Document:

Order to Cease and Desist between Security Bank of North Metro

 Exhibit 10.4 
 FEDERAL DEPOSIT INSURANCE CORPORATION 
 WASHINGTON, D.C. 
  

					
	 	 	)	    	 
	 In the Matter of
	 	)	    	
		 	)	    	ORDER TO
	 SECURITY BANK OF NORTH METRO
	 	)	    	CEASE AND DESIST
	 WOODSTOCK, GEORGIA
	 	)	    
		 	)	    	FDIC-09-116b
	 (Insured State Nonmember Bank)
	 	)	    	
		 	)	    	

 Security Bank of North Metro, Woodstock,
Georgia (“Bank”), having been advised of its right to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Bank and of its right
to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO
CEASE AND DESIST (“CONSENT AGREEMENT”) with a representative for the Legal Division of the Federal Deposit Insurance Corporation (“FDIC”) and the Commissioner (the “Commissioner”) for the State of Georgia, Department of
Banking and Finance (the “Department”), dated the 6th day of April, 2009, whereby solely for the purpose of this proceeding and without
admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and/or regulations, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC and the Commissioner. The
Commissioner may issue an order to cease and desist pursuant to Official Code of Georgia Annotated § 7-1-91(1985). 

 The FDIC and the Commissioner considered the matter and determined that they have reason to believe that
the Bank has engaged in unsafe or unsound banking practices and has committed violations of law and/or regulations. The FDIC and the Commissioner, therefore, accepted the CONSENT AGREEMENT and issued the following: 
 ORDER TO CEASE AND DESIST 
 IT
IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S .C. § 1813(u), and its successors and assigns cease and desist from the following unsafe and unsound banking
practices and violations of law and/or regulation: 
  

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

  

	 	(b)	operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits; 

  

	 	(c)	operating with a large volume of poor quality loans; 

  

	 	(d)	following hazardous lending and lax collection policies and practices; 

  

	 	(e)	operating in such a manner as to produce operating losses; 

  

	 	(f)	operating with inadequate equity capital in relation to the volume and quality of assets held by the Bank 

  

	 	(g)	operating with inadequate provisions for liquidity and funds management; 

  

	 	(h)	operating with inadequate allowance for loan and lease losses (“ALLL”); 

  

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	 	(i)	operating in violation of laws and/or regulations, and in contravention of statements of policy as more fully described on pages 12 through 14 of the Report of Examination of the
Bank dated September 30, 2008 (“Report”). 

 IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its
successors and assigns, take affirmative action as follows: 
 BOARD OF DIRECTORS 
 1. 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. This participation shall include meetings to be held
no less frequently than monthly at which, at a minimum, the following areas shall be reviewed and approved: reports of income and expenses; new, overdue, renewal, insider, charged-off, and recovered loans; investment activity; operating policies;
and individual committee actions. Board minutes shall document these reviews and approvals, including the names of any dissenting directors. 
 COMPLIANCE WITH ORDER 
 2. 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 

  

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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 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 
 3. (a) Within
60 days from the effective date of this ORDER, the Bank shall have and retain qualified management. Each member of management shall have qualifications and experience commensurate with his or her duties and responsibilities at the Bank. Each member
of management shall be provided appropriate written authority from the Bank’s Board, with such authority recorded in the Board minutes, to implement the provisions of this ORDER. Management shall include: 
 (i) a chief executive officer with proven ability in managing a bank of comparable size and complexity and in effectively implementing lending, investment
and operating policies in accordance with sound banking practices; 
 (ii) a senior lending officer with a significant amount of appropriate
lending, collection, and loan supervision experience, and experience in upgrading a low quality loan portfolio; and 
 (iii) a chief
operations officer with a significant amount of appropriate experience in managing the operations of a bank of similar size and complexity in accordance with sound banking practices. 
 (b) The qualifications of management shall be assessed on its ability to: 
 (i) comply with the requirements of this ORDER; 
  

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 (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 asset quality, earnings, capital adequacy, management effectiveness, risk management, liquidity and sensitivity to market risk. 

(c) During the life of this ORDER, the Bank shall notify the FDIC’s Atlanta Regional Office (“Regional Director”) and the Commissioner
(collectively, “Supervisory Authorities”) as determined at subsequent examinations and/or visitations in writing when it proposes to add any individual to the Bank’s Board or employ any individual as a senior executive officer, as
that term is defined in section 303.102 of the FDIC’s Rules and Regulations, 12 C.F.R. § 303.102. The notification should include a description of the background and experience of the individual or individuals to be added or employed and
must be received at least 30 days before such addition or employment is intended to become effective. If the Regional Director issues a notice of disapproval pursuant to section 32 of the Act, 12 U.S.C. § 183 ii, with respect to any proposed
individual, then such individual may not be added or employed by the Bank. 
 CAPITAL 
 4. (a) Within 30 days from the effective date of this ORDER, the Bank shall have Tier I Capital in such amount as to equal or exceed 8.00 percent of the Bank’s
total assets and total risk based capital in such an amount as to equal or exceed 10.00 percent of the Bank’s total risk weighted assets. Thereafter, the Bank shall maintain Tier 1 Capital and total risk based capital ratios equal to or
exceeding 8.00 percent and 10.00 percent, respectively, during the life of this ORDER. 
  

