Attached files
| file | filename |
|---|---|
| EX-10.2 - SOUTHERN COMMUNITY FINANCIAL CORP | v211672_ex10-2.htm |
| EX-10.1 - SOUTHERN COMMUNITY FINANCIAL CORP | v211672_ex10-1.htm |
| EX-99.1 - SOUTHERN COMMUNITY FINANCIAL CORP | v211672_ex99-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report: (Date of Earliest Event
Reported) February
14, 2011
Southern
Community Financial Corporation
|
North
Carolina
|
000-33227
|
56-2270620
|
|
(State
of Incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer
|
|
Identification
No.)
|
|
4605
Country Club Road, Winston-Salem, North Carolina
|
27104
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Issuer's
telephone number: (336) 768-8500
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
¨ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement
On
February 16, 2011, Southern Community Bank
and Trust, a state-chartered community bank (the “Bank”) and wholly-owned bank
subsidiary of Southern Community Financial Corporation, a registered bank
holding company (the “Company”), (NASDAQ: SCMF and SCMFO), entered into a
Consent Order (the “Order”), with the Federal Deposit Insurance Corporation (the
“FDIC”) and the State of North Carolina Office of the Commissioner of Banks (the
“NCCOB”).
Under the
terms of the Order, the Bank has agreed to develop and submit for approval
written plans to: (1) strengthen Board oversight of the management
and operations of the Bank; (2) comply with minimum capital requirements of 8%
Tier 1 leverage capital and 11% total risk-based capital; (3) strengthen credit
risk management practices; (4) reduce over a two-year period the Bank’s risk
exposure to adversely classified assets identified in the Bank’s most recent
Report of Examination; (5) reduce any undue concentration of credit in the
Bank’s loan portfolio; (6) provide for improved management of the Bank’s funds
management practices; and (7) identify and develop the Bank’s long-term
strategic plan for asset growth, market focus, earnings projections, capital
needs, and liquidity position.
With
respect to the Bank’s regulatory capital ratios as of December 31, 2010, the
Tier 1 leverage ratio and the total risk-based capital ratio were 8.34% and
11.72%, respectively. Both of these measures are in excess of the increased
minimum regulatory capital requirements of 8% and 11% imposed under this
Order.
In
addition, the Bank has agreed that it will: (1) notify the FDIC and NCCOB in
writing when it proposes to make changes to the Bank’s directors or senior
executive officers; (2) not make any distributions of interest or principal on
subordinated debentures or declare or pay any dividends or bonuses without the
prior written approval of the FDIC and NCCOB; (3) not undertake asset growth in
excess of 10% or more per year or other material changes in asset and liability
composition without prior notice to the FDIC and NCCOB; (4) not extend
additional credit to or for the benefit of borrowers who have a loan that has
been charged-off or adversely classified, in whole or in part, and is
uncollected, except under certain circumstances and with the prior approval of a
majority of the Board of Directors or a Board committee; (5) eliminate all
assets classified as “loss” and 50% of those assets classified as “doubtful” in
the Bank’s most recent Report of Examination; (6) not accept, renew or rollover
any brokered deposits without obtaining a waiver from the FDIC; (7) provide for
the maintenance of an adequate allowance for loan losses; (8) strengthen lending
and collection policies and provide for the ongoing internal loan review and
grading of the Bank’s loan portfolio; and (9) eliminate or correct all
deficiencies noted in the recent Report of Examination and ensure future
compliance with applicable laws and regulations.
The Board
of Directors of the Bank is also required under the Order to retain an
independent consultant to conduct an analysis and assessment of the Bank’s
Board, management, key staff performance and related staffing
needs. The consultant will provide a report to the Board of
Directors, the FDIC and the NCCOB. Following receipt of the
consultant’s report, the Board must submit a management plan to the FDIC and the
NCCOB that addresses the findings and recommendations in the
report. Following its approval by the FDIC and NCCOB, the Board will
implement and follow the management plan.
