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Christopher "Kit" Menkin is of editor LeasingNews.org (http://www.leasingnews.org/), an internet trade publication for the finance/leasing industry. He has 41 years experience in the finance/leasing industry as well as being a founder of a commercial regional bank and serving on... More
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  • Bank Failures---Three, Four, Five By State---Why They Failed 0 comments
    Jun 18, 2012 3:08 PM

    The Third Bank to Fail in Tennessee 2012

    The four branches of The Farmers Bank of Lynchburg, Lynchburg, Tennessee were closed with Clayton Bank and Trust, Knoxville, Tennessee, to assume all of the deposits.

    This is a long time bank, founded April 25, 1888 and as of March 31, 2012 had 32 full time employees. It first branch was Oakland in 1905, second in Chapel Hill, 1931 then Somerville in 2001 and Tullahoma in 2003. There were 32 full time employees as of March 31, 2012. Year-end 2010 there were 39 full time employees

    Structure change September, 29, 2009 as Oakland Deposit Bank merged and became The Oakland Deposit Bank, a division of The Farmers Bank of Lynchburg. The filing shows they brought equity capital of $12.5 million as wells as noncurrent loans of $6.6 million.

    By the end of the year the total Farmers Bank equity had jumped to $26.5 million, as well as non-current loans to $7.8 million.
    www.bankencyclopedia.com/Oakland-Deposit...

    Oakland office

    Lynchburg office

    There obviously was a change in direction of the bank as the bank was heavy into being mortgage lenders as well as internet banking, and a second branch in Oakland, making three offices. Unfortunately the bank non-current loans increased, profits decreased, and then in 2010 the charge offs hit

    Tier 1 risk-based capital ratio 3.53%

    (in millions, unless otherwise)

    Profit
    2006 $372,000
    2007 $331,000
    2008 $513,000
    2009 -$1.9
    2010 -$6.6
    2011 -$14.8
    3/31 -$131,000

    Non-Current Loans
    2006 $51,000
    2007 $98,000
    2008 $13,000
    2009 $7.8
    2010 $2.5
    2011 $8.8
    3/31 $7.8

    Net Equity
    2006 $7.4
    2007 $7.8
    2008 $7.5
    2009 $26.5
    2010 $21.3
    2011 $6.9
    3/31 $6.7

    Charge Offs
    2006 -$34,000 ($-50,000 1-4 family, $16,000)
    2007 -$13,000 ($-9,000 consumer, -$4,000 1-4 family homes)
    2008 $15,000 ($15,000 1-4 family homes, $1,000 commercial industrial, -$1,000 individual)
    2009 $87,000 ($62,000 other loans, $32,000 1-4 family homes, $1,000 indiv., -$8,000 commercial)
    2010 $3.9 ($1.3 1-4 family, $83,000 individuals, $685, commercial/industrial, $560,000 construction/land, $296,000 farm land) 2011 $5.1 ($1.8 commercial/industrial, $1.2 nonfarm nonres., $1.1 individuals, $72,000 auto, $22,000 credit cards)
    3/31 $261,000 ($147,000 construction loans, other loans $109,000, $112,000 nonfarm nonres, $35,000 1-4 family)

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

    Tier 1 risk-based capital ratio 3.53%

    As of March 31, 2012, The Farmers Bank of Lynchburg had approximately $163.9 million in total assets and $156.4 million in total deposits. Clayton Bank and Trust will pay the FDIC a premium of 0.10 percent to assume all of the deposits of The Farmers Bank of Lynchburg. In addition to assuming all of the deposits of the failed bank, Clayton Bank and Trust agreed to purchase essentially all of the assets.

    The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $28.3 million.

    www.fdic.gov/news/news/press/2012/pr1207...

    The Fourth Bank to Fail in Florida 2012

    The three branches of Putnam State Bank, Palatka, Florida were closed with Harbor Community Bank, Indiantown, Florida, to assume all of the deposits. Founded on December 29, 1988, the bank had 42 full time employees as of March 31, 2012 at its two offices in St. Augustine and one in Palatka. Year-end 2006 they had 52 full time employees.

    Many insider loans to board member friends and relatives in this small town with a 2000 population census of 10,730, the county seat of Putnam County, population 73,250, located on the banks of St. Johns River (perhaps best known for the St. Johns River Blues Festival and wide mouth bass fishing.
    www.youtube.com/watch?v=2slKa61Vx28

    Putnam State Bank was caught in the bubble, with a board of directors who may have been well-connected in the community, but evidently knew very little about banking and risk in lending money. Look at the noncurrent loans:

    (in millions unless otherwise note)

    Non-Current Loans
    2006 $604,000
    2007 $2.1
    2008 $9.1
    2009 $16.0
    2010 $19.4
    2011 $16.9
    3/31 $19.9

    Palatka Mayor Vernon Meyers retired from Putnam State Bank in 2006 after serving as president, chief Executive Officer, and Director for sixteen years. He and his wife now own and operate the Dunkin Doughnuts/Baskin Robbins, and Myers Resources L.L.C., a business and financial services firm. Perhaps he got out just in time, or saw what was coming as he was in the cat bird seat to understand the loans granted.

    The bank had two consent and desist order, June and September, 2010 and went into action raising money, as well as changing seats of several on the board of directors. They new group raised seven million capital in 2010 but disappeared in the two years of losses. They also replaced five board members, including the chairman. five in 2010, a roofing contractor in 2011, among them a excavation company president, a fruit and vegetable farmer, dentist, an Endodontist, a gynecologist, , while the credentials looked good, the new chairman retired in 1992 as Senior Vice President of Georgia Pacific Corporation, yes, with a lot of bank board experience, but was back at it, perhaps 85 years old:


    Chairman Daniel Martinez

    What did they know about banking? Or perhaps they were brought on board to raise more capital---an impossible job with the high noncurrent loans, losses, and also see these foreclosures; note many are listed for sale under $50,000:
    www.bankforeclosuressale.com/list/fl/put...

