EXHIBIT 10.2


 


FEDERAL DEPOSIT INSURANCE CORPORATION


 


WASHINGTON, D.C.


 


	
   

  	
  )

  	
   

  
	
  In the Matter of

  	
  )

  	
   

  
	
   

  	
  )

  	
  ORDER TO

  
	
  ATLANTIC
  SOUTHERN BANK

  	
  )

  	
  CEASE AND DESIST

  
	
  MACON,
  GEORGIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  FDIC-09-225b

  
	
  (Insured
  State Nonmember Bank)

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  



 


Atlantic
Southern Bank, Macon, Georgia (“Bank”), having been advised of its right to a
NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking
practices and violations of law and/or regulations alleged to have been
committed by the Bank and of its right to a hearing on the alleged charges
under section 8(b)(1) of the Federal Deposit Insurance Act (“Act”), 12
U.S.C. § 1818(b)(1), and having waived those rights, entered into a STIPULATION
AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST (“CONSENT AGREEMENT”)
with a representative for the Legal Division of the Federal Deposit Insurance
Corporation (“FDIC”) and the Commissioner (the “Commissioner”) for the State of
Georgia, Department of Banking and Finance (the “Department”), dated September 8,
2009 whereby solely for the purpose of this proceeding and without admitting or
denying the alleged charges of unsafe or unsound banking practices and
violations of law and/or regulations, the Bank consented to the issuance of an
ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC and the Commissioner.  The Commissioner may issue an order


 

















 


to
cease and desist pursuant to section 7-1-91 of the Official Code of Georgia
Annotated, GA Code Ann. Section 7-1-91 (1985).


 


The
FDIC and the Commissioner considered the matter and determined that they have
reason to believe that the Bank has engaged in unsafe or unsound banking
practices and has committed violations of law and/or regulations.  The FDIC and the Commissioner, therefore,
accepted the CONSENT AGREEMENT and issued the following:


 


ORDER TO CEASE AND DESIST


 


IT
IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that
term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its
successors and assigns cease and desist from the following unsafe and unsound
banking practices and violations of law and/or regulation:


 


a)                                      operating with
a board of directors (“Board”) that has failed to provide adequate supervision
over and direction to the management of the Bank;


 


b)                                     operating with
management whose policies and practices are detrimental to the Bank and
jeopardize the safety of its deposits;


 


c)                                      operating with
inadequate equity capital in relation to the volume and quality of assets held
by the Bank;


 


d)                                     operating with
a large volume of poor quality loans;


 


e)                                      following
hazardous lending and lax collection policies and practices;


 


f)                                        operating in
such a manner as to produce operating losses;


 


g)                                     operating with
provisions for liquidity and funds management that need to be enhanced; and


 


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h)                                     operating in
violation of laws and/or regulations, and in contravention of statements of
policy as more fully described on pages 10 through 14 of the Report of
Examination of the Bank dated February 17, 2009 (“Report”).


 


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


 


BOARD OF DIRECTORS


 


1.                                       Beginning with
the effective date of this ORDER, the Board shall increase its participation in
the affairs of the Bank, assuming full responsibility for the approval of sound
policies and objectives and for the supervision of all of the Bank’s
activities, consistent with the role and expertise commonly expected for
directors of banks of comparable size. 
This participation shall include meetings to be held no less frequently
than monthly at which, at a minimum, the following areas shall be reviewed and
approved: reports of income and expenses; new, overdue, renewal, insider,
charged-off, and recovered loans; investment activity; operating policies; and
individual committee actions.  Board
minutes shall document these reviews and approvals, including the names of any
dissenting directors.


 


COMPLIANCE WITH ORDER


 


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


 


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detailing
the Bank’s adherence to the ORDER to the Board at each regularly scheduled
Board meeting.  Such report shall be
recorded in the appropriate minutes of the Board’s meeting and shall be
retained in the Bank’s records. 
Establishment of this committee does not in any way diminish the
responsibility of the entire Board to ensure compliance with the provisions of
this ORDER.


