Federal regulators swooped in to shut down the 12th financial institution of the year and the eighth since July 11, seizing a community bank with links to Florida that has been battered by nonperforming residential loans.
Ameribank Inc., a 102-year-old institution with assets of $113 million based in Welch, W.Va., was seized by the Office of Thrift Supervision on the afternoon of September 19.
The Federal Deposit Insurance Corp., which insures individual accounts up to $100,000, has been named receiver to oversee the liquidation of the failed bank and its eight locations.
“The cost of the transactions to the Deposit Insurance Fund is estimated to be $42 million,” according to an FDIC statement.
In preparation for the seizure, federal regulators worked out “purchase and assumption agreements” to sell off Ameribank’s deposits, locations, and other assets to viable suitors.
Pioneer Community Bank, a 77-year-old institution with $66 million in assets based in Iaeger, W.Va., will assume all of Ameribank’s five West Virginia locations along with the accompanying deposits and some assets.
The Citizens Savings Bank, a 106-year-old institution with assets of $426 million in Martins Ferry, Ohio, will assume all of failed institution’s three Ohio locations, along with the deposits and some assets.
“In addition to assuming all of the deposits of Ameribank, Inc., the acquiring institutions will purchase approximately $23 million in assets from the receivership,” according to the FDIC.
Until August, Ameribank had operated in Florida’s Palm Beach County for five years.
Ameribank at one time was attempting to relocate its headquarters from a low-wage mining community of West Virginia to wealthy Palm Beach County.
In 2003, Ameribank opened a branch location on North Military Trail in Palm Beach Gardens to make loans and collect deposits, which reached $14.6 million in June 2007, according to the latest FDIC data for individual locations.
By July 2008, Ameribank’s Palm Beach location plummeted to less than $1 million in deposits.
The dramatic plummet in deposits occurred in the months after federal banking regulators imposed in October 2007 a cease-and-desist order against Ameribank.
Regulators entered into a 16-page order with Ameribank for “unsafe and unsound banking practices” related to a “failure to comply” with lending limitations, real estate lending standards, loan documentation, and credit underwriting, according to the OTS.
Ameribank’s problems in part were due to risky no-money-down residential loans purchased from Lending One, a Boca Raton mortgage broker, according to the Palm Beach Post.
“The no-money-down one-year home mortgage and renovation loans were designed for speculators who wanted to buy fixer-uppers and flip them for sale at a higher price,” according to the Palm Beach Post. “Borrowers paid Lending One a high interest rate of 15 percent, plus three to five points at closing. In a plan developed by Ameribank's former president, Lou Dunham, Ameribank assumed the risk for an 8 percent cut of the interest, buying hundreds of loans in Florida, Louisiana, Ohio and eight other states.”
Once the housing market began to slow, many of the speculators who owed Ameribank simply stopped paying when they couldn’t flip their investments.
Ameribank lost $10.1 million in 2007 after posting a profit of $2.1 million in 2006. In the first half of 2008, Ameribank lost an additional $6.9 million.
Ameribank is the first institution to be closed in West Virginia since First National Bank of Keystone in September 1999.
Prior to the Ameribank’s closure, Silver State Bank in the Las Vegas suburb of Henderson was the last institution to be shut, that occurring on Sept. 5.
Silver State Bank was the second Nevada institution to fail this year. In July, banking regulators shut down the First National Bank of Nevada in Reno, which along with the First Heritage Bank in Newport Beach, Calif., was owned by First National Bank Holding Co. in Scottsdale, Ariz.
For the year, California, Nevada, and Missouri lead the nation in failed institutions with two banks each. Florida, Arkansas, Minnesota, Kansas, Georgia, and of course West Virginia, have each had one institution shuttered this year.
A host of other banks are being closely monitored by industry watchers who anticipate further failures this year, especially in Sun Belt states where the housing crisis has hit hardest.
Before regulators shuttered Ameribank and Silver State Bank, the focus of examiners was on Greater Atlanta-based Integrity Bank, a $1.1 billion in assets institution that was shut on Aug. 29.
Working down the list of failed lenders, regulators seized Columbian Bank and Trust Co., a $752 million in assets institution based in Topeka, Kansas, on Aug. 22.
Three weeks earlier on Aug. 1, regulators shut First Priority Bank of Bradenton, a six branch institution with $261 million in assets located on the state’s west coast. First Priority’s closing marked the first Florida institution to be closed by regulators in more than four years.
On July 11, federal regulators shut down IndyMac Bank, a $32 billion institution based in Pasadena, Calif. The estimate cost of that seizure is between $4 billion and $8 billion, according to the FDIC.
Before IndyMac, regulators seized Minnesota-based First Integrity Bank with $54.7 million in total assets and $50.3 million in total deposits on May 30; Arkansas-based ANB Financial with $2.1 billion in total assets and $1.8 billion in total deposits on May 9; Missouri-based Hume Bank with total assets of $18.7 million and total deposits of $13.6 million on March 7; and Missouri-based Douglas National Bank with $58.5 million in total assets and $53.8 million in total deposits on January 25, according to the FDIC.
Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .
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