Unassociated Document


    
      UNITED
STATES OF AMERICA

      DEPARTMENT
OF THE TREASURY

      COMPTROLLER
OF THE CURRENCY

      


      
        	
                In
      the Matter of:

                First
      National Bank of The South

                Spartanburg,
      South Carolina

              	
                )

                )

                )

              	
                 

                AA-EC-2009-20

              


      

      


      CONSENT
ORDER

      


      The
Comptroller of the Currency of the United States of America (“Comptroller”),
through his National Bank Examiner, has supervisory authority over First
National Bank of The South, Spartanburg, S.C. (“Bank”).

       

      The Bank,
by and through its duly elected and acting Board of Directors (“Board”), has
executed a Stipulation and Consent to the Issuance of a Consent Order
(“Stipulation and Consent”), dated April 27, 2009, that is accepted by the
Comptroller.  By this Stipulation and Consent, which is incorporated
by reference, the Bank has consented to the issuance of this Consent Order
(“Order”) by the Comptroller.

       

      Pursuant
to the authority vested in him by the Federal Deposit Insurance Act, as amended,
12 U.S.C. § 1818, the Comptroller hereby orders that:

       

      ARTICLE
I

       

      COMPLIANCE
COMMITTEE

       

      (1)           Within
ten (10) days, the Board shall appoint a Compliance Committee of at least three
(3) directors, none of whom shall be employees or controlling shareholders of
the Bank or any of its affiliates (as the term "affiliate" is defined in
12 U.S.C. § 371c(b)(1)), or a family member of any such
person.  Upon appointment, the names of the members of the Compliance
Committee and, in the event of a change of the membership, the name of any new
member shall be submitted in writing to the Director for Special Supervision
("Director").  The Compliance Committee shall be responsible for
monitoring and coordinating the Bank's adherence to the provisions of this
Order.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


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

       

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

       

      
        	
                 
      

              	
                (a)

              	
                a
      description of the actions needed to achieve full compliance with each
      Article of this Order;

              


      

       

      
        	
                 
      

              	
                (b)

              	
                actions
      taken to comply with each Article of this Order;
  and

              


      

       

      
        	
                 
      

              	
                (c)

              	
                the
      results and status of those
actions.

              


      

       

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

       

      (5)           All
reports or plans which the Bank or Board has agreed to submit to the Director
pursuant to this Order shall be forwarded, by overnight mail or via email, to
the following:

       

      
        
          
            	
                    Director
      for Special Supervision

                  	
                    with
      a copy to:

                  
	
                    Office
      of the Comptroller of the Currency

                  	
                    Carolinas
      Field Office

                  
	
                    Mail
      Stop 6-4

                  	
                    212
      South Tryon Street

                  
	
                    250
      E Street, S.W.

                  	
                    Suite
      700

                  
	
                    Washington,
      DC  20219

                  	
                    Charlotte,
      NC 28281

                  


          

        

      

      


      (6)           The
Board shall ensure that the Bank has sufficient processes, personnel, and
control systems to effectively implement and adhere to all provisions of this
Order, and that Bank personnel have sufficient training and authority to execute
their duties and responsibilities under this Order.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      


      ARTICLE
II

       

      STRATEGIC
PLAN

       

      (1)           Within
ninety (90) days, the Board shall forward to the Director for his review,
pursuant to paragraph (4) of this Article, a written Strategic Plan for the Bank
that is acceptable to the Director, covering at least a three-year
period.  At the next Board meeting following receipt of the Director’s
written determination of no supervisory objection, the Board shall adopt and the
Bank (subject to Board review and ongoing monitoring) shall implement and
thereafter ensure adherence to the Strategic Plan.  The Strategic Plan
shall establish objectives for the Bank's overall risk profile, earnings
performance, growth, balance sheet mix, off-balance sheet activities, liability
structure, capital adequacy, reduction in the volume of nonperforming assets,
product line development, and market segments that the Bank intends to promote
or develop, together with strategies to achieve those objectives, and shall, at
a minimum, include:

       

      
        	
                 
      

              	
                (a)

              	
                a
      mission statement that forms the framework for the establishment of
      strategic goals and objectives;

              


      

       

      
        	
                 
      

              	
                (b)

              	
                a
      description of the Bank's targeted market(s) and an assessment of the
      current and projected risks and competitive factors in its identified
      target market(s);

              


      

       

      
        	
                 
      

              	
                (c)

              	
                the
      strategic goals and objectives to be accomplished and actions to be taken
      to achieve identified goals and objectives, including specific time
      frames;

              


      

       

      
        	
                 
      

              	
                (d)

              	
                specific
      actions to improve Bank earnings and asset quality, to reduce the level of
      concentrations of credit and funding costs, and to reduce reliance on
      non-core funding;

              


      

       

      
        	
                 
      

              	
                (e)

              	
                identification
      of Bank personnel to be responsible and accountable for achieving each
      goal and objective of the Strategic Plan, including specific time
      frames;

              


      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                (f)

              	
                a
      financial forecast, to include projections for major balance sheet and
      income statement accounts, targeted financial ratios, and growth
      projections over the period covered by the Strategic
  Plan;

              


      

       

      
        	
                 
      

              	
                (g)

              	
                a
      description of the assumptions used to determine financial projections and
      growth targets;

              


      

       

      
        	
                 
      

              	
                (h)

              	
                an
      identification and risk assessment of the Bank's present and planned
      future product lines (assets and liabilities) that will be utilized to
      accomplish the strategic goals and objectives established in the Strategic
      Plan, with the requirement that the risk assessment of new product lines
      must be completed prior to the offering of such product
    lines;

              


      

       

      
        	
                 
      

              	
                (i)

              	
                a
      description of control systems to mitigate risks associated with planned
      new products, growth, or any proposed changes in the Bank's operating
      environment;

              


      

       

      
        	
                 
      

              	
                (j)

              	
                an
      evaluation of the Bank's internal operations, staffing requirements, board
      and management information systems, and policies and procedures for their
      adequacy and contribution to the accomplishment of the goals and
      objectives established in the Strategic
Plan;

              


      

       

      
        	
                 
      

              	
                (k)

              	
                a
      management employment and succession program to promote the retention and
      continuity of capable management;

              


      

       

      
        	
                 
      

              	
                (l)

              	
                assigned
      responsibilities and accountability for the strategic planning process,
      new products, growth goals, and proposed changes in the Bank's operating
      environment; and

              


      

       

      
        	
                 
      

              	
                (m)

              	
                a
      description of systems to monitor the Bank's progress in meeting the
      Strategic Plan's goals and
objectives.

              


      

      


      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      (2)           At
least monthly, the Board shall review financial reports and earnings analyses
prepared by the Bank that evaluate the Bank's performance against the goals and
objectives established in the Strategic Plan, as well as the Bank’s written
explanation of significant differences between actual and projected balance
sheets, income statements, and expense accounts, including descriptions of
extraordinary and/or nonrecurring items.  Within ten (10) days of the
completion of its review, the Board shall submit a copy of the reports to the
Director.