    Note all the numbers, the declining net equity from $16.2 million in 2007, and the $7 million infusion brought the net equity to $6.5 million and finally March 31, 2012: $189,000. The bank had not made a profit since 2009, and the charge offs were primarily in construction and land development, a reflection of the board of director's occupations with March 31, 2012 a $19.9 non-current loan resulting in a Tier 1 risk-based capital ratio 0.18%.

    Putnam Bank Board of Directors:
    http://www.putnamstatebank.com/aboutus_directors.htm
    http://leasingnews.org/PDF/PutnamStateBankDirectors.pdf

    While the FDIC gets criticism for closing banks down too quickly, they also get it from taking too long. Here is an example where they wanted the community to pull together, but with the record losses, the FDIC was lucky to find a suitor to take over the branches to continue to hopefully serve the community.

    (in millions, unless otherwise)

    Net Equity
    2006 $15.0
    2007 $16.2
    2008 $17.0
    2009 $4.4
    2010 $6.5
    2011 $3.5
    3/31 $189,000

    Profit
    2006 $1.5
    2007 $1.5
    2008 $239,000
    2009 -$13.7
    2010 -$5.5
    2011 -$3.7
    3/31 -$3.2

    Non-Current Loans
    2006 $604,000
    2007 $2.1
    2008 $9.1
    2009 $16.0
    2010 $19.4
    2011 $16.9
    3/31 $19.9

    Charge Offs
    2006 $211,000 ($132,000 commercial/industrial, $51,000 individuals, $38,000 farmland)
    2007 $45,000 ($43,000 individual, $1,000 commercial industrial, $1,000 nonfarm nonres.)
    2008 $683,000 ($409, 000 nonfarm nonres., $209,000 construction/land dev. $114,000 individuals)
    2009 $8.0 ($6.2 construction/land development, $891,000 nonfarm nonindiv, $795,000 commercial, $49,000 individuals, $50,000 1-4 family)
    2010 $3.6 ($1.9 construction/land dev., $1.3 nonfarm nonres, $299,000 commercial/ind., $133,000 1-4 family)
    2011 $3.3 ($1.7 construction/land dev., $1 nonfarm nonres, $496,000 commercial, $99,000 1-4 fam.)
    3/31 $1.3 ($741,000 commercial, $452,000 nonfarm nonres., $74,000 1-4 family, $12,000 individuals)

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

    As of March 31, 2012, Putnam State Bank had approximately $169.5 million in total assets and $160.0 million in total deposits. In addition to assuming all of the deposits of the failed bank, Harbor Community Bank agreed to purchase essentially all of the assets.

    The FDIC and Harbor Community Bank entered into a loss-share transaction on $112.3 million of Putnam State Bank's assets. Harbor Community Bank will share in the losses on the asset pools covered under the loss-share agreement.

    The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $37.4 million
    www.fdic.gov/news/news/press/2012/pr1206...

    The Fifth Bank to Fail in Georgia 2012

    The two branches of Security Exchange Bank, Marietta, Georgia were closed with Fidelity Bank, Atlanta, Georgia, to assume all of the deposits. Founded April 17, 2000, the bank had 19 full time employees March 31, 2012 at their two offices in Marietta. Year-end 2007 the bank had 25 full time employees.

    Georgia with its lists of many community banks was perhaps one of the hardest hit states, especially because many of these relatively new banks began to expand in perhaps one of the largest real estate bubbles the United States has experienced, which this bank started to experience in 2007 with the noncurrent loans jumping from $191,000 to $1.5 million and then the charge off and losses in 2008:

    Charge Offs
    (In millions unless stated otherwise)
    2006 $22,000 ($23,000 commercial and industrial, -$1,000 consumer loan)
    2007 $27,000 ($25,000 commercial and industrial, $2,000 loans to individuals)
    2008 $2.0 ($1.1 construction/land, $$574,000 1-4 family, $209,000 commercial, $45,000 individual)
    2009 $4.0 ($2.1 construction/land, $276,000 nonfarm-nonres., $238,000 multifamily, $219,000 commercial, $49,000 individuals)
    2010 $2.7 ($1.5 construciton/land, $991,000 nonfarm-nonres, $50,000 multifamily, $19,000 commercial, $14,000 individual)
    2011 $1.0 ($633,000 construction/land, $334,000 1-4 family, $97,000 nonfarm nonres., $6,000 individuals)
    3/31 $681,000 ($473,000 construction/land, $208,000 nonfarm nonresidential)

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

    (in millions, unless otherwise)

    Non-Current Loans
    2006 $191,000
    2007 $1.5
    2008 $10.9
    2009 $27.6
    2010 $8.5
    2011 $11.8
    3/31 $11.4

    Profit
    2006 $1.0
    2007 $1.5
    2008 -$1.7
    2009 -$6.5
    2010 -$3.0
    2011 -$3.3
    3/31 -$281,000

    Net Equity
    2006 $11.7
    2007 $13.7
    2008 $16.3
    2009 $9.5
    2010 $6.1
    2011 $3.2
    3/31 $2.9

    Tier 1 risk-based capital ratio 2.54%

    As of March 31, 2012, Security Exchange Bank had approximately $151.0 million in total assets and $147.9 million in total deposits. In addition to assuming all of the deposits of the failed bank, Fidelity Bank agreed to purchase essentially all of the assets.

    The FDIC and Fidelity Bank entered into a loss-share transaction on $102.8 million of Security Exchange Bank's assets.

    The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $34.3 million

    www.fdic.gov/news/news/press/2012/pr1207...

    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.

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