Severn Bancorp (SVBI) in Annapolis, Md., plans to sell soured and other loans for $23 million.
The $840 million-asset company will take a third-quarter charge of about $10 million on the sale of the loans, which have a book value of $33 million, it said. The company did not name the buyer.
The Office of the Comptroller of the Currency issued an enforcement action against Severn's banking unit in April. The agreement requires the bank to clean up its loan book, among other stipulations. The bank had a Tier 1 leverage ratio of 14.94% and total risk-based capital of 21.73% as of June 30, according to the Federal Deposit Insurance Corp.
The portfolio of loans includes performing and nonperforming loans. Severn will consider further loan sales, Chief Executive Alan Hyatt said.
"This transaction speeds up improvement in our credit quality, lowers our problem-loans-to-assets ratio to a more acceptable level and allows the bank to focus on new business," Hyatt said in the news release. "The sale of underperforming loans is an important initiative to clean up the bank's balance sheet."