       

      (3)           At
least quarterly, the Board shall prepare a written evaluation of the Bank's
performance against the Strategic Plan, based on the Bank’s monthly reports,
analyses, and written explanations of any differences between actual performance
and the Bank’s strategic goals and objectives, and shall include a description
of the actions the Board will require the Bank to take to address any
shortcomings, which shall be documented in the Board meeting
minutes.  Within ten (10) days of completing its evaluation, the Board
shall submit a copy to the Director.

       

      (4)           Prior
to adoption by the Board, a copy of the Strategic Plan, and any subsequent
amendments or revisions, shall be forwarded to the Director for review and prior
written determination of no supervisory objection.  Upon receiving a
written determination of no supervisory objection from the Director, the Board
shall adopt and the Bank shall immediately implement and adhere to the Strategic
Plan.

       

      (5)           The
Bank may not initiate any action that deviates significantly from the
Board-approved Strategic Plan without a written determination of no supervisory
objection from the Director.  The Board must give the Director
advance, written notice of its intent to deviate significantly from the
Strategic Plan, along with an assessment of the impact of such change on the
Bank's condition, including a profitability analysis and an evaluation of the
adequacy of the Bank's organizational structure, staffing, management
information systems, internal controls, and written policies and procedures to
identify, measure, monitor, and control the risks associated with the change in
the Strategic Plan.

      


      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (6)           For
the purposes of this Article, changes that may constitute a significant
deviation from the Strategic Plan include, but are not limited to, a change in
the Bank's marketing strategies, marketing partners, underwriting practices and
standards, credit administration, account management, collection strategies or
operations, fee structure or pricing, accounting processes and practices, or
funding strategy, any of which, alone or in aggregate, may have a material
impact on the Bank's operations or financial performance; or any other changes
in personnel, operations, or external factors that may have a material impact on
the Bank's operations or financial performance.  For purposes of this
paragraph, “personnel” shall include the president, chief executive officer,
chief operating officer, chief financial officer, chief credit officer, chief
compliance officer, risk manager, auditor, member of the Bank's board of
directors, or any other position subsequently identified in writing by the
Director.

       

      ARTICLE
III

       

      CAPITAL PLAN AND HIGHER
MINIMUMS

       

      (1)           The
Board shall within one hundred twenty (120) days achieve and thereafter maintain
the following minimum capital ratios (as defined in 12 C.F.R. Part 3)1:

       

      
        	
                 
      

              	
                (a)

              	
                Tier
      1 capital at least equal to eleven percent (11%) of risk-weighted
      assets;

              


      

       

      
        	
                 
      

              	
                (b)

              	
                Tier
      1 capital at least equal to nine percent (9%) of adjusted total
      assets.2

              


      

       

        
          


      

      
        1 The
requirement in this Order to meet and maintain a specific capital level means
that the Bank may not be deemed to be "well capitalized" for purposes of
12 U.S.C. § 1831o and 12 C.F.R. Part 6, pursuant to
12 C.F.R. § 6.4(b)(1)(iv).

      

        
        2 Adjusted
total assets is defined in 12 C.F.R. § 3.2(a) as the average total
asset figure used for call report purposes minus end-of-quarter intangible
assets.

         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

      

       

      (2)           Within
ninety (90) days, the Board shall forward to the Director for his review,
pursuant to paragraph (4) of this Article, a written Capital Plan for the Bank,
consistent with the Bank's Strategic Plan as required by Article II, covering at
least a three-year period.  At the next Board meeting following
receipt of the Director’s written determination of no supervisory objection, the
Board shall adopt and the Bank (subject to Board review and ongoing monitoring)
shall implement and thereafter ensure adherence to the Capital
Plan.  The Capital Plan shall include:

       

      
        	
                 
      

              	
                (a)

              	
                specific
      plans for the achievement and maintenance of adequate capital, which may
      in no event be less than the requirements of paragraph (1) of this
      Article;

              


      

       

      
        	
                 
      

              	
                (b)

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

              


      

       

      
        	
                 
      

              	
                (c)

              	
                projections
      of the sources and timing of additional capital to meet the Bank's future
      needs, as set forth in the Strategic
Plan;

              


      

       

      
        	
                 
      

              	
                (d)

              	
                identification
      of the primary sources from which the Bank will maintain an appropriate
      capital structure to meet the Bank's future needs, as set forth in the
      Strategic Plan;

              


      

       

      
        	
                 
      

              	
                (e)

              	
                specific
      plans detailing how the Bank will comply with restrictions or requirements
      set forth in this Order and with 12 U.S.C. § 1831o, including
      the restrictions against brokered deposits in 12 C.F.R. § 337.6;
      and

              


      

       

      
        	
                 
      

              	
                (f)

              	
                contingency
      plans that identify alternative methods to strengthen capital, should the
      primary source(s) under paragraph (d) of this Article not be
      available.

              


      

       

      (3)           The
Bank may pay a dividend or make a capital distribution only:

       

      
        	
                 
      

              	
                (a)

              	
                when
      the Bank is in compliance with its approved Capital Plan and would remain
      in compliance with its approved Capital Plan immediately following the
      payment of any dividend;

              


      

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      


      
        	
                 
      

              	
                (b)

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

              


      

       

      
        	
                 
      

              	
                (c)

              	
                following
      the prior written determination of no supervisory objection by the
      Director.

              


      

       

      (4)           Prior
to adoption by the Board, a copy of the Capital Plan shall be submitted to the
Director for a prior written determination of no supervisory
objection.  Upon receiving a written determination of no supervisory
objection from the Director, the Board shall adopt and the Bank shall
immediately implement and adhere to the Capital Plan.  The Board shall
review and update the Bank's Capital Plan at least annually and more frequently
if necessary or if requested by the Director.  Revisions to the Bank’s
Capital Plan shall be submitted to the Director for a prior written
determination of no supervisory objection.

       

      (5)           If
the Director determines, in his sole judgment, that the Bank has failed to
submit an acceptable Capital Plan as required by paragraph (2) of this Article,
or has failed to implement or adhere to a Capital Plan to which the Director has
taken no supervisory objection pursuant to paragraph (4) of this Article; then
within thirty (30) days of receiving written notice from the Director of such a
determination, the Bank shall develop and shall submit to the Director for his
review and prior written determination of no supervisory objection a Disposition
Plan that shall detail the Board’s proposal to sell or merge the Bank, or
liquidate the Bank under 12 U.S.C. § 181.

