Document:

Stipulation to the Issuance of a Consent Order

 Exhibit 10.1 
 FEDERAL DEPOSIT INSURANCE CORPORATION 
 WASHINGTON, D.C.

  

					
	  
	 		    	
	In the Matter of	 	)	    	STIPULATION TO THE
		 	)	    	ISSUANCE OF A
	MOUNTAIN 1ST BANK & TRUST COMPANY	 	)	    	CONSENT ORDER
	HENDERSONVILLE, NORTH CAROLINA	 	)	    	
		 	)	    	FDIC-09-679b
	(Insured State Nonmember Bank)	 	)	    	
	  
	 	)	    	

 Subject to the acceptance of this STIPULATION TO THE ISSUANCE OF A CONSENT
ORDER (“STIPULATION”) by the Federal Deposit Insurance Corporation (“FDIC”), it is hereby stipulated and agreed by and between a representative of the Legal Division of the FDIC, the North Carolina Commissioner of Banks
(“Commissioner”) and Mountain 1st
Bank & Trust Company, Hendersonville, North Carolina (“Bank”), through its board of directors, as follows. 
 1. The Bank has
been advised of its right to receive a written Notice of Charges and of Hearing (“Notice”) 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 FDIC’s Rules of Practice and Procedure (“Rules”), 12 C.F.R. Part 308, and has
waived those rights. 
 2. The Bank, solely for the purpose of this proceeding and without admitting or denying any of the alleged charges of
unsafe or unsound banking practices and any violations of law and/or regulations, hereby consents and agrees to the issuance of a CONSENT ORDER (“ORDER”) by the FDIC and the Commissioner in the form

 
attached hereto. The Bank further stipulates and agrees that such ORDER shall become effective immediately after its issuance by the FDIC and the Commissioner and be fully enforceable by the FDIC
pursuant to the provisions of section 8(i)(1) of the Act, 12 U.S.C. § 1818(i)(1), and the Rules, and by the Commissioner subject only to the conditions set forth in paragraph 3 of this STIPULATION. 
 3. In the event the FDIC accepts this STIPULATION and issues the ORDER, it is agreed that no action to enforce said ORDER in the United States District
Court will be taken by the FDIC unless the Bank or any “institution affiliated party”, as such term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), has violated or is about to violate any provision of the ORDER.

 4. The Bank hereby waives: 
  

	 	(a)	the receipt of a written Notice; 

  

	 	(b)	all defenses to the charges to be set forth in the Notice; 

  

	 	(c)	a hearing for the purpose of taking evidence regarding the allegations to be set forth in the Notice; 

  

	 	(d)	the filing of Proposed Findings of Fact and Conclusions of Law; 

  

	 	(e)	a Recommended Decision of an Administrative Law Judge; and 

  

	 	(f)	exceptions and briefs with respect to such Recommended Decision. 

  

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 Dated: February 22, 2010 
  

	
	 FEDERAL DEPOSIT INSURANCE CORPORATION
 LEGAL DIVISION

	
	BY:
	
	  

	Barbara J. Lukes
	Counsel

  

	
	NORTH CAROLINA COMMISSIONER OF BANKS
	
	BY:
	
	  

	Joseph A. Smith, Jr.
	Commissioner of Banks
	State of North Carolina

  

	
	 MOUNTAIN 1ST BANK & TRUST COMPANY
 HENDERSONVILLE, NORTH CAROLINA

	
	BY:
	
	  

	B. Lee Beason
	
	  

	William H. Burton
	
	  

	Michael D. Foster
	
	  

	James C. Kirkpatrick

  

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	H. Steve McManus
	
	  

	Van F. Phillips
	
	  

	Vincent K. Rees
	
	  

	Bradley B. Schnyder
	
	  

	Catherine H. Schroader
	
	  

	John S. Sheiry
	
	THE BOARD OF DIRECTORS

  

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 FEDERAL DEPOSIT INSURANCE CORPORATION 
 WASHINGTON, D.C. 
  

