Southern Community Financial (SCMF) Updates Q2 Outlook

June 30, 2009 8:13 AM EDT

Southern Community Financial Corporation (NASDAQ: SCMF) updated its guidance for second quarter 2009 results. The Company now expects its provision for loan losses will increase to approximately $6.0 million for the second quarter 2009 in response to an accelerated level of charge-offs. Net charge-offs are now anticipated to be approximately $5.7 million to $5.9 million, or 1.78% to 1.84% of average loans on an annualized basis, compared with $3.5 million or 1.09% of average loans (annualized) for the first quarter 2009. The allowance for loan losses is expected to be in the range of $19.4 million to $19.6 million or 1.53% to 1.55% of total loans, up from $19.3 million or 1.49% of total loans in the first quarter of 2009.

Southern Community also announced that it expects to take a $1.0 million charge against earnings to write off the value of collateral held by Lehman Brothers as the counterparty in certain derivative contracts.

"...However, despite the expected decline in nonperforming loans, an increased level of foreclosed assets is expected to increase nonperforming assets to a range between 2.10% to 2.15% of total assets at June 30, 2009 compared with 1.73% of total assets at March 31, 2009," said F. Scott Bauer, Chairman and Chief Executive Officer. [SM]

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