What Made Six More Banks Fail

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 |  Includes: IAT, KRE, RKH
by: Christopher Menkin


The 125th FDIC-insured institution to fail in the nation this year, and the first in Wisconsin, Maritime Savings Bank, West Allis was closed with North Shore Bank, FSB, Brookfield, Wisconsin. The bank had nine branches and had gone from 89 full time employees June 30, 2009 to 66 full time employees. It was founded January 1, 1912.

Maritime had eight branches in the Milwaukee area and one branch in the Phoenix, Arizona area, which was seriously caught in the real estate downturn. Most of the non-current loans were reportedly in real estate. Many of the banks were originally regional but extended themselves in other areas such as Arizona and Nevada, for instance, hoping to cash in on the rapid real estate growth.

The Office of Thrift Supervision had issued a warning to the bank November 3, 2009 that it was "Significantly Undercapitalized, then on March 20, 2010 a "Prompt Corrective Action Directive" with capital restoration by " Merger, Acquisition, or Sale" and other requirements to be made prior to June 30, 2010.

Net equity dropped almost two/thirds, going from $29.6 million in June 30, 2009 to $9.4 million June 30, 2010; non-current loans $35.3 million with the bank losing $3.4 million June 30, 2009 and losing $2.9 million June 30, 2010, after a charge off of $1.75 million in commercial and industrial loans, $402,000 in real estate loans. Tier 1 risk-based capital ratio was 3.24%.

As of June 30, 2010, Maritime Savings Bank had approximately $350.5 million in total assets and $248.1 million in total deposits.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $83.6 million

The night they drove old Dixie down happened last week as the fourteenth bank to fail this year in Georgia was The Peoples Bank, Winder, which was closed. Community & Southern Bank of Carrollton, Georgia acquired the banking operations, including all the deposits. The Peoples Bank had total assets of $447.2 million and total deposits of $398.2 million. It had 15 branches with 146 full time employees.

Winder is a city in Barrow County, Georgia, United States. The population was 10,201 at the 2000 census.


Downtown Winder
(Photo: Wikipedia)

The bank was founded in 1926 by a group of local business leaders and survived the Great Depression, which reportedly claimed four rival Barrow County lenders. It also got into Arizona real estate problems.

AJC.com (The Atlanta Journal-Constitution) reports:

Peoples Bank was a sleepy rural lender for much of its history. But Atlanta’s rapid suburban push and the housing boom helped the bank nearly quadruple in size to $520.7 million in assets by the end of 2008.

In addition to its bet on local real estate, Peoples Bank was the lead lender on Merrill Ranch, a $100 million, 5,600-acre development in the Arizona desert outside Phoenix. The loan, which was too big for Peoples Bank alone, was marketed by Silverton Bank to more than 60 other community banks, including many from Georgia.

Spearheaded by Atlanta Developer W. Harrison Merrill, Merrill Ranch collapsed when the housing market went under, and the land was sold off in two large chunks for $36 million, resulting in heavy losses for the banks.

The net equity had dropped from $29.7 million to $6.7 million with $19.5 million in non-current loans. The bank had lost $8.1 million the previous period, and $11.4 million June 30, 2010, following charge offs of $2.7 million in property secured by nonfarm nonresidential property, $2.6 million in construction and land development, and almost $1 million in property secured by 1-4 family residential properties. Tier 1 risk-based capital ratio 1.71%

Community & Southern Bank will pay the FDIC a premium of 1.0 percent to acquire all of the deposits of the Bank of Ellijay and First Commerce Community Bank. They also will pay the FDIC a premium of 1.25 percent to acquire all of the deposits of The Peoples Bank. Besides assuming all the deposits from the three Georgia institutions, Community & Southern Bank will purchase virtually all the failed banks’ assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for The Peoples Bank will be $98.9 million. Not the Tier 1 for the three Georgia Banks: .066%, 1.71% and 1.8%. For the three banks that Community & Southern Bank purchased the total loss for the FDIC will be $225.5 million.

