Exhibit
10.14


 


Consent Order


 


FEDERAL DEPOSIT INSURANCE
CORPORATION


 


WASHINGTON, D.C.


 




	
   

  	
  )

  	
   

  
	
  In the Matter of

  	
  )

  	
   

  
	
   

  	
  )

  	
  CONSENT ORDER

  
	
  COMMUNITYSOUTH BANK AND

  	
  )

  	
   

  
	
  TRUST

  	
  )

  	
  FDIC-09-698b

  
	
  EASLEY, SOUTH CAROLINA

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  (Insured State Nonmember
  Bank)

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  






 


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


 


The
Bank, by and through its duly elected and acting Board of Directors (“Board”),
has executed a “Stipulation to the Issuance of a Consent Order” (“STIPULATION”),
dated February 23, 2010, that is accepted by the FDIC and the Commissioner
of Banking (“Commissioner”) on behalf of the State Board of Financial
Institutions for the State of South Carolina (“State Board”).  With the Stipulation, the Bank has consented,
without admitting or denying any charges of unsafe or unsound banking practices
relating to asset quality, capital adequacy, earnings, management
effectiveness, and liquidity, to the issuance of this Consent Order (“ORDER”)
by the FDIC and the State Board.


 


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


 


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BOARD OF DIRECTORS


 


1.             (a)           As of the effective date of
this ORDER, the Board shall increase its participation in the affairs of the
Bank, assuming full responsibility for the approval of sound policies and
objectives and for the supervision of all of the Bank’s activities, consistent
with the role and expertise commonly expected for directors of banks of
comparable size.  The Board shall prepare
in advance and follow a detailed written agenda for each meeting, including
consideration of the actions of any committees. 
Nothing in the foregoing sentences shall preclude the Board from
considering matters other than those contained in the agenda.  This participation shall include meetings to
be held no less frequently than monthly at which, at a minimum, the following
areas shall be reviewed and approved: 
reports of income and expenses; new, overdue, renewal, insider,
charged-off, and recovered loans; investment activity; operating policies; and
individual committee actions.  Board
minutes shall document these reviews and approvals, including the names of any
dissenting directors.


 


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


 


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MANAGEMENT


 


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


 


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


 


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


 


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


 


(iii)          identification and establishment of such Bank
committees as are needed to provide guidance and oversight to active
management;


 


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


 


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


 


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


 


(vi)          an
organizational chart.


 


CAPITAL


 


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


 


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


 


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


 


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


 


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


 


ALLOWANCE
FOR LOAN AND LEASE LOSSES


 


4.             Within 60 days from the effective date of this ORDER,
the Board shall review the adequacy of the ALLL and establish a 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 shall be completed in time to
properly report the ALLL in the quarterly Reports of Condition and Income.  The review shall 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 and its implementation shall be
satisfactory to the Supervisory Authorities.


 


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REDUCTION
OF CLASSIFIED ASSETS


 


5.             (a)           Within 60 days from the effective date of
this ORDER, the Bank shall submit to the Supervisory Authorities, for review
and comment, a written plan to reduce the Bank’s risk position in each asset in
excess of $250,000, which is classified “Substandard” or “Doubtful” in the FDIC’s
Visitation Report dated October 26, 2009 (“Report”).  Within 10 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 a Board meeting. 
Thereafter, the Bank shall implement and follow this plan.


 


(b)           The
written plan mandated by this provision shall further require a reduction in
the aggregate balance of assets classified “Substandard” and “Doubtful” 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, a reduction of twenty-five percent (25%) in the balance of assets
classified “Substandard” or “Doubtful.”


 


(ii)           Within
360 days, a reduction of forty-five percent (45%) in the balance of assets
classified “Substandard” or “Doubtful.”


 


(iii)          Within
540 days, a reduction of sixty-five percent (65%) in the balance of assets
classified “Substandard” or “Doubtful.”


 


(iv)          Within
720 days, a reduction of seventy-five percent (75%) in the balance of assets
classified “Substandard” or “Doubtful.”


 


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NO
ADDITIONAL CREDIT


 


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


 


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


 


(c)           Paragraph 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 as follows:


 


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


 


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


 


(iii)          how
the Bank’s position would be improved.


