Document:

UNITED
STATES OF AMERICA

    Before
the

    OFFICE
OF THRIFT SUPERVISION

    

    
      
        
          
            	 
      	
                    )

                  	 
      	 
      
	
                    In
      the Matter of

                  	
                    )

                  	
                    Order
      No.:

                  	
                    SE-10-047

                  
	 
      	
                    )

                  	 
      	 
      
	 
      	
                    )

                  	 
      	 
      
	
                    SUPERIOR
      BANK

                  	
                    )

                  	
                    Effective
      Date:    

                  	
                    November
      2, 2010

                  
	 
      	
                    )

                  	 
      	 
      
	
                    Tampa,
      Florida

                  	
                    )

                  	 
      	 
      
	
                    OTS
      Docket No. 18010

                  	
                    )

                  	 
      	 
      
	 
      	
                    )

                  	 
      	 
      

          

        

      

    

    

    STIPULATION AND CONSENT TO
ISSUANCE OF ORDER TO CEASE AND DESIST

    

    WHEREAS, the Office of Thrift
Supervision (OTS), acting by and through its Regional Director for the Southeast
Region (Regional Director), and based upon information derived from the exercise
of its regulatory and supervisory responsibilities, has informed Superior Bank,
Tampa, Florida, OTS Docket No. 18010 (Association), that the OTS is of the
opinion that grounds exist to initiate an administrative proceeding against the
Association pursuant to 12 U.S.C. § 1818(b);

     

    WHEREAS, the Regional
Director, pursuant to delegated authority, is authorized to issue Orders to
Cease and Desist where a savings association has consented to the issuance of an
order; and

     

    WHEREAS, the Association
desires to cooperate with the OTS to avoid the time and expense of such
administrative cease and desist proceeding by entering into this Stipulation and
Consent to Issuance of Order to Cease and Desist (Stipulation) and, without
admitting or denying that such grounds exist, but only admitting the statements
and conclusions in Paragraphs 1 and 2 below concerning Jurisdiction, hereby
stipulates and agrees to the following terms:

     

    Superior
Bank

    Stipulation
and Consent to Issuance of Order to Cease and Desist

    Page 1 of
7
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Jurisdiction.

     

    1.           The
Association is a “savings association” within the meaning of 12 U.S.C. § 1813(b)
and 12 U.S.C. § 1462(4).  Accordingly, the Association is “an insured
depository institution” as that term is defined in 12 U.S.C.
§ 1813(c).

     

    2.           Pursuant
to 12 U.S.C. § 1813(q), the Director of the OTS is the “appropriate Federal
banking agency” with jurisdiction to maintain an administrative enforcement
proceeding against a savings association.  Therefore, the Association
is subject to the authority of the OTS to initiate and maintain an
administrative cease and desist proceeding against it pursuant to 12 U.S.C. §
1818(b).

     

    OTS Findings of
Fact.

     

    3.           Based
on its April 26, 2010 examination of the Association (2010 Examination), the OTS
finds that the Association has engaged in unsafe or unsound banking practices
and failed to comply with conditions imposed in writing by the OTS
including:

     

    (a)           operating
the Association with an inadequate level of capital protection for the volume,
type and quality of assets held by the Association;

     

    (b)           operating
with inadequate earnings to augment capital and support reserves;

     

    (c)           operating
with an excessive level of adversely classified loans and assets;

     

    (d)           creating
and operating with an excessive concentration of commercial real estate and
construction loans.

     

    (e)           operating
the Association with a materially underfunded ALLL and inaccurately reported and
understated classified assets.

     

    Superior
Bank

    Stipulation
and Consent to Issuance of Order to Cease and Desist

    Page 2 of
7

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (f)           engaging
in unsafe and unsound practices by failing to:

     

    (i)           provide
OTS with an acceptable business plan and capital plan that included reasonable
strategies to preserve and enhance capital, improve asset quality, and
strengthen and improve earnings;

     

    (ii)          adopt
and implement acceptable Allowance for Loan Lease Loss (ALLL) policies,
procedures and methodologies that ensured the timely establishment and
maintenance of adequate ALLLs;

     

    (iii)         adopt
and implement policies and procedures to ensure the Association indentified and
classified problem assets in compliance with 12 C.F.R. § 563.160 and 12 C.F.R.
Part 570; and

     

    (iv)         correct
all deficiencies and weaknesses identified in the 2010 Examination.

     

    4.           Based
on its 2010 Examination of the Association, the OTS finds that the Association
has engaged in violations of law and regulation, including:

     

    (a)           12
C.F.R. § 560.101 (regarding Real Estate Lending Standards);

     

    (b)           12
C.F.R. § 560.160 (regarding accurate and timely classification of
assets);

     

    (c)           12
C.F.R. § 563.161 (regarding safe and sound management and financial policies);
and

     

    (d)           12
C.F.R. § 563.170(c) (regarding establishment and maintenance of accurate books
and records).

     

    Consent.

     

    5.           The
Association consents to the issuance by the OTS of the accompanying Order to
Cease and Desist (Order).  The Association further agrees to comply
with the terms of the Order upon the Effective Date of the Order and stipulates
that the Order complies with all requirements of law.

     

    Superior
Bank

    Stipulation
and Consent to Issuance of Order to Cease and Desist

    Page 3 of
7

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Finality.

     

    6.           The
Order is issued by the OTS under 12 U.S.C. § 1818(b).  Upon the
Effective Date, the Order shall be a final order, effective, and fully
enforceable by the OTS under the provisions of 12 U.S.C. § 1818(i).

     

    Waivers.