					
	  
	 		    	
		 	)	    	
	In the Matter of	 	)	    	
		 	)	    	
	MOUNTAIN 1ST BANK & TRUST COMPANY	 	)	    	CONSENT ORDER
	HENDERSONVILLE, NORTH CAROLINA	 	)	    	
		 	)	    	FDIC-09-679b
	(INSURED STATE NONMEMBER BANK)	 	)	    	
	  
	 	)	    	

 The Federal Deposit Insurance Corporation (“FDIC”) is the
appropriate Federal banking agency for Mountain 1st
Bank & Trust Company, Hendersonville, North 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 22, 2010, that is accepted by the FDIC and
the North Carolina Commissioner of Banks (the “Commissioner”). The Commissioner may issue an order pursuant to the provisions of N.C. Gen. Stat. § 53-107.1 (2005). 
 With the STIPULATION, the Bank has consented, without admitting or denying any charges of unsafe or unsound banking practices or violations
of law or regulation relating to weaknesses in capital, asset quality, management, earnings, and liquidity, to the issuance of this Consent Order (“ORDER”) by the FDIC and the Commissioner. 
 Having determined that the requirements for issuance of an order under 12 U.S.C. § 1818(b) have been satisfied, the FDIC and the
Commissioner hereby order that: 
  

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 BOARD OF DIRECTORS 
 1.(a) Beginning with the effective date of this ORDER, the Board shall increase its participation in the affairs of the Bank, assuming full responsibility
for the approval of sound policies and objectives and for the supervision of all of the Bank’s activities, consistent with the role and expertise commonly expected for directors of banks of comparable size. 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, including loan-to-value exceptions; 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 establish a Board committee (“Directors’
Committee”), consisting of at least four members, to oversee the Bank’s compliance with the ORDER. Three of the members of the Directors’ Committee shall not be officers of the Bank. The Directors’ Committee shall receive from
Bank management monthly reports detailing the Bank’s actions with respect to compliance with the ORDER. The Directors’ Committee shall present a report detailing the Bank’s adherence to the ORDER to the Board at each regularly
scheduled Board meeting. Such report shall be recorded in the appropriate minutes of the Board’s

  

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meeting and shall be retained in the Bank’s records. Establishment of this committee does not in any way diminish the responsibility of the entire Board to ensure compliance with the
provisions of this ORDER. 
 MANAGEMENT 
 2. The Bank shall have and retain qualified management. 
 (a) Within 90 days from
the effective date of this Order, each member of management shall have 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. Management shall include the chief executive officer, senior lending officer, and chief financial officer. All management officials shall have an appropriate level of experience
and expertise that is needed to perform his or her duties. 
 (b) The qualifications of management shall be assessed on its
ability to: 
  

	 	(i)	Comply with the requirements of this ORDER; 

  

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

  

	 	(iii)	Comply with applicable laws and regulations; and 

  

	 	(iv)	Restore all aspects of the Bank to a safe and sound condition, including, but not limited to, asset quality, capital adequacy, earnings, management effectiveness, risk
management, liquidity, and sensitivity to market risk. 

 (c) During the life of this ORDER, the Bank shall notify
the Regional Director of the FDIC’s Atlanta Regional Office (“Regional Director”) and the Commissioner (collectively, “Supervisory Authorities”) in writing of the resignation or termination of any of the Bank’s
directors or senior executive officers. Prior to the

  

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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.
§ 1831i, and Subpart F of Part 303 of the FDIC Rules and Regulations, 12 C.F.R. §§ 303.100-303.104 and any requirement of the State of North Carolina for prior notification and approval. 
 (d) While this ORDER is in effect, the Bank shall comply with the requirements of 12 U.S.C. § 1823(k)(5) and Part 359 of the FDIC Rules
and Regulations, 12 C.F.R. Part 359. 
 CAPITAL 
 3.(a) While this ORDER is in effect, the Bank shall have and maintain Tier 1 capital in such an amount as to equal or exceed eight (8%) percent of the Bank’s total assets and total risk-based
capital in such an amount as to equal or exceed twelve (12%) percent of the Bank’s total risk-weighted assets. In the event this ratio falls below the established minimum, the Bank shall notify the Supervisory Authorities and shall
increase capital in an amount sufficient to comply with this paragraph within 90 days. 
 (b) Within 60 days from the effective
date of this ORDER, the Bank shall develop and adopt a plan for achieving and maintaining the capital levels required by paragraph 3(a) during the life of this ORDER. The plan shall be submitted to the Supervisory Authorities for review and
approval. 
 (c) The level of Tier 1 capital and total risk based capital to be maintained during the life of this ORDER
pursuant to paragraph 3(a) shall be in addition to a fully funded allowance for loan and lease losses (“ALLL”), the adequacy of which shall be satisfactory to the Supervisory Authorities as determined at subsequent examinations and/or
visitations. 
  