In
accordance with the terms of the Order, the Bank has already appointed a
committee to monitor compliance with the Order. The directors of the
Bank and executive management will diligently seek to comply with all
requirements of the Order.
The Bank,
by and through its Board of Directors, has executed a “Stipulation to the
Issuance of a Consent Order” (“Stipulation”), dated February 16, 2010, that is
accepted by the FDIC and the NCCOB. With the Stipulation, the Bank
has consented, without admitting or denying any charges of unsafe or unsound
banking practices and/or violations of law or regulation to the issuance of this
Order by the FDIC and the NCCOB.
During
and since the completion of the on-site examination by the FDIC and the NCCOB,
management of the Bank has proactively taken steps, including renegotiating
payment terms on collateral dependent loans to include scheduled principal
curtailments, strengthening the Bank’s liquidity position and its allowance for
loan losses and making adjustments in credit risk management policies and
practices to alleviate the effects of the credit challenge caused by the
economic deterioration and market conditions in the Bank’s market areas.
Additionally, management and the Board of Directors have aggressively addressed
the findings of the examination and are taking an active role in working with
the regulatory agencies to improve the Bank’s financial condition and comply
with the requirements of the Order.
The Bank
is required to provide written progress reports to the FDIC and NCCOB on a
quarterly basis until such time as the requirements of the Order have been
accomplished and the FDIC and NCCOB have released the Bank in writing from such
obligation. The Order will remain in effect until modified or
terminated by the FDIC and NCCOB. Although the Company intends to
take all actions necessary to enable the Bank to comply with the requirements of
the Order, there can be no assurance that the Bank will be able to comply fully
with the provisions of the Order. Failure to meet these requirements
may result in additional regulatory action.
The
foregoing description of the Order is a summary of its material terms and does
not purport to be a complete description of all of the terms of the
Order.
Item
8.01 Other Events
On
February 14, 2011, the Company announced that it had suspended the payment of
regular quarterly cash dividends on the Company’s Fixed Rate Cumulative
Perpetual Preferred Stock, Series A, issued to the U.S. Treasury Department and
elected to defer the payment of regularly scheduled interest payments on both
issues of junior subordinated debentures, relating to its outstanding trust
preferred securities.
The full
text of the press release announcing these decisions is filed herewith as
Exhibit 99.1 and is incorporated by reference herein.
Item
9.01 Financial Statements and Exhibits
(d) Exhibits
|
10.1
|
Stipulation
to the Issuance of a Consent Order dated February 16, 2011 by and between
Southern Community Bank and Trust, the Federal Deposit Insurance
Corporation and the North Carolina Commissioner of
Banks
|
|
10.2
|
Consent
Order dated February 16, 2011 by and between Southern Community Bank and
Trust, the Federal Deposit Insurance Corporation and the North Carolina
Commissioner of Banks
|
|
99.1
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Press
release dated February 17, 2011
|
This
Current Report on Form 8-K (including information included or incorporated by
reference herein) may contain “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995, such as statements
relating to future plans and expectations, and are thus
prospective. Such forward-looking statements include but are not
limited to (1) statements regarding potential future economic recovery, (2)
statements with respect to our plans, objectives, expectations, intentions and
other statements that are not historical facts, and (3) other statements
identified by words such as “believes,” “expects,” “anticipates,” “estimates,”
“intends,” “plans,” “targets” and “projects,” as well as similar
expressions. Such statements are subject to risks, uncertainties and
other factors which could cause actual results to differ materially from future
results expressed or implied by such forward-looking
statements. Although we believe that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove to
be inaccurate. Therefore, we can give no assurance that the results
contemplated in the forward-looking statements will be realized. The
inclusion of this forward-looking information should not be construed as a
representation by our Company or any person that the future events, plans or
expectations contemplated by our Company will be achieved.
Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, Southern Community
Financial Corporation has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
Southern
Community Financial Corporation
|
||
|
February
17, 2011
|
By:
|
/s/
F. Scott Bauer
|
| Name: F. Scott Bauer | ||
| Title: Chairman and Chief Executive Officer | ||