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 (b) The level of Tier 1 Capital and total risk based capital to be maintained during the life of this
ORDER pursuant to subparagraph 4(a) shall be in addition to a fully funded ALLL, the adequacy of which shall be satisfactory to the Supervisory Authorities as determined at subsequent examinations and/or visitations. 
 (c) Any increase in Tier 1 Capital necessary to meet the requirements of Paragraph 4 of this ORDER may not be accomplished through a deduction from the
Bank’s ALLL. For the purposes of this ORDER, the terms “Tier I Capital,” “total risk based capital,” “total assets,” and “total risk weighted assets” shall have the meanings ascribed to them in Part 325
of the FDIC Rules and Regulations, 12 C.F.R. Part 325. 
 ALLOWANCE FOR LOAN AND LEASE LOSSES 
 5. (a) Immediately, the Board shall make a provision to replenish the ALLL for the loans charged off as a result of this examination and reflect the potential for
further losses in the remaining loans or leases classified “Substandard” as well as all other loans and leases in its portfolio. 
 (b) Within 30 days from the effective date of this ORDER, the Board shall review the adequacy of the ALLL and establish a comprehensive policy for determining the adequacy of the ALLL. For the purpose of this determination, the adequacy of
the ALLL shall be determined after the charge-off of all loans or other items classified “Loss”. The policy shall provide for a review of the ALLL at least once each calendar quarter. Said review should be completed at least ten
(10) days prior to the end of each quarter, in order that the findings of the Board with respect to the ALLL may be properly reported in the quarterly Reports of Condition and Income. The review should focus on the results of the Bank’s
internal loan review, loan and lease loss experience, trends of 

  

 -6- 

 
delinquent and non-accrual loans, an estimate of potential loss exposure of significant credits, concentrations of credit, and present and prospective
economic conditions. A deficiency in the ALLL shall be remedied in the calendar quarter it is discovered, prior to submitting the Report of Condition, 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 as determined at subsequent examinations and/or
visitations. 
 LIQUIDITY AND FUNDS MANAGEMENT 
 6. (a) Within 60 days from the effective date of this ORDER, the Bank shall review, revise and adopt its written liquidity, contingency funding and funds management policy to provide effective guidance and control
over the Bank’s funds management activities, which policy shall include, at a minimum, revisions to address all items of criticism enumerated on page 4 the Report. Such policy and its implementation shall be in a form and manner acceptable to
the Supervisory Authorities as determined at subsequent examinations and/or visitations. The revised policy shall provide for a periodic review of the Bank’s deposit structure. Such review shall include the volume and trend of total deposits
and the volume and trend of the various types of deposits offered, the maturity distribution of time deposits, rates being paid on each type of deposit, rates being paid by trade area competition, caps on large time deposits, public funds,
out-of-area deposits, and any other information needed. 
 (b) Within 60 days from the effective date of this ORDER, the Bank shall implement
adequate models for managing liquidity. 
  

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 (c) The Bank shall calculate monthly the liquidity and dependency ratios, following the format utilized
internally, and provide the calculations to the Board for review with such review noted in the Board minutes. 
 BROKERED DEPOSITS

 7. During the life of this ORDER, the Bank shall not accept, renew, or rollover brokered deposits without obtaining a brokered deposit waiver
approved by the FDIC pursuant to Section 29 of the Act, 12 U.S.C. § 183lf. For purposes of this ORDER, brokered deposits are defined as described in Section 337.6(a)(2) of the FDIC’s Rules and Regulations, 12 C.F.R. §
337.6(a)(2) to include any deposits funded by third party agents or nominees for depositors, including depositors managed by a trustee or custodian when each individual beneficial interest is entitled to a right to federal deposit insurance.