       

      (6)           In
the event that the Disposition Plan submitted by the Bank’s Board outlines a
sale or merger of the Bank, the Disposition Plan shall, at a minimum, address
the steps that will be taken and the associated timeline to ensure that a
definitive agreement for the sale or merger is executed not later than ninety
(90) days after the receipt of the Director’s written determination of no
supervisory objection to the Disposition Plan.  If the Disposition
Plan outlines a liquidation of the Bank, the Disposition Plan shall detail the
actions and steps necessary to accomplish the liquidation in conformance with 12
U.S.C. §§ 181 and 182, and the dates by which each step of the liquidation
shall be completed, including the date by which the Bank will terminate the
national bank charter.  In the event of liquidation, the Bank shall
hold a shareholder vote, pursuant to 12 U.S.C. § 181, and commence liquidation
within thirty (30) days of receiving the Director’s written determination of no
supervisory objection to the Disposition Plan.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      


      (7)           After
the Director has advised the Bank in writing that he does not take supervisory
objection to the Disposition Plan, the Board shall immediately adopt and
implement, and shall thereafter ensure adherence to, the terms of the
Disposition Plan.  Failure to submit a timely, acceptable Disposition
Plan, or failure to implement and adhere to the Disposition Plan after the Board
obtains a written determination of no supervisory objection from the Director,
may be deemed a violation of this Order, in the exercise of the Director’s sole
discretion.

       

      ARTICLE
IV

       

      BOARD TO ENSURE COMPETENT
MANAGEMENT

       

      (1)           The
Board shall ensure that the Bank has competent management in place on a
full-time basis in all executive officer positions to carry out the Board's
policies; ensure compliance with this Order; ensure compliance with applicable
laws, rules, and regulations; and manage the day-to-day operations of the Bank
in a safe and sound manner.

       

      (2)           Within
ninety (90) days, the Board shall prepare a written assessment of the
capabilities of the Bank’s executive officers to perform present and anticipated
duties, taking into account the findings contained in the Report of Examination,
and factoring in the officer's past actual performance, experience, and
qualifications, compared to their position description, duties and
responsibilities, with particular emphasis on their proposed responsibilities to
execute the Strategic Plan and correct the concerns raised in the Report of
Examination.  Upon completion, a copy of the written assessment shall
be submitted to the Director.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      


      (3)           If
the Board determines that an officer's performance, skills or abilities needs
improvement, the Board will, within thirty (30) days following its
determination, require the Bank to develop and implement a written program, with
specific time frames, to improve the officer's performance, skills and
abilities.  Upon completion, a copy of the written program shall be
submitted to the Director.

       

      (4)           If
the Board determines that an officer will not continue in his/her position, the
Board shall document the reasons for this decision in its assessment performed
pursuant to paragraph (2) of this Article, and shall within sixty (60) days of
such vacancy identify and provide notice to the Director, pursuant to paragraph
(5) of this Article, of a qualified and capable candidate for the vacant
position who shall be vested with sufficient executive authority to ensure the
Bank's compliance with this Order and the safe and sound operation of functions
within the scope of that position's responsibility.

       

      (5)           Prior
to the appointment of any individual to an executive officer position, the Board
shall submit to the Director written notice, as required by 12 C.F.R.
§ 5.51 and in accordance with the Comptroller's Licensing
Manual.  The Director shall have the power to disapprove the
appointment of the proposed executive officer.  However, the failure
to exercise such veto power shall not constitute an approval or endorsement of
the proposed officer.  The requirement to submit information and the
prior disapproval provisions of this Article are based upon the authority of 12
U.S.C. § 1818(b) and do not require the Comptroller or the Director to complete
his review and act on any such information or authority within ninety (90)
days.

       

      (6)           The
Board shall perform, at least annually, a written performance appraisal for each
Bank executive officer that establishes objectives by which the officer’s
effectiveness will be measured, evaluates performance according to the
position's description and responsibilities, and assesses accountability for
action plans to remedy issues raised in Reports of Examination or audit
reports.  Upon completion, copies of the performance appraisals shall
be submitted to the Director.  The Board shall ensure that the Bank
addresses any identified deficiencies in a manner consistent with paragraphs (3)
and (4) of this Article.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      


      ARTICLE
V

       

      LIQUIDITY RISK MANAGEMENT
PROGRAM

      


      (1)           Within
sixty (60) days, the Board shall revise and maintain a comprehensive liquidity
risk management program which assesses, on an ongoing basis, the Bank's current
and projected funding needs, and ensures that sufficient funds or access to
funds exist to meet those needs.  Such a program must include
effective methods to achieve and maintain sufficient liquidity and to measure
and monitor liquidity risk, to include at a minimum:

       

      
        	
                 
      

              	
                (a)

              	
                strategies
      to maintain sufficient liquidity at reasonable costs including, but not
      limited to, the following:

              


      

       

      
        	
                 
      

              	
                (i)

              	
                better
      diversification of funding sources, reducing reliance on high cost
      providers;

              


      

       

      
        	
                 
      

              	
                (ii)

              	
                reducing
      rollover risk;

              


      

       

      
        	
                 
      

              	
                (iii)

              	
                increasing
      liquidity through such actions as obtaining additional capital, placing
      limits on asset growth, aggressive collection of problem loans and
      recovery of charged-off assets, and asset sales;
  and

              


      

       

      
        	
                 
      

              	
                (iv)

              	
                monitoring
      the projected impact on reputation, economic and credit conditions in the
      Bank's market(s).

              


      

       

      
        	
                 
      

              	
                (b)

              	
                The
      preparation of liquidity reports which shall be reviewed by the Board on
      at least a monthly basis, to include, at a minimum, the
      following:

              


      

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
      
        
          	
                   
      

                	
                  (i)

                	
                  a
      certificate of deposit maturity schedule, including separate line items
      for brokered deposits and uninsured deposits, depicting maturities on a
      weekly basis for the next two months and monthly for the following four
      months, which schedule shall be updated at least
weekly;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (ii)

                	
                  a
      schedule of all funding obligations, including money market accounts,
      unfunded loan commitments, outstanding lines of credit and outstanding
      letters of credit, showing the obligations that can be drawn immediately,
      and on a weekly basis for the next two months and monthly for the
      following four months, which schedule shall be prepared and updated at
      least weekly;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (iii)

                	
                  a
      listing of funding sources, prepared and updated on a weekly basis for the
      next two months and monthly for the following four months, including
      federal funds sold; unpledged assets and assets available for sale; and
      borrowing lines by lender, including original amount, remaining
      availability, type and book value of collateral pledged, terms, and
      maturity date, if applicable.

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (iv)

                	
                  a
      monthly sources and uses of funds report for a minimum period of six
      months, updated monthly, which reflects known and projected changes in
      asset and liability accounts, and the assumptions used in developing the
      projections.  Such reports shall include, at a
      minimum:

                
	 	 	 


        

         

      

      
        
          
            	
                     

                  	
                    1.

                  	
                    the
      funding obligations and sources required by (b) and (c) of this
      paragraph;

                  


          

        

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

         

      

      
        
          	
                   
      

                	
                  2.