     

    7.           The
Association waives the following:

     

    (a)           the
right to be served with a written notice of the OTS’s charges against it as
provided by 12 U.S.C. § 1818(b) and 12 C.F.R. Part 509;

     

    (b)           the
right to an administrative hearing of the OTS’s charges as provided by 12 U.S.C.
§ 1818(b) and 12 C.F.R. Part 509;

     

    (c)           the
right to seek judicial review of the Order, including, without limitation, any
such right provided by 12 U.S.C. § 1818(h), or otherwise to challenge the
validity of the Order; and

     

    (d)          any
and all claims against the OTS, including its employees and agents, and any
other governmental entity for the award of fees, costs, or expenses related to
this OTS enforcement matter and/or the Order, whether arising under common law,
federal statutes, or otherwise.

     

    OTS Authority Not Affected.

     

    8.           Nothing
in this Stipulation or accompanying Order shall inhibit, estop, bar, or
otherwise prevent the OTS from taking any other action affecting the Association
if at any time the OTS deems it appropriate to do so to fulfill the
responsibilities placed upon the OTS by law.

     

    Superior
Bank

    Stipulation
and Consent to Issuance of Order to Cease and Desist

    Page 4 of
7

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Other Governmental Actions
Not Affected.

     

    9.           The
Association acknowledges and agrees that its consent to the issuance of the
Order is solely for the purpose of resolving the matters addressed herein,
consistent with Paragraph 8 above, and does not otherwise release, discharge,
compromise, settle, dismiss, resolve, or in any way affect any actions, charges
against, or liability of the Association that arise pursuant to this action or
otherwise, and that may be or have been brought by any governmental entity other
than the OTS.

     

    Miscellaneous.

     

    10.         The
laws of the United States of America shall govern the construction and validity
of this Stipulation and of the Order.

     

    11.         If
any provision of this Stipulation and/or the Order is ruled to be invalid,
illegal, or unenforceable by the decision of any Court of competent
jurisdiction, the validity, legality, and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby, unless
the Regional Director in his or her sole discretion determines
otherwise.

     

    12.         All
references to the OTS in this Stipulation and the Order shall also mean any of
the OTS’s predecessors, successors, and assigns.

     

    13.         The
section and paragraph headings in this Stipulation and the Order are for
convenience only and shall not affect the interpretation of this Stipulation or
the Order.

     

    14.         The
terms of this Stipulation and of the Order represent the final agreement of the
parties with respect to the subject matters thereof, and constitute the sole
agreement of the parties with respect to such subject matters.

     

    15.         The
Stipulation and Order shall remain in effect until terminated, modified, or
suspended in writing by the OTS, acting through its Regional Director or other
authorized representative.

     

    Superior
Bank

    Stipulation
and Consent to Issuance of Order to Cease and Desist

    Page 5 of
7

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Signature of Directors/Board
Resolution.

     

    16.         Each
Director signing this Stipulation attests that he or she voted in favor of a
Board Resolution authorizing the consent of the Association to the issuance of
the Order and the execution of the Stipulation.  This Stipulation may
be executed in counterparts by the directors after approval of execution of the
Stipulation at a duly called board meeting.

    

    [Remainder
of Page Intentionally Left Blank]

    

    Superior
Bank

    Stipulation
and Consent to Issuance of Order to Cease and Desist

    Page 6 of
7

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    WHEREFORE, the Association, by
its directors, executes this Stipulation.

     

    
      
        
          
            
              
                
                  
                    	 
      	 	
                            Accepted
      by:

                          
	 
      	 	 
      
	
                            SUPERIOR
      BANK

                          	 	
                            OFFICE
      OF THRIFT SUPERVISION

                          
	
                            Tampa,
      Florida

                          	 	 
      
	 
      	 	 
      
	
                            By:

                          	
                            /s/ C. Stanley Bailey

                          	 	
                            By:

                          	
                            /s/ James G. Price

                          
	 
      	
                            C.
      Stanley Bailey

                          	 	 
      	
                            James
      G. Price

                          
	 
      	
                            Chairman

                          	 	 
      	
                            Regional
      Director, Southeast Region

                          
	 
      	 
      	 	 
      
	 
      	 
      	 	
                            Date:
      See Effective Date on page 1

                          
	 
      	 
      	 	 
      
	 
      	
                            /s/ C. Marvin Scott

                          	 	
                            /s/ Peter L. Lowe

                          
	 
      	
                            C.
      Marvin Scott, Director

                          	 	
                            Peter
      L. Lowe, Director

                          
	 
      	 
      	 	 
      
	 
      	
                            /s/ Rick D. Gardner

                          	 	
                            /s/ John C. Metz

                          
	 
      	
                            Rick
      D. Gardner, Director

                          	 	
                            John
      C. Metz, Director

                          
	 
      	 
      	 	 
      
	 
      	
                            /s/ Roger D. Barker

                          	 	 
      
	 
      	
                            Roger
      D. Barker, Director

                          	 	
                            D.
      Dewey Mitchell, Director

                          
	 
      	 
      	 	 
      
	 
      	
                            /s/ Thomas E. Dobbs, Jr.

                          	 	
                            /s/ Robert R. Parrish,
  Jr.

                          
	 
      	
                            Thomas
      E. Dobbs, Jr., Director

                          	 	
                            Robert
      R. Parrish, Jr., Director

                          
	 
      	 
      	 	 
      
	 
      	
                            /s/ Thomas E. Jernigan, Jr.

                          	 	
                            /s/ Charles W. Roberts,
  III

                          
	 
      	
                            Thomas
      E. Jernigan, Jr., Director

                          	 	
                            Charles
      W. Roberts, III, Director

                          
	 
      	 
      	 	 
      
	 
      	
                            /s/ James Mailon Kent, Jr.

