EX-10.1 CEASE AND DESIST ORDER






EXHIBIT 10.1




FEDERAL DEPOSIT INSURANCE CORPORATION




WASHINGTON, D.C.




	 	 	 	 	 
	 

In the Matter of
 

SOUTHERN
COMMUNITY BANK

FAYETTEVILLE, GEORGIA
 

(INSURED
STATE NONMEMBER BANK)

 

 


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ORDER
TO

CEASE AND DESIST

 

FDIC-08-156b
 
 






     SOUTHERN COMMUNITY BANK, FAYETTEVILLE, 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 the Official Code of Georgia Annotated § 7-1-91, and having waived those
rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST
(“CONSENT AGREEMENT”) with Counsel for the Federal Deposit Insurance Corporation (“FDIC”) and the
Commissioner (“Commissioner”) for the State of Georgia, Department of Banking and Finance
(“Department”), dated October 6, 2008, whereby solely for the purpose of this proceeding and
without admitting or denying the alleged charges of unsafe or unsound banking practices and
violations of law and/or regulations, the Bank consented to the issuance of an ORDER TO CEASE AND
DESIST (“ORDER”) by the FDIC and the Commissioner.



     The FDIC and the Commissioner considered the matter and determined that it had reason to
believe that the Bank had engaged in unsafe or unsound banking practices and had committed



 









 







violations of law and/or regulations. The 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 management whose policies and practices are detrimental to the Bank and
jeopardize the safety of its deposits;




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




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




          (d) Operating with an excessive level of adversely classified items;




          (e) Operating with an underfunded allowance for loan and lease losses (“ALLL”);




          (f) Operating with hazardous loan underwriting and administration practices;




          (g) Operating in such a manner as to produce operating losses; and




          (h) Operating in apparent violation of laws, regulations, and/or statements of policy as more
fully described on pages 15 through 17 of the FDIC Report of Examination dated January 31, 2008
(“ROE”).




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



BOARD OF DIRECTORS




     1. (a) Beginning with the effective date of this ORDER, the Board shall increase participation in
the affairs of the Bank, assuming full responsibility for the approval of sound policies, strategic
plans, and budgets for the supervision of all of the Bank’s activities, consistent with the role
and expertise commonly expected for directors of banks of comparable size. The Board shall
establish specific procedures designed to fully inform the Board regarding the management,
operation, and financial condition of the Bank at regular intervals and in a consistent format.
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, renewed, extended, restructured, insider, non-accrual, charged-off, and recovered loans;
investment activity; operating policies; personnel actions; audit and supervisory reports; and the
minutes summarizing individual committee meetings and actions. Board minutes shall be detailed,
maintained and recorded on a timely basis and shall document reviews and any related actions,
including the names of any dissenting directors.



     (b) Within 30 days from the effective date of this ORDER, the Board shall establish a Board
committee (“Directors’ Committee”), consisting of at least four members, responsible for ensuring
compliance with the ORDER, overseeing corrective measures with respect to the ORDER, and reporting
to the Board. Three of the members of the Directors’ Committee shall not be officers of the Bank.
The Director’s Committee shall monitor compliance with this ORDER and, within 30 days from the
effective date of this ORDER, and every 30 days thereafter, shall submit a written report detailing
the Bank’s compliance with this ORDER to the Board, for review and consideration during its
regularly scheduled meeting. Such report and any discussion related to the report or the ORDER
shall be recorded in the appropriate minutes of the meeting of the Board and



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shall be retained in the Bank’s records. Nothing contained herein shall diminish the
responsibility of the entire Board to ensure compliance with the provisions of this ORDER.



