10 months ago
Macon-based Security Bank Corporation says it has agreed to halt what federal regulators have called "unsafe and unsound banking practices."
A Federal Deposit Insurance Corp. order says the bank had too many "poor quality loans," "hazardous lending and lax collection," lacked adequate capital and was poorly managed.
The federal regulators said the bank's directors "failed to provide adequate supervision."
In March, the bank filed documents saying its auditor had expressed "substantial doubt" about the bank's ability to stay in business because of its loan losses.
On Friday, the company announced it has agreed to cease-and-desist orders with the FDIC and Georgia's banking department on its lending and capital policies.
The orders also limit dividends paid to the parent corporation by five of its six banking subsidiaries.
The corporation is the parent company for Security Banks in Bibb, Houston and Jones counties and well as the Atlanta area.
The FDIC order filed with the federal Securities and Exchange Commission gave this description of the order:
"IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns cease and desist from the following unsafe and unsound banking practices and violations of law and/or regulation:
"(a) operating with a board of directors ("Board) that has failed to provide adequate supervision over and direction to the management of the Bank;
"(b) operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;
"(c) operating with a large volume of poor quality loans;
"(d) following hazardous lending and lax collection policies and practices;
"(e) operating in such a manner as to produce operating losses;
"(f) operating with inadequate equity capital in relation to the volume and quality of assets held by the Bank
"(g) operating with inadequate provisions for liquidity and funds management;
"(h) operating with inadequate allowance for loan and lease losses ("ALLL")."
The bank holding company disclosed a net loss of $18.5 million in the first three months of 2009.
In a news release quoting bank president and C.E.O. Tony Collins, the bank said the consent orders are part of a process of reducing risks in its lending portfolios.
Collins said "our financial results continue to be impacted by the unprecedented economic conditions we are facing, as the residential housing market remains under significant pressure."
He said the bank already initiated many of the steps outlined in the orders.
Spokesman Tom Woodberry also released the following statement Friday afternoon:
"This agreement sets up a formal process for Security Bank to work with the FDIC to address the challenges we face. The present economic downturn is adversely affecting many banks and a growing number of them have similar agreements with state and federal regulators.
"We appreciate our many loyal customers and remind them they can continue to bank as they always have. All checking, savings, CD and other deposit accounts at Security Bank are fully insured by the FDIC for at least $250,000 per customer."
As part of the cease-and-desist agreements, Security Bank withdrew its application for federal aid under the TARP program.
Security's stock price on the NASDAQ fell almost 31 percent on Friday and closed at 58 cents per share.
To read the company's first-quarter news release, click on the link to the right.
