Regulators are barring an Alabama bank holding company from paying shareholders or incurring debt until it takes steps to improve its practices.
SouthFirst Bancshares, the parent of the $114 million-asset SouthFirst Bank of Sylacauga, Ala., has 45 days from the end of each calendar quarter to detail for the Federal Reserve in writing the company's compliance with an agreement between the bank and the Office of the Comptroller of the Currency that obligates the company to boost its capital and strengthen its operations.
As part of the agreement between SouthFirst and the OCC, SouthFirst must attain total risk-based capital of at least 12% of risk-weighted assets and Tier 1 capital at least equal to 8% of adjusted total assets by the end of this year.
At June 30, SouthFirst's core capital leverage ratio was 6.52% and its total risk-based capital ratio was 11.04%, according to the Federal Deposit Insurance Corp. The bank lost close to $3 million last year, though it did turn a modest profit in the first half of this year, according to the FDIC. The company received roughly $3 million in June 2009 from the Troubled Asset Relief Program.
SouthFirst must submit to the OCC by Nov. 15 a plan that addresses its blueprint for maintaining adequate capital, identifying risks, projecting its financial results and developing its business.
The agreement also obligates the company to monitor troubled loans and to refrain from lending additional sums to their borrowers, to identify concentrations of credit, to ensure an sufficient allowance for loan losses, to appoint someone with sufficient experience to review and identify problems loans independently of management, to adopt a policy for restructuring troubled debt, and to ensure the bank has sufficient liquidity in relation to its needs.
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