     (c) Within 60 days from the effective date of this ORDER, the Bank shall designate a Board
committee to review and approve loans, with such committee being structured so that a majority of
members are persons who are not actively involved in the Bank’s lending activities. The loan
committee shall, at a minimum, perform the following functions:



          (i) evaluate and act upon requests for loans or other extensions of credit and assess the
administration of outstanding loans or other extensions of credit, in accordance with the Bank’s
loan policy, as amended to comply with this ORDER;




          (ii) provide a thorough, written explanation of any deviations from the loan policy, which
shall:





     a. address how such exceptions are in the Bank’s best interest;




     b. be included in the minutes of the corresponding committee meeting; and




     c. be maintained in the borrower’s credit file;



          (iii) review and monitor the status of repayment and collection of overdue and maturing loans,
all loans classified “Substandard” in the most recent regulatory Report of Examination, and all
loans included on the Bank’s internal watch list;




          (iv) review and give prior written approval for all advances, renewals, extensions of credit
or overdrafts to any borrower or the borrower’s “related interests” when the aggregate volume of
credit extended to the borrower and its “related interests,” as such term is defined in section
215.2(n) of Regulation O of the Board of Governors of the Federal Reserve System’s Regulations
(“Regulation O”), 12 C.F.R. § 215.2(n) exceed $500,000;




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          (v) review all applications for new loans and renewals of existing loans to Bank directors,
executive officers, and their related interests, prepare a written opinion as to whether the credit
is in conformance with the Bank’s loan and conflicts of interest or ethics policies, as well as
applicable laws and regulations, and refer each application and written opinion to the Board for
consideration and approval; and




          (vi) maintain written minutes of the committee meetings, including a record of the review and
status of the loans considered. All loan committee minutes shall be reviewed by the Board during
the next scheduled meeting.




MANAGEMENT




     2. (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 responsible for supervision of the lending function and with oversight
responsibility for all other areas of bank operations. This individual must have a proven ability
in managing a bank of comparable size and complexity and in effectively implementing lending,
investment and operating policies in accordance with sound banking practices. Management shall also
include a senior lending officer with significant appropriate lending, collection, and loan
supervision experience, and proven success in upgrading a low quality loan portfolio. Each member
of management shall be provided appropriate written authority from the 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;




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          (iii) comply with applicable laws and regulations; and




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




     (c) During the life of this ORDER, the Bank shall notify the FDIC’s Atlanta Regional Director
(“Regional Director”) and the Commissioner (collectively the “Supervisory Authorities”), in
writing, of the resignation or termination of any of the Bank’s directors or senior executive
officers. Prior to the addition of any individual to the Board or the employment of any individual
as a senior executive officer, the Bank shall comply with the requirements of section 32 of the
Act, 12 U. S. C. § 1831 (i), subpart F of Part 303 of the FDIC Regulations, 12 C.F.R.
§§ 303.100-303.103 and any State requirement for prior notification and approval. The notification
shall include a description of the background and experience of the individual(s) to be added or
employed and must be received at least 30 days before such addition or employment is intended to
become effective. The Bank may not add any individual to its Board or employ any individual as an
executive officer if the Regional Director or Commissioner issues a notice of disapproval pursuant
to section 32 of the FDI Act, 12 U. S. C. § 1831(i).



     (d) To facilitate having and retaining qualified management, the Board shall, within 30 days
from the effective date of this ORDER, engage an independent third-party acceptable to the
Supervisory Authorities that possesses appropriate expertise and qualifications to perform an
assessment of the Bank’s management and staffing needs (“Management Plan”), which shall, at a
minimum:



          (i) identify both the type and number of officer positions needed to manage and properly
supervise the affairs of the Bank;




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          (ii) identify and establish Bank committees needed to provide guidance and oversight to
management;




          (iii) evaluate each Bank officer to determine whether these individuals possess the ability,
experience and other qualifications required to perform present and anticipated duties, including
adherence to the Bank’s established policies and practices, and maintain the Bank in a safe and
sound condition;




          (iv) evaluate the current duties and responsibilities of each Bank officer to determine
whether such duties and responsibilities have been properly assigned;




          (v) establish a plan to recruit and hire any additional or replacement personnel with the
requisite ability, experience and other qualifications necessary to fill Bank officer or staff
positions consistent with the Management Plan;




          (vi) identify training and development needs, and incorporate a plan to provide such training
and development; and




          (vii) establish procedures to periodically review and update the Management Plan, as well as
periodically review and assess the performance of each officer and staff member.