                          	 	
                            /s/ James C. White

                          
	 
      	
                            James
      Mailon Kent, Jr., Director

                          	 	
                            James
      C. White,
Director

                          

                  

                

              

            

          

        

      

    

    

    Superior
Bank

    Stipulation
and Consent to Issuance of Order to Cease and Desist

    Page 7 of
7UNITED
STATES OF AMERICA

      Before
the

      OFFICE
OF THRIFT SUPERVISION

       

      
        
          
            
              	 
      	
                      )

                    	 
      	 
      
	
                      In
      the Matter of

                    	
                      )

                    	
                      Order
      No.:

                    	
                      SE-10-047

                    
	 
      	
                      )

                    	 
      	 
      
	 
      	
                      )

                    	 
      	 
      
	
                      SUPERIOR
      BANK

                    	
                      )

                    	
                      Effective
      Date:    

                    	
                      November
      2, 2010

                    
	 
      	
                      )

                    	 
      	 
      
	
                      Tampa,
      Florida

                    	
                      )

                    	 
      	 
      
	
                      OTS
      Docket No. 18010

                    	
                      )

                    	 
      	 
      
	 
      	
                      )

                    	 
      	 
      

            

          

        

      

       

      ORDER TO CEASE AND
DESIST

       

      WHEREAS, Superior Bank, Tampa,
Florida, OTS Docket No. 18010 (Association), by and through its Board of
Directors (Board), has executed a Stipulation and Consent to Issuance of Order
to Cease and Desist (Stipulation); and

       

      WHEREAS, the Association, by executing the
Stipulation, has consented and agreed to the issuance of this Order to Cease and
Desist (Order) by the Office of Thrift Supervision (OTS) pursuant to
12 U.S.C. § 1818(b); and

       

      WHEREAS, pursuant to delegated
authority, the OTS Regional Director for the Southeast Region (Regional
Director) is authorized to issue Orders to Cease and Desist where a savings
association has consented to the issuance of an order.

       

      Superior
Bank

      Order to
Cease and Desist

      Page 1 of
22

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      NOW, THEREFORE, IT IS ORDERED
that:

       

      Cease and
Desist.

       

      1.           The
Association, its institution-affiliated parties,1 and its
successors and assigns, shall cease and desist from any action (alone or with
others) for or toward causing, bringing about, participating in, counseling, or
the aiding and abetting the unsafe or unsound banking practices that resulted
in:

       

      (a)           operating
the Association with an inadequate level of capital protection for the volume,
type and quality of assets held by the Association;

       

      (b)          operating
with inadequate earnings to augment capital and support reserves;

       

      (c)           operating
with an excessive level of adversely classified loans and assets;

       

      (d)          creating
and operating with an excessive concentration of commercial real estate and
construction loans.

       

      (e)          operating
the Association with a materially underfunded Allowance for Loan Lease Loss
(ALLL) and inaccurately reported and understated classified assets.

       

      (f)           engaging
in unsafe and unsound practices by failing to:

       

      (i)           provide
OTS with an acceptable business plan and capital plan that included reasonable
strategies to preserve and enhance capital, improve asset quality, and
strengthen and improve earnings;

       

      (ii)          adopt
and implement acceptable ALLL policies, procedures and methodologies that will
ensure the timely establishment and maintenance of adequate ALLLs;

        

      
        

      

      1 The term
“institution-affiliated party” is defined at 12 U.S.C. § 1813(u).

       

      Superior
Bank

      Order to
Cease and Desist

      Page 2 of
22

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (iii)         adopt
and implement policies and procedures to ensure the Association indentified and
classified problem assets in compliance with 12 C.F.R. § 563.160 and 12 C.F.R.
Part 570; and

       

      (iv)         correct
all deficiencies and weaknesses identified in the April 26, 2010 OTS Report of
Examination (2010 Examination).

       

      2.           The
Association, its institution-affiliated parties, and its successors and assigns,
shall also cease and desist from any action (alone or with others) for or toward
causing, bringing about, participating in, counseling, or the aiding and
abetting violations of the following laws and regulations:

       

      (a)           12
C.F.R. § 560.101 (regarding Real Estate Lending Standards);

       

      (b)           12
C.F.R. § 560.160 (regarding accurate and timely classification of
assets);

       

      (c)           12
C.F.R. § 563.161 (regarding safe and sound management and financial policies);
and

       

      (d)           12
C.F.R. § 563.170(c) (regarding establishment and maintenance of accurate books
and records).

       

      
        Capital.

      

       

      3.           By
March 31, 2011, the Association shall have and maintain a Tier 1 (Core) Capital
Ratio equal to or greater than ten percent (10%) and a Total Risk-Based Capital
Ratio equal to or greater than fourteen percent (14%).2

        

      
        

      

      2 The
requirement in Paragraph 3 to have and maintain a specific capital level
means that the Association may not be deemed to be “well-capitalized” for
purposes of 12 U.S.C. §1831o and 12 C.F.R. Part 565, pursuant to 12 C.F.R.
§565.4(b)(1)(iv).

       

      Superior
Bank

      Order to
Cease and Desist

      Page 3 of
22

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      4.           Within
sixty (60) days, the Association shall submit a written plan to achieve and
maintain the Association’s capital at the levels prescribed in Paragraph 3
(Capital Plan) that is acceptable to the Regional Director.  At a
minimum, the Capital Plan shall:

       

      (a)          identify
the specific sources of additional capital and the timeframes and methods by
which additional capital will be raised, including specific target dates and
corresponding capital levels;

       

      (b)          detail
the Association’s capital preservation and enhancement strategies with specific
narrative goals;

       

      (c)          address
the requirements and restrictions imposed by this Order relating to capital
under different forward-looking scenarios involving progressively stressed
economic environments;

       

      (d)          include
detailed quarterly financial projections, including Tier 1 (Core) and Total
Risk-Based Capital Ratios;

       

      (e)          address
the Association’s level of classified assets, ALLL, earnings, asset
concentrations, liquidity needs, and trends in the foregoing areas;
and

       

      (f)           address
current and projected trends in real estate market conditions.

