Exhibit
10.1


 


AGREEMENT BY AND BETWEEN


First Community Bank, National Association


Lexington, South Carolina


and


The Comptroller of the Currency


 


First
Community Bank, National Association, Lexington, South Carolina (“Bank”), and
the Comptroller of the Currency of the United States of America (“Comptroller”)
wish to protect the interests of the depositors, other customers, and
shareholders of the Bank, and, toward that end, wish the Bank to operate safely
and soundly and in accordance with all applicable laws, rules and
regulations.


 


The
Comptroller has found unsafe and unsound banking practices relating to
management of the Bank’s investment portfolio.


 


In
consideration of the above premises, it is agreed, between the Bank, by and
through its duly elected and acting Board of Directors (“Board”), and the
Comptroller, through his authorized representative, that the Bank shall operate
at all times in compliance with the articles of this Agreement.


 


ARTICLE I


 


JURISDICTION


 


(1)           This Agreement shall be
construed to be a “written agreement entered into with the agency” within the
meaning of 12 U.S.C. § 1818(b)(1).


 


(2)           This Agreement shall be
construed to be a “written agreement between such depository institution and
such agency” within the meaning of 12 U.S.C. § 1818(e)(1) and 12 U.S.C. §
1818(i)(2).


 


(3)           This Agreement shall be
construed to be a “formal written agreement” within the meaning of 12 C.F.R. §
5.51(c)(6)(ii). See 12 U.S.C. § 1831i.


 

















 


(4)           This Agreement shall be
construed to be a “written agreement” within the meaning of 12 U.S.C. §
1818(u)(1)(A).


 


(5)           All reports or plans which
the Bank or Board has agreed to submit to the Assistant Deputy Comptroller
pursuant to this Agreement shall be forwarded to the:


 


Assistant
Deputy Comptroller


Carolinas
Field Office


212
South Tryon Street, Suite 700


Charlotte,
North Carolina 28281


 


ARTICLE II


 


COMPLIANCE COMMITTEE


 


(1)           Within ten (10) days of
the date of this Agreement, the Board shall appoint a Compliance Committee of
at least five (5) directors, of which no more than two (2) shall be
an employee or controlling shareholder of the Bank or any of its affiliates (as
the term “affiliate” is defined in 12 U.S.C. § 371c(b)(1)), or a family member
of any such person. Upon appointment, the names of the members of the Compliance
Committee and, in the event of a change of the membership, the name of any new
member shall be submitted in writing to the Assistant Deputy Comptroller. The
Compliance Committee shall be responsible for monitoring and coordinating the
Bank’s adherence to the provisions of this Agreement.


 


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


 


(3)           Within ninety (90) days of
the date of this Agreement and quarterly thereafter, the Compliance Committee
shall submit a written progress report to the Board setting forth in detail:


 


(a)                                  a description of the action
needed to achieve full compliance with each Article of this Agreement;


 


(b)                                 actions taken to comply with
each Article of this Agreement; and


 


(c)                                  the results and status of
those actions.


 


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


 


ARTICLE III


 


STRATEGIC PLAN


 


(1)           Within sixty (60) days, the
Board shall adopt, implement, and thereafter ensure Bank adherence to a written
strategic plan for the Bank covering at least a three-year period. The
strategic plan shall establish objectives for the Bank’s overall risk profile,
earnings performance, growth, balance sheet mix, off-balance sheet activities,
liability structure, capital adequacy, reduction in the volume of nonperforming
assets, product line development and market segments that the Bank intends to
promote or develop, together with strategies to achieve those objectives and,
at a minimum, include:


 


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


 


(b)                                 an assessment of the Bank’s
present and future operating environment;


 


(c)                                  the development of strategic
goals and objectives to be accomplished over the short and long term;


 


(d)                                 an identification of the
Bank’s present and future product lines (assets and liabilities) that will be
utilized to accomplish the strategic goals and objectives established in (1)(c) of
this Article;


