Risky commercial mortgages and loans to finance construction-and-development projects sank a bank in the St Louis area. A loss-sharing arrangement made the deal more attractive for the winning bidder.
Last week’s only bank failure was 24-year-old Truman Bank.
The Missouri Division of Finance seized the Clayton, Mo., bank, Friday after management failed to obtain additional capital and the board of directors voted to turn the 56-employee company over to the state.
“The demise of this bank is the result of aggressive, imprudent lending decisions made by prior management,” Missouri Commissioner of the Division of Finance Richard J. Weaver said in a statement. “Many of these loans were in high-risk commercial real estate and development projects that proved uncollectible. The bank has operated under close regulatory scrutiny since 2008.”
In April, Truman Bank was hit with a prompt corrective action by the Federal Reserve Board of Governors.
The Federal Deposit Insurance Corp., which was named receiver of the financial institution, awarded the winning bid for the failed bank to Simmons First National Bank.
Simmons picked up all of Truman Bank’s $282 million in total assets including $54 million in residential one-to-four unit loans, $91 million in commercial real estate loans and $31 million in construction-and-land-development loans.
Simmons also assumed all of Truman Bank’s $246 million in total deposits.
Factoring in a $118 million loss-sharing agreement, the FDIC projected that losses to the Deposit Insurance Fund from last week’s single bank failure will reach $34 million.
Truman Bank was the 42nd federally insured bank to fail so far during 2012 and the 68th mortgage-related business to close so far this year as tracked by Mortgage Daily.