 CASH DIVIDENDS 
 8. The Bank
shall not pay cash dividends without the prior written consent of the Supervisory Authorities. 
 CHARGE-OFF AND REDUCTION OF CLASSIFIED
ITEMS 
 9. (a) Immediately upon 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” that have not been previously collected or charged off. Elimination 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 of the receipt of any official Report of
Examination of the Bank from the 

  

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Supervisory Authorities, eliminate from its books, by collection, charge-off, or other proper entries, the remaining balance of any assets classified
“Loss” unless otherwise approved in writing by the Supervisory Authorities. 
 (c) (i) Within 180 days from the effective date
of this ORDER, the Bank shall have reduced the assets classified “Substandard” in the Report by 25%. 
 (ii) Within 360 days from
the effective date of this ORDER, the Bank shall have reduced the assets classified “Substandard” in the Report by 45%. 
 (iii)
Within 540 days from the effective date of this ORDER, the Bank shall have reduced the assets classified “Substandard” in the Report by 60%. 
 (d) The requirements of this paragraph are not to be construed as standards for future operation of the Bank. Following compliance with the reduction schedule, the Bank shall continue to reduce the total volume of
adversely classified assets. Reduction of these assets through proceeds of other loans made by the Bank is not considered collection for the purpose of this paragraph. As used in Subparagraph 9(c), the word “reduce” means: 
 (i) to collect; 
 (ii) to charge-off; or

 (iii) to sufficiently improve the quality of assets adversely classified to warrant removing any adverse classification, as determined by
the Supervisory Authorities. 
 NO ADDITIONAL CREDIT 
 10. (a) Beginning with the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower 
  

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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) Subparagraph 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 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; including an explanatory statement of how
the Bank’s position would be improved; and 
 (iii) an appropriate workout plan has been developed and will be implemented in
conjunction with the additional credit to be extended. 
 (d) The signed certification shall be made a part of the minutes of the Board or
designated committee, and a copy of the signed certification shall be retained in the borrower’s credit file. 
  

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 LENDING AND COLLECTION POLICIES 
 11. (a) Within 90 days from the effective date of this ORDER, the Bank shall revise, adopt, and implement a written lending, underwriting and collection policy to
provide effective guidance and control over the Bank’s lending function, which policy shall include, at a minimum, revisions to address criticisms and recommendations enumerated on page 8 and 9 of the Report pertaining to the administration of
acquisition, development and construction (“ADC”) loans as well as commercial real estate lending and specific guidelines for placing loans on a nonaccrual basis. 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 as determined at subsequent examinations and/or visitations. 
 (b) Within 30 days from the effective date of this ORDER, the Board shall adopt and implement a policy limiting the use of loan interest reserves. Such
policy shall confine the use of interest reserves to properly underwritten ADC loans where development or building plans have specific timetables that commence within a reasonable time of the loan’s approval and that include realistic
completion dates. Interest reserves shall be used only for payment of interest on ADC loans for projects that are progressing according to their timetables. Interest reserves may be supplemented only with the prior written approval of the Board or a
committee thereof, so long as the approval documents a prudent reason for the supplement. 
 REDUCE CONCENTRATIONS OF CREDIT 

 12. Within 90 days from the effective date of this ORDER, the Bank shall develop a written plan and policy for systematically reducing the Bank’s
portfolio of loans or other extensions of credit advanced or committed, directly or indirectly, to or for the benefit of any borrowers noted on page 31 of the Report. At a minimum, the plan shall include: 
 (i) amounts and percent of capital to which the Bank shall reduce each concentration; 
  

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 (ii) time-frames for achieving the reduction in dollar levels identified in response to Subparagraph
12(i); 
 (iii) provisions for the submission of monthly, written progress reports to the Board for review and notation in the minutes of its
meetings; and 
 (iv) procedures for monitoring the Bank’s compliance with the plan. 
 PLAN FOR EXPENSES AND PROFITABILITY 
 13.
(a) Within 60 days from the effective date of this ORDER, the Bank shall formulate and fully implement a written plan and a comprehensive budget for all categories of income and expense. The plan and budget required by this paragraph 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,
control overhead, and improve and sustain earnings of the Bank. The plan shall include a projected balance sheet and 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 of each subsequent year. The plan and budget required by Subparagraph 13(a) of this ORDER shall be acceptable to the Supervisory Authorities as determined at
subsequent examinations and/or visitations. 
  

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 (b) Following the end of each calendar quarter, the Board shall evaluate the Bank’s actual
performance in relation to the plan and budget required by Subparagraph 13(a) of this ORDER and shall record the results of the evaluation, and any actions taken by the Bank, in the minutes of the Board meeting at which such evaluation is
undertaken. 
 WRITTEN STRATEGIC PLAN 
 14. Within 90 days from the effective date of this ORDER, the Bank shall prepare and submit to the Supervisory Authorities its written strategic plan consisting of longterm goals designed to improve the condition of the Bank and its
viability and strategies for achieving those goals. The plan shall he 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. 
 VIOLATIONS OF LAW AND 
 CONTRAVENTIONS OF STATEMENTS OF POLICY 
 15.
Within 60 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law and/or regulations, which are more fully set out on pages 12 through 14 of the Report. Within 60 days from the effective date of this
ORDER, the Bank shall also correct all contraventions of FDIC Statements of Policy which are listed among the violations of law set out on pages 12 through 14 of the Report. In addition, the Bank shall take all necessary steps to ensure future
compliance with all applicable laws, regulations and statements of policy. 
  