 


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


 


REDUCE CONCENTRATIONS OF CREDIT


 


7.             Within 45 days from the
effective date of this ORDER, the Bank shall perform a risk segmentation
analysis with respect to the Concentrations of Credit discussed in the
Report.  Concentrations should be
identified by product type, geographic distribution, underlying collateral or
other asset groups, which are considered economically related and in the
aggregate represent a large portion of the Bank’s Tier 1 Capital.  The Bank shall develop a written plan
approved by its Board and acceptable to the Supervisory Authorities to
systematically reduce any segment of the portfolio which the Supervisory Authorities
deems to be an undue concentration of credit in relation to the Bank’s Tier 1
Capital.  At a minimum the plan must
provide for written procedures for the ongoing measurement and monitoring of
the concentrations of credit, and a limit on concentrations commensurate with
the Bank’s capital position, safe and sound banking practices, and the overall
risk profile of the Bank.


 


INTERNAL
LOAN REVIEW


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


PLAN FOR EXPENSES/PROFITABILITY


 


9.             (a)           Within 60 days from the
effective date of this ORDER, the Bank shall formulate and implement a written
profit plan and a realistic, comprehensive budget for all categories of income
and expense.  This plan shall be
forwarded to the Supervisory Authorities for review and comment and shall
address, at a minimum, the following:


 


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


 


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


 


(iii)          the operating assumptions
that form the basis for, and adequately support, major projected income and
expense components.


 


(b)           Following the end of each
calendar quarter, the Board shall evaluate the Bank’s actual performance in
relation to the plan 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.


 


FUNDS
MANAGEMENT PLAN


 


10.           Within 60 days from the effective date of this ORDER,
the Bank shall adopt and implement a written plan addressing liquidity,
contingent funding, and asset liability management.  A copy of the plan shall be submitted to 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. 



 


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Annually during the life
of this ORDER, the Bank shall review this plan for adequacy and, based upon
such review, shall make appropriate revisions to the plan that are necessary to
strengthen funds management procedures and maintain adequate provisions to meet
the Bank’s liquidity needs.


 


BROKERED DEPOSITS


 


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


 


(b)           Within 30 days of the
effective date of this ORDER, the Bank shall submit a written plan for
eliminating its reliance on brokered deposits to the FDIC 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 FDIC, 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.


 


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


 


ASSET GROWTH LIMITATIONS


 


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


 


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of
the Supervisory Authorities.  In no event
shall asset growth result in noncompliance with the capital maintenance
provisions of this ORDER unless the Bank receives prior written approval from
the Supervisory Authorities.


 


RESTRICTIONS
ON CERTAIN PAYMENTS


 


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


 


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


 


DISCLOSURE


 


14.           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 


 


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


 


PROGRESS
REPORTS


 


15.           Within 45 days from the end of the first quarter
following the effective date of this ORDER, and within 45 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
Reports of Condition and of Income.  Such
reports may be discontinued when the corrections required by this ORDER have
been accomplished and the Supervisory Authorities have released the Bank in
writing from making further reports.  All
progress reports and other written responses to this ORDER shall be reviewed by
the Board and made a part of the minutes of the appropriate Board meeting.


 


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


 


This
ORDER shall be effective on the date of issuance.


 


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The
provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.


 


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


 


Issued
Pursuant to Delegated Authority


 


	
   

  	
  Dated this 23rd day of February,
  2010.

  
	
   

  	
   

  
	
   

  	
  /s/ Doreen R. Eberley

  
	
   

  	
  Doreen R. Eberley

  
	
   

  	
  Acting Regional
  Director

  
	
   

  	
  Division of Supervision
  and Consumer Protection

  
	
   

  	
  Atlanta Region

  
	
   

  	
  Federal Deposit
  Insurance Corporation

  



 


 


The
Commissioner, having duly approved the foregoing ORDER on behalf of the State
Board, 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 State Board to the
same degree and to the same legal effect that such ORDER would be binding if
the State Board had issued a separate ORDER that included and incorporated all
of the provisions of the foregoing ORDER, pursuant to S.C. Code Ann. § 34-1-60
(1976).


 


 


	
   

  	
  Dated this 23rd day of February, 2010.

  
	
   

  	
   

  
	
   

  	
  /s/ Louie A. Jacobs

  
	
   

  	
  Louie
  A. Jacobs

  
	
   

  	
  Commissioner
  of Banking

  
	
   

  	
  South
  Carolina

  
	
   

  	
  State
  Board of Financial Institutions

  



 


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