The Board of Directors of Southern Community Financial has voted to suspend the quarterly cash dividend payment. It has not given any indication about future dividend status, only to say that it will evaluate these each quarter on the merits of providing dividends at that time. They have also given some indications regarding the projected first quarter results for 2009.

The company has also released information regarding the non-performing status of loans to somewhere in the neighborhood of $21 million to $23.5 million. These numbers represent the range of just under two per cent of the total issued loans covering the first quarter of 2009. This is an increase over the last quarter of last year, which saw a non-performing loan percentage of 1.10% or a total of $14.4 million.

Southern Community also announced that it anticipates nonperforming loans to increase to a range of approximately $21.0 million to $25.3 million, or 1.60% to 1.93% of total loans in the first quarter of 2009, up from $14.4 million or 1.10% of total loans in the fourth quarter of 2008. The Company also anticipates net charge-offs of approximately $3.1 million to $3.3 million or approximately 0.95% to 1.01% of average loans on an annualized basis, up from $1.4 million or 0.44% of average loans (annualized) in the fourth quarter of 2008. As a result of the increased level of nonperforming loans and net charge-offs, Southern Community expects to record a provision for loan losses of approximately $4.0 million. The allowance for loan losses is expected to be in the range of $19.6 million to $19.8 million or 1.50% to 1.51% of total loans, up from $18.9 million or 1.43% of total loans in the fourth quarter of 2008.

F. Scott Bauer, Chairman and Chief Executive Officer stated that “The suspension of our quarterly dividend, while disappointing, is a prudent step in preserving our capital during this severe economic crisis. In addition, we proactively took this step and believe that cash dividends should be paid from current and expected earnings preserving our capital. We estimate that our decision will save nearly $2.7 million in capital annually, or $671 thousand per quarter…As it was in the fourth quarter of 2008, the increase in nonperforming loans and net charge-offs during the first quarter of 2009 was primarily related to our residential construction and development loans, which have been negatively impacted by the persistent slow housing market. Our lending officers are proactively monitoring delinquencies, and we are continuing to work with builders to effectively resolve problem credits and provide relief until market conditions improve. This includes monitoring the completion of homes, meeting with borrowers, employing key realtors who are actively selling properties and reducing housing inventories. While the provision for loan losses is expected to increase significantly in the first quarter of 2009 compared to the fourth quarter of 2008, we expect to remain modestly profitable in the first quarter of 2009. Our capital remains strong exceeding the regulatory standards for well capitalized institutions. As a result of the increased loan loss provision and strong capital position, I believe we will be better positioned to weather the uncertain economic climate that is expected to unfold throughout 2009.”

Southern Community Financial Corporation headquarters are located in Winston-Salem, North Carolina.