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 DISCLOSURE 
 16. Following the effective date of this ORDER, the Bank shall send to its shareholders or otherwise furnish a description of this ORDER in conjunction with the Bank’s next shareholder communication and also in
conjunction with its notice or proxy statement preceding the Bank’s next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, statement, or notice
shall be sent to the FDIC, Registration and Disclosure Section, Washington, D.C. 20429 and the Commissioner, Georgia Department of Banking and Finance, 2990 Brandywine Rd., Suite 200, Atlanta, Georgia 30341-5565, at least fifteen (15) days
prior to dissemination to shareholders. Any changes requested to be made by the FDIC and Commissioner shall be made prior to dissemination of the description, communication, notice, or statement. 
 PROGRESS REPORTS 
 17. Within 30 days of the
end of the first quarter following the effective date of this ORDER, and within 30 days of the end of each quarter thereafter, the Bank shall furnish written progress reports to the Supervisory Authorities detailing the form and manner of any
actions taken to secure compliance with this ORDER and the results thereof. Such reports shall include a copy of the Bank’s Report of Condition and the Bank’s Report of Income. Such reports may be discontinued when the corrections required
by this ORDER have been accomplished and the Supervisory Authorities have released the Rank in writing from making further reports. 
 This
ORDER shall become effective immediately upon the date of its issuance. The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified,
terminated, suspended, or set aside by the FDIC. Pursuant to delegated authority. 
  

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 Dated at Atlanta, Georgia, this 17th day of April, 2009. 
  

	
	 

	Mark S. Schmidt
	Regional Director
	Atlanta Region
	Federal Deposit Insurance Corporation

 The Georgia Department of Banking and Finance having duly approved the foregoing ORDER, and
the Bank, through its Board, agree that the issuance of said ORDER by the FDIC shall be binding as between the Bank and the Georgia Commissioner of Banking and Finance to the same degree and to the same legal effect that such ORDER would be binding
if the Department had issued a separate ORDER that included and incorporated all of the provisions of the foregoing ORDER, pursuant to Official Code of Georgia Annotated § 7-1-91(1985). 
 Dated this              of April, 2009. 
  

	
	 

	Robert M. Braswell
	Commissioner
	Department of Banking and Finance
	State of Georgia

  

 -15-Order to Cease and Desist between Security Bank of Houston County

 Exhibit 10.5 
 

 

					
	 Sonny Perdue
 Governor
	  	  
 Department of Banking and Finance
 2990 Brandywine Road, Suite 200
 Atlanta, Georgia 30341-5565
 770-986-1633
 www.gadbf.org
	  	 Robert M. Braswell
 Commissioner

		  	  
 March 25, 2009
	  	

 The Board of Directors 
 Security Bank of Houston County 
 P.O. Box 1310 
 Perry,
Georgia 31069-1310 
 Dear Members of the Board: 
 The results
of the examination of Security Bank of Houston County, conducted by the Georgia Department of Banking and Finance (Department) as of October 21, 2008, reveal that the condition of the bank is unsatisfactory, with the deficiencies noted being of
such magnitude that the bank’s operation is considered unsafe and unsound by the Department. 
 Accordingly, the Department, in consultation with the
Federal Deposit Insurance Corporation (FDIC), is issuing this Order, pursuant to the provisions of Subsection 7-l-91(d) of the Financial Institutions Code of Georgia, requiring the bank to CEASE AND DESIST from the following enumerated unsafe and
unsound practices and to adopt a program of corrective action as a means to address the deficiencies. The unsafe and unsound practices are as follows: 
  

	 	1.	Operating with inadequate supervision and direction over the financial affairs of the Bank; 

  

	 	2.	Operating with an inadequate level of capital based upon the level of risk identified; 

  

	 	3.	Operating with an excessive volume of assets subject to adverse classification, resulting from engaging in inadequate credit administration and underwriting practices;

  

	 	4.	Operating with an excessive volume of credit concentrations which reflect a lack of diversity in the loan portfolio; 

  

	 	5.	Operating with an excessive volume of nonearning assets; 

  

	 	6.	Operating with marginal liquidity; and 

  

	 	7.	Engaging in violations of applicable federal and state regulations. 

  