                	
                  projected
      additional funding sources, including loan payments, loan
      sales/participations, or deposit increases; and

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  3.

                	
                  projected
      additional funding requirements from a reduction in deposit accounts
      including uninsured and brokered deposits, inability to acquire federal
      funds purchased, or availability limitations or reductions associated with
      borrowing relationships.

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (c)

                	
                  A
      contingency funding plan that, on a monthly basis, forecasts funding
      needs, and funding sources under different stress scenarios which
      represent management's best estimate of balance sheet changes that may
      result from a liquidity or credit event.  The contingency
      funding plan shall include:

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (i)

                	
                  specific
      plans detailing how the Bank will comply with restrictions or requirements
      set forth in this Order and 12 U.S.C. §1831o, including the
      restrictions against brokered deposits in 12 C.F.R. §337.6 (which
      plans may be subject to revision as may be appropriate upon the adoption,
      if any, of currently-proposed changes to 12
  C.F.R.337.6);

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (ii)

                	
                  the
      preparation of reports which identify and quantify all sources of funding
      and funding obligations under best case and worst case scenarios,
      including asset funding, liability funding and off-balance sheet funding;
      and

                
	 	 	 


        

      

      
        	
                 
      

              	
                (iii)

              	
                procedures
      which ensure that the Bank's contingency funding practices are consistent
      with the Board's guidance and risk
tolerances.

              


      

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (2)          
The Board shall submit a copy of the comprehensive liquidity risk management
program, along with the reports required by this Article, to the Director for
review.

       

      ARTICLE
VI

       

      LOAN PORTFOLIO
MANAGEMENT

       

      (1)          
Within sixty (60) days, Board shall adopt and the Bank (subject to Board review
and ongoing monitoring) shall implement and thereafter ensure adherence to a
written credit policy to improve the Bank's loan portfolio
management.  The credit policy shall include (but not be limited
to):

       

      
        
          	
                   
      

                	
                  (a)

                	
                  a
      description of the types of credit information required from borrowers and
      guarantors, including (but not limited to) annual audited statements,
      interim financial statements, personal financial statements, and tax
      returns with supporting schedules;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (b)

                	
                  procedures
      that require any extension of credit (new, maturity extension, or renewal)
      is made only after obtaining and validating current credit information
      about the borrower and any guarantor sufficient to fully assess and
      analyze the borrower’s and guarantor’s cash flow, debt service
      requirements, contingent liabilities, and global liquidity condition, and
      only after the credit officer prepares a documented credit
      analysis;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (c)

                	
                  procedures
      that require any extension of credit (new, maturity extension, or renewal)
      is made only after obtaining and documenting the current valuation of any
      supporting collateral, and that reasonable limits are established on
      credit advances against collateral, based on a consideration of (but not
      limited to) a realistic assessment of the value of collateral, the ratio
      of loan to value, and overall debt service
  requirements;

                


        

         

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

         

      

      
        
          	
                   
      

                	
                  (d)

                	
                  procedures
      and controls to periodically verify the existence and lien position of
      collateral;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (e)

                	
                  procedures
      to ensure that loans made for the purpose of constructing or developing
      real estate include (but are not limited to) requirements
    to:

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (i)

                	
                  obtain
      and evaluate detailed project plans; detailed project budget; time frames
      for project completion; detailed market analysis; and sales projections,
      including projected absorption rates;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (ii)

                	
                  conduct
      stress testing of significant project and lending; and

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (iii)

                	
                  obtain
      current documentation sufficient to support a detailed analysis of the
      financial condition of borrowers and significant
    guarantors.

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (f)

                	
                  a
      requirement that borrowers and/or guarantors maintain any collateral
      margins established in the credit approval process;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (g)

                	
                  procedures
      that prohibit the capitalization of accrued interest on any loan renewal
      or extension;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (h)

                	
                  procedures
      that prohibit, on any loan renewal, extension or modification, the
      establishment of an interest reserve using the proceeds of any Bank loan
      to the same borrower or guarantor;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (i)

                	
                  procedures
      to ensure that all exceptions to the credit policy shall be clearly
      documented on the loan offering sheet, problem loan report, and other MIS;
      and approved by the Board or a committee thereof before the loan is funded
      or renewed;

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (j)

                	
                  credit
      risk rating definitions consistent with applicable regulatory
      guidance;

                


        

         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

           

        

      

      
        
          	
                   
      

                	
                  (k)

                	
                  procedures
      for early problem loan identification, to ensure that credits are
      accurately risk rated at least monthly; and

                
	 	 	 


        

      

      
        	
                 
      

              	
                (l)

              	
                prudent
      lending and approval limits for lending officers that are commensurate
      with their experience and qualifications, and that prohibit combining
      individual lending officers’ lending authority to increase
      limits.

              


      

       

      (2)          
The Board shall ensure that Bank personnel performing credit analyses are
adequately trained in cash flow analysis, particularly analysis using
information from tax returns, and that processes are in place to ensure that
additional training is provided as needed.

       

      (3)          
Within sixty (60) days the Board shall establish a written performance
appraisal  and salary administration process for loan officers that
adequately considers performance relative to job descriptions, policy
compliance, documentation standards, accuracy in credit grading, and other loan
administration matters.

       

      ARTICLE
VII

       

      APPRAISALS OF REAL
PROPERTY

       

      (1)          
The Board shall require and the Bank shall obtain a current independent
appraisal or updated appraisal, in accordance with 12 C.F.R. Part 34, on
any loan that is secured by real property:

       

      
        
          	
                   
      

                	
                  (a)

                	
                  where
      the loan’s appraisal was found to violate 12 C.F.R. Part 34;
      or

                
	 	 	 


        

      

      
        
          	
                   
      

                	
                  (b)

                	
                  where
      the loan was criticized in the most recent ROE or by the Bank's internal
      or external loan review and the most recent independent appraisal is more
      than twelve (12) months old; or

                
	 	 	 


        

      

      
        	
                 
      

              	
                (c)

              	
                where
      the borrower has failed to comply with the contractual terms of the loan
      agreement and the loan officer’s analysis of current financial information
      does not support the ongoing ability of the borrower or guarantor(s) to
      perform in accordance with the contractual terms of the loan agreement and
      the most recent independent appraisal is more than twelve (12) months
      old.

              


      

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (2)          
Appraisals required by this Article shall be ordered within thirty (30) days
following the event triggering the appraisal requirement, for delivery to the
Bank within sixty (60) days of ordering.

