Southern Community Financial Corp. of Winston-Salem, N.C., said Thursday that its bank has signed a consent order requiring it to reduce problem loans and maintain capital levels.
The $1.6 billion-asset company said in a press release that its bank reached the agreement Feb. 16 with the Federal Deposit Insurance Corp. and the North Carolina Office of the Commissioner of Banks.
The regulatory order requires Southern Community Bank to lower its credit risk exposure by reducing problem assets and enhancing credit risk management practices. The bank must also maintain a leverage ratio of 8% and a total risk-based capital ratio of 11%. The bank is also barred from accepting or renewing any brokered deposits. At Dec. 31 the bank had a leverage ratio of 8.34% and a total risk-based capital ratio of 11.72%.
The company told the Treasury Department that it will defer dividends under the Troubled Asset Relief Program. The company also plans to defer interest payments on two issues of junior subordinated debentures tied to outstanding trust preferred securities. The moves should save a total of $5.1 million in capital a year.
F. Scott Bauer, the CEO, said during a Jan. 31 conference call to discuss quarterly results that Southern Community was making progress with problematic assets. Delinquencies remained on the decline and the company was dealing with fewer newly impaired loans. "We continue to make progress with our nonperforming collateral-dependent loans and anticipate improvement in our earning asset mix," he said.