 1 

 This Order to Cease and Desist (ORDER) between the Supervisory Authorities of the Georgia Department of Banking and
Finance and the Federal Deposit Insurance Corporation (Supervisory Authorities) and the Board of Directors is designed to bring about correction of the currently identified problems of the bank by a good faith effort on the part of the Board of
Directors (Board) and bank management, without admitting or denying the alleged charges of unsafe or unsound banking practices, to comply with each particular Paragraph of the ORDER. The program of corrective action to be adopted is as
follows, with all time periods contained herein to begin with the effective date of the ORDER: 
 CAPITAL 
 1. (a) Within sixty (60) days from the effective date of this ORDER, the Board shall submit to the Supervisory Authorities a revised Capital
Plan based on the significant change in the risk profile of the institution. Specifically, the Capital Plan shall address the increase in classified assets, current earnings projections, and the projected shrinkage of the bank’s total assets.
Additionally, statutory requirements for the holding and approval of brokered deposits shall be considered in the Capital Plan. Further, the Capital Plan shall identify sources of additional capital and provide for the injection of such capital as
necessary in order to maintain compliance with capital ratios required in this ORDER. 
 (b) Within ninety (90) days from the effective
date of this ORDER, the Bank shall have Tier 1 Capital in such an amount as to equal or exceed eight (8) percent of the Bank’s total assets. Thereafter, during the life of this ORDER, the Bank shall maintain Tier 1 Capital in such an
amount as to equal or exceed eight (8) percent of the Bank’s total assets. Within thirty (30) days from the effective date of this ORDER, the Bank shall develop and adopt a plan for achieving the aforementioned Tier 1 Capital level
and for maintaining Tier 1 Capital in such an amount as to equal or exceed eight (8) percent of the Bank’s total assets during the life of this ORDER. The plan shall be submitted to the Supervisory Authorities for review and approval.

 (c) Within forty-five (45) days from the effective date of this ORDER, the Bank shall develop and adopt a plan to meet the minimum
risk-based capital requirements for a well-capitalized bank, as described in Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325. The plan shall be submitted to the Supervisory Authorities for review and approval. 
 (d) The level of Tier 1 capital to be maintained during the life of this ORDER pursuant to Subparagraph l(b) shall be in addition to a fully funded ALLL,
the adequacy of which shall be satisfactory to the Supervisory Authorities as determined at subsequent examinations and/or visitations. 
 (e) Any increase in Tier 1 capital necessary to meet the requirements of Paragraph 1 of this ORDER may be accomplished by the following: 
 (i) the sale of common stock; or 
 (ii) the sale of noncumulative perpetual preferred stock; or 
  

 2 

 (iii) the direct contribution of cash by the board of directors, shareholders, and/or parent holding
company; or 
 (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 1 of this ORDER may not be accomplished through a deduction from the Bank’s ALLL. 
 ADVERSELY CLASSIFIED ITEMS 
 2. (a) Within ten (10) days from the effective date of this
ORDER, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets adversely classified “Loss” in the Report that have not been previously charged-off or collected. Elimination 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 thirty (30) days of the receipt of any official Report of the Bank from the Department or the FDIC, eliminate from its books, by collection, charge-off, or other proper entries, the remaining
balance of any assets classified “Loss” unless otherwise approved in writing by the Supervisory Authorities. 
 (c) Within six
(6) months from the effective date of this ORDER, the Bank shall reduce the assets classified “Substandard” and those assets classified “Doubtful” as of October 21, 2008, that have not previously been charged off to not
more than $32,000,000. 
 (d) Within twelve (12) months from the effective date of this ORDER, the Bank shall reduce the assets
classified “Substandard” and those assets classified “Doubtful” as of October 21, 2008, that have not previously been charged off to not more than $26,500,000. 
 (e) Within eighteen (18) months from the effective date of this ORDER, the Bank shall reduce the assets classified “Substandard” and those
assets classified “Doubtful” as of October 21, 2008, that have not previously been charged off to not more than $21,000,000. 
 (f) Within twenty-four (24) months from the effective date of this ORDER, the Bank shall reduce the assets classified “Substandard” and those assets classified “Doubtful” as of October 21, 2008, that have not
previously been charged off to not more than $15,500,000. 
 (g) Within thirty (30) months from the effective date of this ORDER, the
Bank shall reduce the assets classified “Substandard” and those assets classified “Doubtful” as of October 21, 2008, that have not previously been charged off to not more than $10,000,000. 
 (h) The requirements of Subparagraphs 2(a), 2(b), 2(c), 2(d), 2(e), 2(f) and 2(g) of this ORDER are not to be construed as standards for future
operations and, in addition to the 

  

 3 

 
foregoing, the Bank shall eventually reduce the total of all adversely classified assets. Reduction of these assets through proceeds of other loans made by
the Bank is not considered collection for the purpose of this Paragraph. As used in Subparagraphs 2(c), 2(d), 2(e), 2(f) and 2(g) the word “reduce” means: 
 (i) to collect; 
 (ii) to charge-off; or 
 (iii) to sufficiently improve the quality of assets adversely classified to warrant removing any adverse classification, as determined by the Supervisory
Authorities. 
 NO ADDITIONAL CREDIT 
 3.
(a) Beginning with the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower who has a loan or other extension of credit from the Bank that has been
charged off or classified, in whole or in part, “Loss” or “Doubtful” and is uncollected. The requirements of this Paragraph shall not prohibit the Bank from renewing (after collection in cash of interest due from the borrower)
any credit already extended to the borrower. However, the certification required in Subparagraph 3(c)(i), (ii), and (iii) would apply to such a renewal. 
 (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 in part, “Substandard” and is uncollected. 
 (c) Subparagraph 3(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 extending additional credit pursuant to this Subparagraph, either in form of a renewal, extension, or further
advance of funds, such additional credit shall be approved by a majority of the board of directors, 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.

