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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 Bank, at du!y ;onstituted the boards of directors of the BHC and the meetings adopted resolutions authorizing and directing, Vincent 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 on behalf of the by the BHC rurd the Bank and patties, as defined by sections 3(u) and 8(b)(3) of the Federal Deposit lnsurancf: Act, as amended (12 l_.S.C, 1813(u) and (b)(3)) (;he”FDI Act”), with each and every apphcable provision, of this Agreement. NOW, THEREFORE, before the taking of any testimony or adjudication an:y issue of fxt or law herein and without this Agreement a!legation made or implied by the Board ofGovernors constituting of or fi:gding on an admission of any or the OFIS, the DHC, the Bank. the Reserve Bank, and rhe OFIS agree as follows: 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: Bank’s current and IInure capital requirements, (i) the 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’s assets, including branches: (iii) the Bank’s level of concentrations of credit; (iv) the volume of the Bank’s adversely classified assets; (v) the Bank’s anticipated level of retained earnings; and (vi) the 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 30, 2000 achieve restoration Management 2. conduct a review of all officers written (a) Within address, consider, 90 days of this Agreement, findings, and operational to perform the Bank’s functions conclusions, and its guarantee of the 12, 2000. personnel at a minimum, identification shall Bank and the OFIS of specific management. of a management to the Bank’s needs, actions that the The primary structure a purpose that is adequately The review shall the following: of the type and number manage and properly an evaluation to the Reserve the Bank’s suitable board of directors of the Bank and of the performance and a description to take to strengthen and include, (ii) the Bank shall of no less than 9 percents on May of the Bank and shall forward and trained (i) I(a) hereof, the term of this Agreement necessary of Governors shall be to aid in the development staffed by qualified during ratio at a level by the Board of all managerial proposes of paragraph of Directors and employees board of directors 1 leverage shall take all actions plan accepted report that includes of the review its tier The BHC and Board the provisions and, at all times thereafter 1, 2002, maintain (cl capital Notwithstanding supervise of each oflicer possess the ability, experience, of officer the lending to determine positions hmction whether needed to of the Bank; the individual and other qualifications required to perform competently present and anticipated duties, including the ability to provide appropriate oversight of the lending function, to adhere to the Bank’s established policies and procedures, 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 (b) their assigned duties. The Bank shall take all available actions 3s are necessary to have, at all times, a minimum of two outside directors with banking experience. For the purposes of this 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 4 Reserve Bank and the OFIS Regulation Y of the Board (4 or the Bank’s directors without Within (a) accordance the prior written approval H of H). or indirectly, including, of indebtedness, 30 days of this Agreement, written policies pay any salary or but not limited to or on behalf of the Reserve to, the of any of the BHC’s Bank and the OFIS. the Bank shall submit and procedures with The Bank shall not originate the Bank’s written Reserve Bank and the OFIS. and include, concentration 4~ and the Bank shall not, directly by Subpart for monitoring, to the Reserve reporting, and past due leases. @I Strategic (I 2 C.F~R. 225, Sibpart or the payment Bank and the OFIS acceptable consider, as required and Procedures 3, collecting or appointment the fees, or make any other payments, of expenses Lease Policies of Governors The BHC any bonus or increase reimbursement of such election limits, Plan and (a) Bank and the OFIS lease policies Such policies but not be limited and approval or acquire and procedures and procedures to: underwriting authorities any lease contracts shall, that are acceptable at a minimum, and documentation for individual except in to the address, standards; lease offrcers~ Budget Within a written 60 days of this Agreement, strategic plan and budget the Bank shall submit concerning the Bank’s to the Reserve proposed business activities for the remainder of2000 and for 2001~ This plan shall, at a minimum, provide for or describe: (i) the responsibilities defmition, strategic of the Bank’s approval, implementation plan and budget, management, condition lending, of the Bank (iii) an earnings (iv) the operating assumptions of the designed objectives, IO ensure given the in the most recent report of and subsequent improvement the such responsibilities, and operational of the Bank as reflected examination income fulfills regarding and monitoring and the procedures that the board of directors (ii) board of directors reports; plan; that form the bases for major and expense components, projected and the sources and uses of new funds; (v) financial performance earnings, liquidity, annual pro forma balance (4 actual income (b) strategic and capital financial sheets and income the establishment budgetary objectives, supported plans for asset growth, by detailed statements, including statements; and of a monthly and expenses including review quarterly projected budgets, process to monitor of the Bank in comparison and the to projections~ The Bank shall submit plan or budget at least 30 days prior to the Reserve Bank and the OFIS a revised to the occurrence 6 of any planned material changes I IO adopted the OFIS strategic plans or budgets, of any significant Cc) shall be submitted that calendar Allowance (a) examination approved (b) allowance Within Bank and plans or budgets. for each calendar year subsequent at least one month of the potential 30 days from the receipt assets as “loss”, in writing by the Reserve for loan and lease losses. in light Bank prior to 2000 to the beginning of through 22, 1993. charges to current The adequacy of the volume all such assets, unless of the allowance of criticized operating as contained Policy in the Bank’s Statement loans and leases, the current allowance for loan and lease losses and shall maintain Indicating the methodology used in determining portfolio, current at a minimum, a written the amount 7 an economic level evaluation conditions, most recent report ofexamination, on the Allowance The Bank shall conduct, income, for loan and lease loans and leases, past loan and lease loss experience, of the Interagency dated December or state report of and the OFIS. for loan and lease losses in the Bank’s other criticisms of any federal the Bank shall charge-off The Bank shall maintain, of past due and nonperforming requirements the Reserve and Lease Losses be determined examiner’s plan and budget strategic to the Reserve Bank and the OFIS that classifies losses shall from adopted notify year. 5. adequate A strategic for Loan otherwise deviations and the Bank shall promptly and the for Loan and Lease Losses, a monthly record, assessment for supervisory of the allowance needed. of its review, Cc) The Bank shall submit ofpast due loans and leases and adversely current condition Internal classified and status of each classified of the allowance to the Reserve Bank and the OFIS a monthly assets; with a written description asset in excess of $25,000, report of the and the dollar amount for loan and lease losses. Controls 6. Within (a) Bank and the OFIS to maintain consider, general 60 days of this Agreement, acceptable the accuracy and include: ledger account; ofthe the Bank shall written procedures Bank’s books and records, (i) reconcilement designed submit to strengthen which shall, its internal preparation ofthe software Bank’s controls at a minimum, of the Bank’s lease accounting and (ii) the accurate to the Reserve Report and address, to the Bank’s of Condition and Income (b) procedures of the review Asset/Liability I. Within for conformance following: with and its conclusions current the Bank shall review industry standards and practices. shall be retained for future supervisory its accounting A written summary reviews Management Within the OFIS an acceptable management 90 days of this Agreement, 60 days of this Agreement, revised of the Bank’s (a) a minimum (c) an appropriate written liquidity. asset/liability The revised level of temporary level ofcore the Bank shall submit deposits; management policy shall, 8 policy designed at a minimum, assets, (b) a maximum (d) the number to the Reserve Bank and and amount level to improve address the of volatile of large deposits; liabilities; (e) the number, amount, leases relative standards Deposit and maturity to deposits for volume, Taking and capital; (a) of section (g) the Bank’s mix, and maturity from the Federal 29 ofthe Deposit of the Bank’s availability; level of loans and and (h) appropriate loans, leases, investments, bearing of comparable The Bank maturity any waiver Corporation disposition an interest deposits FDI Act (12 U. S. C. 183 If) Insurance of the FDIC’s (b) deposits (r) an appropriate bortiwing The Bank shall not accept brokered Bank and the OFIS if the Bank requests and the OFIS deposits; and deposits~ Activities 8. provisions dates of brokered (the “FDIC”), normal and shall notify or indirectly, market imposed with the the Reserve by section 29 the Reserve Bank for such a waivers rate that exceeds the prevailing in the Bank’s in compliance The Bank shall notify of the restrictions of any request shall not, directly except solicit, effective area, without renew or accept any yields on insured prior written deposits approval of the Reserve Bank and the OFIS~ Dividends 9 approval (a) of the Reserve Bank, Regulation period the Director of the Board of Governors shall be received contain, The Bank shall not declare or pay any dividends at least 30 days prior but not be limited and the last quarters of the Division (the “Director”), to the proposed to, information on the Bank’s of Banking and the OFIS, without Supervision written and Requests for approval date for declaration earnings the prior ofdividends and shall for the most recent annual @I approval shall not declare or pay any dividends of the Reserve Bank and the Director. 