    


    (3)          
Within ninety (90) days, the Board shall require and the Bank shall develop and
implement an independent review and analysis process to ensure that appraisals
conform to appraisal standards and regulations. The appraisal review and
analysis process shall ensure that appraisals are:

    


    
      	
               
      

            	
              (a)

            	
              performed
      in accordance with 12 C.F.R. Part
34;

            


    

    
      
        	 	 	 
	
                 
      

              	
                (b)

              	
                consistent
      with the guidance in OCC Bulletin 2005-6, "Appraisal Regulations and the
      Interagency Statement on Independent Appraisal and Evaluation Functions:
      Frequently Asked Questions" (March 22, 2005);
  and

              


      

    

    
      
        	 	 	 
	
                 
      

              	
                (c)

              	
                consistent
      with OCC Advisory Letter 2003-9, "Independent Appraisal and Evaluation
      Function" (October 28, 2003).

              


      

    

     

    (4)          
Written documentation supporting each appraisal review and analysis shall be
retained in the loan file, along with the appraisal.

    


    ARTICLE
VIII

    


    OTHER REAL ESTATE
OWNED

    


    (1)          
Within thirty (30) days from the effective date of this Order, the Board shall
adopt, implement, and thereafter ensure Bank adherence to a written action plan
for each parcel of Other Real Estate Owned (“OREO”), to ensure that these assets
are accounted for and managed in accordance with 12 U.S.C. § 29 and 12 C.F.R.
Part 34.  Further, upon transfer of an asset to OREO, the Board shall
adopt, implement, and thereafter ensure Bank adherence to a written action plan
for the OREO, to ensure that the asset is accounted for and managed in
accordance with 12 U.S.C. § 29 and 12 C.F.R. Part 34.  At a minimum, the
plans shall:

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 
      

              	
                (a)

              	
                detail
      the valuation analysis and accounting for each OREO property, including
      the appraisal and all supporting documentation;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (b)

              	
                contain
      an analysis of the OREO property, which compares the cost to carry against
      the financial benefits of near term sale;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (c)

              	
                detail
      the marketing strategy and targeted time frames for disposing of each OREO
      property;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (d)

              	
                identify
      the Bank officer responsible for managing and authorizing transactions
      relating to each OREO property;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (e)

              	
                establish
      procedures to require periodic market valuations of each property, and the
      methodology to be used;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (f)

              	
                establish
      targeted write-downs at periodic intervals if marketing strategies are
      unsuccessful; and

              
	 	 	 


      

    

    
      	
               
      

            	
              (g)

            	
              provide
      for reports to the Board on the status of each OREO property and its
      disposition, on at least a monthly
basis.

            


    

    


    (2)          
Upon adoption, the Board shall submit a copy of the plans to the Director, and
shall provide to the Director a copy of the monthly status reports required in
paragraph (1)(g).

    


    ARTICLE
IX

     

    CONCENTRATIONS OF
CREDIT

    


    (1)          
Within sixty (60) days, the Board shall adopt and the Bank (subject to Board
review and ongoing monitoring) shall implement and thereafter ensure adherence
to a written commercial real estate (“CRE”) and construction & development
(“C&D) concentration management program (including appropriate revisions to
policies and procedures), designed to manage the risk in the Bank's CRE and
C&D loan portfolios in accordance with the guidelines in OCC Bulletin
2006-46, “Concentration in Commercial Real Estate Lending, Sound Risk Management
Practices” (December 6, 2006), and “Commercial Real Estate and Construction
Lending,” Booklet A-CRE of the Comptroller's Handbook. The
program shall include (but not be limited to) the following:

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    


    
      	
               
      

            	
              (a)

            	
              policy
      guidelines and an overall CRE and C&D lending strategy, addressing the
      level and nature of CRE and C&D exposures acceptable to the
      institution and setting concentration limits, including limits on
      commitments to individual borrowers and appropriate sub-limits (for
      example, by property types);

            


    

    


    
      	
               
      

            	
              (b)

            	
              procedures
      and controls to monitor compliance with the Bank’s lending policies and
      the Strategic Plan;

            


    

    


    
      	
               
      

            	
              (c)

            	
              procedures
      to identify and quantify the nature and level of risk presented by CRE and
      C&D concentrations, including review of reports describing changes in
      conditions in the Bank’s CRE and C&D
  markets;

            


    

    


    
      	
               
      

            	
              (d)

            	
              procedures
      to periodically review and revise, as appropriate, CRE and C&D risk
      exposure limits and sub-limits to conform to any changes in the
      institution’s strategies and to respond to changes in market
      conditions;

            


    

    


    
      	
               
      

            	
              (e)

            	
              periodic
      portfolio-level stress tests or sensitivity analysis to quantify the
      impact of changing economic conditions on asset quality, earnings, and
      capital;

            


    

    


    
      	
               
      

            	
              (f)

            	
              ongoing
      market analyses for the various property types and geographic markets
      represented in its portfolio;

            


    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (g)

            	
              appropriate
      strategies for managing CRE and C&D concentration levels, including a
      contingency plan to reduce or mitigate concentrations in the event of
      adverse CRE or C&D market conditions;
and

            


    

    


    
      	
               
      

            	
              (h)

            	
              periodic
      reports to the Board, to include the following, as
      appropriate:

            


    

    


    
      
        	
                 
      

              	
                (i)

              	
                a
      summary of concentration levels, by type and subtype;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (ii)

              	
                a
      synopsis of the Bank’s market analysis;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (iii)

              	
                a
      discussion of recommended strategy (for example, revise limits or change
      underwriting criteria) when concentrations approach or exceed
      Board-approved limits;

              
	 	 	 


      

    

    
      	
               
      

            	
              (iv)

            	
              a
      synopsis of changes in risk levels by concentration type and subtype, with
      discussion of recommended changes in credit administration procedures (for
      example, underwriting practices, risk rating, monitoring, and
      training).

            


    

    


    (2)          
The Board shall forward a copy of the program required in paragraph (1) above,
and any concentration reports, studies, or analyses to the
Director.

    


    ARTICLE
X

     

    CREDIT AND COLLATERAL
EXCEPTIONS

    


    (1)          
The Bank shall obtain current and complete credit information on all loans
lacking such information, including those listed in the most recent Report of
Examination (within sixty (60) days from the effective date of this Order), in
any subsequent Report of Examination (within sixty (60) days from the issuance
of such Report of Examination), in any internal or external loan review (within
sixty (60) days from the completion of such review), or in any listings of loans
lacking such information provided to management by the National Bank Examiners
at the conclusion of an examination (within sixty (60) days from receipt of such
listing).  The Bank shall maintain a list of any credit exceptions that
have not been corrected within the timeframe discussed above.  This list
shall include an explanation of the actions taken to correct the exception, the
reasons why the exception has not yet been corrected, and a plan to correct the
exception.

