I

UNITED STATES OF AMERICA BEFORE THE: BOARD OF GOVERNORS OF THE FED&AL RESERVE SYSTEM WASHINGTON, D.C STATE OF MICHIGAN OFFICE OF FINANCIAL AND INSURANCE LANSING, MICHIGAN

SERVICES

Written Agreement by and among NEW CENTURY BANCORP Southfield, Michigan NEW CENTURY BANK Southfield, Michigan FEDERAL RESERVE BANK OF CHICAGO Chicago, Illinois

; ; ! ;

Docket Nos.

00-004 WA/RI%HC 00.004 WARB-SM

OFFlCE OF FINANCIAL AND INSURANCE SERVICES Lansing, Michigan

;

WHEREAS, in recognition of their common goal to restore and maintain the financial soundness ofNew Century Bancorp, Southfield, Michigan (the “BHC”), a registered bank holding company, and its subsidiary bank, the New Century Bank, Southfield, Michigan (the “Bank”), a state chartered bank that is a member of the Federal Reserve System, the BHC, the Bank, the Federal Reserve Bank of Chicago (the “Reserve Bank”), and the Offtce of Financial and Insurance Services (the “OFIS”) have mutually agreed to enter into this Written Agreement (the “Agreement”); and

, 2000

the boards of directors of the BHC and the and directing, Vincent on behalf of the

Bank, at du!y ;onstituted

meetings adopted resolutions authorizing

DiLorenzo, Chairman ofthe BHC and the Bank, to enter into rnis Agreement BIIC and the Bank, respectively, their insti!u!ion-aiiiliated and consented to compliance

by the BHC rurd the Bank and

patties, as defined by sections 3(u) and 8(b)(3) of the Federal Deposit Act”), with each and every

lnsurancf: Act, as amended (12 l_.S.C, 1813(u) and (b)(3)) (;he”FDI apphcable provision, of this Agreement.

NOW, THEREFORE,

before the taking of any testimony or adjudication constituting

of or fi:gding on

an:y issue of fxt or law herein and without this Agreement a!legation made or implied by the Board ofGovernors Reserve Bank, and rhe OFIS agree as follows:

an admission of any

or the OFIS, the DHC, the Bank. the

Capital Adequacy 1. (a) Within 60 days ofthis Agreement, the BHC and the Bank shall subrnrt to

the Reserve Bank and the OFIS an acceptable joint written plan to achieve and maintain sufficient capital at the Bank The plan shall, at a minimum, address and consider: (i) the

Bank’ current and IInure capital requirements, s

including comp:iance with the Capital Adequacy

Guidelines of the Board of Governors (12 C~F.R. Part 208, App, A and B) and the minimum capital levels committed to as a condition of federal and state regulatory approval of the formation of the BHC and the Bank; (ii) any planned growt!t in the Bank’ assets, including s branches: (iii) the Bank’ level of concentrations s of credit; (iv) the volume of the Bank’ s

adversely classified assets; (v) the Bank’ anticipated level of retained earnings; and (vi) the s

source and timing

of additional

funds to fulfill

the future

capital

and allowance

for loan and lease

loss needs of the Bank,

(b)
by August until July

Notwithstanding

the provisions

of paragraph during

I(a) hereof,

the Bank shall and

30, 2000 achieve 1, 2002, maintain

and, at all times thereafter its tier 1 leverage

the term of this Agreement of no less than 9 percents

ratio at a level

(cl
capital restoration

The BHC plan accepted

shall take all actions by the Board

necessary

to perform

its guarantee

of the

of Governors

on May

12, 2000.

Management 2. conduct

and Board (a)

of Directors 90 days of this Agreement, and operational the Bank’ s board of directors shall

Within

a review

of all managerial

functions

of the Bank and of the performance to the Reserve Bank and the OFIS actions that the purpose a

of all officers written

and employees

of the Bank and shall forward findings, conclusions,

report that includes proposes

and a description the Bank’ s

of specific

board of directors of the review

to take to strengthen

management. structure needs,

The primary

shall be to aid in the development and trained and include, (i) personnel

of a management to the Bank’ s

that is adequately shall

staffed by qualified address, consider,

suitable

The review

at a minimum, identification

the following: of the type and number supervise of officer positions needed to

manage and properly (ii) an evaluation

the lending

hmction whether

of the Bank; the individual required to

of each oflicer experience,

to determine

possess the ability,

and other qualifications

perform competently

present and anticipated duties, including the

ability to provide appropriate oversight of the lending function, to adhere to the Bank’ established policies and procedures, s to restore

and maintain the Bank to a safe and sound condition, and to comply with the requirements of this Agreement; and

a plan to recruit, hire, or appoint additional or replacement personnel with the ability, experience, and other qualifications required to perform competently their assigned duties.

