CapitalSouth Bancorp in Birmingham, Ala., which has lost more than $21 million in the last two quarters on bad real estate loans, has been slapped with an enforcement order requiring it to strengthen its board, improve credit oversight, and hire an independent consultant to evaluate management.
The cease-and-desist order issued by the Federal Reserve Board was dated Oct. 29 but made public last week; it also requires the $737 million-asset CapitalSouth to liquidate some troubled assets.
CapitalSouth, which had announced Aug. 4 that it expected the order, is also required to develop a plan to increase capital levels at its bank. Its total risk-based capital was 9.67% at June 30, according to the Federal Deposit Insurance Corp.
A story in the Birmingham Business Journal said CapitalSouth's problems can be traced to its 2006 purchase of Monticello Bancshares Inc. in Jacksonville, Fla., which was issued an Office of Thrift Supervision cease-and-desist order before the deal closing over its lending practices.
At Sept. 30, CapitalSouth said that 6.5% of its assets, or $48 million, were nonperforming. It lost $5.3 million in the third quarter and $16 million in the second quarter.
As part of the management review, the Fed specifically required an independent consultant to scrutinize people in the bank's credit areas within 30 days of Oct. 29.