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 (e) 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; 

  

	 	(ii)	The sale of non-cumulative perpetual preferred stock; 

  

	 	(iii)	The direct contribution of cash by the Board, shareholders; 

  

	 	(iv)	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. 
 (f) If all or part of the increase in Tier 1 capital required by paragraph 3 of this ORDER 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 the 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 Section, 550 17th Street, N.W., Room F-6066,
Washington, D.C. 20429 and to the North Carolina Office of the Commissioner of Banks, 4309 Mail Service Center, Raleigh, North Carolina 27699. Any

  

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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 non-cumulative 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. 
 (g) In complying with the provisions of paragraph 3 of this ORDER, 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. 
 (h) For the purposes of this ORDER, the terms “Tier 1 capital,” “total risk-based capital,” and “total assets” shall have, the meanings ascribed to them in Part 325 of the FDIC Rules and Regulations, 12 C.F.R.
§§ 325.2(v) and 325.2(x), respectively. 
 LIQUIDITY AND FUNDS MANAGEMENT POLICY 
 4.(a) Within 60 days from the effective date of this ORDER, the Bank shall adopt and implement a written plan addressing liquidity, contingency 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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Quarterly 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. 
 REDUCTION OF
CLASSIFIED ASSETS 
 5.(a) Within 60 days from the effective date of this ORDER, the Bank shall formulate a written plan to reduce the
Bank’s risk exposure in each asset in excess of $250,000 classified Substandard or Doubtful in the Report of Examination dated as of August 31, 2009 (“Report”). For purposes of this paragraph, “reduce” means to collect,
charge off, or improve the quality of an asset so as to warrant its removal from adverse classification by Supervisory Authorities. In developing the plan 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 to improve the Bank’s collateral position. 
 (b) In addition, the written plan
mandated by this paragraph shall also include, but not be limited to, the following: 
  

	 	(i)	A schedule for reducing the outstanding dollar amount of each adversely classified asset, including timeframes for achieving the reduced dollar amounts (at a minimum,
the schedule for each adversely classified asset must show its expected dollar balance on a quarterly basis); 

  

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	 	(ii)	Specific actions plans intended to reduce the Bank’s risk exposure in each classified asset; 

  

	 	(iii)	A schedule showing, on a quarterly basis, the expected consolidated balance of all adversely classified assets, and the ratio of the consolidated balance to the
Bank’s projected Tier 1 capital plus the ALLL; 

  

	 	(iv)	A provision for the Bank’s submission of monthly written progress reports to its Board; and 

  

	 	(v)	A provision mandating Board review of the progress reports, with a notation of the review recorded in the Board minutes. 

 (c) The plan mandated by this paragraph 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 fifteen percent (15%) in the balance of assets classified “Substandard” or “Doubtful.”

  

	 	(ii)	Within 360 days, a reduction of thirty-five percent (35%) in the balance of assets classified “Substandard” or “Doubtful.”

  

	 	(iii)	Within 540 days, a reduction of sixty percent (60%) 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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 (d) The requirements of this paragraph do not represent standards for future operations of
the Bank. Following compliance with the above reduction schedule, the Bank shall continue to reduce the total volume of adversely classified assets. 
 (e) Within 60 days from the effective date of this ORDER, the Bank shall submit the written reduction plan to the Supervisory Authorities for review and comment. Within 30 days from receipt of any comment
from the Supervisory Authorities, and after due consideration of any recommended changes, the Bank shall approve the plan, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and fully
comply with the plan. Such plans 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 this ORDER. 
 ALLOWANCE FOR LOAN AND LEASE LOSSES 
 6.(a) Immediately upon the entry of this ORDER, the Board shall make a provision to replenish the ALLL which is underfunded as set forth in the Report. 
 (b) Within 60 days from the effective date of this ORDER, the Board shall review the ALLL and establish a comprehensive policy for
determining the adequacy of the Allowance. 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 of 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

  

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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. 
 SPECIAL MENTION 
 7.
Within 90 days from the effective date of this ORDER, the Bank shall correct the cited deficiencies in the loans listed for “Special Mention” in the Report. 
 REDUCTION OF CONCENTRATIONS OF CREDIT 
 8. Within 30 days from the effective date of
this ORDER, the Bank shall perform a risk segmentation analysis with respect to the Concentrations of Credit listed on the Concentration page of 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 provide a copy of this analysis to the Supervisory Authorities. The Bank
shall develop a plan to reduce any segment of the portfolio which the Supervisory Authorities deem to be an undue concentration of credit in relation to the Bank’s Tier 1 capital. The plan and its implementation shall be in a form and manner
acceptable to the Supervisory Authorities. 
 CHARGE-OFF 
 9.(a) Within 30 days from the effective date of this ORDER, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of
assets classified “Loss” and 50 percent of those assets classified “Doubtful” in the Report that have not been previously collected or charged-off. If an asset classified “Doubtful” is a

  