 


(e)                                  an evaluation of the Bank’s
internal operations, staffing requirements, board and management information
systems and policies and procedures 


 


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for
their adequacy and contribution to the accomplishment of the goals and
objectives developed under (1)(c) of this Article;


 


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


 


(g)                                 product line development and
market segments that the Bank intends to promote or develop;


 


(h)                                 an action plan to improve
bank earnings and accomplish identified strategic goals and objectives,
including individual responsibilities, accountability and specific time frames;


 


(i)                                     a financial forecast to
include projections for major balance sheet and income statement accounts and
desired financial ratios over the period covered by the strategic plan;


 


(j)                                     control systems to mitigate
risks associated with planned new products, growth, or any proposed changes in
the Bank’s operating environment;


 


(k)                                  specific plans to establish
responsibilities and accountability for the strategic planning process, new
products, growth goals, or proposed changes in the Bank’s operating
environment; and


 


(l)                                     systems to monitor the
Bank’s progress in meeting the plan’s goals and objectives.


 


(2)           Upon adoption, a copy of the
plan shall be forwarded to the Assistant Deputy Comptroller for review and
prior written determination of no supervisory objection. Upon receiving a
determination of no supervisory objection from the Assistant Deputy
Comptroller, the Bank shall implement and adhere to the strategic plan.


 


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(3)           The Board shall ensure that
the Bank has processes, personnel, and control systems to ensure implementation
of and adherence to the plan developed pursuant to this Article.


 


ARTICLE
IV


 


CAPITAL
PLAN


 


(1)           Within ninety (90) days, the
Board shall develop, implement, and thereafter ensure Bank adherence to a three
year capital program. The program shall include:


 


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


 


(b)                                 projections of the sources
and timing of additional capital to meet the Bank’s current and future needs;


 


(c)                                  the primary source(s) from
which the Bank will strengthen its capital structure to meet the Bank’s needs;


 


(d)                                 contingency plans that
identify alternative methods should the primary source(s) under (c) above
not be available; and


 


(e)                                  a dividend policy that
permits the declaration of a dividend only:


 


(i)                                     when the Bank is in
compliance with its approved capital program;


 


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


 


(iii)                               with the prior written
determination of no supervisory objection by the Assistant Deputy Comptroller.
Upon receiving a determination of no supervisory objection from the Assistant 


 


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Deputy
Comptroller, the Bank shall implement and adhere to the dividend policy.


 


(2)           Upon completion, the Bank’s
capital program shall be submitted to the Assistant Deputy Comptroller for
prior written determination of no supervisory objection. Upon receiving a
determination of no supervisory objection from the Assistant Deputy
Comptroller, the Bank shall implement and adhere to the capital program. The
Board shall review and update the Bank’s capital program on an annual basis, or
more frequently if necessary. Revisions to the Bank’s Capital Plan shall be
submitted to the Assistant Deputy Comptroller for a prior written determination
of no supervisory objection.


 


(3)           The Board shall ensure that
the Bank has processes, personnel, and control systems to ensure implementation
of and adherence to the program developed pursuant to this Article.


 


ARTICLE V


 


INVESTMENT POLICY


 


(1)           Within sixty (60) days, the
Board shall review and revise as necessary the Bank’s investment policy,
implement the revised policy, and thereafter ensure Bank adherence to the
policy. The policy shall contain the basic elements of a sound investment
policy consistent with regulatory guidance provided in An Examiner’s Guide
to Investment Products and Practices (December 1992); 12 C.F.R. Part 1;
OCC Bulletin 98-20 (April 27, 1998); OCC Bulletin 2002-19 (May 22,
2002); OCC Bulletin 2004-25a (June 15, 2004); and, shall include:


 


(a)           an investment portfolio strategy and risk management
framework that are consistent with Board approved Bank asset and liability
management policies and risk tolerances;