       

      5.           Upon
receipt of written notification from the Regional Director that the Capital Plan
is acceptable, the Association shall implement and adhere to the Capital
Plan.  A copy of the Capital Plan and the Board meeting minutes
reflecting the Board’s adoption thereof shall be provided to the Regional
Director within twenty (20) days after the Board meeting.

       

      6.           At
each monthly board meeting, beginning with the December 2010 board
meeting,  the Board shall review the Association’s compliance with the
Capital Plan.  At a minimum, the Board’s review shall
include:

       

      Superior
Bank

      Order to
Cease and Desist

      Page 4 of
22

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (a)           a
comparison of actual operating results to projected results;

       

      (b)          detailed
explanations of any material deviations;3
and

       

      (c)           a
discussion of specific corrective actions or measures that have been or will be
implemented to address each material deviation.

       

      7.           Within
fifteen (15) days after: (a) the Association fails to meet the capital
requirements prescribed in Paragraph 3; (b) the Association fails to comply with
the Capital Plan prescribed in Paragraph 4; or (c) any written request from the
Regional Director, the Association shall submit a written Contingency Plan that
is acceptable to the Regional Director.

       

      8.           The
Contingency Plan shall detail the actions to be taken, with specific time
frames, to achieve one of the following results by the later of the date of
receipt of all required regulatory approvals or sixty (60) days after the
implementation of the Contingency Plan: (a) merger with, or acquisition by,
another federally insured depository institution or holding company thereof; or
(b) voluntary dissolution by filing an appropriate application with the OTS in
conformity with applicable laws, regulations and regulatory
guidance.

       

      9.           Upon
receipt of written notification from the Regional Director, the Association
shall implement and adhere to the Contingency Plan immediately.  The
Association shall provide the Regional Director with written status reports
detailing the Association’s progress in implementing the Contingency Plan by no
later than the first (1st) and
fifteenth (15th) of
each month following implementation of the Contingency Plan.

       

      
        
          

        

      

      3 A
deviation shall be considered material under this Paragraph of the Order when
the Association: determines that it needs to adjust its identified sources of
additional capital, timeframes, methods, or target dates by which it will raise
capital.

       

      Superior
Bank

      Order to
Cease and Desist

      Page 5 of
22

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Business
Plan.

       

      10.         Within
sixty (60) days , the Association shall submit a comprehensive business
plan for the remainder of calendar year 2010 and calendar years 2011 and
2012 (Business Plan)
that addresses all corrective actions in the 2010 Examination relating to the
Association’s business operations to the Regional Director for review and
non-objection.  Thereafter, the Association shall submit an updated
three year Business Plan at least ninety (90) days prior to the end of each
calendar year.  At a minimum, the Business Plan shall conform to
applicable laws, regulations and regulatory guidance and include:

       

      (a)          plans
to improve the Association’s core earnings and achieve profitability on a
consistent basis throughout the term of the Business Plan;

       

      (b)          detailed
strategies and actions the Association will take to reduce the overall risk
profile of the Association;

       

      (c)          specific
targets and dates and supporting documentation to demonstrate the reduction in
the overall risk profile of the institution;

       

      (d)          detailed
strategies and actions to reduce the outstanding balance of the non-homogenous
lending portfolios, and any asset categories that present higher or unusual risk
characteristics;

       

      (e)          quarterly
pro forma financial projections (balance sheet, regulatory capital ratios, and
income statement) for each quarter covered by the Business Plan;
and

       

      (f)           consideration
of the requirements of this Order.

       

      11.         Upon
receipt of written notification of non-objection from the Regional Director, the
Association shall implement and adhere to the Business Plan.  A copy
of the Business Plan and the Board meeting minutes reflecting the Board’s
adoption thereof shall be provided to the Regional Director within twenty (20)
days after the Board meeting.

       

      Superior
Bank

      Order to
Cease and Desist

      Page 6 of
22

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      12.         Any
material modifications4 to the
Business Plan must receive the prior written non-objection of the Regional
Director.  The Association shall submit proposed material
modifications to the Regional Director at least forty-five (45) days prior to
implementation.

       

      13.         Within
thirty (30) days after the end of each quarter, beginning with the Quarter
ending December 31, 2010, the Board shall review quarterly variance reports on
the Association’s compliance with the Business Plan (Variance
Reports).  The Variance Reports shall:

       

      (a)          identify
variances in the Association’s actual performance during the preceding quarter
as compared to the projections set forth in the Business Plan;

       

      (b)          contain
an analysis and explanation of identified variances; and

       

      (c)          discuss
the specific measures taken or to be taken to address
identified  variances.

       

      14.         A
copy of the Variance Reports and Board meeting minutes shall be provided to the
Regional Director within ten (10) days after the Board meeting.

       

      Growth.

       

      15.         Effective
immediately, the Association shall not increase its total assets during any
quarter in excess of an amount equal to net interest credited on deposit
liabilities during the prior quarter without the prior written notice of
non-objection of the Regional Director.

       

      
        
          

        

      

      4 A
modification shall be considered material under this Section of the Order if the
Association plans to: (a) engage in any activity that is inconsistent with the
Business Plan; or (b) exceed the level of any activity contemplated in the
Business Plan or fail to meet target amounts established in the Business Plan by
more than ten percent (10%), unless the activity involves assets risk-weighted
fifty percent (50%) or less, in which case a variance of more than twenty-five
percent (25%) shall be deemed to be a material modification.

       

      Superior
Bank

      Order to
Cease and Desist

      Page 7 of
22

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Lending.