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loan or lease, the Bank may, in the alternative, increase its ALLL by an amount equal to 50 percent of the loan or lease classified “Doubtful”. Elimination of any of these assets
through proceeds of other loans made by the Bank is not considered collection for purposes of this paragraph. 
 (b)
Additionally, while this ORDER remains in effect, the Bank shall, within 30 days from the receipt of any official Report of Examination of the Bank from the FDIC or the Commissioner, eliminate from its books, by collection, charge-off, or other
proper entries, the remaining balance of any asset classified “Loss” and 50 percent of the those classified “Doubtful” unless otherwise approved in writing by the Supervisory Authorities. 
 NO ADDITIONAL CREDIT 
 10.(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, 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” or is listed for “Special Mention” and
is uncollected. 
 (c) Paragraph 10(b) shall not apply if the Bank’s failure to extend further credit to a particular
borrower would be detrimental to the best interests of the Bank. Prior to the extending of any additional credit pursuant to this paragraph, either in the

  

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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 Bank’s position would be improved thereby; and 

  

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

 (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.

 LENDING AND COLLECTION POLICIES 
 11. Within 90 days from the effective date of this ORDER, the Bank shall ensure the full implementation of its written lending and collection policy to provide effective guidance and control over the
Bank’s lending function, which implementation shall include the resolution of those exceptions enumerated in the Report. In addition, the Bank shall obtain adequate and current documentation for all loans in the Bank’s loan portfolio. Such
policy and its implementation shall be in a form and manner acceptable to the Supervisory Authorities. 
 INTERNAL LOAN
REVIEW 
 12. Within 90 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 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 and Audit Committee, 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. 
 WRITTEN STRATEGIC PLAN 
 13. Within 90 days from the effective date of this ORDER, the Bank shall prepare and submit to the Supervisory Authorities its written strategic plan consisting of long-term goals designed to improve the
condition of the Bank and its viability and strategies for achieving those goals. The plan shall be in a form and manner acceptable to the Supervisory Authorities, but at a minimum shall cover three years and provide specific objectives for asset
growth, market focus, earnings projections, capital needs, and liquidity position. 
 PLAN TO IMPROVE EARNINGS/BUDGET

 14.(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 for the calendar year ending 2010. 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 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 preceding each subsequent budget year. 
 (b) The plan and budget and any subsequent modification thereto shall be submitted to the Supervisory Authorities for review and comment.
Within 30 days after the receipt of any comment from the Supervisory Authorities, the Board shall approve the

  

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plan and budget or subsequent modification thereto, which approval shall be recorded in the minutes of the meeting of the Board. 
 (c) Following the end of each calendar quarter, the Board shall evaluate the Bank’s actual performance in relation to the plan and
budget 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. 
 POLICY FOR INTERNAL ROUTINE AND CONTROL 
 15. Within 90 days from the effective date
of this ORDER, the Bank shall adopt and implement a policy for the operation of the Bank in such a manner as to provide adequate internal routine and controls within the Bank consistent with safe and sound banking practices. Such policy and its
implementation shall, at a minimum, eliminate and/or correct all internal routine and control deficiencies as more fully set forth in the Report and shall be satisfactory to the Supervisory Authorities. 
 AUDITS 
 16. Within
90 days from the effective date of this ORDER, the Bank shall adopt and implement a comprehensive written audit program. A copy of the audit program 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. The Bank shall thereafter implement and enforce an effective system of internal and external audits. The internal
auditor shall make written monthly reports of audit findings directly to the Board. The minutes of the meetings of the Board shall reflect consideration of these reports and describe any action taken as a result thereof. 
  

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 OTHER REAL ESTATE 
 17. Within 90 days from the effective date of this ORDER, the Board shall develop a written policy for managing the Other Real Estate of the Bank. The Bank
shall submit the policy to the Supervisory Authorities for review and comment. Within 30 days from receipt of any comment from the Supervisory Authorities, and after due consideration of any recommended changes, the Bank shall approve the policy,
which approval shall be recorded in the minutes of the Board meeting. Thereafter, the Bank shall implement and fully comply with the policy. 
 BROKERED DEPOSITS 
 18.(a) Throughout the effective life of this ORDER, the Bank
shall not accept, renew, 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) The Bank shall comply with the restrictions on the effective yields on deposits as described in
12 C.F.R. § 337.6. 
 RESTRICTIONS ON CERTAIN PAYMENTS 
 19.(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. 
  