 


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(b)           individual and committee investment portfolio
purchase and sale authority;


 


(c)           approval procedures that include dollar size limits,
quality limitations, maturity limitations, and concentration or diversification
guidelines;


 


(i)            including specific investment diversification
guidelines and concentration limits for securities backed by non-agency
mortgage collateral;


 


(d)           a requirement that all investment securities be
supported by appropriate due diligence prior to purchase and on a periodic
basis as described in the “Interest Rate Risk” booklet of the Comptroller’s
Handbook, OCC Bulletin 98-20, and OCC Bulletin 2002-19;


 


(i)            the level of due diligence must be commensurate with
the complexity of the instrument, the materiality of the investment in relation
to capital, and the overall quality of the investment portfolio as it relates
to serving the liquidity and pledging needs of the bank;


 


(e)           required reviews and use of securities dealers;


 


(f)            periodic reports to and approval by the Board for
all investment portfolio purchases and sales and strategy changes; and


 


(g)           a monthly review by the Board of the Bank’s
investment portfolio performance and activity to ensure adherence to the
investment policy, relevant accounting standards, and applicable banking and
securities laws and regulations.


 


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(2)           The revised investment
policy shall be implemented and a copy shall be forwarded to the Assistant
Deputy Comptroller.


 


(3)           The Board shall ensure that
the Bank has processes, personnel, and control systems to ensure implementation
of and adherence to the policy developed pursuant to this Article.


 


ARTICLE VI


 


INVESTMENT PORTFOLIO ACTIVITY


 


(1)           Within ninety (90) days, a
committee of the Board shall conduct a review of all of the Bank’s classified
securities that are backed by non-agency mortgage collateral. The committee
shall retain an independent accounting firm or a qualified independent
investment advisor to assist the committee in this review and any subsequent
reviews, as needed. The committee shall provide the Board with a written report
based upon the results and conclusions of the review. The report shall address:


 


(a)           the adequacy of the Bank’s risk measurement systems,
controls and due diligence process given the complexity and risk profile of
these securities;


 


(b)           the appropriateness of the risk rating and valuation
of each security, and include a determination of the applicability of
other-than-temporary impairment;


 


(c)           an analysis of the collateral composition and
performance of each  Security at the pool
level, including:


 


(i)            a full understanding of the characteristics and
performance of the underlying collateral pool, such as general collateral and
deal 


 


8

















 


information,
underlying loan data, prepayment speeds, geographic concentrations, delinquency
data, and payment and loss history;


 


(ii)           a thorough understanding of the cash flow waterfall
and amount of current and projected credit support based on reasonable
estimates of delinquency, probability of default and loss given default; and


 


(d)           a written action plan to address limiting any
additional impact to the bank’s earnings and capital, including an exit
strategy identifying conditions under which the Bank would sell the investments
and unwind any related funding mechanisms.


 


(2)           The Board shall promptly
forward a copy of this report to the Assistant Deputy Comptroller.


 


ARTICLE VII


 


LIQUIDITY


 


(1)           Within sixty (60) days, the
Board shall review and revise as necessary, and thereafter ensure Bank
adherence, to a written Liquidity Policy. The Liquidity Policy shall:


 


(a)           ensure adequate liquidity reports that accurately
and effectively identify, measure, monitor and control the Bank’s liquidity
position, including:


 


(i)            a sources and uses report that shows the volume and
timing of expected sources and uses of funds and related trends over a
reasonable time horizon (e.g.,
30, 60, and 90 days); and


 


(ii)           a rollover risk report that focuses on those funds with
contractual maturities (e.g., Fed
Funds Purchased, Correspondent Lines, 


 


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Repos,
Certificates of Deposit, Federal Home Loan Bank (FHLB) advances); and


 


(b)           set limits on key liquidity measures including, but
not limited to, wholesale funding, FHLB advances, and non-agency mortgage
related securities (e.g., CMOs,
MBS), regardless of their involvement in any leverage transaction.