     (e) The Management Plan and any subsequent modification thereto shall be submitted to the
Supervisory Authorities for review and comment. Within 30 days from receipt of any comment from the
Supervisory Authorities, and after consideration of such comment, the Board shall approve the
Management Plan and/or any subsequent modification thereto, which approval shall be recorded in the
minutes of the meeting of the Board. Thereafter, the Bank and its directors, officers and employees
shall implement and follow the Management Plan and any modifications thereto. It shall remain the
responsibility of the Board to fully implement the plan within the specified time frames. In the
event the plan, or any portion thereof, is not implemented, the Board shall immediately advise the Supervisory Authorities, in writing, of specific reasons for
deviating from the Management Plan.



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CAPITAL




     3. (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. Thereafter, during the
life of this ORDER, the Bank shall maintain Tier 1 capital in such an amount as to equal or exceed
8 percent of the Bank’s total assets.



     (b) Within 30 days from the effective date of this ORDER, the Bank shall develop and adopt a
plan for achieving and maintaining the Tier 1 capital level required by subparagraph 3(a) during
the life of this ORDER. The plan shall be submitted to the Supervisory Authorities for review and
approval.



     (c) Within 30 days from the effective date of this ORDER, the Bank shall develop and adopt a
plan to meet and maintain the minimum risk-based capital requirements for a well-capitalized bank,
as described in the FDIC Statement of Policy on Risk-Based Capital contained in Appendix A to Part
325 of the FDIC’s Rules and Regulations, 12 C.F.R. Part 325, Appendix A. The Plan shall be in a
form and manner acceptable to the Supervisory Authorities as determined at subsequent examinations.



     (d) In the event any capital ratio falls below the established minimum risk-based capital
requirements for a well-capitalized bank, the Bank shall notify the Supervisory Authorities and
shall increase capital in an amount sufficient to comply with this provision within 60 days.



     (e) The level of Tier 1 capital to be maintained during the life of this ORDER pursuant to
subparagraph 3(a) shall be in addition to a fully funded ALLL, the adequacy of which shall be satisfactory to the Supervisory Authorities as determined at subsequent examinations and/or visitations.



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



          (i) the sale of common stock; or





          (ii) the sale of noncumulative perpetual preferred stock; or




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




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





          (v) any combination of the above means.



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




     (g) If all or part of the increase in Tier 1 capital required by this paragraph is
accomplished by the sale of new securities, the Board shall adopt and implement a plan for the sale
of such additional securities, including the voting of any shares owned or proxies held or
controlled by them in favor of the plan. Should the implementation of the plan involve a public
distribution of the Bank’s securities (including a distribution limited only to the Bank’s existing
shareholders), the Bank shall prepare offering materials fully describing the securities being
offered, including an accurate description of the financial condition of the Bank and the
circumstances giving rise to the offering, and any other material disclosures necessary to comply
with federal securities laws. Prior to the implementation of the plan and, in any event, not less
than 20 days prior to the dissemination of such materials, the plan and any materials used in the
sale of the securities shall be submitted to the FDIC, Division of Supervision and Consumer
Protection, Accounting and Securities Disclosure



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Section, 550 17th Street, N.W., Room F-6066, Washington, D.C. 20429 and to the
Commissioner, Georgia Department of Banking and Finance, 2990 Brandywine Road, Suite 200, Atlanta,
Georgia 30341-5565 for review. Any changes requested to be made in the plan or materials shall be
made prior to their dissemination. If the increase in Tier 1 capital is provided by the sale of
noncumulative perpetual preferred stock, then all terms and conditions of the issue, including but
not limited to those terms and conditions relative to interest rate and convertibility factor,
shall be presented to the Supervisory Authorities for prior approval.



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



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



CHARGE-OFF




     4. (a) Within 10 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” in the ROE
that have not been previously collected or charged-off.