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 (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. 
 CONFLICTS OF INTEREST 
 20. Within 30 days from the effective date of this ORDER, the Bank shall develop, adopt, and
implement written policies and procedures designed to bring to the attention of each member of the Board conflicts of interest which may exist in approving loans or other transactions in which officers, directors or principal shareholders of the
Bank (“Insiders”) are involved. Such policies and procedures shall, at a minimum, ensure that each member of the Board has been apprised of any potential conflict prior to making a decision, or acting specifically on any loan or other
transaction in which Insiders and/or their business associates are, directly or indirectly, involved. The results of any deliberations by the Board regarding potential conflicts shall be reflected in the minutes of its meetings. 
 VIOLATIONS OF LAW AND REGULATION 
 21. Within 60 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law and regulation as well as all contraventions of statements of policy that are
contained in the Report. In addition, the Bank shall take all necessary steps to ensure future compliance with all applicable laws, regulations, and statements of policy. 
 ASSET GROWTH LIMITATIONS 
 22. During the life of this ORDER, the Bank shall limit
asset growth to no more than ten percent (10%) per annum and in no event shall asset growth result in noncompliance

  

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with the capital maintenance provisions of this ORDER without receiving prior written approval of the Supervisory Authorities. 
 PROGRESS REPORTS 
 23. Within 30 days from the end of the first
quarter following the effective date of this ORDER, and within 30 days of the end of each quarter thereafter, the Bank shall furnish written progress reports to the Supervisory Authorities detailing the form and manner of any actions taken to secure
compliance with this ORDER and the results thereof. Such reports shall include a copy of the Bank’s 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.

 DISCLOSURE 
 24. Following the issuance of this ORDER, the Bank shall provide to its shareholders or otherwise furnish a description of this ORDER in conjunction with the Bank’s next shareholder communication or
in conjunction with its notice or proxy statement preceding the Bank’s next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, statement, or notice
shall be sent to the FDIC, Division of Supervision and Consumer Protection, Accounting and Securities Disclosure Section, 550 17th Street, N.W., Room F-6066, Washington, D.C. 20429 and to the North Carolina Office of the Commissioner of Banks, 4309
Mail Service Center, Raleigh, North Carolina 27699-4309, to review at least twenty (20) days prior to dissemination to shareholders. The Bank shall make any

  

 18 

 
changes required by the Supervisory Authorities prior to dissemination of the description, communication, notice, or statement. 
 The provisions of this ORDER shall not bar, estop, or otherwise prevent the FDIC, the Commissioner, 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. 
 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
     day of February, 2010. 
  

	
	  

	Doreen R. Eberley
	Acting Regional Director
	Atlanta Region
	Federal Deposit Insurance Corporation

  

 19 

 The North Carolina Commissioner of Banks having duly approved the foregoing ORDER, and the
Bank, through its Board, agree that the issuance of the said ORDER by the Federal Deposit Insurance Corporation shall be binding as between the Bank and the Commissioner to the same degree and legal effort that such ORDER would be binding on the
Bank if the Commissioner had issued a separate ORDER that included and incorporated all of the provisions of the foregoing ORDER pursuant to the provisions of N.C. Stat. § 53-107.1(2005). 
 Dated this      day of             , 2010.

  

	
	  

	Joseph A. Smith, Jr.
	Commissioner of Banks
	State of North Carolina

  

 20Amendment to Adoption Agreement for the Restated VBA Executives'

 Exhibit 10.4.4 
 VIRGINIA BANKERS ASSOCIATION 
 MODEL NON-QUALIFIED
DEFERRED COMPENSATION PLAN 
 FOR EXECUTIVES 
 (As Restated Effective January 1, 2008) 
 AMENDMENT TO 
 ADOPTION AGREEMENT 
 If the Employer completing this document has any questions about the adoption of the Plan, the provisions of the Plan, its representative
should contact Bette J. Albert, C.L.U. at the Virginia Bankers Association Benefits Corporation, 4490 Cox Road, Glen Allen, VA 23060-3341 - telephone number (804) 643-7469 during business hours.  
  
  
  

							
	  
 1.      EMPLOYER(S) ADOPTING PLAN NAMED IN PARAGRAPH 1.18 OF THE PLAN.
  

	 (a)
	 	 Name of Plan Sponsor:
 C&F Financial Corporation
	  	(b)	 	 Plan Sponsor’s telephone Number:
 ( 804 ) 843-2360

	 (c)
	 	 Address of Plan Sponsor:
 Post
Office Box 391
  
	  	(d)	 	 Plan Sponsor’s EIN:
 54-1680165

  
  

			
	  
 2.      GENERAL PLAN INFORMATION.
  

	 (a)
	 	 Name of Plan:
  
 VBA Executive’s Deferred Compensation Plan for C&F Financial Corporation

	 (b)
	 	 Name, Address and EIN of Plan Administrator(s): [If other than Plan Sponsor, appointment must be
by resolution]
  