    


    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (2)          
The Bank shall ensure proper collateral documentation is maintained on all loans
and correct each collateral exception listed in the most recent Report of
Examination (within sixty (60) days from the effective date of this Order), in
any subsequent Report of Examination (within sixty (60) days from the issuance
of such Report of Examination), in any internal or external loan review (within
sixty (60) days from the completion of such review), or in any listings of loans
lacking such information provided to management by the National Bank Examiners
at the conclusion of an examination (within sixty (60) days from the receipt of
such listing).  The Bank shall maintain a list of any collateral exceptions
that have not been corrected within the timeframe discussed above.  This
list shall include an explanation of the actions taken to correct the exception,
the reasons why the exception has not yet been corrected, and a plan to correct
the exception.

    


    (3)          
Effective immediately, the Bank may grant, extend, renew, alter or restructure
any loan or other extension of credit only after:

    


    
      
        	
                 
      

              	
                (a)

              	
                documenting
      the specific reason or purpose for the extension of
  credit;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (b)

              	
                identifying
      the expected source of repayment in writing;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (c)

              	
                structuring
      the repayment terms to coincide with the expected source of
      repayment;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (d)

              	
                documenting,
      with adequate supporting material, the value of collateral and properly
      perfecting the Bank's lien on it where applicable; and

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (e)

              	
                obtaining
      and analyzing current and complete credit information, including cash flow
      analysis, where loans are to be repaid from operations and global cash
      flow analysis, where loan repayment is expected from other sources such as
      Guarantors;

              


      

    

    


    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (4)          
Failure to obtain the information required by subparagraph (3)(d) of this
Article shall require a majority of the full Board (or a designated committee
thereof) to certify in writing the specific reasons why obtaining and analyzing
the required information in (3)(d) would be detrimental to the best interests of
the Bank.  A copy of the Board certification shall be maintained in the
credit file of the affected borrower(s).

    


    ARTICLE
XI

    


    LOAN
REVIEW

    


    (1)          
Within thirty (30) days, the Board shall establish an effective, independent,
and on-going loan review program to review, at least quarterly, the Bank's loan
and lease portfolios, to assure the timely identification and categorization of
problem credits.  The program shall provide for a written report to be
filed with the Board promptly after each review and shall employ a loan and
lease rating system consistent with the guidelines set forth in “Rating Credit
Risk” and “Allowance for Loan and Lease Losses,” booklets A-RCR and A-ALLL,
respectively, of the Comptroller’s Handbook. Such
reports shall include, at a minimum:

    


    
      
        	
                 
      

              	
                (a)

              	
                conclusions
      regarding the overall quality of the loan and lease
      portfolios;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (b)

              	
                the
      identification, type, rating, and amount of problem loans and
      leases;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (c)

              	
                the
      identification and amount of delinquent loans and
  leases;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (d)

              	
                credit
      and collateral documentation exceptions;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (e)

              	
                loans
      meeting the criteria for nonaccrual status;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (f)

              	
                the
      identity of the loan officer of each loan reported in accordance with
      subparagraphs (b) through (e);

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (g)

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

              


      

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

         

      

    

    
      	
               
      

            	
              (h)

            	
              concentrations
      of credit;

            


    

    
      
        	 	 	 
	
                 
      

              	
                (i)

              	
                loans
      and leases to the directors, executive officers, and principal
      shareholders of the Bank and to their related interests;
    and

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (j)

              	
                loans
      and leases in nonconformance with the Bank's lending and leasing policies,
      and exceptions to the Bank’s lending and leasing
  policies.

              
	 	 	 


      

    

    (2)           The
Board shall evaluate the loan and lease review report(s) and shall ensure that
immediate, adequate, and continuing remedial action, as appropriate, is taken
upon all findings noted in the report(s), and documentation of the action taken
by the Bank to collect or strengthen assets identified as problem credits, shall
be preserved in the Bank.

     

    ARTICLE
XII

     

    ALLOWANCE FOR LOAN AND LEASE
LOSSES

     

    (1)           The
Board shall immediately require and the Bank shall implement and thereafter
adhere to a program for the maintenance of an adequate Allowance for Loan and
Lease Losses ("ALLL").  The program shall be consistent with the
comments on maintaining a proper ALLL found in the Interagency Policy Statement
on the ALLL contained in OCC Bulletin 2006-47 (December 13, 2006) and with
"Allowance for Loan and Lease Losses," booklet A-ALLL of the Comptroller's Handbook, and
shall incorporate the following:

    
      
        	 	 	 
	
                 
      

              	
                (a)

              	
                internal
      risk ratings of loans;

              


      

    

    
      
        	 	 	 
	
                 
      

              	
                (b)

              	
                results
      of the Bank's independent loan
review;

              


      

    

    
      
        	 	 	 
	
                 
      

              	
                (c)

              	
                criteria
      for determining which loans will be reviewed under Financial Accounting
      Standard ("FAS") 114, how impairment will be determined, and procedures to
      ensure that the analysis of loans complies with FAS 114
      requirements;

              
	 	 	 


      

    

    
      	
               
      

            	
              (d)

            	
              criteria
      for determining FAS 5 loan pools and an analysis of those loan
      pools;

            


    


    
      
         


      

      
        23

        
          

        

      

      
         


      

    

    


    
      
        	
                 
      

              	
                (e)

              	
                recognition
      of non-accrual loans in conformance with generally accepted accounting
      principles (“GAAP”) and regulatory guidance;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (f)

              	
                loan
      loss experience;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (g)

              	
                trends
      of delinquent and non-accrual loans;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (h)

              	
                concentrations
      of credit in the Bank; and

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (i)

              	
                present
      and projected economic and market conditions.

              
	 	 	 


      

    

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

     

    (3)           A
copy of the Board's ALLL program, and any subsequent revisions to the program,
shall be submitted to the Director for review.

     

    ARTICLE
XIII

     

    CRITICIZED
ASSETS

     

    (1)           Within
thirty (30) days, the Board shall adopt and the Bank (subject to Board review
and ongoing monitoring) shall implement and thereafter ensure adherence to a
written program designed to protect the Bank's interest in those assets
criticized in the most recent Report of Examination (“ROE”), in any subsequent
ROE, by any internal or external loan review, or in any list provided to
management by the National Bank Examiners during any examination as “doubtful,”
“substandard,” or “special mention.”  The program shall include the
development of Criticized Asset Reports (“CARs”) identifying all credit
relationships and other assets totaling in aggregate two hundred fifty thousand
dollars ($250,000) or more, criticized as "doubtful," "substandard," or "special
mention."  The CARs must be updated and submitted to the Board and the
Director monthly.  Each CAR shall cover an entire credit relationship
and include, at a minimum, analysis and documentation of the
following:


    
      
         


      

      
        24

        
          

        

      

      
         


      

    

    


    
      
        	
                 
      

              	
                (a)

              	
                the
      origination date and any renewal or extension dates, amount, purpose of
      the loan, and the originating and current loan
  officer(s);

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (b)

              	
                the
      expected primary and secondary sources of repayment, and an analysis of
      the adequacy of the repayment source;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (c)

              	
                the
      appraised value of supporting collateral and the position of the Bank's
      lien on such collateral, where applicable, as well as other necessary
      documentation to support the current collateral
  valuation;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (d)

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

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (e)

              	
                results
      of any FAS 114 impairment analysis;

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (f)

              	
                significant
      developments, including a discussion of changes since the prior CAR, if
      any; and

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (g)

              	
                the
      proposed action to eliminate the basis of criticism and the time frame for
      its accomplishment, including an appropriate exit
  strategy.