 The signed certification shall be made a part of the minutes of the board of directors or designated committee, and a copy of the signed
certification shall be retained in the borrower’s credit file. 
  

 4 

 PLANS FOR REDUCING/IMPROVING CLASSIFIED ASSETS 
 4. Within ninety (90) days of the effective date of this ORDER, the Bank shall submit to the Supervisory Authorities specific plans and proposals to
effect the reduction and/or improvement of any lines of credit which are adversely classified by the Supervisory Authorities as of the date of the Report and which aggregate $500,000 or more as of that date. The plans shall identify, at a minimum,
the cause(s) of the borrower’s problems, the bank’s current lien position and collateral values, the proposed exit strategy, and an estimate of any potential loss exposure. Such plans shall thereafter be monitored and progress reports
thereon resubmitted by the Bank at 90-day intervals concurrently with the other reporting requirements set forth in Paragraph 14 of this ORDER. 
 CONCENTRATIONS OF CREDIT 
 5. (a) Within sixty (60) days from the effective date of this ORDER, the Bank shall
submit to the Supervisory Authorities an acceptable written plan detailing appropriate strategies for managing CRE concentration levels, including a contingency plan to reduce or mitigate concentrations given current adverse market conditions. If
the contingency plan includes selling or securitizing CRE loans, management shall include an assessment of the marketability of the portfolio in the plan. The Board shall submit this written CRE plan in the same time frame to the Supervisory
Authorities for review and comment. 
 (b) Within sixty (60) days from the effective date of this ORDER, the Bank shall perform a risk
segmentation analysis with respect to the Concentrations of Credit listed on Page 29 of the Report. Concentrations should be stratified as the Board deems appropriate, but shall include concentrations identified by industry, geographic distribution,
underlying collateral, direct or indirect extensions of credit to or for the benefit of any borrowers dependent upon the performance of a single developer or builder, and other asset groups that are considered economically related. The Board should
refer to the Joint Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, for information regarding risk segmentation analysis. 
 STRATEGIC PLAN/EARNINGS 
 6. Within sixty (60) days from the effective date of this ORDER, the
Bank shall submit to the Supervisory Authorities a written strategic business plan that covers three (3) years for improving the earnings and overall financial condition of the Bank. The plan, at a minimum, shall provide for or describe:

 (a) The identification of major areas including, at a minimum, asset growth, loan portfolio and deposit mix, market focus, earnings
projections, capital needs, and liquidity management, and means by which the Board will seek to improve the Bank’s operating performance; 
  

 5 

 (b) Management, lending, and earnings objectives, appropriate to the Bank’s condition, and specific
strategies for achieving such objectives; 
 (c) a realistic and comprehensive budget; 
 (d) A description of the operating assumptions that form the basis for, and adequately support, major projected income and expense components and
provisions needed to establish and maintain an adequate ALLL; and 
 (e) A budget review process incorporating the use of pro forma income
statements and analysis of budgeted versus actual income and expense, with significant deviations from budgeted projections being analyzed in writing. 
 The plan shall consist of short and 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 as determined at subsequent examinations and/or visitations. 
 ALLOWANCE FOR LOAN AND LEASE LOSSES 
 7. The Bank shall maintain an adequate ALLL. In complying with this Paragraph, the Board shall review the adequacy of the ALLL prior to the end of each
calendar quarter and make appropriate provisions. Such review, at a minimum, shall take into consideration the results of the Bank’s most recent regulatory examination, loan review, net loan loss history, level of nonperforming loans,
concentrations within the loan portfolio, the overall composition of the loan portfolio, internal and/or external loan reviews, an estimate of potential loss exposure of significant credits, and present and prospective economic conditions. A
deficiency in the ALLL shall be remedied in the calendar quarter it is discovered, prior to submitting the Reports of Condition and Income, by a charge to current operating earnings. The minutes of the Board meeting at which such review is
undertaken shall indicate the results of the review. The method used for computing the ALLL shall be consistent with outstanding regulatory guidance and Generally Accepted Accounting Principles (GAAP) and be satisfactory to the Supervisory
Authorities as determined at subsequent examinations and/or visitations. A written record shall be maintained, indicating the methodology utilized, and the review shall be included in the minutes of the Board. 
 FUNDS MANAGEMENT 
 8. Within forty-five (45) days
from the effective date of this ORDER, the Bank shall perform an assessment of the Bank’s liquidity needs and plans for ensuring such needs are met on an ongoing basis. The Bank shall review the adequacy of its asset/liability management (ALM)
practices in light of the change in the Bank’s overall financial condition. The assessment shall take into consideration the Bank’s loan, investment, operating, and budget policies as well as the bank’s liquidity contingency plan. In
addition, the Bank shall develop a plan for reducing its volatile liability dependence and brokered deposits. 
  