  
 Plan Amendments 
 Pursuant to subparagraph 11.1 of the Plan, the Board hereby adopts the following amendment to the Model Plan. This amendment is effective January 1, 2009. 
 1. Item 3(b)(3) of the Adoption Agreement is amended to read as follows: 
 [X]    (3)    Special or Other Transitional Provisions. [Use attachment if additional space is
needed] 
 [Enter any special provisions including alternate definitions or other transitional provisions relating to any
Predecessor Plan Account and the Plan as restated] 
 Effective January 1, 2006, any Employer may, in its discretion, elect
to contribute for all of any of its employees participating in the Plan or under any contribution feature (i.e., Employer Matching Contributions, Excess Profit Sharing Employer Non-Elective Contributions, Excess Cash Balance Employer Non-Elective
Contributions (effective January 1, 2009) and SERP Employer Non-Elective Contributions), less than the amount otherwise called for under the other provisions of the Adoption Agreement and/or to make Employer Matching Contributions at a
different rate than otherwise called for under the other provisions of the Adoption Agreement. 

 2. Item 6(a)(1)(C) of the Adoption Agreement is amended to read as follows: 

 
  

			
	[X]	  	(C) Other Applicable Rules. A Participant shall be vested in his Employer Non-Elective Deferral Account in accordance with the following rules: See Attachment for
vesting in the Employer Deferral Account Cash Balance subaccount and the Employer Deferral Account SERP subaccount.
		  	  

		  	  

		  	  

		  	[Describe vesting provisions, including automatic vesting provisions, applicable schedule and rules for counting service.]

 IN WITNESS WHEREOF, each Employer, by its duly authorized representatives, has executed this instrument this 16th day of
February , 2010. 
  

					
	 C&F Financial Corporation

	[Enter Name of Employer]
		
	By	 	 /s/ Larry G. Dillon

		 	Its	 	     CEO

 [SEAL] 
  

			
	ATTEST:
	
	 /s/ Mallory P. Spencer

	Its	 	  

  

					
	 Citizens and Farmers Bank

	[Enter Name of Employer]
		
	By	 	 /s/ Thomas F. Cherry

		 	Its	 	     CFO

 [SEAL] 
  

			
	ATTEST:
	
	 /s/ Mallory P. Spencer

	Its	 	  

  

					
	 C&F Mortgage Corporation

	[Enter Name of Employer]
		
	By	 	 /s/ Larry G. Dillon

		 	Its	 	     Chairman

  

 - 2 - 

 [SEAL] 
  

			
	ATTEST:
	
	 /s/ Mallory P. Spencer

	Its	 	  

  

					
	 C&F Finance Company

	[Enter Name of Employer]
		
	By	 	 /s/ Thomas F. Cherry

		 	Its	 	     Treasurer, Board Member

 [SEAL] 
  

			
	ATTEST:
	
	 /s/ Mallory P. Spencer

	Its	 	  

  

 - 3 - 

 ATTACHMENT TO 
 THE ADOPTION AGREEMENT FOR 
 VBA EXECUTIVE’S
DEFERRED COMPENSATION PLAN 
 FOR C&F FINANCIAL CORPORATION 
 (As Restated Effective January 1, 2008 and As Further Amended October 20, 2009) 
 Pursuant to authorization of the Board of Directors of C&F Financial Corporation, the following additions are made to the Adoption Agreement for the VBA Executive’s Deferred Compensation Plan for
C&F Financial Corporation, as restated effective January 1, 2008 in the form of the Virginia Bankers Association Model Non-Qualified Deferred Compensation Plan for Executives and as amended from time to time (the “Plan”), with an
amendment adopted on October 20, 2009 adding “Excess Cash Balance” Employer Non-Elective Contributions (effective for Plan Years beginning on or after January 1, 2009): 
 1. Types of Employer Contributions. The Employer may make Employer Matching Contributions and three types of Employer
Non-Elective Contributions – (1) “Excess Profit Sharing” Employer Non-Elective Contributions, (2) “Excess Cash Balance” Employer Non-Elective Contributions (effective for Plan Years beginning on or after
January 1, 2009) and (3) “SERP” Employer Non-Elective Contributions. 
 2. Designation as a
Participant Eligible for Employer Contributions. Eligibility of an Employee for participation in any or all of the Employer Contributions requires designation by the Board (or a committee thereof). 
  

	 	(a)	Participants who may be entitled to an Employer Matching Contribution are sometimes referred to as Matching Participants for this purpose. 

  

	 	(b)	Participants who may be entitled to an “Excess Profit Sharing” Employer Non-Elective Contribution are sometimes referred to as Excess Profit Sharing
Participants for this purpose. 

  

	 	(c)	Participants who may be entitled to an “Excess Cash Balance” Employer Non-Elective Contribution are sometimes referred to as Excess Cash Balance Participants
for this purpose. 