       

      16.         Effective
immediately, the Association shall not originate or purchase, or commit to
originate or purchase, any new construction, multifamily, nonresidential, land
or commercial nonmortgage loans (Covered Loans).  The Association may
fund legally binding commitments on Covered Loans entered into prior to June 15,
2010.  Within ten (10) days, the Association shall provide the
Regional Director with a report on the status of each legally binding commitment
identified on the list provided to the OTS on June 25, 2010.

       

      17.         Effective
immediately, the Association shall not renew or modify any existing
construction, multifamily, nonresidential, land, or commercial nonmortgage loans
without obtaining, prior to renewal, (i) a new appraisal of the collateral, (ii)
current financial information on the borrower, and (iii) any other credit or
collateral documentation appropriate for the type of loan, or required by the
Association’s lending policies.  The Association shall perform a
global debt service coverage analysis and a Statement of Financial Accounting
(FAS) 114 impairment analysis on all such loans using the information provided
and appropriately and immediately classify such loans as indicated by the
results of the debt service and impairment analysis.

       

      18.        
By December 31, 2010, the Association shall obtain new, full-document appraisals
for each adversely classified asset5 that has
a book value of $500,000 or greater and an appraisal on file more than one year
old.  Appraisals shall comply with generally accepted appraisal
standards, applicable law and regulation, and the Association’s appraisal
policies.  The Association shall obtain other or additional appraisals
of assets as required by applicable regulations and the Association’s appraisal
policies.

       

        
          

        

      

      5 For
purposes of this paragraph, the term “adversely classified asset” shall mean any
asset that is classified as special mention, substandard, doubtful or loss; any
asset that is non-performing, and any asset that is on non-accrual
status.

       

      Superior
Bank

      Order to
Cease and Desist

      Page 8 of
22

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Problem Asset
Plan.

       

      19.         Within
sixty (60) days, the Association shall submit a detailed, written plan with
specific strategies, targets and timeframes to reduce6 the
Association’s level of problem assets7 (Problem
Asset Reduction Plan) to the Regional Director for review and
non-objection.  Upon receipt of written non-objection from the
Regional Director, the Association shall implement and adhere to the Problem
Asset Reduction Plan.  The Problem Asset Reduction Plan, at a minimum,
shall include:

       

      (a)           quarterly
targets for the level of problem assets expressed as dollar amounts and a
percentage of Tier 1 (Core) capital plus ALLL;

       

      (b)           a
description of the specific methods for reducing the Association’s level of
problem assets to the established targets; and

       

      (c)           all
relevant assumptions and projections.

       

      20.         Within
sixty (60) days, the Association shall revise all individual written specific
workout plans for each problem asset, group of loans to any one borrower or loan
relationship of Seven Hundred and Fifty Thousand Dollars ($750,000) or greater
(Asset Workout Plans) to address all corrective actions in the 2010
Examination.  Each Asset Workout Plan shall:

       

      (a)           contain
detailed strategies and actions that are designed to eliminate the basis of
criticism or classification for each asset, and must not include the acquisition
of troubled loans from other lenders to the same borrower as a
strategy;

       

      (b)           include
specific timeframes for the completion of all detailed strategies and actions,
including an exit strategy for each problem asset;

       

      
        
          

        

      

      6 For
purposes of this Paragraph, “reduce” means to collect, sell, charge off, or
improve the quality of an asset sufficient to warrant its removal from adverse
criticism or classification.

      7 The term
“problem assets” shall include all classified assets, assets designated special
mention, nonperforming assets, real estate owned, and delinquent
loans.

       

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      (c)           include
a list of any credit and collateral documentation that is needed to
comply with the Associations lending and appraisal policies;
and

       

      (d)           detail
the actions and steps the Association will take to obtain any needed credit and
collateral documentation.

       

      21.         Within
thirty (30) days after the end of each quarter, beginning with the quarter
ending September 30, 2010, the Association shall submit a quarterly written
asset status report (Quarterly Asset Report) to the Board.  The
Board’s review of the Quarterly Asset Report shall be documented in the Board
meeting minutes.  The Quarterly Asset Report shall include, at a
minimum:

       

      (a)           the
current status of all Asset Workout Plans;

       

      (b)           a
comparison of problem assets to Tier 1 (Core) capital plus ALLL and Total
Risk-Based capital;

       

      (c)           a
comparison of problem assets at the current quarter end with the preceding
quarter;

       

      (d)           a
breakdown of problem assets by type and risk factor;

       

      (e)           an
assessment of the Association’s compliance with the Problem Asset Reduction
Plan; and

       

      (f)           a
discussion of the actions taken during the preceding quarter to reduce the
Association’s level of problem.

       

      22.         Within
forty-five (45) days after the end of each quarter, a copy of the Quarterly
Asset Report shall be provided to the Regional Director.

       

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      Allowance for Loan and Lease
Losses.

       

      23.         Within
sixty (60) days, the Association shall revise its policies, procedures, and
methodology relating to the timely establishment and maintenance of an adequate
ALLL level (ALLL Policy) to address all corrective actions set forth in the 2010
Examination relating to ALLL, and specifically, ensure that all FAS 114 losses
are included and properly calculated.  The ALLL Policy shall comply
with applicable laws, regulations, and regulatory guidance and
shall:

       

      (a)          incorporate
the results of all internal loan reviews and classifications;

       

      (b)          address
the historical loan
loss rates of the Association in compliance with regulatory guidance, which
shall be updated quarterly with heavier weighting assigned to rates of the most
recent quarters;

       

      (c)          require
an expanded segmentation of the Association’s loan portfolio for internal loan
review analysis;

       

      (d)          include
an estimate of the potential loss exposure on each significant8
credit;

       

      (e)          require
the stress testing of loss rates and delinquency rates to: (i) determine the
sensitivity of the ALLL methodology to changes from primary inputs; (ii) provide
information regarding the risk of miscalculation if the credit environment
changes; and (iii) evaluate the appropriateness of the ALLL in a range of credit
environments; and

       

      (f)           address
the level and impact of the Association’s current concentrations of credit,
including geographic concentrations.