 6 

 MANAGEMENT 
 9. (a) Within sixty (60) days from the effective date of this ORDER, the Bank shall develop a written analysis and assessment of the Bank’s management and staffing needs (“management plan”). The Board shall submit
this written management plan in the same time frame to the Supervisory Authorities for review and comment. The qualifications of management shall be assessed on management’s ability to comply with the requirements of this ORDER; operate the
bank in a safe and sound manner; comply with applicable laws, regulations and policy statements; and restore all aspects of the Bank to a safe and sound condition including management, asset quality, earnings, capital, liquidity, and sensitivity to
market risks. The management plan shall cover the Bank’s management structure for the purpose of determining those positions considered to be part of the Bank’s management, defining the responsibilities and duties of those positions, and
judging the adequacy of the overall management structure and changes needed. At a minimum, the management plan shall include: 
 (i) The type
and number of management positions needed to properly manage and supervise the affairs of the Bank; 
 (ii) A clear and concise description
of the required experience and level of compensation for each management position at the bank; 
 (iii) An evaluation of the Board, each Bank
officer, and staff members to determine whether those individuals possess the ability, experience and other qualifications required to competently perform present and anticipated duties, including the ability to provide appropriate oversight of the
lending function, to adhere to established policies and procedures of the Bank, to restore and maintain the Bank in a safe and sound condition, and to comply with all requirements of this ORDER. Specifically, this review shall ensure that an
adequate lending staff is in place, with competence in the commercial real estate (CRE) lending field. Also, the plan shall include an evaluation of the salary that each officer is receiving when compared to the responsibilities the individual is
performing; 
 (iv) Procedures to recruit, hire, or appoint additional or replacement personnel with the requisite ability, experience, and
other qualifications required to competently perform their assigned duties; and 
 (b) Any changes needed shall be made within ninety
(90) days of the completion of the management assessment. Further, the Bank shall notify the Supervisory Authorities, in writing, of the resignation or termination of any of the Bank’s directors or senior executive officers. Additionally,
during the life of this ORDER, the Bank shall notify the Supervisory Authorities in writing when it proposes to add any individual to the Bank’s board of directors or employ any individual as a senior executive officer. The notification must be
received at least thirty (30) days before the planned addition or employment is intended to become effective and shall include a description of the background and experience of the individual or individuals to be added or employed. The Bank may
not add any individual to its Board or employ any individual as an executive officer without the approval of the Commissioner and the Regional Director. 
  

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 (c) Any subsequent modifications to the management plan shall be submitted to the Supervisory Authorities
for review and comment. No more than thirty (30) days from the receipt of any comment from the Supervisory Authorities, and after consideration of such comment, the Board shall approve the management plan modification. 
 BOARD OF DIRECTORS 
 10. (a) Immediately from 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. 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: new, past due, renewal, insider, charge-off, and recovered loans; operating policies and policy exceptions; insider transactions; reports of income and expenses; investment activity; operating policies; and individual committee
actions. Board minutes shall fully document these reviews and approvals, including the names of any dissenting directors. 
 (b) Within
thirty (30) days from the effective date of this ORDER, the Board shall establish a Board committee (“Directors’ Committee”), consisting of at least four members, responsible for ensuring compliance with the ORDER, overseeing
corrective measures with respect to the ORDER, and reporting to the Board. Three of the members of the Directors’ Committee shall not be officers of the Bank. The Directors’ Committee shall monitor compliance with this ORDER and, within
thirty (30) days from the effective date of this ORDER, and every thirty (30) days thereafter, shall submit a written report detailing the Bank’s compliance with this ORDER to the Board, for review and consideration during its regularly
scheduled meeting. Such report and any discussion related to the report of the ORDER shall be recorded in the appropriate minutes of the meeting of the Board and shall be retained in the Bank’s records. Nothing contained herein shall diminish
the responsibility of the entire Board to ensure compliance with the provisions of this ORDER. 
 (c) Within sixty (60) days from the
effective date of this ORDER, the Bank shall designate a Board committee to review and approve loans, with such committee being structured so that a majority of members are persons who are not actively involved in the Bank’s lending activities.

 VIOLATIONS 
 11. Within thirty (30)
days from the effective date of this ORDER, the Bank shall take all necessary steps consistent with sound banking practices to eliminate and/or correct all violations noted on the Violations of Laws and Regulations page of the Report. In addition,
the Bank shall take all necessary steps to ensure future compliance with all applicable laws and regulations. 
  