  

	 	(d)	Participants who may be entitled to a SERP Employer Non-Elective Contribution are sometimes referred to as SERP Participants for this purpose. 

3. Employer Matching Contributions. Unless otherwise provided by the Board, each Employer shall make an Employer Matching
Contribution for each Plan Year in an amount, subject to the limitations provided in the Plan, equal to the following percentage(s) of each Matching Participant’s Deferral Contributions of Compensation as defined in Option 4(a)(2)(C) of the
Adoption Agreement for such Plan Year: 100% of his Compensation as defined in Option 4(a)(2)(C) of the Adoption Agreement contributed to the Plan (up to a maximum of 5% of such Compensation), provided however that the actual Employer Matching
Contribution for a Plan Year for any Matching Participant shall not exceed the excess of (a) 5% of the Matching Participant’s Compensation as defined in Option 4(a)(2)(C) of the Adoption Agreement for such Plan Year over (b) the
maximum matching contribution that could be made for the Matching Participant under the 401(k) Plan assuming he contributes the maximum permitted amount to the 401(k) Plan (taking into account all 401(k) Plan limits on contributions and covered
compensation thereunder). 

 For purposes hereof, the “401(k) Plan” means the Virginia Bankers Association
Defined Contribution Plan for Citizens and Farmers Bank as amended from time to time (or any successor thereto). 
 4. Excess Profit Sharing Employer Non-Elective Contributions. Unless otherwise provided by the Board, an “Excess Profit Sharing” Employer Non-Elective Contribution shall be made on behalf of an Excess Profit Sharing
Participant who has Excess Compensation and who meets the accrual requirements to receive an allocation of the profit sharing contribution under the 401(k) Plan (as defined above) in an amount equal to the product obtained by multiplying
(a) the 401(k) Plan profit sharing contribution rate (i.e., the actual profit sharing contribution to the 401(k) Plan expressed as a percentage of the covered compensation of 401(k) Plan participants entitled to a share of the profit sharing
contribution) by (b) the Excess Profit Sharing Participant’s Excess Compensation. 
 For purposes hereof, the
following terms have the following meanings: 
  

	 	(a)	“Compensation Limit” has the same meaning assigned to it in the 401(k) Plan. 

  

	 	(b)	“Excess Compensation” means Base Salary and Bonus in excess of the Compensation Limit (as defined in the 401(k) Plan and as applicable to the Plan Year in
question). 

 5. Excess Cash Balance Employer Non-Elective Contributions. Effective as of and from
January 1, 2009, unless otherwise provided by the Board, an “Excess Cash Balance” Employer Non-Elective Contribution shall be made for each Plan Year in which ends the plan year of the Cash Balance Plan (as defined below) on behalf of
an Excess Cash Balance Participant who has Excess Compensation for such plan year and who meets the accrual requirements to receive Pay Credits (as defined in the Cash Balance Plan) under the Cash Balance Plan for such plan year in an amount equal
to the product obtained by multiplying (a) the Excess Cash Balance Participant’s “Pay Credit” percentage under the Cash Balance Plan for such plan year by (b) the Excess Cash Balance Participant’s Excess Compensation
for such plan year. 
 For purposes hereof, the following terms have the following meanings: 
  

	 	(a)	“Compensation Limit” has the same meaning assigned to it in the Cash Balance Plan. 

  

	 	(b)	“Excess Compensation” means the Excess Cash Balance Participant’s Compensation (as defined in the Cash Balance Plan) in excess of the Compensation Limit
(as defined in the Cash Balance Plan and as applicable to the plan year in question). 

 For purposes hereof, the
“Cash Balance Plan” means the Virginia Bankers Association Defined Benefit Plan for Citizens and Farmers Bank as amended from time to time (or any successor thereto). 
 The Company has participated in the Troubled Asset Relief Program Capital Purchase Program (“CPP”) created by the U.S. Department
of the Treasury (the “Treasury Department”) pursuant to authority granted under the Emergency Economic Stabilization Act of 2008, as amended (the “EESA”); and the Company is required to comply with the requirements of
Section 111(b) of the EESA, as amended from time to time, and the CPP with respect to the compensation, including certain bonus accrual and payment prohibitions and limitations, of certain current and future employees of the Company (as
determined for purposes of the EESA and the guidance and regulations issued by the Treasury Department with respect to the CPP (the “CPP Requirements”)), in accordance with the CPP Requirements. Notwithstanding anything to the contrary in
the foregoing, no “Excess Cash Balance” Employer Non-Elective Contribution shall be made for any portion of a plan year under the Cash Balance Plan for which an Excess Cash Balance Participant is subject to the bonus non-accrual CPP
Requirement.

