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Slowness In Payments And Nonperformance Brings Small Missouri Bank Down

The two branches of Community Bank of the Ozarks, Sunrise Beach, Missouri were closed with Bank of Sullivan, Sullivan, Missouri, to assume all of the deposits.

According to December 10, 2012 report about undercapitalized banks fall to lowest level in 3.5 years, only 51 banks have failed this year compared to 157 in 2010 and 92 in 2011. More importantly 41 banks in the US are undercapitalized? And of those it looks like about 25% of them are somehow increasing their capital. (1)

So we are down to 29 banks now that might fail. And many of these are in the Southwest. This is the fourth bank to fail in Missouri in Missouri this year.

Founded September 1, 1988, Community Bank of the Ozarks had 18 full time employees at the end of September 30, 2012 at their office in Pleasant Hope and Sunrise Beach. The year-end of 2007 had 40 full time employees.

"In the 1920's and early 1930's, Sunrise Beach and surrounding communities consisted of nothing more than vast areas of timber and brush. After the construction of Bagnell Dam by Union Electric, several communities sprang up around the lake, primarily due to the beauty inherent in this area. Sunrise Beach, located on the west side of the lake, was one of those communities, and now offers all the amenities that modern life considers necessary, from recreational facilities (including many resorts and marinas) to medical and real estate offices, and everything in between. Some consider Sunrise Beach to be the single most beautiful community around the lake."
odd.net/ozarks/sunrise/

From the house rentals

http://www.resortsandlodges.com/lodging/usa/missouri/lake-of-the-ozarks/city-sunrise-beach.html

http://www.vacationrentals.com/vacation-rentals/34648.html

184 listings of homes for sale
in nonfarm population are of 384 population

http://www.city-data.com/housing/houses-Sunrise-Beach-Missouri.html

184 residential listings
http://www1.findlakeozarkhomes.com

"The demise of this bank is the result of liberal lending practices compounded by adverse economic trends, "Richard J. Weaver, Commissioner of the Division of Finance for Missouri said. Many of these loans became delinquent and non-performing. Losses have been realized and are more than the bank can support. The bank has operated under close regulatory scrutiny since 2009. The board voted to turn the bank over to the State Division of Finance."

It was an easy vote by the board as the bank had a Tier 1 risk-based capital ratio of 1.86%, had gone from a net equity of $6.4 million in 2007 to $726,000 the end of September 30, 2012 with non-current loans at $5 million, quite high for a bank this size.

The charge offs were not high, so it appears the slowness in payments as a result of the local economy and evidently over exuberance of tourism to be generated by lakefront property and rentals resulted in the bank closure.

(in millions, unless otherwise)

Net Equity
2006 $6.2
2007 $6.4
2008 $5.9
2009 $5.2
2010 $3.5
2011 $2.1
9/31 $726,000

Profit
2006 $366,000
2007 $430,000
2008 -$182,000
2009 -$705,000
2010 -$1.7
2011 -$1.2
9/31 -$1.5

Non-Current Loans
2006 $886,000
2007 $11,000
2008 $1.1
2009 $2.3
2010 $4.4
2011 $3.8
9/31 $5.0

Charge Offs
2006 $211,000 ($235,000 commercial/industrial, $-$24,000
nonfarm/nonres.)
2007 $407,000 ($134,000 commercial/ind.,$109,000 const., $74,000 nonfarm/nonres.,$25,000 1-4 family, $43,000 other, $35,000 consumer)
2008 $287,000 ($195,000 nonfarm/nonres,$66,000 1-4 family, $$28,000 commercial/Industrial)
2009 $297,000 ($150,000 construction/land, $61,000 indiv.,$49,000 1-4 family, $20,000 commercial)
2010 $772,000 ($593,000 construction/land, $130,000 1-4 family, $50,000 commercial/industrial, -$1,000 individuals)
2011 $497,000 ($421,000 nonfarm/nonres., $74,000 1-4 family, $$3,000 indiv.)
9/31 $215,000 ($222,000 farmland,-$5,000 const.,-$10,000 auto,-$2,000 ind.)

Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.

As of September 30, 2012, Community Bank of the Ozarks had approximately $42.8 million in total assets and $41.9 million in total deposits. In addition to assuming all of the deposits of the failed bank, Bank of Sullivan agreed to purchase essentially all of the assets.

The FDIC and Bank of Sullivan entered into a loss-share transaction on $37.3 million of Community Bank of the Ozarks' assets.

www.fdic.gov/news/news/press/2012/pr1214...

(1) Undercapitalized Banks Fall To Lowest Level In 3.5 Years
http://leasingnews.org/archives/Dec2012/12_10.htm#snl

List of Bank Failures:
http://www.fdic.gov/bank/individual/failed/banklist.html

Bank Beat:
http://www.leasingnews.org/Conscious-Top%20Stories/Bank_Beat.htm

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.