 


MANAGEMENT


 


3.                                       (a)                                  Within 60 days
from the effective date of this ORDER, the Bank shall have and retain qualified
management.  Each member of management shall have qualifications and experience
commensurate with his or her duties and responsibilities at the Bank.  Management shall include a chief executive
officer, senior lending officer, and chief financial officer.  All three management officials shall have an
appropriate level of experience and expertise that is needed to perform his or
her duties.  Each member of management
shall be provided appropriate written authority from the Bank’s Board to
implement the provisions of this ORDER.


 


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


 


(i)                                     Comply with the requirements
of this ORDER;


 


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


 


(iii)                               Comply with
applicable laws and regulations; and


 


(iv)                              Restore all aspects of the
Bank to a safe and sound condition, including asset quality, earnings, capital
adequacy, earnings, management effectiveness, risk management, liquidity, and sensitivity
to market risk.


 


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(c)                                  During the life
of this ORDER, the Bank shall notify the Regional Director of the FDIC’s
Atlanta Regional Office (“Regional Director”) and the Commissioner
(collectively, “Supervisory Authorities”) in writing when it proposes to add
any individual to the Bank’s Board or employ any individual as a senior
executive officer, as that term is defined in section 303.102 of the FDIC’s Rules and
Regulations, 12 C.F.R. § 303.102.  The
notification should include a description of the background and experience of
the individual or individuals to be added or employed and must be received at
least 30 days before such addition or employment is intended to become
effective.  If the Regional Director
issues a notice of disapproval pursuant to section 32 of the Act, 12 U.S.C. §
1831i, with respect to any proposed individual, then such individual may not be
added or employed by the Bank.


 


CAPITAL


 


4.                                       (a)                                  Within 90 days
from the effective date of this ORDER, the Bank shall have Tier 1 Capital in
such an amount as to equal or exceed 8 percent of the Bank’s total assets and
total risk-based capital in such an amount as to equal or exceed 10 percent of
the Bank’s total risk-weighted assets, and, thereafter, the Bank shall maintain
Tier 1 Capital and total risk based capital ratios equal to or exceeding 8
percent and 10 percent, respectively, during the life of this ORDER.


 


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


 


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(c)                                  Any increase in
Tier 1 Capital and total risk-based capital necessary to meet the requirements
of this paragraph of the ORDER may be accomplished by the following:


 


(i)                                     Sale of common
stock;


 


(ii)                                  Sale of
noncumulative perpetual preferred stock;


 


(iii)                               Direct
contribution of cash by the Board, shareholders, and/or     parent holding company;


 


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


 


(v)                                 Any combination
of the above means.


 


(d)                                 Any increase in
Tier 1 Capital necessary to meet the requirements of Paragraph 4 of this ORDER
may not be accomplished through a deduction from the Bank’s ALLL.


 


(e)                                  For the
purposes of this ORDER, the terms “Tier 1 Capital,” “total risk-based capital,”  “total assets,” and “total risk-weighted
assets” shall have the meanings ascribed to them in Part 325 of the FDIC’s
Rules and Regulations, 12 C.F.R. Part 325.


 


DIVIDENDS


 


5.                                       While this
ORDER is in effect, the Bank shall not declare or pay any cash dividends
without the prior written approval of the Supervisory Authorities.


 


LIQUIDITY AND FUNDS MANAGEMENT


 


6.                                       (a)                                  Within 60 days
from the effective date of this ORDER, the Bank shall review, revise as
necessary, and implement a written plan addressing liquidity, contingent
funding, interest rate risk, and asset liability management, which plan shall
include, at a 


 


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minimum,
revisions to address all items of criticism enumerated on pages 3 — 4 of
the Report.


 


(b)                                 The plan shall
incorporate the guidance contained in Financial Bank Letter (FIL) 84-2008,
dated August 26, 2008, entitled Liquidity
Risk Management.  The plan
shall provide restrictions on the use of brokered and internet deposits
consistent with safe and sound banking practices.