  

 2 

 
Where this limitation applies for part but not all of a plan year, Excess Compensation shall be assumed to be earned pro rata over the plan year with the result that an “Excess Cash
Balance” Employer Non-Elective Contribution may be accrued for the portion of the plan year for which the bonus non-accrual CPP Requirement is inapplicable. 
 6. SERP Employer Non-Elective Contributions. Effective as of and from January 1, 2000, unless otherwise provided by the Board, a “SERP” Employer Non-Elective Contribution shall
be made on behalf of a Participant who is a SERP Participant in such amount, if any, as determined in writing by the Board at or prior to the time the contribution is made. 
 7. Employer Non-Elective Deferral Account and Subaccounts Thereof. The Employer Non-Elective Deferral Account shall be
subdivided into three subaccounts: 
  

	 	(a)	The Employer Deferral Account Profit Sharing subaccount to which shall be allocated Excess Profit Sharing Employer Non-Elective Contributions. 

 

	 	(b)	The Employer Deferral Account Cash Balance subaccount to which shall be allocated Excess Cash Balance Employer Non-Elective Contributions. 

  

	 	(c)	The Employer Deferral Account SERP subaccount to which shall be allocated SERP Employer Non-Elective Contributions. 

 8. Vesting in and Payment of Employer Deferral Account Cash Balance Subaccount. 
  

	 	(a)	The Employer Deferral Account Cash Balance subaccount of an Excess Cash Balance Participant shall be fully vested if, when and to the extent his accrued benefit under
the Cash Balance Plan (as defined above) is vested. 

  

	 	(b)	The Employer Deferral Account Cash Balance subaccount of an Excess Cash Balance Participant shall be paid at the same time and in the same form as his Employer Deferral
Account Profit Sharing subaccount. Notwithstanding anything to the contrary in the foregoing, no Employer Deferral Account Cash Balance subaccount balance shall be paid to an Excess Cash Balance Participant where and to the extent the bonus
non-payment CPP requirement is applicable to Employer Deferral Account Cash Balance subaccount balance. 

 9. Vesting in and Payment of Employer Deferral Account SERP Subaccount. 
  

	 	(a)	Except as otherwise provided in item 9(b) of this Attachment to the Adoption Agreement for the Plan, the Employer Deferral Account SERP subaccount of a SERP Participant
shall be fully vested upon the first to occur of the following while he is an Employee: 

  

	 	(i)	His death. 

  

	 	(ii)	His total disability (based on the standard applicable under the Employer’s long term disability program or, if none or if he is not a participant in that program,
based on his entitlement to Social Security disability). 

  

	 	(iii)	His retirement at or after age 65. 

  

	 	(iv)	His early retirement with consent of the Board expressly providing for such vesting. 

  

	 	(v)	A Change in Control. 

  

	 	(b)	 If other vesting provisions are provided by the Board or the Compensation Committee of the Board with respect to the Employer Deferral Account SERP
subaccount of any SERP Participant no later than the date the first contribution by the Employer to the Participant’s

  

 3 

	 	 
Employer Deferral Account SERP subaccount is made (or at any time thereafter if such other vesting provision make vesting more favorable to the SERP Participant), vesting in the SERP
Participant’s Employer Deferral Account SERP subaccount shall be determined as so provided by the Board or its Compensation Committee. 

  

	 	(c)	Unless otherwise provided by the Board or the Compensation Committee of the Board with respect to the Employer Deferral Account SERP subaccount of any SERP Participant
no later than the date the first contribution by the Employer to the Participant’s Employer Deferral Account SERP subaccount is made (or alternatively on a year by year basis before the beginning of the year in question), a SERP
Participant’s Employer Deferral Account SERP subaccount shall be paid at the time and in the form as the SERP Participant’s Employer Deferral Account Profit Sharing subaccount. Any such special payment provisions shall be in writing and
shall provide for payment at a time and in a form permitted under the Plan. 

 IN WITNESS WHEREOF, C&F
Financial Corporation, as the Plan Sponsor, has caused its name to be signed to this amended Attachment by its duly authorized officer as of the date noted below. 
  

					
	Dated:    February 16, 2010        	 	C&F Financial Corporation, Plan Sponsor
			
		 	By:	 	 /s/ Larry G. Dillon

		 	   Its	 	 President & CEO

 By execution hereof by the duly authorized Representative, the Virginia Bankers Association Benefits Corporation hereby accepts the above
amended Attachment. 
  

			
	Dated:    February 16, 2010        	 	 /s/ Bette J. Albert

		 	 Virginia Bankers Association Benefits Corporation Representative

  

 4

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