       

      
        
          

        

      

      8 A credit
shall be considered significant for the purposes of assessing, establishing, and
maintaining an appropriate level of ALLL if it is/was Five Hundred Thousand
Dollars ($500,000.00) or greater at origination.

       

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      24.         Within
seventy (70) days, the Association shall submit a copy of its ALLL Policy to the
Regional Director.  The Association shall implement and adhere to the
ALLL Policy.

       

      25.         Within
thirty (30) days after the end of each quarter, beginning with the quarter
ending December 31, 2010, the Association shall analyze the adequacy of the ALLL
consistent with its ALLL Policy (Quarterly ALLL Report).  The Board’s
review of the Quarterly ALLL Report, including, but not limited to, all
qualitative factors considered in determining the adequacy of the Association’s
ALLL, shall be fully documented in the Board meeting minutes. Any deficiency in the
ALLL shall be remedied by the Association in the quarter in which it is
discovered and before the Association files its Thrift Financial Report (TFR)
with the OTS.  A copy of the Quarterly ALLL Report and the Board
meeting minutes detailing the Board’s review shall be provided to the Regional
Director within ten (10) days after the Board meeting.

       

      Internal Asset Review and
Classification.

       

      26.         Within
sixty (60) days, the Association shall revise its written internal asset review
and classification program (IAR Program) to address all corrective actions set
forth in the 2010 Examination relating to internal asset review and
classification.  The IAR Program shall comply with all applicable
laws, regulations and regulatory guidance and shall:

       

      (a)          ensure
the accurate and timely identification, classification, and reporting of the
Association’s assets, including the designation of loans as special mention or
placement of loans on a watch list where a borrower’s credit standing has
deteriorated on an ongoing basis ;

       

      (b)          detail
the Association’s loan grading system and specify parameters for the
identification of problem loans for each type of loan offered by the
Association;

       

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      (c)          provide
for the appointment of a qualified, experienced, and independent third party to
conduct, at a minimum, annual reviews of the Association’s  loan
portfolio and assessments of the Association’s internal asset review process
thereof.  At least ninety percent of the Association’s commercial real
estate loans should be subject to independent review;

       

      (d)          provide
for procedures to ensure that repossessed assets are accounted for in accordance
with generally accepted accounting principles.

       

      (e)          be
independent of the Association’s lending function and report to a Board level
committee that is independent of the Association’s lending
function.

       

      Concentrations of
Credit.

       

      27.         Within
sixty (60) days, the Association shall revise its written program for
identifying, monitoring, and controlling risks associated with concentrations of
credit (Credit Concentration Program) to address all corrective actions set
forth in the 2010 Examination relating to concentrations of credit, and to
ensure that all elements of CEO Memo 252 are addressed, including establishing a
credit risk review function and conducting stress tests  of the
various portfolios.  The Credit Concentration Program shall comply
with all applicable laws, regulations and regulatory guidance and
shall:

       

      (a)          establish
more prudent concentration limits expressed as a percentage of Core Capital plus
ALLL, and document the appropriateness of such limits based on the Association’s
risk profile;

       

      (b)          establish
stratification categories of the Association’s concentrations of credit, such as
(e.g., land loans,
construction loans, income property loans, nonresidential real estate loans,
commercial loans) and establish enhanced risk analysis, monitoring, and
management, including stress testing, for each stratification
category;

       

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      (c)          contain
specific review procedures and reporting requirements, including written reports
to the Board, designed to identify, monitor, and control the risks associated
with concentrations of credit and periodic market analysis for the various
property types and geographic markets represented in its portfolio;
and

       

      (d)          contain
a written action plan, including specific time frames, for bringing the
Association into compliance with its concentration limits and for reducing
exposure to concentrations of credit.

       

      Liquidity Contingency
Funding Plan.

       

      28.         Upon
receipt of written notification of non-objection from the Regional Director, the
Association shall implement and adhere to the Liquidity Funding Plan submitted
on August 12, 2010.   If the Regional Director objects to
that plan, within thirty (30) days, the Association shall submit a revised
liquidity and funds management contingency funding plan to the Regional Director
(Liquidity Funding Plan that  includes all information discussed in
the Interagency Policy Statement on Funding and Liquidity Risk and
shall:

       

      (a)          designate
specific actions that will be taken to reduce the Association’s dependency on
volatile funding sources;

       

      (b)          include
a comprehensive and detailed cash flow analysis;

       

      (c)          identify
all primary and secondary funding sources; and

       

      (d)          require
the preparation of written weekly assessments of the Association’s liquidity
position.

       

      29.         The
Board will receive and review a written monthly assessment of the Association’s
current liquidity position.  Effective immediately, the Association
shall continue to submit weekly liquidity reports to the OTS that provide
information regarding recent and anticipated sources and uses of funds for all
operational needs, including the payoff of maturing brokered
deposits.

       

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      Enterprise Risk
Management.

       

      30.         Within
sixty (60) days, the Association shall revise its Enterprise Risk Management
Plan to address all deficiencies and weaknesses and incorporate all corrective
actions in the 2010 Examination.  The Enterprise Risk Management Plan
shall, at a minimum:

       

      (a)
require the development and adoption of policies and procedure that ensure that
risk considerations are factored into decision-making ;

       

      (b)
require the  development of  strong risk management, audit,
and compliance functions that are separate and independent from the operating
and lending functions; and

       

      (c)
provide for  monitoring  the strength of controls and the
adequacy of management’s adherence to policies, controls, and regulations, and
making all necessary adjustments.