 


(c)                                  The plan shall
also establish a strategy to:


 


(i)                                     Identify,
measure, and control the nature and amount of interest rate risk the Bank
takes;


 


(ii)                                  Provide a
periodic calculation of interest rate exposure at various time horizons;


 


(iii)                               Specify risk
limits and target ratios; and


 


(iv)                              Define lines of
responsibility and authority for managing risk.


 


(d)                                 A copy of the plan shall be
submitted to the Supervisory Authorities upon its completion for review and
comment.  Within 30 days from the receipt
of any comments from the Supervisory Authorities, the Bank shall incorporate
those recommended changes.  Thereafter,
the Bank shall implement and follow the plan, and implementation shall be in a
form and manner acceptable to the Supervisory Authorities as determined at
subsequent examinations and/or visitations.


 


BROKERED DEPOSITS


 


7.                                       (a)                                  Upon the
effective date of this ORDER, and so long as this ORDER is in effect, the Bank
shall not accept, renew, or rollover brokered deposits without obtaining a
brokered deposit waiver approved by the FDIC pursuant to Section 29 of the
Act, 12 


 


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U.S.C.
§ 1831f.  Within 10 days of the effective
date of this ORDER, the Bank shall submit a written plan for eliminating its
reliance on brokered deposits to the Supervisory Authorities for review and
comment.  The plan shall detail the
current composition of brokered deposits by maturity and explain the means by
which such deposits will be paid.  Within
30 days of receipt of all such comments from the Supervisory Authorities, and
after consideration of all such comments, the Bank shall approve the revised
plan, which approval shall be recorded in the minutes of the Board
meeting.  Thereafter, the Bank shall
implement and fully comply with the plan. 
For purposes of this ORDER, brokered deposits are defined in section
337.6(a)(2) of the FDIC’s Rules and Regulations, 12 C.F.R.
§337.6(a)(2), to include any deposits funded by third-party agents or nominees
for depositors, including deposits managed by a trustee or custodian when each
individual beneficial interest is entitled to or asserts a right to federal
deposit insurance.


 


(b)                                 The Bank shall
provide a written progress report to the Supervisory Authorities detailing the
level, source, and use of brokered deposits with specific reference to progress
under the Bank’s plan together with the progress report required by paragraph
16.


 


(c)                                  The Bank shall
comply with the restrictions on the effective yields on deposits described in
12 C.F.R. § 337.6(b)(4).


 


CHARGE-OFF AND REDUCTION OF CLASSIFIED ITEMS


 


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


 


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approved in writing by the Supervisory Authorities.  Elimination or reduction of assets through
proceeds of other loans made by the Bank is not considered collection for
purposes of this provision.


 


(b)                                 Within 30 days
from the effective date of the ORDER, the Bank shall establish a reserve for
contingent liabilities and charge all contingent liabilities classified “Loss”
in the Report to the reserve. 
Thereafter, the Bank shall maintain an adequate reserve for contingent
liabilities as an “other liability” on the Bank’s balance sheet.


 


(c)                                  The aggregate
balance of assets classified “Substandard” in the Report in accordance with the
following schedule.  For purposes of this paragraph, “number of days”
means number of days from the effective date of this ORDER.


 


(i)                                   Within 180 days
from the effective date of this ORDER, the Bank shall have reduced the assets
classified Substandard in the Report by 20%;


 


(ii)                                Within 360 days
from the effective date of this ORDER, the Bank shall have reduced the assets
classified Substandard in the Report by 40%;


 


(iii)                             Within 540 days
from the effective date of this ORDER, the Bank shall have reduced the assets
classified Substandard in the Report by 60; and.


 


(iv)                            Within 720 days
from the effective date of this ORDER, the Bank shall have reduced the assets
classified Substandard in the Report by 75%.


 


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(d)                                 Elimination or
reduction of assets through proceeds of other loans made by the Bank to the
same borrower is not considered collection for purposes of this provision.