The Bank of Ellijay, Ellijay, Georgia, and Bank of Canton, Canton, Georgia, (a division of Bank of Ellijay) were closed with Community & Southern Bank, Carrollton, Georgia acquiring the banking operations, including all the deposits. The bank had 27 full time employees.

Located 80 miles north of Atlanta and 65 miles south of Chattanooga, it is considered the Apple Capital of Georgia and growth area for wineries, which brought tourism to the area. It is reported there was a gold rush in 1842 and visitors can still find gold nuggets in the streams. Expansion was to vacation homes and condo rentals and the bank got caught in the dramatic downturn, creating one of the worst Tier 1 ratios of recent bank failures: 0.66%.

As of June 30, 2010, Bank of Ellijay had total assets of $168.8 million and total deposits of $160.7 million. Its net equity had dropped considerably, from $12.8 million June 30, 2009 to $945,000 June 30, 2010, as well as non-current loans in June 30, 2009 at $6.4 million to $38.4 million. The bank last reported $2.6 million the previous period and $7.1 million in June 30, 2010.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for Bank of Ellijay will be $55.2 million.

The two branches of First Commerce Community Bank, Douglasville, Georgia, were closed with Community & Southern Bank of Carrollton, Georgia acquiring the banking operations, including all the deposits. As many other banks that failed, the problem again was construction and land development.

First Commerce Community Bank had total assets of $248.2 as of June 30, 2010. Employee count had dropped from 34 full time employees to 28 full time employees on June 10, 2010. In the same time period, net equity in the bank went from $22.6 million to $3.9 million with $35.1 million in non-current loans. The bank had lost $1.6 million the year before and in June 30, 2010 it had lost almost $11.3 million, following a charge of $5 million in land construction and development. Tier 1 risk-based capital ratio was at 1.80%.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for First Commerce Community Bank will be $71.4 million.

Bramble Savings Bank, Milford, Ohio, was closed with Foundation Bank, Cincinnati, Ohio, to assume all of the deposits. Located at 954 State Route 28 the bank had 10 full time employees. The Bank had not turned a profit since 2006.

Milford was developing into a suburb of nearby Cincinnati; many of its residents work in the city of Cincinnati or its other suburbs. The bank tried to expand as did the city, but also ran into land development and construction problems.

In August, Bramble had announced a plan to convert from a mutual form of ownership in which depositors control it, to stock ownership. There were no takers and on June 30, 2010 figures were released showing bank equity had dropped from $2.8 million June 30,2009 to $468,000 as ofJune 30, 2010. Non-current loans increased from $1.3 million to $3 million during the same time period, with a loss of $688,000 as of June 30, 2009 and a loss of $1.2 million as of June 30, 2010. Tier 1 risk-based capital ratio 1.21%.

As of June 30, 2010, Bramble Savings Bank had approximately $47.5 million in total assets and $41.6 million in total deposits.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $14.6 million.

The nine year old ISN Bank, Cherry Hill, New Jersey was closed with New Century Bank (doing business as Customers Bank), Phoenixville, Pennsylvania, ready to assume all of the deposits. Customers Bank will have 16 branch locations after completing this deal and its recently announced acquisition of Berkshire Bank. Again, land construction and development was the bank's downfall.

The sole branch of ISN Bank was located on 457 Haddonfield Road, Liberty View Building. The bank had dropped from 15 full time employees to 10 on June 30, 2010. Net equity had gone from $4 million to $1.5 million, with $19.9 million in non-current loans; The bank had gone from a loss of $836,000 in June 30, 2010 to a loss of $1.4 million following almost $2.6 million of charge offs in construction and land development and $1.4 million in loans secured by nonfarm nonresidential property. Tier 1 risk-based capital ratio was at 2.26%. As of June 30, 2010, ISN Bank had approximately $81.6 million in total assets and $79.7 million in total deposits.

The FDIC and New Century Bank entered into a loss-share transaction on approximately $64.8 million of ISN Bank's assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be approximately $23.9 million.

List of Bank Failures here

Bank Beat here

Disclosure: No position