       

      Management Assessment
Report.

       

      31.         Within
ninety (90) days, the Association shall submit to the Regional Director for
review a written assessment of the Association’s board and management structure
prepared by an independent third-party (Management Study).  The
Management Study shall address the adequacy and suitability of the
Association’s management (at both board and executive levels)  in
light of the size, complexity, operations and risk profile of the Association,
and specifically address the management and staffing of the Association’s
lending, asset classification , and enterprise risk management
functions.  The Management Study shall address the requirements
imposed by this Order and shall evaluate and determine responsibility for the
current condition of the Association and make recommendations with respect to
changes and/or additions to the current Board of Directors, management, and
staff.

       

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      32.         Within
sixty (60) days of receipt of the Management Study, the Association shall
implement all recommendations of the Management Study or, within the same
timeframe, provide the Regional Director with a detailed written explanation for
each recommendation that was rejected by the Association.

       

      Directorate and Management
Changes. 

       

      33.         Effective
immediately, the Association shall comply with the prior notification
requirements for changes in directors and Senior Executive Officers9 set
forth in 12 C.F.R. Part 563, Subpart H.

       

      Golden Parachute and
Indemnification Payments.

       

      34.         Effective
immediately, the Association shall not make any golden parachute payment10 or
prohibited indemnification payment11 unless,
with respect to each such payment, the Association has complied with the
requirements of 12 C.F.R. Part 359 and, as to indemnification payments, 12
C.F.R. § 545.121.

       

      Employment Contracts and
Compensation Arrangements.

       

      35.         Effective
immediately, the Association shall not enter into, renew, extend or revise any
contractual arrangement relating to compensation or benefits for any Senior
Executive Officer or director of the Association, unless it first provides the
Regional Director with not less than thirty (30) days prior written notice of
the proposed transaction.  The notice to the Regional Director shall
include a copy of the proposed employment contract or compensation arrangement
or a detailed, written description of the compensation arrangement to be offered
to such officer or director, including all benefits and
perquisites.  The Board shall ensure that any contract, agreement or
arrangement submitted to the Regional Director fully complies with the
requirements of 12 C.F.R. Part 359, 12 C.F.R. §§ 563.39 and 563.161(b), and 12
C.F.R. Part 570 – Appendix A.

       

      
        
          

        

      

      9 The term
“Senior Executive Officer” is defined at 12 C.F.R. § 563.555.

      10 The
term “golden parachute payment” is defined at 12 C.F.R. § 359.1(f).

      11 The
term “prohibited indemnification payment” is defined at 12 C.F.R. §
359.1(l).

       

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      Dividends and Other Capital
Distributions.

       

      36.         Effective
immediately, the Association shall not declare or pay dividends or make any
other capital distributions, as that term is defined in 12 C.F.R. § 563.141,
without receiving the prior written approval of the Regional Director in
accordance with applicable regulations and regulatory guidance.  The
Association’s written request for approval shall be submitted to the Regional
Director at least thirty (30) days prior to the anticipated date of the proposed
declaration, dividend payment or distribution of capital.

       

      Third Party
Contracts.

       

      37.         Effective
immediately, the Association shall not enter into any arrangement or contract
with a third party service provider that is significant to the overall operation
or financial condition of the Association12 or
outside the Association’s normal course of business unless, with respect to each
such contract, the Association has: (a) provided the Regional Director with a
minimum of thirty (30) days prior written notice of such arrangement or contract
and a written determination that the arrangement or contract complies with the
standards and guidelines set forth in Thrift Bulletin 82a (TB 82a); and (b)
received written notice of non-objection from the Regional
Director.

       

      
        
          

        

      

      12 A
contract will be considered significant to the overall operation or financial
condition of the Association where the annual contract amount equals or exceeds
two percent (2%) of the Association’s total capital, where there is a foreign
service provider, or where it involves information technology that is critical
to the Association’s daily operations without regard to the contract
amount.

       

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      Brokered
Deposits.

       

      38.         Effective
immediately, the Association shall comply with the requirements of 12 C.F.R. §
337.6(b).

       

      39.         Within
forty-five (45) days after the end of each calendar quarter, Management shall
submit to the Board for review a written report detailing the level of brokered
deposits for each month within the quarter (Brokered Deposit Report) and
conclusions regarding compliance with Paragraph 38.  The Board’s
review of the Brokered Deposit Report shall be documented in the meeting
minutes.

       

      Debt
Limitations.

       

      40.         Effective
immediately, the Association shall not: (a) incur, issue, renew, or rollover any
debt,13
increase any current lines of credit, or otherwise incur any additional debt
without receiving the prior written non-objection of the Regional Director; or
(b) authorize or permit any subsidiary of the Association to incur, issue,
renew, or rollover any debt, increase any current lines of credit, or otherwise
incur any additional debt without receiving the prior written non-objection of
the Regional Director..  All written requests to the Regional Director
shall include, at a minimum: a statement regarding the purpose of the debt; a
copy of the debt agreement; the planned source(s) for debt repayment; and an
analysis of the cash flow resources available to meet such debt
repayment.  The Association’s written request for non-objection shall
be submitted to the Regional Director at least forty-five (45) days prior to the
anticipated date of the proposed debt issuance, renewal, or rollover; the
proposed increase in any current lines of credit; the proposed guarantee of the
debt of any entity; or any other incurrence of additional debt.

       

      
        
          

        

      

      13 For
purposes of this Paragraph of the Order, the term “debt” includes, but is not
limited to: loans, bonds, cumulative preferred stock, hybrid capital instruments
such as subordinated debt or trust preferred securities, and guarantees of debt;
and does not include: liabilities that are incurred in the ordinary course of
business to acquire goods and services and that are normally recorded as
accounts payable under generally accepted accounting principles.