 


NO ADDITIONAL CREDIT


 


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


 


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


 


(c)                                  Subparagraph 10(b) shall
not apply if the Bank’s failure to extend further credit to a particular
borrower would be detrimental to the best interests of the Bank.  Prior to the extending of any additional
credit pursuant to this paragraph, either in the form of a renewal, extension,
or further advance of funds, such additional credit shall be approved by a
majority of the Board, or a designated committee thereof, who shall certify, in
writing:


 


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


 


(ii)           That the Bank’s position would be improved thereby;
including an explanatory statement of how the Bank’s position would be improved;
and


 


(iii)          An appropriate workout plan has been developed and
will be implemented in conjunction with the additional credit to be extended.


 


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


 


LENDING AND COLLECTION POLICIES


 


10.           (a)           Within 90 days from the
effective date of this ORDER, the Bank shall review, revise as necessary, and
implement its written lending, underwriting, and collection policy to provide
effective guidance and control over the Bank’s lending function, which policy
shall include, at a minimum, revisions to address criticisms and
recommendations enumerated on page 3 of the Report pertaining to the
administration of acquisition, development and construction (“ADC”) loans as
well as commercial real estate lending and specific guidelines for placing
loans on a nonaccrual basis.  In
addition, the Bank shall obtain adequate and current documentation for all
loans in the Bank’s loan portfolio.  The
policy shall include provisions which require complete loan documentation,
realistic repayment terms, and current credit information adequate to support
the outstanding indebtedness of the borrower. 
Such documentation shall include 


 


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current
financial information, profit and loss statements, or copies of tax returns and
cash flow projections.  Such policy and
its implementation shall be in a form and manner acceptable to the Supervisory
Authorities as determined at subsequent examinations and/or visitations.


 


(b)           Within 30 days from the
effective date of this ORDER, the Board shall adopt and implement a policy
limiting the use of loan interest reserves. 
Such policy shall confine the use of interest reserves to properly
underwritten ADC loans where development or building plans have specific
timetables that commence within a reasonable time of the loan’s approval and
that include realistic completion dates. 
Interest reserves shall be used only for payment of interest on ADC
loans for projects that are progressing according to their timetables.  Interest reserves may be supplemented only
with the prior written approval of the Board or a committee thereof, so long as
the approval documents a prudent reason for the supplement.


 


CONCENTRATIONS OF CREDIT


 


11.           Within 60 days from the
effective date of this ORDER, the Bank shall perform a risk segmentation
analysis with respect to the Concentrations of Credit listed on the Concentrations
pages of the Report and any other concentration deemed important by the
Bank.  Concentrations should be
identified by product type, geographic distribution, underlying collateral, or
other asset groups which are considered economically related and in the
aggregate represent a large portion of the Bank’s Tier 1 Capital.  A copy of this analysis shall be provided to
the Supervisory Authorities and the Board agrees to develop a plan to reduce
any segment of the portfolio which the Supervisory Authorities deem to be an
undue concentration of credit in relation to the Bank’s Tier 1 Capital.  The plan and 


 


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its
implementation shall be in a form and manner acceptable to the Supervisory
Authorities as determined at subsequent examinations and/or visitations.


 


PLAN FOR EXPENSES AND PROFITABILITY


 


12.           (a)           Within 60 days from the effective date of
this ORDER, the Bank shall formulate and fully implement a written plan and a
comprehensive budget for all categories of income and expense.  The plan and budget required by this
paragraph shall include formal goals and strategies, consistent with sound
banking practices and taking into account the Bank’s other written policies, to
improve the Bank’s net interest margin, increase interest income, reduce
discretionary expenses, control overhead, and improve and sustain earnings of
the Bank.  The plan shall include a
projected balance sheet and a description of the operating assumptions that
form the basis for and adequately support major projected income and expense
components.  Thereafter, the Bank shall
formulate such a plan and budget by November 30 of each subsequent
year.  The
plan and budget required by Subparagraph 12(a) of this ORDER shall be
acceptable to the Supervisory Authorities as determined at subsequent
examinations and/or visitations.