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



     (c) Elimination or reduction of assets through proceeds of other loans made by the Bank is not
considered collection for purposes this paragraph.



REDUCTION OF CLASSIFIED ITEMS




     5. (a) Within 60 days of the effective date of this ORDER, the Bank shall formulate a written plan
to reduce the aggregate balance of assets classified “Substandard” in the ROE in accordance with
the following schedule:



          (i) Within 180 days from the effective date of this ORDER, the Bank shall have reduced the
items classified “Substandard” in the ROE to not more than $65,000,000.




          (ii) Within 360 days from the effective date of this ORDER, the Bank shall have reduced the
items classified “Substandard” in the ROE to not more than $45,000,000.




          (iii) Within 540 days from the effective date of this ORDER, the Bank shall have reduced the
items classified “Substandard” in the ROE to not more than $20,000,000.




          (iv) Within 720 days from the effective date of this ORDER, the Bank shall have reduced the
items classified “Substandard” in the ROE to not more than $10,000,000.




     (b) The Bank shall immediately submit the plan to the Supervisory Authorities for review and
comment. Within 30 days from the receipt of any comment from the Supervisory Authorities, and after
due consideration of any recommended changes, the Bank shall approve the plan, which approval shall
be recorded in the minutes of the meeting of the Board. Thereafter, the



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Bank shall implement and fully comply with the plan. Such plan shall be monitored and progress
reports thereon shall be submitted to the Supervisory Authorities at 90-day intervals concurrently
with the other reporting requirements set forth in paragraph 21 of this ORDER.



     (c) The requirements of this paragraph are not to be construed as standards for future
operations of the Bank. Furthermore, the Bank shall eventually reduce the total of all adversely
classified assets. Reduction of these assets through proceeds of other loans made by the Bank is
not considered collection for the purpose of this paragraph. As used in subparagraphs Sea) through
(c), the word “reduce” means:



          (i) to collect;




          (ii) to charge off; or




          (iii) to sufficiently improve the quality of assets adversely classified
to warrant removing any adverse classification as determined by the Regional Director or Commissioner.




NO ADDITIONAL CREDIT




     6. (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



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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 6(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:



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




          (ii) that the extension of such credit would improve the Bank’s position, including an
explanatory statement of how the Bank’s position would be improved; and




          (iii) an appropriate work-out 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.




PLANS FOR REDUCING/IMPROVING CLASSIFIED ASSETS




     7. Within 60 days from the effective date of this ORDER, the Bank shall submit to the Supervisory
Authorities specific plans and proposals to effect the reduction and/or improvement of all
borrowers with total borrowings, including unfunded loan commitments which are adversely classified
or listed for Special Mention in the ROE and which aggregate $500,000 or more. In developing the
plans mandated by this paragraph, the Bank shall, at a minimum, and with respect to each adversely
classified loan or lease, review, analyze, and document the financial position of the borrower,
including source of repayment, repayment ability, and alternative repayment sources, as well as the
value and accessibility of any pledged or assigned collateral, and any possible actions



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to improve the Bank’s collateral position. Such plans shall thereafter be monitored and progress
reports thereon shall be submitted to the Supervisory Authorities at 90-day intervals concurrently
with the other reporting requirements set forth in paragraph 21 of this ORDER.



SPECIAL MENTION




     8. Within 60 days from the effective date of this ORDER, the Bank shall take all necessary steps to
correct the cited deficiencies in the loans listed for “Special Mention” on pages 35 through 36 of
the ROE. The Board should provide reports regarding steps taken to correct the cited deficiencies
to the Supervisory Authorities at 90-day intervals concurrently with the other reporting
requirements set forth in paragraph 21 of this ORDER.