       

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      Financial
Reporting.

       

      41.         Effective
immediately, the Association shall ensure that its books and records, financial
reports and statements are timely and accurately prepared and filed in
compliance with generally accepted accounting principles and applicable laws,
regulations, and regulatory guidance including, but not limited to, 12 C.F.R.
Part 562 and the Thrift Financial Report (TFR) instructions.

       

      Violations of
Law.

       

      42.         Within
sixty (60) days, the Association shall ensure that all violations of
law  and/or regulation discussed in the 2010
Examination  are corrected and that adequate policies, procedures and
systems are established or revised and thereafter implemented to prevent future
violations.

       

      Board Oversight of
Compliance with Order.

       

      43.         Within
thirty (30) days, the Board shall designate a committee to monitor and
coordinate the Association’s compliance with the provisions of this Order and
the completion of all corrective actions required in the 2010 Examination
(Compliance Committee).  The Compliance Committee shall review all of
management’s corrective actions and make an independent determination of the
Association’s compliance with this Order.  The Compliance Committee
shall be comprised of three (3) or more directors, the majority of whom shall be
independent14
directors.

       

      
        
          

        

      

      14 For
purposes of this Order, an individual who is “independent” with respect to the
Association shall be any individual who:

       

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      44.         Within
thirty (30) days after the end of each quarter, beginning with the quarter
ending December 31, 2010, the Compliance Committee shall submit a written
compliance progress report to the Board (Compliance Tracking
Report).  The Compliance Tracking Report shall, at a
minimum:

       

      (a)          separately
list each corrective action required by this and the 2010
Examination;

       

      (b)          identify
the required or anticipated completion date for each corrective action;
and

       

      (c)          discuss
the current status of each corrective action, including the action(s) taken or
to be taken to comply with each corrective action; and

       

      (d)          detail
the Compliance Committee’s determinations regarding the Association’s compliance
with the Order and completion of all corrective actions required in the 2010
Examination.

       

      45.         Within
forty-five (45) days after the end of each quarter, beginning with the quarter
ending December 31, 2010, the Board shall review the Compliance Tracking
Report and all reports required by this Order.  Following its review,
the Board shall adopt a resolution: (a) certifying that each director has
reviewed the Compliance Tracking Report and all required reports; and (b)
documenting any corrective actions adopted by the Board.  A copy of
the Compliance Tracking Report and the Board resolution shall be provided to the
Regional Director within ten (10) days after the Board meeting.

       

      
        
          

        

      

      
        (a)          is not
employed in any capacity by the Association, its subsidiaries, or its
affiliates, other than as a director;

      

      
        (b)         does not
own or control more than ten percent (10%) of the outstanding shares of the
Association or any of its affiliates;

      

      
        (c)          is not
related by blood or marriage to any officer or director of the Association or
any of its affiliates, or to any shareholder owning more than ten percent (10%)
of the outstanding shares of the Association or any of its affiliates, and who
does not otherwise share a common financial interest with any such officer,
director or shareholder;

      

      
        (d)         
is not
indebted, directly or indirectly, to the Association or any of its affiliates,
including the indebtedness of any entity in which the individual has a
substantial financial interest, in an amount exceeding 10 percent (10%) of the
Association’s total Tier 1 (Core) capital; and

      

      
        (e)          has not
served as a consultant, advisor, underwriter, or legal counsel to the
Association or any of its affiliates.

      

       

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      Effective Date,
Incorporation of Stipulation.

       

      46.         This
Order is effective on the Effective Date as shown on the first
page.  The Stipulation is made a part hereof and is incorporated
herein by this reference.

       

      Duration.

       

      47.         This
Order shall remain in effect until terminated, modified, or suspended by written
notice of such action by the OTS, acting by and through its authorized
representatives.

       

      Time
Calculations.

       

      48.         Calculation
of time limitations for compliance with the terms of this Order run from the
Effective Date and shall be based on calendar days, unless otherwise
noted.

       

      49.         The
Regional Director, or an OTS authorized representative, may extend any of the
deadlines set forth in the provisions of this Order upon written request by the
Association that includes reasons in support for any such
extension.  Any OTS extension shall be made in writing.

       

      Submissions and
Notices.

       

      50.         All
submissions, including any reports, to the OTS that are required by or
contemplated by this Order shall be submitted within the specified
timeframes.

       

      51.         Except
as otherwise provided herein, all submissions, requests, communications,
consents or other documents relating to this Order shall be in writing and sent
by first class U.S. mail (or by reputable overnight carrier, electronic
facsimile transmission or hand delivery by messenger) addressed as
follows:

       

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                (a)

              	
                To
      the OTS:

              

      

      Regional Director

      Office of Thrift
Supervision

      1475 Peachtree St., NE

      Atlanta, Georgia 30309

       

      
        	
                 
      

              	
                (b)

              	
                To
      the Association:

              

      

      c/o C. Stanley Bailey,
Chairman

      Superior Bank

      17 North 20th
Street

      Birmingham, Alabama 35203

       

      No Violations
Authorized.

       

      51.         Nothing
in this Order or the Stipulation shall be construed as allowing the Association,
its Board, officers, or employees to violate any law, rule, or
regulation.

       

      IT
IS SO ORDERED.

       

      
        
          	 
      	
                  OFFICE
      OF THRIFT SUPERVISION

                
	 
      	 
      
	 
      	
                  By:

                	
                  /s/ James G. Price

                
	 
      	
                  James
      G. Price

                
	 
      	
                  Regional
      Director, Southeast Region

                
	 
      	 
      
	 
      	
                  Date:
      See Effective Date on page 1

                

        

      

       

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