

 

Theprovisions of this ORDER shall not bar, estop, or otherwise prevent the FDIC,the State Board, or any other federal or state agency or department from takingany other action against the Bank or any of the Bank’s current or formerinstitution-affiliated parties.

 

ThisORDER shall be effective on the date of issuance.

 

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Theprovisions of this ORDER shall be binding upon the Bank, itsinstitution-affiliated parties, and any successors and assigns thereof.

 

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

 

IssuedPursuant to Delegated Authority

 
|   | Dated this 23rd day of February,  2010.          |
|--------|--------------------------------------------------|
|   |                                             |
|   | /s/ Doreen R. Eberley                            |
|   | Doreen R. Eberley                                |
|   | Acting Regional  Director                        |
|   | Division of Supervision  and Consumer Protection |
|   | Atlanta Region                                   |
|   | Federal Deposit  Insurance Corporation           |

 

 

TheCommissioner, having duly approved the foregoing ORDER on behalf of the StateBoard, and the Bank, through its Board, agree that the issuance of said ORDERby the FDIC shall be binding as between the Bank and the State Board to thesame degree and to the same legal effect that such ORDER would be binding ifthe State Board had issued a separate ORDER that included and incorporated allof the provisions of the foregoing ORDER, pursuant to S.C. Code Ann. § 34-1-60(1976).

 

 
|   | Dated this 23rd day of February, 2010. |
|--------|----------------------------------------|
|   |                                   |
|   | /s/ Louie A. Jacobs                    |
|   | Louie  A. Jacobs                       |
|   | Commissioner  of Banking               |
|   | South  Carolina                        |
|   | State  Board of Financial Institutions |

 

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