LENDING PRACTICES




     9. (a) Within 60 days from the effective date of this ORDER, the Bank shall submit to the
Supervisory Authorities specific plans and proposals to effect the correction of all loan
underwriting, loan administration, and loan portfolio management weaknesses detailed in the ROE. At
a minimum, these plans and proposals shall incorporate procedures:



          (i) to address all loan underwriting weaknesses detailed in the ROE;




          (ii) to address construction loan inspection procedures;




          (iii) to address the appropriate use of interest reserves;




          (iv) to ensure proper financial analysis of potential and existing credit relationships,
including the documentation of cash flow for the primary and secondary sources of repayment;




          (v) to obtain adequate and current documentation for all loans;




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          (vi) to evaluate the Bank’s loan review and grading system and implement changes needed to
ensure that problem loans are timely identified and considered in the Bank’s assessment of the
adequacy of capital and the ALLL;




          (vii) to strengthen collections;




          (viii) to revise the loan policy to include guidelines for loan mix, formal inspections, and
feasibility studies, as well as, risk limits for industry concentrations and procedures for
monitoring and reporting such; and




          (ix) to monitor officer compliance with the written loan policy and to assign responsibility
for exceptions to the policy.




     (b) Within 60 days from the effective date of this ORDER, the Bank shall establish an
effective system of loan documentation and shall take all reasonable steps to correct and/or
eliminate all existing loan documentation exceptions. In addition, and so long as this ORDER
remains in effect, the Bank shall ascertain that all necessary supporting documentation, or
evidence thereof, is obtained and evaluated before any further credit or loan is extended by the
Bank.



     (c) Within 60 days from the effective date of this ORDER, the Bank shall revise, adopt, and
implement written lending and collection policies to provide effective guidance, monitoring, and
control over the Bank’s lending function, which policies shall address Part 323 of the FDIC’s Rules
and Regulations regarding appraisals, 12 C.F.R. § 323.1 et seq., and Part 365 regarding real estate
lending standards, 12 C.F.R. § 365.1 et seq. The policies shall also address the joint guidance on
Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, available at
http://www.fdic.gov/news/news/press/2006/pr06114.html, and provide specific guidance for monitoring
and controlling the Bank’s acquisition, development, and construction (“ADC”) lending function. The
policy shall address the weaknesses related to the Bank’s ADC



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lending activities, as discussed in the ROE. Also, the policy shall include appropriate risk
limits sufficient to mitigate risk associated with concentrations of credit, including ADC loans,
and provide for a planned material reduction in the volume of funded and unfunded ADC loans as a
percentage of Tier 1 capital. Such policies shall be in a form and manner acceptable to the
Supervisory Authorities as determined at subsequent examinations and/or visitations.



CONCENTRATIONS OF CREDIT




     10. (a) 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 page 37 of the ROE.
Concentrations should be stratified as the Board deems appropriate, but shall include
concentrations identified by industry, geographic distribution, underlying collateral, direct or
indirect extensions of credit to or for the benefit of any borrowers dependent upon the performance
of a single developer or builder, and other asset groups that are considered economically related.
The Board should refer to the interagency guidance on Concentrations in Commercial Real Estate
Lending, Sound Risk Management Practices, for information regarding risk segmentation analysis. A
copy of the analysis shall be provided to the Supervisory Authorities. The analysis shall be in a
form and manner acceptable to the Supervisory Authorities as determined at subsequent examinations
and/or visitations.



     (b) Within 90 days from the effective date of this ORDER, the Bank shall adopt and submit to
the Supervisory Authorities a plan to reduce the Bank’s concentration of credit in residential ADC
loans.



LOAN REVIEW AND GRADING SYSTEM




     11. Within 60 days from the effective date of this ORDER, the Board shall develop an effective
system of independent loan review to appropriately assess and grade the overall quality of the loan
portfolio.