 8 

 DIRECTORS’ FEES, CASH DIVIDENDS AND BONUSES 
 12. The Bank shall not, directly or indirectly, pay fees to the Bank’s directors including, but not limited to, reimbursement of expenses or payment
of indebtedness without the prior written approval of the Supervisory Authorities. Further, the Bank shall not pay cash dividends or bonuses without the prior written consent of the Supervisory Authorities. 
 NOTICE TO SHAREHOLDERS 
 13. Following the effective
date of this ORDER, the Bank shall send to its shareholders or otherwise furnish a description of this ORDER in conjunction with the Bank’s next shareholder communication and also in conjunction with its notice or proxy statement preceding the
Bank’s next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, statement, or notice shall be sent to the Supervisory Authorities at least fifteen
(15) days prior to the dissemination to shareholders. Any changes requested to be made by the Supervisory Authorities shall be made prior to the dissemination of the description, communication, notice, or statement. 
 PROGRESS REPORTS 
 14. Within forty-five
(45) days of the end of the first quarter following the effective date of this ORDER, and within forty-five (45) days of the end of each quarter thereafter, the Bank shall furnish written progress reports to the Supervisory Authorities
detailing the form and manner of any actions taken to secure compliance with this ORDER and the results thereof. Such reports shall include a copy of the Bank’s Report of Condition and the Bank’s Report 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. 
 This ORDER shall become effective ten (10) days from the date of its issuance. The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions
of this ORDER shall have been modified, terminated, suspended, or set aside by the Supervisory Authorities. 
 This Order is issued under the provision of
Section 7-l-91(d) of the Financial Institutions Code of Georgia. 
  

 9 

 This the 7th
 day of April, 2009. 
  

	
	 /s/    Robert M. Braswell

	Robert M. Braswell
	Commissioner
	Georgia Department of Banking and Finance

 The undersigned, as Regional Director of the Federal Deposit Insurance Corporation, acknowledges this Cease and
Desist Order issued by the Georgia Department of Banking and Finance and considers its acceptance as representing a commitment to the Federal Deposit Insurance Corporation from the Board of Directors of Security Bank of Houston County, Perry
Georgia, to make a good faith effort to comply with the terms of this Agreement. 
  

	
	 /s/    Mark S. Schmidt

	Mark S. Schmidt
	Regional Director
	Federal Deposit Insurance Corporation

  

 10 

 The undersigned Directors of Security Bank of Houston County, Perry, Georgia, acknowledge receipt of and agree to make a
good faith effort to comply with the terms and conditions of this ORDER. 
  

					
	 /s/    Edward M. Beckham, II
	 		 	 /s/    George E. Slappey, Jr.

	Edward M. Beckham, II	 		 	George E. Slappey, Jr.
			
	 /s/    Mark Byrd
	 		 	 /s/    Gail N. Spivey

	Mark Byrd	 		 	Gail N. Spivey
			
	 /s/    Robert H. Causey, III
	 		 	 /s/    Bobby Stalnaker

	Robert H. Causey, III	 		 	Bobby Stalnaker
			
	 /s/    Vividawn L. Gibson
	 		 	 /s/    T. R. Tolleson, Jr.

	Vividawn L. Gibson	 		 	T. R. Tolleson, Jr.
			
	 /s/    Riley Hunt
	 		 	 /s/    Larry Walker

	Riley Hunt	 		 	Larry Walker
			
	  
	 		 	 /s/    William D. Watson

	Christopher Murman	 		 	William D. Watson
			
	 /s/    Foster Rhodes
	 		 	
	Foster Rhodes	 		 	

  

 11 

 The undersigned Directors of Security Bank of Houston County, Perry, Georgia, acknowledge receipt of and agree to make a
good faith effort to comply with the terms and conditions of this ORDER. 
  

					
	 /s/    Edward M. Beckham, II
	 		 	 /s/    George E. Slappey, Jr.

	Edward M. Beckham, II	 		 	George E. Slappey, Jr.
			
	 /s/    Mark Byrd
	 		 	 /s/    Gail N. Spivey

	Mark Byrd	 		 	Gail N. Spivey
			
	 /s/    Robert H. Causey, III
	 		 	 /s/    Bobby Stalnaker

	Robert H. Causey, III	 		 	Bobby Stalnaker
			
	 /s/    Vividawn L. Gibson
	 		 	  

	Vividawn L. Gibson	 		 	T. R. Tolleson, Jr.
			
	 /s/    Riley Hunt
	 		 	 /s/    Larry Walker

	Riley Hunt	 		 	Larry Walker
			
	 /s/    Christopher Murman
	 		 	 /s/    William D. Watson

	Christopher Murman	 		 	William D. Watson
			
	 /s/    Foster Rhodes
	 		 	
	Foster Rhodes	 		 	

  

 11

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