              
	 	 	 


      

    

    (2)           The
Bank may not extend credit, directly or indirectly, including renewals,
extensions, or capitalization of accrued interest, to a borrower whose loans or
other extensions of credit are criticized in any ROE, in any internal or
external loan review, or in any list provided to management by the National Bank
Examiners during any examination, unless and until each of the following
conditions is met:


    
      
         


      

      
        25

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              (a)

            	
              the
      Board, or a designated committee thereof, finds that the extension of
      additional credit is necessary to promote the best interests of the Bank
      and that prior to renewing, extending, or capitalizing any additional
      credit, a majority of the full Board (or designated committee) approves
      the credit extension and records, in writing, why such extension is
      necessary to promote the best interests of the Bank.  A copy of
      the findings and approval of the Board or designated committee shall be
      maintained in the credit file of the affected borrower and made available
      for review by National Bank
Examiners;

            


    

    
      
        	 	 	 
	
                 
      

              	
                (b)

              	
                the
      Bank performs a written credit and collateral analysis as required by
      paragraph (1)(d) of this Article and, if necessary, the proposed action
      referred to in paragraph (1)(g) of this Article is revised, as
      appropriate; and

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (c)

              	
                the
      Board's formal plan to collect or strengthen the criticized asset will not
      be compromised by the extension of additional credit.

              
	 	 	 


      

    

    ARTICLE
XIV

     

    INTEREST RATE
RISK

     

    (1)           Within
sixty (60) days, the Board shall adopt, implement, and thereafter ensure Bank
adherence to a written interest rate risk program.  In formulating
this program, the Board shall refer to the “Interest Rate Risk” booklet of the
Comptroller’s
Handbook.  The program shall provide for a coordinated interest
rate risk strategy and, at a minimum, shall address:

     

    
      	
               
      

            	
              (a)

            	
              the
      establishment of adequate management reports on which to base sound
      interest rate risk management
decisions;

            


    

    
      
        	 	 	 
	
                 
      

              	
                (b)

              	
                establishment
      and guidance of the Bank’s strategic direction and tolerance for interest
      rate risk;

              
	 	 	 


      

    

    
      	
               
      

            	
              (c)

            	
              implementation
      of effective tools to measure and monitor the Bank’s performance and
      overall interest rate risk
profile;

            


    


    
      
         


      

      
        26

        
          

        

      

      
         


      

    

    


    
      	
               
      

            	
              (d)

            	
              employment
      of competent personnel to manage interest rate
  risk;

            


    

    
      
        	 	 	 
	
                 
      

              	
                (e)

              	
                prudent
      limits on the nature and amount of interest rate risk that can be taken,
      and strategies to reduce excessive risk; and

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (f)

              	
                periodic
      review of the Bank's adherence to the program.

              
	 	 	 


      

    

    (2)           Upon
adoption, a copy of the written program shall be forwarded to the Director for
review.

     

    ARTICLE
XV

     

    ADMINISTRATIVE APPEALS AND
EXTENSIONS OF TIME

     

    (1)           If
the Bank requires an extension of any timeframe within this Order, the Board
shall submit a written request to the Director asking for relief.  Any
written requests submitted pursuant to this Article shall include a statement
setting forth in detail the special circumstances that require an extension of a
timeframe within this Order.

     

    (2)           All
such requests shall be accompanied by relevant supporting documentation, and any
other facts upon which the Bank relies.  The Director's decision
concerning a request is final and not subject to further review.

     

    ARTICLE
XVI

     

    CLOSING

     

    (1)           Although
the Bank is required to submit certain proposed actions and programs for the
review or prior written determination of no supervisory objection of the
Director, the Board has the ultimate responsibility for proper and sound
management of the Bank and the completeness and accuracy of the Bank’s books and
records.

     

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


    
      
         


      

      
        27

        
          

        

      

      
         


      

    

    


    (3)           Except
as otherwise expressly provided herein, any time limitations imposed by this
Order shall begin to run from the effective date of this Order.

     

    (4)           The
provisions of this Order are effective upon issuance of this Order by the
Comptroller, through his authorized representative whose hand appears below, and
shall remain effective and enforceable, except to the extent that, and until
such time as, any provisions of this Order shall have been amended, suspended,
waived, or terminated in writing by the Comptroller.

     

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

    
      
        	 	 	 
	
                 
      

              	
                (a)

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

              
	 	 	 


      

    

    
      	
               
      

            	
              (b)

            	
              require
      the timely reporting by Bank management of such actions directed by the
      Board to be taken under the terms of this
Order;

            


    

    
      
        	 	 	 
	
                 
      

              	
                (c)

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

              
	 	 	 


      

    

    
      
        	
                 
      

              	
                (d)

              	
                require
      corrective action be taken in a timely manner of any non-compliance with
      such actions.

              
	 	 	 


      

    

    (6)           This
Order is intended to be, and shall be construed to be, a final order issued
pursuant to 12 U.S.C. § 1818(b), and expressly does not form, and may not
be construed to form, a contract binding on the Comptroller or the United
States.


    
      
         


      

      
        28

        
          

        

      

      
         


      

    

    


    (7)           The
terms of this Order, including this paragraph, are not subject to amendment or
modification by any extraneous expression, prior agreements, or prior
arrangements between the parties, whether oral or written.

    


    IT IS SO
ORDERED, this 27th day of April,
2009.

    


    
      
        
          	
                  

                    /s/
      Ronald G. Schneck    

                  

                
	
                  Ronald
      G. Schneck

                
	
                  Director
      for Special
Supervision

                


        

      

    


    
      
         


      

      
        29

        
          

        

      

      
         


      

    

    


    UNITED
STATES OF AMERICA

    DEPARTMENT
OF THE TREASURY

    COMPTROLLER
OF THE CURRENCY

    


    
      	
              In
      the Matter of:

              First
      National Bank of The South

              Spartanburg,
      South Carolina

            	
              )

              )

              )

            	
              AA-EC-2009-20

               

            


    

    


    STIPULATION
AND CONSENT TO THE ISSUANCE

    OF
A CONSENT ORDER

    


    The
Comptroller of the Currency of the United States of America (“Comptroller”)
intends to initiate cease and desist proceedings against First National Bank of
The South, Spartanburg, South Carolina (“Bank”), pursuant to 12 U.S.C.
§ 1818(b), through the issuance of a Notice of Charges, for unsafe and
unsound banking practices relating to supervision of the Bank.