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ALLOWANCE FOR LOAN AND LEASE LOSSES




     12. Within 30 days from the effective date of this ORDER, the Board shall review the adequacy of
the ALLL and establish a comprehensive policy for determining the adequacy of the ALLL. For the
purpose of this determination, the adequacy of the ALLL shall be determined after the charge-off of
all loans or other items classified “Loss.” The policy shall provide for a review of the ALLL at
least once each calendar quarter. Said review should be completed at least 10 days prior to the end
of each quarter, in order that the findings of the Board with respect to the ALLL may be properly
reported in the quarterly Reports of Condition and Income. The review should focus on the results
of the Bank’s internal loan review, loan and lease loss experience, trends of delinquent and
non-accrual loans, an estimate of potential loss exposure of significant credits, concentrations of
credit, and present and prospective economic conditions. A deficiency in the ALLL shall be remedied
in the calendar quarter it is discovered, prior to submitting the Reports of Condition and Income,
by a charge to current operating earnings. The minutes of the Board meeting at which such review is
undertaken shall indicate the results of the review. The Bank’s policy for determining the
adequacy of the ALLL shall be in compliance with FDIC statements of policy, and its implementation
shall be satisfactory to the Supervisory Authorities as determined at subsequent examinations
and/or visitations.



PLAN TO IMPROVE EARNINGS




     13. (a) Within 90 days from the effective date of this ORDER, the Bank shall formulate and fully
implement a written plan and a comprehensive budget for all categories of income and expense. The
plan and budget shall include formal goals and strategies, consistent with sound banking practices
and taking into account the Bank’s other written policies, to improve the Bank’s net interest
margin, increase interest income, reduce discretionary expenses, and improve and sustain earnings
of the Bank. The plan shall include a description of the operating assumptions that



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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.



     (b) The plan and budget required by this paragraph, and any subsequent modification thereto,
shall be acceptable to the Supervisory Authorities as determined at subsequent examinations and/or
visitations.



     (c) 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 this paragraph 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.



WRITTEN STRATEGIC PLAN




     14. Within 90 days from the effective date of this ORDER, the Bank shall prepare and submit to the
Supervisory Authorities a written three-year business/strategic plan covering the overall operation
of the Bank. The plan shall be in a form and manner acceptable to the Supervisory Authorities as
determined at subsequent examinations and/or visitations.



CASH DIVIDENDS




     15. The Bank shall not pay cash dividends without the prior written consent of the Supervisory
Authorities.



LIQUIDITY AND FUNDS MANAGEMENT




     16. (a) From the effective date of this ORDER, the Bank shall review its liquidity position at
least monthly to ensure that the Bank has sufficient liquid assets or sources of liquidity to meet
current and anticipated liquidity needs. Monitoring procedures shall include a sources and uses of



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funds analysis. The results of each monthly analysis shall be made a part of the Board minutes and
submitted to the Supervisory Authorities at 30-day intervals.



     (b) Within 60 days from the effective date of this ORDER, the Bank shall develop or revise,
adopt, and implement a written liquidity contingency plan. At a minimum, this plan shall:



          (i) define responsibilities and decision making authority for Bank personnel;




          (ii) assess possible liquidity events;




          (iii) assess the potential liquidity risk posed by Bank activities;




          (iv) identify potential sources and uses of funds;




          (v) identify and assess the adequacy of contingent funding sources;





          (vi) identify the sequence in which sources of funds will be used for contingent needs;




          (vii) accelerate the timeframes for funds management reporting in a problem liquidity
situation;




          (viii) require periodic testing of accessibility to established lines of credit and other
alternative sources of funds; and




          (ix) address procedures to ensure funds will meet the overnight cash letter.



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




     (c) 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 U.S.C. §1831f. For purposes of this
ORDER, brokered deposits are defined in section 337.6(a)(2) of the FDIC Rules and Regulations to
include any deposits funded by third-party agents or nominees for depositors,



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including deposits managed by a trustee or custodian when each individual beneficial interest
is entitled to or asserts a right to federal deposit insurance.



