SCB Bank in Shelbyville, Ind., is running low on capital after management opted to set aside more than $11 million to cover problem loans dating to the tenure of its former chief executive.

Blue River Bancshares Inc., the thrift's parent company, said late Friday that SCB's capital levels have fallen below regulatory minimums and that it is under a directive from the Office of Thrift Supervision to boost those ratios significantly.

At March 31, SCB's Tier 1 leverage capital ratio was 3.75% and its total risk-based capital ratio was 6.31%. The OTS instructed the thrift in a cease-and-desist order to maintain a 8.75% leverage ratio and a 12.25% total risk-based ratio. The $247 million-asset company also said it expects a prompt corrective action directive from the OTS.

The board ordered a review of loans made under Randy Collier, who resigned as chief executive in January. Certain loans were reclassified as nonperforming and others were charged off. As a result, the bank's 2010 loss widened to $13.7 million from $1.4 million. A first-quarter 2011 loss of nearly $1.4 million was nearly 10 times larger than the year-earlier loss.

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