Commonwealth Bankshares has said that in order to maintain financial soundness, the company and its banking subsidiary, Bank of the Commonwealth, have mutually entered into a written agreement with the Federal Reserve Bank of Richmond and the Virginia State Corporation Commission Bureau of Financial Institutions.

Under the terms of the agreement, Commonwealth Bankshares and its subsidiary have committed to take certain actions to strengthen the their financial condition and maintain effective control over and supervision of major operations and activities, including credit risk management, capital, funding, liquidity and earnings.

The agreement imposes no restriction on Commonwealth Bankshares’s products or services offered to customers, nor does it impose any type of penalties or fines upon Bank of the Commonwealth.

Edward Woodard, president and CEO of CLBB, said: “Management and the board have been working proactively over the past six months and have made significant progress in addressing many of the issues subsequently cited in the agreement, while at the same time, we continue to serve our customers with the high level of service and dedication for which our franchise is recognized in the market.

“During the first quarter of 2010, our board and senior management have continued the execution of our three year strategic plan and our three year capital management plan. We have substantially increased loan loss reserves, increased core deposits and reduced our reliance on brokered deposits. In addition, we have increased problem loan management staff, improved risk management practices and have maintained our ‘well capitalized’ capital status.

“Many of the issues discussed in the agreement have already been addressed and we expect to make further progress in the near future. We are fully committed to seeing the company return to profitability and realize the full potential of the Commonwealth Bankshares franchise.”