ASSET/LIABILITY MANAGEMENT




     17. (a) Within 60 days from the effective date of this ORDER, the Board shall implement an
asset/liability management policy which establishes an acceptable range for the Bank’s net noncore
funding dependence ratio, as computed by the Uniform Bank Performance Report. The policy shall set
forth suitable benchmarks and timeframes for the reduction of this ratio to levels that are
consistent with prudent banking practices. To the extent such measures have not previously been
initiated, the Bank shall immediately initiate measures detailed in the policy required by this
paragraph to accomplish the objectives set forth in the policy. The requirements of this paragraph
shall not be construed as standards for future operations, and the Bank’s net noncore funding
dependence ratio shall be maintained at a level consistent with safe and sound banking practices.
Such policy shall be submitted to the Supervisory Authorities for review and approval, and its
implementation shall be acceptable to the Supervisory Authorities as determined at subsequent
examinations and/or visitations.



     (b) Within 60 days from the effective date of this ORDER, the Bank shall review, and amend as
necessary, the Bank’s written interest rate risk policy. At a minimum, the policy shall include
guidelines for the following:



          (i) measures designed to control the nature and amount of interest rate risk the Bank takes,
including those that specify risk limits and define lines of responsibilities and authority for
managing risk;




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          (ii) a system for identifying and measuring interest rate risk, including a periodic
calculation to measure interest rate risk exposure at various time horizons and compare to
established target ratios;




          (iii) establish goals and strategies for reducing and managing the Bank’s interest rate risk
exposure;




          (iv) a system for monitoring and reporting risk exposures; and




          (v) a system for internal controls, review, and audit to ensure the integrity of the overall
management process.



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.




BANK SECRECY ACT/INFORMATION TECHNOLOGY PROGRAMS




     18. (a) Within 60 days from the effective date of this ORDER, the Bank shall review and implement
all Bank Secrecy Act compliance program deficiencies set forth on pages 12 and 13 of the ROE.



     (b) Within 60 days from the effective date of this ORDER, the Bank shall review and implement
all Information Technology program deficiencies set forth on pages 6 and 7 of the ROE.



ELIMINATE/CORRECT ALL VIOLATIONS OF LAW




     19. (a) Within 60 days from the effective date of this ORDER, the Bank shall take all necessary
steps, subject to safe and sound banking practices, to eliminate and/or correct the violations of
law set out on pages 15 and 16 of the ROE. In addition, the Bank shall take all necessary steps to
ensure future compliance with all applicable laws and regulations.



     (b) Within 60 days from the effective date of this ORDER, the Bank shall take all necessary
steps, to eliminate the contraventions of statements of policy, set out on pages 16 and 17 of the ROE. In addition, the Bank shall take all necessary steps to ensure future compliance
with all applicable policies.



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DISCLOSURE




     20. 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. 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., Washington, D. C. 20429 and the Commissioner, Georgia Department of Banking and
Finance, 2990 Brandywine Road, Suite 200, Atlanta, Georgia 30341-5565 for review at least 20 days
prior to dissemination to shareholders. Any changes requested to be made by the FDIC and the
Commissioner shall be made prior to dissemination of the description, communication, notice, or
statement.



PROGRESS REPORTS




     21. 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, and the
results thereof, to secure compliance with this ORDER. Such written progress reports shall include
a copy of the Bank’s Reports of Condition and Income and shall provide cumulative detail of the
Bank’s progress toward achieving compliance with each provision of the ORDER. Progress reports may
be discontinued when the corrections required by this ORDER have been accomplished and the
Supervisory Authorities have, in writing, released the Bank from making further reports.



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     This ORDER shall become effective 10 days from 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          
       day of _________, 2008.



 


	 	 	 	 	 
	 	 
	 
	 	Mark S. Schmidt

Regional Director

Atlanta Region	 
	 	 	 
	 	 	 
	 	 	 
	 




     The Georgia Department of Banking and Finance, having duly approved the foregoing ORDER, and
the Bank, through its Board, agree that the issuance of the 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
legal effect that such ORDER would be binding on the Bank 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.



     Dated
this ______day of _________, 2008.



 


	 	 	 	 	 
	 	 
	 
	 	Robert M. Braswell

Commissioner

Department of Banking and Finance

State of Georgia
	 
	 	 	 
	 	 	 
	 	 	 
	 




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