30 days prior limited The BHC to the proposed to, information Requests date for declaration on consolidated for approval of dividends earnings without the prior shall be received and shall contain, for the most recent annual written at least but not be period and the last quatier. Debt and Stock Redemption 10. written (a) approval not be limited planned The BHC ofthe Reserve to, a statement source(s) shall not, directly or indirectly, Bank, All requests for prior regarding the purpose ofthe for debt repayment and an analysis incur written any debt without approval the prior shall contain, but debt, the terms of the debt, and the of the cash flow resources available to meet such debt repayments (b) The BHC shall not redeem any stock without the prior written approval of the Reserve Banks Compliance II to correct with Laws and Regulations The Bank shall take the necessary steps, consistent all violations the Bank, including, of law and regulation but not limited set forth to, divesting sound banking practices, in the most recent report of examination the Bank’s IO with impermissible investments of Compliance with Agreement 12~ appoint Within (a) a committee majority ofwhom of Regulation compliance (the “Compliance 0 (12 C.F~R. 215.2(m)), with the provisions within Within ofthis Committee setting in detail or principal comprised ofat shareholders, least 5 directors, as defined in section and coordinate shall the 215~2(m) the Bank’s Agreement. appointment end of each quarter shall submit the actions Bank’s board of directors of the Bank to monitor 30 days ofthe 30 days ofthe Compliance forth Committee”) shall not be offtcers (b) thereafter, 15 days of this Agreememthe a written following progress taken to comply ofthe with Compliance Committee, the date ofthis report to the Bank’s each provision Agreement, and, the board of directors of this Agreement and the results of those actions. (cl Bank’s board of directors with any additional The Bank’s director comments has reviewed further 15 days atier its receipt shall forward board of directors may be discontinued making Within from the Compliance a copy of the report described made by the board of directors, shall certify each quarterly in writing progress when the Reserve Bank and the OFIS, reports, II in paragraph the 12(b) hereof, to the Reserve Bank and the OFIS to the Reserve Bank report required Committee, and the OFIS that each by this paragraph, in writing, Such reports releases the Bank from Approval of Plans, Policies, 13~ (a) and 7 hereof Acceptable and Procedures The policies, shall be submitted policies, OFIS within procedures, procedures, and the plan shall be submitted set forth Bank shall adopt all approved policies, the Reserve Bank and the OFIS Agreement, the BHC (b) in this Agreement. procedures, The Bank’s approval applicable, the BHC (a) During with of the Reserve them. the approved Bank shall review this Agreement Mr, John J. Wixted, Senior Federal (b) Illinois shall be sent to: Jr. Street 60690 Mr~ Frank Mu Fitzgerald Commissioner Oftice of Financial and Insurance P 0, Box 30224 Lansing, Michigan 48909 12 the term of this policies, all policies, Reserve Bank of Chicago Chicago. by procedures, and the OFIS Vice President 230 South LaSalle and the comply Communications regarding Bank and the 10 days of approval board ofdirectors All communications 3(a), 6 (a), and approval. plans annually. 14. l(a), and the plan within and then shall fully written for review to the Reserve Where and the Bank shall not amend or rescind the prior by paragraphs to the Reserve Bank and the OFIS the time periods and the plan without and plan reouired Services procedures, and Cc) Mr. Vincent DiLorenzo Chairman New Century Bancorp New Century Bank 23 155 Northwest Southfield, .I Highway Michigan 48075 Miscellaneous IS. Notwithstanding any provision Bank and the OFIS may, in their sole discretion, the Bank to comply with 16. all oftheir any provision The provisions institution-affiliated of this Agreement grant written to the contrary, extensions the Reserve of time to the BHC and of this Agreement of this Agreement parties, shall be binding in their capacities upon BHC and the Bank and as such, and their successors and assigns 17~ Each provision stayed, modified, 18. terminated The provisions Board of Governors affecting the BHC their successors of this Agreement or suspended ofthis shall remain and enforceable until by the Reserve Bank and the OFIS. Agreement shall not bar, estop, or otherwise or the OFIS or any other federal or the Bank or any of their current and assigns, effective or state agency or former from taking institution-affriiated prevent the any other action parties and 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_. _- Michael Chirco 16 reading the foregoing