 


(b)           Following the end of each
calendar quarter, the Board shall evaluate the Bank’s actual performance in
relation to the plan and budget required by Subparagraph 12(a) of this
ORDER and shall record the results of the evaluation, and any actions taken by
the Bank, in the minutes of the Board meeting at which such evaluation is
undertaken.


 


VIOLATIONS OF LAW AND


CONTRAVENTIONS OF STATEMENTS OF
POLICY


 


13.             Within
60 days from the effective date of this ORDER, the Bank shall eliminate and/or
correct all violations of law and/or regulation and contraventions of
statements of policy, which are more fully set out on pages 10 through 14
of the Report.  In addition, 


 


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the Bank shall take all necessary steps to ensure
future compliance with all applicable laws, regulations, statements of policy,
and regulatory guidance.


 


SPECIAL MENTION


 


14.           Within 60 days from the
effective date of this ORDER, the Bank shall develop a plan to correct all
deficiencies in the assets listed for “Special Mention”.  The Bank shall immediately submit the plan to
the Supervisory Authorities for review and comment.  Within 30 days from receipt of any comment
from the Supervisory Authorities, and after due consideration of any
recommended changes, the Bank shall approve the plan, which approval shall be
recorded in the minutes of the Board meeting. 
Thereafter, the Bank shall implement and fully comply with the plan.


 


DISCLOSURE


 


15.           Following the effective date
of this ORDER, the Bank shall send to its shareholders or otherwise furnish a
description of this ORDER in conjunction with the Bank’s next shareholder
communication and also in conjunction with its notice or proxy statement
preceding the Bank’s next shareholder meeting. 
The description shall fully describe the ORDER in all material
respects.  The description and any
accompanying communication, statement, or notice shall be sent to the FDIC,
Division of Supervision and Consumer Protection, Accounting and Securities
Disclosure Section, 550 17th Street, N.W., Room F-6066,
Washington, D.C. 20429 and the Commissioner, Georgia Department of Banking and
Finance, 2990 Brandywine Rd., Suite 200, Atlanta, Georgia 30341-5565, at
least fifteen (15) days prior to dissemination to shareholders.  Any changes requested to be made by the FDIC
and Commissioner shall be made prior to dissemination of the description,
communication, notice, or statement.


 


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PROGRESS REPORTS


 


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


 


This
ORDER shall become effective immediately on the date of its issuance.  The provisions of this ORDER shall remain
effective and enforceable except to the extent that, and until such time as,
any provisions of this ORDER shall have been modified, terminated, suspended,
or set aside by the FDIC.


 


Pursuant
to delegated authority.


 


Dated
at Atlanta, Georgia, this 11th day of September, 2009.


 


 


	
   

  	
  /s/ Doreen R. Eberley

  
	
   

  	
  Doreen R. Eberley

  
	
   

  	
  Acting
  Regional Director

  
	
   

  	
  Division
  of Supervision and Consumer Protection

  
	
   

  	
  Atlanta Region

  
	
   

  	
  Federal Deposit Insurance
  Corporation

  



 


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The
Georgia Department of Banking and Finance (“Department”), having duly approved
the foregoing ORDER, and the Bank, through its Board, agree that the issuance
of said ORDER by the FDIC shall be binding as between the Bank and the Georgia
Commissioner of Banking and Finance to the same degree and to the same legal
effect that such ORDER would be binding if the Department had issued a separate
ORDER that included and incorporated all of the provisions of the foregoing
ORDER, pursuant to section 7-1-91 of the Official Code of Georgia Annotated, GA
Code Ann. § 7-1-91 (1985).


 


Dated
this 11th of September, 2009.


 


 


	
   

  	
  /s/
  Robert M. Braswell

  
	
   

  	
  Robert
  M. Braswell

  
	
   

  	
  Commissioner

  
	
   

  	
  Department of Banking and
  Finance

  
	
   

  	
  State of Georgia

  



 


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