Three bank failures last week included a 161-year-old institution with more than $2 billion in assets. In all, losses tied to the closing of the banking trio are expected to exceed a quarter billion dollars.
The Commonwealth of Virginia saw its first state bank failure since 1992. The State Corporation Commission, acting pursuant to Virginia banking law, Section 6.2-913, closed Virginia Business Bank. The Federal Deposit Insurance Corp. was appointed receiver of the five-year old company, as is the case when any federally insured bank fails.
The $96 million in total assets of the Richmond, Va., bank — including $16 million in home loans, $45 million in commercial real estate loans and $6 million in construction-and-land-development loans — were taken over by Xenith Bank. In addition, Xenith assumed the 11-employee bank’s $85 million in deposits.
Virginia Business Bank was hit with a Federal Reserve Board prompt corrective action in January, and it entered a formal agreement with the Fed and the Virginia Bureau of Financial Institutions in August 2009. The FDIC expects its Deposit Insurance Fund to be depleted by $17 million as a result of the bank’s demise.
A little further down the Atlantic Coast, in Columbia, S.C., the Office of the Comptroller of the Currency shut down BankMeridian, N.A. The regulator said that “the bank had experienced substantial dissipation of assets and earnings due to unsafe or unsound practices” that depleted capital and left it “critically undercapitalized” with no prospect of becoming adequately capitalized without help from the federal government.
BankMeridian was founded in 2006, and its staff size stood around 34 at the time it was taken over. On its balance sheet were $53 million in one- to four-family residential loans, $53 million in CRE loans and $52 million in construction-and-development loans. The OCC issued a cease-and-desist order against BankMeridian in September 2010.
BankMeridian’s $240 million in total assets were acquired by SCBT, N.A. The FDIC agreed to share in losses on $179 million of the assets, pushing the cost of the bank failure to $65 million. SCBT also assumed the institution’s $216 million in deposits.
Friday’s final and biggest bank failure was Integra Bank, N.A., which was seized by the OCC, handed over to the FDIC as receiver and acquired by Old National Bank.
“The OCC acted after finding that the bank had experienced substantial dissipation of assets due to unsafe or unsound practices,” a news release stated. “The OCC also found that the bank incurred losses that depleted its capital, and there is no reasonable prospect that the bank will become adequately capitalized without federal assistance.”
Evansville, Ind.-based Integra was founded in 1850. It employed around 516 people at the time it was seized. Its residential holdings were $314 million, while it also owned $495 million in commercial mortgages and $159 million in C&D assets.
In August, the OCC hit the bank with a capital directive, while Integra entered a formal agreement with the Federal Reserve Bank of St. Louis in May 2010 and faced an OCC civil money penalty in May 2009.
In order to induce Old National to purchase Integra’s $2.2 billion in total assets, the FDIC had to enter a loss-sharing agreement on $1.2 billion of its assets. Old National paid a 1 percent premium to assume the failed institution’s $1.9 billion in deposits.
The FDIC projects that losses tied to Integra’s failure will reach $171 million. Integra’s demise brought the number of FDIC-insured banks that have failed so far this year to 61.
Including 17 credit unions and 10 non-banks, Mortgage Daily has tracked the closing or failure of 88 mortgage-related businesses this year.
The FDIC’s Office of Inspector General issued an analysis of the failure of Peninsula Bank. The Englewood, Fla., bank was seized by the Florida Division of Financial Institutions in June 2010. The bank was founded in 1986, had 138 employees and $644 million in assets.
Peninsula’s collapse was attributed to a failure by its board of directors and management to control rapid growth between 2003 and 2006 that led to a high concentration of C&D loans, which totaled around $146 million at the time it was closed. Also considered factors were liberal underwriting practices, lax oversight of the lending function and a reliance on non-core funding sources.