(b)

The Bank shall take all available actions 3s are necessary to have, at all For the purposes of this

times, a minimum of two outside directors with banking experience.

Agreement, the terms (i) “outside director” is defined as an individual, not an employee or executive officer of the BHC or the Bank, who owns less than IO percent of the outstanding voting stock of the BHC or the Bank and who is not related in any manner to any shareholder who owns IO percent or more of the outstanding voting stock of the BHC or the Bank or any related interest of such a shareholder; and (ii) “executive officer” shall be defined as set forth in section 215.2(e) of Regulation 0 of the Board of Governors (“Regulation 0”) (I2 C.F.R. 2 15.2(e)).

Cc)

Prior to the election or appointment

of any director or senior executive

officer during the term of this Agreement, the BHC and the Bank shall provide notice to the

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Reserve Regulation

Bank and the OFIS Y of the Board

of such election of Governors

or appointment

as required H).

by Subpart

H of

(I 2 C.F~R. 225, Sibpart

(4
any bonus or increase reimbursement

The BHC

and the Bank shall not, directly

or indirectly,

pay any salary or to, the

the fees, or make any other payments, or the payment the prior of indebtedness, approval

including,

but not limited

of expenses

to or on behalf of the Reserve

of any of the BHC’ s

or the Bank’ directors s

without

written

Bank and the OFIS.

Lease Policies 3,

and Procedures (a) Within 30 days of this Agreement, written policies the Bank shall submit for monitoring, to the Reserve reporting, and

Bank and the OFIS acceptable collecting past due leases.

and procedures

@I
accordance with

The Bank shall not originate lease policies

or acquire

any lease contracts

except

in

the Bank’ written s

and procedures shall,

that are acceptable at a minimum,

to the

Reserve Bank and the OFIS. consider, and include, limits,

Such policies

and procedures

address,

but not be limited and approval

to: underwriting for individual

and documentation lease offrcers~

standards;

concentration

authorities

Strategic 4~

Plan and (a)

Budget Within a written 60 days of this Agreement, strategic plan and budget the Bank shall submit concerning the Bank’ s to the Reserve business

Bank and the OFIS

proposed

activities describe:

for the remainder

of2000

and for 2001~ This plan shall, at a minimum,

provide

for or

(i)

the responsibilities defmition, strategic approval,

of the Bank’ s implementation

board of directors and monitoring

regarding of the

the

plan and budget,

and the procedures fulfills

designed

IO ensure

that the board of directors (ii) management, condition examination (iii) an earnings the operating income funds; lending,

such responsibilities, objectives, given the

and operational

of the Bank as reflected of the Bank improvement assumptions

in the most recent report of reports;

and subsequent plan;

(iv)

that form the bases for major

projected

and expense components,

and the sources and uses of new

(v)

financial earnings, annual balance

performance liquidity,

objectives,

including

plans for asset growth, by detailed quarterly and

and capital financial

supported

pro forma

statements, statements; review

including and

projected

budgets,

sheets and income

(4

the establishment actual income budgetary

of a monthly

process to monitor to

the

and expenses

of the Bank in comparison

projections~

(b)
strategic

The Bank shall submit

to the Reserve

Bank and the OFIS a revised of any planned material changes

plan or budget at least 30 days prior

to the occurrence

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I
IO adopted the OFIS strategic plans or budgets, deviations and the Bank shall promptly from adopted strategic notify the Reserve Bank and

of any significant

plans or budgets.

Cc)
shall be submitted that calendar year.