 


(2)           Within sixty (60) days, the
Board shall review and revise as necessary, and thereafter ensure Bank
adherence to, a written Liquidity Plan. The Liquidity Plan shall, at a minimum:


 


(a)           implement a sources and uses statement to accurately
identify actual and anticipated sources and uses of the bank’s funds over short
time periods; and


 


(b)           include important factors detailed in an extensive
Contingency Funding Plan, such as removing brokered deposits as a source of
funds from the crisis scenario to paint a more realistic scenario during a
crisis situation.


 


(3)           A copy of the Board’s
revised written Liquidity Policy and Liquidity Plan shall be submitted to the
Assistant Deputy Comptroller for review and prior written determination of no
supervisory objection. Upon receiving a determination of no supervisory
objection from the Assistant Deputy Comptroller, the Bank shall implement and
adhere to the program.


 


(4)           Notwithstanding paragraphs
(1), (2) and (3) of this Article, the bank shall not exceed the level
of brokered deposits, as measured by the bank’s total dollar volume of brokered
deposits, on the effective date of this Agreement, without obtaining the prior
written determination of no supervisory objection from the Assistant Deputy
Comptroller. “Brokered 


 


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deposit”
shall have the meaning set forth in 12 C.F.R. § 337.6(a)(2). The limitation of
this paragraph shall include the acquisition of Brokered Deposits through any
transfer, purchase, or sale of assets, including Federal funds transactions
administered through a deposit broker.


 


ARTICLE VIII


 


LOAN PORTFOLIO MANAGEMENT


 


(1)           Within sixty
days (60) days, the Board shall develop, adopt, implement, and thereafter
ensure Bank adherence to systems which provide for effective monitoring of:


 


(a)           compliance with the Bank’s lending policies and
laws, rules, and regulations pertaining to the Bank’s lending function;


 


(b)           the adequacy and documentation of analyses of
current and comprehensive financial data from borrowers, including guarantor
contingent liability information and rent rolls; and


 


(c)           the adequacy and documentation of global cash flow
analysis and updates related to guarantor support.


 


(2)           The Board shall
ensure that the Bank has processes, personnel, and control systems to ensure
implementation of and adherence to the systems developed pursuant to this
Article.


 


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ARTICLE IX


 


ALLOWANCE FOR LOAN AND LEASE LOSSES


 


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


 


(a)           internal risk ratings of loans;


 


(b)           results of the Bank’s independent loan review;


 


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


 


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


 


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


 


(f)            loan loss experience;


 


(g)           trends of delinquent and non-accrual loans;


 


(h)           concentrations of credit in the Bank; and


 


(i)            present and projected economic and market
conditions.


 


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


 


(3)           A copy of the Board’s ALLL
program, and any subsequent revisions to the program, shall be submitted to the
Assistant Deputy Comptroller for review.


 


ARTICLE X


 


APPRAISALS OF REAL PROPERTY


 


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


 


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


 


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


 


(c)           where the borrower has failed to comply with the
contractual terms of the loan agreement and the loan officer’s analysis of
current financial information does not support the ongoing ability of the
borrower or guarantor(s) to perform in accordance with the contractual
terms of the


 


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loan
agreement and the most recent independent appraisal is more than twelve (12)
months old.


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE XI


 


CLOSING


 


(1)           Although the Board has
agreed to submit certain programs and reports to the Assistant Deputy
Comptroller for review or prior written determination of no supervisory 


 


14

















 


objection,
the Board has the ultimate responsibility for proper and sound management of
the Bank.


 


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


 


(3)           Any time limitations imposed
by this Agreement shall begin to run from the effective date of this Agreement.
Such time requirements may be extended in writing by the Assistant Deputy
Comptroller for good cause upon written application by the Board.