     

    The Bank,
in the interest of compliance and cooperation, consents to the issuance of a
Consent Order, dated April 27, 2009 (“Order”).

     

    In
consideration of the above premises, the Comptroller, through his authorized
representative, and the Bank, through its duly elected and acting Board of
Directors, hereby stipulate and agree to the following:

     

    ARTICLE
I

     

    JURISDICTION

     

    (1)           The
Bank is a national banking association chartered and examined by the Comptroller
pursuant to the National Bank Act of 1864, as amended, 12 U.S.C. § 1
et seq.

     

    (2)           The
Comptroller is “the appropriate Federal banking agency” regarding the Bank,
pursuant to 12 U.S.C. §§ 1813(q) and 1818(b).

     

    (3)           The
Bank is an “insured depository institution” within the meaning of 12 U.S.C.
§ 1818(b)(1).


    
      
         


      

      
        30

        
          

        

      

      
         


      

    


    (4)           As
a result of this Order:

     

    
      	
               
      

            	
              (a)

            	
              the
      Bank is not an “eligible bank” pursuant to 12 C.F.R. § 5.3(g)(4) for the
      purposes of 12 C.F.R. Part 5 regarding rules, policies and procedures for
      corporate activities, and is not an “eligible Bank” pursuant to 12 C.F.R.
      § 24.2(e)(4) for the purposes of 12 C.F.R. Part 24 regarding public
      welfare investments, unless, in either case, the Bank is informed in
      writing by the Comptroller;

            


    

    
      
        	 	 	 
	
                 
      

              	
                (b)

              	
                the
      Bank is subject to the limitation of 12 C.F.R. § 5.51(c)(6)(ii) for the
      purposes of 12 C.F.R. § 5.51 requiring OCC approval of a change in
      directors and senior executive officers, unless otherwise informed in
      writing by the Comptroller; and

              
	 	 	 


      

    

    
      	
               
      

            	
              (c)

            	
              the
      Bank is subject to the limitation on golden parachute and indemnification
      payments provided by 12 C.F.R. § 59.1(f)(1)(ii)(C) and 12 C.F.R. §
      5.51(c)(6)(ii), unless otherwise informed in writing by the
      Comptroller.

            


    

     

    ARTICLE
II

     

    AGREEMENT

     

    (1)           The
Bank, without admitting or denying any wrongdoing, hereby consents and agrees to
the issuance of the Order by the Comptroller.

     

    (2)           The
Bank further agrees that said Order shall be deemed an “order issued with the
consent of the depository institution,” as defined in 12 U.S.C.
§ 1818(h) (2), and consents and agrees that said Order shall become
effective upon its issuance and shall be fully enforceable by the Comptroller
under the provisions of 12 U.S.C.
§ 1818(i).  Notwithstanding the absence of mutuality of
obligation, or of consideration, or of a contract, the Comptroller may enforce
any of the commitments or obligations herein undertaken by the Bank under his
supervisory powers, including 12 U.S.C. § 1818(i), and not as a matter of
contract law.  The Bank expressly acknowledges that neither the Bank
nor the Comptroller has any intention to enter into a contract.

     

    (3)           The
Bank also expressly acknowledges that no officer or employee of the Comptroller
has statutory or other authority to bind the United States, the U.S. Treasury
Department, the Comptroller, or any other federal bank regulatory agency or
entity, or any officer or employee of any of those entities to a contract
affecting the Comptroller’s exercise of his supervisory
responsibilities.


    
      
         


      

      
        31

        
          

        

      

      
         


      

    

    


    ARTICLE
III

     

    WAIVERS

     

    (1)           The
Bank, by signing this Stipulation and Consent, hereby waives:

    
      
        	 	 	 
	
                 
      

              	
                (a)

              	
                the
      issuance of a Notice of Charges pursuant to 12 U.S.C.
      § 1818(b);

              


      

    

    
      
        	 	 	 
	
                 
      

              	
                (b)

              	
                any
      and all procedural rights available in connection with the issuance of the
      Order;

              
	 	 	 


      

    

    
      	
               
      

            	
              (c)

            	
              all
      rights to a hearing and a final agency decision pursuant to 12 U.S.C.
      § 1818(i) or 12 C.F.R. Part
19;

            


    

    
      
        	 	 	 
	
                 
      

              	
                (d)

              	
                all
      rights to seek any type of administrative or judicial review of the Order;
      and

              
	 	 	 


      

    

    
      	
               
      

            	
              (e)

            	
              any
      and all rights to challenge or contest the validity of the
      Order.

            


    

     

    ARTICLE
IV

     

    OTHER
ACTION

     

    (1)           The
Bank agrees that the provisions of this Stipulation and Consent shall not
inhibit, estop, bar, or otherwise prevent the Comptroller from taking any other
action affecting the Bank if, at any time, the Comptroller deems it appropriate
to do so to fulfill the responsibilities placed upon him by the several laws of
the United States of America.

    


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

    


    
      	
              /s/ Ronald G. Schneck 

            	 
      	
              April 27, 2009

            
	
              Ronald
      G. Schneck

              Director,
      Special Supervision Division

            	 
      	
              Date

            


    


    
      
         


      

      
        32

        
          

        

      

      
         


      

    


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

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        	

                                                                                                /s/
      C. Dan Adams

                                                                                              	 
      	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                C.
      Dan Adams

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      Mellnee G. Buchheit

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                Mellnee
      G. Buchheit

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      Jerry Calvert

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                Jerry
      Calvert

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 	 	 
	

                                                                                                /s/
      Martha C. Chapman

                                                                                              	 
      	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                Martha
      C. Chapman

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      W. Russel Floyd, Jr.

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                W.
      Russel Floyd, Jr.

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      C. Tyrone Gilmore, Sr.

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                C.
      Tyrone Gilmore, Sr.

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      I.S. Leevy Johnson

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                I.S.
      Leevy Johnson

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      Norman F. Pulliam

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                Norman
      F. Pulliam

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      Joel A. Smith, III

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                Joel
      A. Smith, III

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      Robert E. Staton

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                Robert
      E. Staton

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      William H. Stern

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                William
      H. Stern

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 
      	 
      	 
      
	

                                                                                                /s/
      Peter E. Weisman

                                                                                              	 	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                Peter
      E. Weisman

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 	 	 
	

                                                                                                /s/
      Donald Wildman

                                                                                              	 
      	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                Donald
      Wildman

                                                                                              	 
      	
                                                                                                Date

                                                                                              
	 	 	 
	

                                                                                                /s/
      Coleman Young, Jr.

                                                                                              	 
      	
                                                                                                April
      27, 2009

                                                                                              
	
                                                                                                Coleman
      Young, Jr.

                                                                                              	 
      	
                                                                                                Date

                                                                                              


                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    


    
      
         


      

      
        33