A strategic

plan and budget

for each calendar

year subsequent prior

to 2000 of

to the Reserve Bank and the OFIS

at least one month

to the beginning

Allowance 5. examination otherwise

for Loan (a)

and Lease Losses Within 30 days from the receipt of any federal or state report of all such assets, unless

that classifies approved

assets as “ loss” ,

the Bank shall charge-off Bank and the OFIS.

in writing

by the Reserve

(b)
adequate allowance

The Bank shall maintain, for loan and lease losses. in light

through

charges to current of the allowance

operating

income,

an

The adequacy of criticized

for loan and lease level

losses shall

be determined

of the volume

loans and leases, the current

of past due and nonperforming of the potential examiner’ s requirements

loans and leases, past loan and lease loss experience, portfolio, current economic

evaluation conditions, and the

for loan and lease losses in the Bank’ s as contained Policy in the Bank’ s Statement

other criticisms

most recent report ofexamination,

of the Interagency 22, 1993.

on the Allowance at a minimum, a written

for Loan and Lease Losses, a monthly assessment of its

dated December allowance Indicating

The Bank shall conduct,

for loan and lease losses and shall maintain the methodology used in determining

record,

for supervisory needed.

review,

the amount

of the allowance

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Cc)
ofpast current

The Bank shall submit

to the Reserve

Bank and the OFIS a monthly a written description and the dollar

report

due loans and leases and adversely condition

classified

assets; with

of the amount

and status of each classified for loan and lease losses.

asset in excess of $25,000,

of the allowance

Internal 6.

Controls (a) Within acceptable ofthe 60 days of this Agreement, written Bank’ s procedures designed the Bank shall to strengthen which shall, submit to the Reserve controls and

Bank and the OFIS to maintain consider, general Income

its internal at a minimum, software

the accuracy and include:

books and records,

address,

(i) reconcilement

of the Bank’ lease accounting s preparation ofthe Bank’ s

to the Bank’ s and

ledger account;

and (ii) the accurate

Report

of Condition

(b)
procedures of the review

Within

90 days of this Agreement, with current industry

the Bank shall review and practices. supervisory

its accounting summary

for conformance

standards for future

A written reviews

and its conclusions

shall be retained

Asset/Liability I.

Management Within 60 days of this Agreement, revised written the Bank shall submit management policy shall, policy to the Reserve Bank and designed to improve

the OFIS an acceptable management following:

asset/liability The revised

of the Bank’ s (a) a minimum

liquidity.

at a minimum, level

address the liabilities; (e) the

level of temporary deposits;

assets, (b) a maximum and amount

of volatile

(c) an appropriate

level ofcore

(d) the number

of large deposits;

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number,

amount,

and maturity

dates of brokered

deposits;

(r) an appropriate availability;

level of loans and and (h) appropriate and deposits~

leases relative standards

to deposits

and capital;

(g) the Bank’ s of the Bank’ s

bortiwing

for volume,

mix, and maturity

loans, leases, investments,

Deposit

Taking 8.

Activities (a) The Bank shall not accept brokered 29 ofthe FDI Act (12 U. S. C. 183 If) any waiver deposits except in compliance with the

provisions

of section

The Bank shall notify imposed

the Reserve 29 Bank

Bank and the OFIS if the Bank requests from the Federal and the OFIS Deposit Insurance

of the restrictions

by section the Reserve

Corporation

(the “ FDIC” ),

and shall notify

of the FDIC’ s

disposition

of any request

for such a waivers

(b)
deposits bearing

The Bank

shall not, directly

or indirectly,

solicit,

renew or accept any on insured deposits of the

an interest maturity

rate that exceeds the prevailing normal market

effective

yields

of comparable

in the Bank’ s

area, without

prior written

approval

Reserve Bank and the OFIS~

Dividends 9 approval Regulation (a) The Bank shall not declare or pay any dividends the Director of the Division of Banking without the prior and written

of the Reserve Bank,

Supervision

of the Board of Governors at least 30 days prior

(the “ Director” ), to the proposed on the Bank’ s

and the OFIS,

Requests for approval ofdividends and shall

shall be received contain, period

date for declaration earnings

but not be limited and the last quarters

to, information

for the most recent annual

@I
approval

The BHC

shall not declare or pay any dividends Requests for approval

without

the prior

written at least

of the Reserve Bank and the Director. to the proposed date for declaration earnings

shall be received

30 days prior limited quatier.