 


(4)           The provisions of this Agreement
shall be effective upon execution by the parties hereto and its provisions
shall continue in full force and effect unless or until such provisions are
amended in writing by mutual consent of the parties to the Agreement or
excepted, waived, or terminated in writing by the Comptroller.


 


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


 


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


 


(b)           require the timely reporting by Bank management of
such actions directed by the Board to be taken under the terms of this
Agreement;


 


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


 


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(d)           require corrective action be taken in a timely
manner of any noncompliance with such actions.


 


(6)           This Agreement is intended
to be, and shall be construed to be, a supervisory “written agreement entered
into with the agency” as contemplated by 12 U.S.C. § 1818(b)(1), and expressly
does not form, and may not be construed to form, a contract binding on the
Comptroller or the United States. Notwithstanding the absence of mutuality of
obligation, or of consideration, or of a contract, the Comptroller may enforce
any of the commitments or obligations herein undertaken by the Bank under his
supervisory powers, including 12 U.S.C. § 1818(b)(1), and not as a matter of
contract law. The Bank expressly acknowledges that neither the Bank nor the
Comptroller has any intention to enter into a contract. The Bank also expressly
acknowledges that no officer or employee of the Office of the Comptroller of
the Currency has statutory or other authority to bind the United States, the
U.S. Treasury Department, the Comptroller, or any other federal bank regulatory
agency or entity, or any officer or employee of any of those entities to a
contract affecting the Comptroller’s exercise of his supervisory
responsibilities. The terms of this Agreement, including this paragraph, are
not subject to amendment or modification by any extraneous expression, prior
agreements or prior arrangements between the parties, whether oral or written.


 


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


 


	
  /s/
  Kent D. Stone

  	
   

  	
  April 6,
  2010

  
	
  Kent
  D. Stone

  	
   

  	
  Date

  
	
  Assistant
  Deputy Comptroller

  	
   

  	
   

  
	
  Carolinas
  Field Office

  	
   

  	
   

  



 


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


 


 


	
  /s/
  Thomas C. Brown

  	
   

  	
  April 6,
  2010

  
	
  Thomas
  C. Brown

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  Chimin J. Chao

  	
   

  	
  April 6,
  2010

  
	
  Chimin
  J. Chao

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  Michael Crapps

  	
   

  	
  April 6,
  2010

  
	
  Michael
  Crapps

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  Anita B. Easter

  	
   

  	
  April 6,
  2010

  
	
  Anita
  B. Easter

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  O.A. (Sonny) Etheridge, D.M.D.

  	
   

  	
  April 6,
  2010

  
	
  O.A.
  (Sonny) Etheridge, D.M.D.

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  George H. Fann, Jr. D.M.D.

  	
   

  	
  April 6,
  2010

  
	
  George
  H. Fann, Jr., D.M.D.

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  J. Thomas Johnson

  	
   

  	
  April 6,
  2010

  
	
  J.
  Thomas Johnson

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  W. James Kitchens, Jr.

  	
   

  	
  April 6,
  2010

  
	
  W.
  James Kitchens, Jr.

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  James (Jim) Leventis

  	
   

  	
  April 6,
  2010

  
	
  James
  (Jim) Leventis

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  Alexander Snipe, Jr.

  	
   

  	
  April 6,
  2010

  
	
  Alexander
  Snipe, Jr.

  	
   

  	
  Date

  



 


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  /s/
  Roderick M. Todd, Jr.

  	
   

  	
  April 6,
  2010

  
	
  Roderick
  M. Todd, Jr.

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  April 6,
  2010

  
	
  Richard
  K. Bogan M.D.

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  Loretta (Retta) Whitehead

  	
   

  	
  April 6,
  2010

  
	
  Loretta
  (Retta) Whitehead

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/
  Mitchell M. Willoughby

  	
   

  	
  April 6,
  2010

  
	
  Mitchell
  M. Willoughby

  	
   

  	
  Date

  



 


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