Southern Community Bank shuttered - Atlanta Business Chronicle:

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Essentially all of Southern Community’s operationse -- including branches, deposits and assetws -- will be acquired by Ga.-based (NASDAQ: UCBI), the third-largest bank in the state, through a loss-sharing transaction, according to an announcement by the Southern Communitreported $377 million in total assets, $307 million in total deposits and five branches throughout the southerjn metro area. Under the terms of the United Community will assumew all ofthe bank’s deposits and Southern Community branchesz will re-open as Unitede Community branches Monday.
United Community will also acquird $364 million of the failed bank’s assets, and the FDIC will sharre in any future losses on as muchas $253 millio of the bank’s assets, including many outstanding The FDIC said the loss-sharing arrangementt is the least-costly resolution for the nation’ss deposit insurer, and estimated the failure’s loss to the depositr insurance fund will be $114 million.
Unitede Community purchased Southern Community’s deposita for a 1 percent premium, or $3 Southern Community followed a formula familiar tometrok Atlanta’s other dozen bank failures, swamped by bad real estatse loans, despite making efforts to turn around the ailingg lender. Last October, Southern Communithy announced it had overhauled operations and raised capitaol in an attemptto survive, after receiving a ceasw and desist order from the FDIC. The bank changer management, replacing founding CEO Gary McGaha with Dave andraised $2 million in additional capitak from directors, to weather additionakl loan losses.
"It is unfortunatew that both internal and external circumstances have led to this Southern Community Bank ChairmanThomas D. Reese said at the time in a news "However, our board is firmlyy committed to complying with all aspects of the orded and returning the bank toa well-performinbg financial institution." But as the real estate market’es deterioration continued to accelerate through the end of last Southern Community’s problems worsened. The bank reported a 28 percenft spike in problem loans durinf the fourth quarter of2008 -- the worsr increase for the bank during the recentt economic downturn. By first quarter Southern Community reporteda 39.
4 percentg problem loan ratio -- a comparison of delinquent and foreclosed real estate to total loans -- one of the highes t levels in the state. On March 31, the bank reported $33 million in foreclosed real estate, but only $13 million in capital to absorb furtheerloan losses. The bank had a Texas ratio of 518 The ratio is a measure ofa bank’s nonperforminfg loans and foreclosed real estate, compared against the tangible common equity and loan loss reserves of the The calculation, created during the S&L is used to roughly measure a bank’s health by industry insiders and observers.
Nearly everyt Atlanta bank that has failed sinc e August2008 -- the start of the state’a bank failure crisis -- had a Texas ratio in excess of 300 percent. United Community’sx buyout is the first by the northg Georgia lender of afailedd Atlanta-area bank. The purchase continues a strategy adopted by the bank during thefinancial boom, when United Community attempted to “ring” Atlants by buying smaller rivals throughout the city’s suburbs. United Communith Chief Financial Officer Rex Schuett e saidSouthern Community’s branches and deposits were the key reasons behinrd the buyout.
“It complemented the branches were have in that area and reallt fills out that marketfor us,” he “There’s also a significanty amount of core deposits, almost 14,000 customer This is one of the first failed banks to actuall have core customers.”