of dividends

and shall contain, period

but not be and the last

to, information

on consolidated

for the most recent annual

Debt and Stock Redemption 10.
written approval

(a)
ofthe

The BHC Reserve

shall not, directly Bank, All requests the purpose

or indirectly, for prior ofthe

incur

any debt without approval

the prior but

written

shall contain,

not be limited planned

to, a statement

regarding

debt, the terms of the debt, and the resources available to

source(s)

for debt repayment

and an analysis

of the cash flow

meet such debt repayments

(b)
the Reserve Banks

The BHC

shall not redeem any stock without

the prior written

approval

of

Compliance II
to correct

with Laws and Regulations The Bank shall take the necessary steps, consistent
with sound banking practices, of

all violations

of law and regulation but not limited

set forth

in the most recent report of examination impermissible investments

the Bank, including,

to, divesting

the Bank’ s

IO

Compliance 12~ appoint majority

with Agreement (a) Within 15 days of this Agreememthe Committee” ) or principal comprised shareholders, Bank’ board of directors s ofat least 5 directors, in section shall the 215~2(m)

a committee ofwhom

(the “ Compliance shall not be offtcers

as defined and coordinate

of Regulation compliance

0 (12 C.F~R. 215.2(m)), with the provisions ofthis

of the Bank to monitor Agreement.

the Bank’ s

(b)
thereafter, Compliance setting forth within

Within

30 days ofthe

appointment

ofthe

Compliance the date ofthis

Committee, Agreement,

and, the

30 days ofthe

end of each quarter a written

following

Committee in detail

shall submit

progress with

report to the Bank’ s each provision

board of directors and the

the actions

taken to comply

of this Agreement

results of those actions.

(cl
Bank’ s

Within

15 days atier its receipt

from the Compliance

Committee,

the

board of directors

shall forward

a copy of the report described

in paragraph

12(b) hereof,

with any additional The Bank’ s director

comments

made by the board of directors, shall certify in writing

to the Reserve Bank and the OFIS and the OFIS that each Such reports

board of directors

to the Reserve Bank

has reviewed

each quarterly

progress

report required

by this paragraph, in writing,

may be discontinued making further

when the Reserve Bank and the OFIS,

releases the Bank from

reports,

II

Approval

of Plans, Policies, (a)

and Procedures procedures, and plan reouired by paragraphs for review l(a), 3(a), 6 (a),

13~ and 7 hereof Acceptable OFIS within

The policies,

shall be submitted policies, procedures,

to the Reserve Bank and the OFIS and the plan shall be submitted in this Agreement. procedures, Where

and approval. Bank and the and the by

to the Reserve applicable,

the time periods

set forth policies,

the BHC

Bank shall adopt all approved the Reserve Agreement, Bank and the OFIS the BHC

and the plan within comply with them.

10 days of approval During

and then shall fully

the term of this procedures,

and the Bank shall not amend or rescind the prior written approval of the Reserve

the approved Bank

policies,

and the plan without

and the OFIS

(b)
plans annually.

The Bank’ s

board ofdirectors

shall review

all policies,

procedures,

and

Communications 14. All communications regarding this Agreement Jr. shall be sent to:

(a)

Mr, John J. Wixted, Senior Federal Chicago. Vice President

Reserve Bank of Chicago Street 60690 Illinois

230 South LaSalle

(b)

Mr~ Frank Mu Fitzgerald Commissioner Oftice Lansing, of Financial Michigan and Insurance 48909 Services P 0, Box 30224

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Cc)

Mr. Vincent Chairman New Century New Century Southfield,

DiLorenzo Bancorp Bank Highway 48075 .I

23 155 Northwest

Michigan

Miscellaneous

IS.

Notwithstanding

any provision

of this Agreement grant written

to the contrary,

the Reserve and

Bank and the OFIS the Bank to comply

may, in their sole discretion, with any provision

extensions

of time to the BHC

of this Agreement

16. all oftheir assigns

The provisions institution-affiliated

of this Agreement parties,

shall be binding

upon BHC

and the Bank and and

in their capacities

as such, and their successors

17~ stayed, modified,

Each provision terminated

of this Agreement or suspended

shall remain

effective

and enforceable

until

by the Reserve Bank and the OFIS.

18.

The provisions

ofthis

Agreement

shall not bar, estop, or otherwise or state agency or former from taking

prevent

the

Board of Governors affecting the BHC

or the OFIS or any other federal or the Bank or any of their current

any other action parties and

institution-affriiated

their successors

and assigns,

19.

This Agreement is a “written agreement” for the purposes of section 8 of the

FDI Act (12 U.S.C. 1818).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the J:? day of P&
,zooo.

New Century Bancorp

New Century Bank

Office of Financial and

BHC individua!lv.acknt~v~lodge by the BIIC=

reading the foregoing

The undersigned

directors oithe Bank individually acknowledge nt thereto by the Bank_.

reading the foregoing

_-

Michael Chirco

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