Four Banks--One Large, three small fail---why?

The 17 branches of Waccamaw Bank, Whiteville, North Carolina, were closed with First Community Bank, Bluefield, Virginia, to assume all of the deposits of Waccamaw Bank. Founded in September 2, 1997 the bank had 124 full time employees as of March 31, 2012 in North Carolina with 2 offices in Shallotte and Southport, and one in Chadbourn, Elizabethtown, Oak Island, Ocean Isle Beach, Supply, Tabor City, and Whiteville plus five offices in South Carolina, two in Conway, one each in Heath Springs, Little River, and Myrtle Beach. December 31, 2007 the bank had 207 full time employees.

The demise of this bank is no surprises as many cease and desist and “prompt action” notices have been issued as the bank is less than five years had cut full time employees in half, but it did not stop the losses starting in 2009 that drove the 2007 equity of $42.1 million to $3.2 million by March 31, 2012, where the Tier 1 risk-based capital ratio 1.24%.

The bank is the third in this specific area of North Carolina to fail in the economy turndown, followed by Pawleys Island-based Plantation Federal in April and Myrtle Beach based Beach First National in April, 2010. Certainly construction and land development as well as nonfarm nonresidential loans took the bank down. Once listed on NASDAQ, the investors lost everything. Another example of the real estate boom—bust!

A dispute developed over capital raised on a loan to sell $16 million of stock as the Fed believe Waccamaw overpaid for the loans, saying the bank was basically “funding their own capital,” but finally allowed $8.4 million to be counted in Tier 1 regulatory capital.

http://www.starnewsonline.com/article/20120209/articles/120209651

Then the bank had hoped to sell 11 of its branches to First Bank, Troy, North Carolina, October, 2011, but both state and federal regulators did not approve the sale, according to Bank president CEO Geoffrey R. Hopkins.

http://wilmingtonbiz.com/industry_news_details.php?id=3214

Hopkins had been president of the bank since January, 2003.

http://www.linkedin.com/pub/geoffrey-hopkins/45/438/2b7

Despite the controversy of the capital, the hoopla of selling off 11 branches, and the extreme measures of cutting staff, and operational expense cuts, the fact is the bank continued to have losses: 2009: $13.7 million, 2010: $14.8 million, 2011: $21 million, and the first three months of this year: $3.5 million. Despite infusion of capital and operation cuts, you can’t have the losses this bank continued to have and stay in business.

(in millions, unless otherwise)

Net Equity
2006 $38.4
2007 $42.1
2008 $40.0
2009 $29.7
2010 $26.9
2011 $6.8
3/31 $3.2

Profit
2006 $4.2
2007 $4.4
2008 -$1.4
2009 -$13.7
2010 -$14.8
2011 -$21.0
3/31 -$3.5

Non-Current Loans
2006 $1.5
2007 $4.1
2008 $17.0
2009 $22.8
2010 $42.7
2011 $42.2
3/31 $41.2

Charge Offs
2006 $548,000 ($500, 000 Commercial/Industrial, $45,000 1-4 family, $3, individuals)
2007 -$114,000 ($179,000 individual, -$294,000 construction/land)
2008 $1.2 ($492,000 construction/land, $277,000 commercial, $200,000 nonfarm, $50,000 indiv.)
2009 $13.6 ($6.8 construction/land, $2 nonfarm/nonres.,$1.8 commercial, $1.6 multifamily, $909,000 1-4 family, $208,000 other, $155 individual)
2010 $6.8 ($4.1 construction/land, $750,000 nonfarm nonres., $566,000 multifamily, $322,000 commercial, $108, consumer)
2011 $15.0 ( $10.1 construction/land, $1.9 commercial, $1.5 multifamily, $1.3 1-4 family, $756,000 nonfarm, $233,000 individuals) 3/31 $2.8 ($1.3 construction/land, $812,000 nonfarm nonres.,$638,000 1-4 family, $6,000 individuals, $4,000 commercial)

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

As of March 31, 2012, Waccamaw Bank had approximately $533.1 million in total assets and $472.7 million in total deposits. In addition to assuming all of the deposits of the failed bank, First Community Bank agreed to purchase approximately $515.3 million of the failed bank’s assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and First Community Bank entered into a loss-share transaction on $330.6 million of Waccamaw Bank’s assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $51.1 million.

http://www.fdic.gov/news/news/press/2012/pr12067.html

First Capital Bank, Kingfisher, Oklahoma, was closed with F & M Bank, Edmond, Oklahoma, to assume all of the deposits. This small bank was established January 1, 1902 and as of March 31, 2012 had 15 full time employees. December 31, 2007 they had 41 full time employees.

Many of the bank failures are relatively new banks. According to problembanklist.com, First Capital Bank, originally founded in 1902 as Guthrie Savings Bank, provided banking services to its customers at a time when Oklahoma was not yet a state and Guthrie was the capital of the Oklahoma Territory.

1926

The bank when it folded:

March 31, 2012: Tier 1 risk-based capital ratio 2.73%

Jeff Johnson, President, First Capital Bank, Kingfisher

Jeff Johnson, president was president-elect of the Horizon Banks, the leadership group of the Community Bankers Association of Oklahoma, and president of the Oklahoma Community Institute. In the January 6, 2011 community Times he delivered the following message:

“At OCI, it is our mission ‘to be a catalyst that enables and encourages Oklahoma citizens to improve their communities.” And at the root of this statement is the overriding necessity for Oklahomans’ to PLAN for the improvement of their communities.

“Translated into juicy nuggets of wisdom, I believe that the root of OCI’s mission can be summarized in the following ways:

1. “He who fails to plan, plans to fail.”
2. “It pays to plan ahead. After all, it wasn’t raining when Noah built the ark.”
3. “If you’re not at the table, chances are you’re probably on the menu.”
4. “A good plan today is better than a perfect plan tomorrow.”

“Does your community have a plan? If not, please re-read quote #1.”

“Do you see nothing but clear skies ahead for your community? If so, re-read quote #2.”

“Is your community leadership content with the status quo? If so, re-read quote #3”

“Are you afraid that you don’t have the resources necessary to put together an adequate plan for your community? If so, please re-read quote #4…and then call OCI!” and he signed his name to this, too.

http://leasingnews.org/PDF/communitytimesfeb.pdf

Without seeing the actual loans, it is difficult to relate the message above with the bank failures, particularly in commercial and industrial charge offs, particularly knowing the 2011 year-end showed a $11.2 million loss for this small bank going from a $11.1 million equity in 2009 to $1 million by March 31, 2012, with non-current loans $21.2 million 2010; $11.2 million 2011; three months in 2012 $8.2 million.

(in millions, unless otherwise)

Net Equity
2006 $6.5
2007 $9.0
2008 $9.3
2009 $11.1
2010 $8.6
2011 $1.6
3/31 $1.0

Profit
2006 $517,000
2007 $1.5
2008 $2.7
2009 $1.1
2010 -$905,000
2011 -$7.0
3/31 -$573,000

Non-Current Loans
2006 $2.6
2007 $2.9
2008 $3.6
2009 $5.6
2010 $21.2
2011 $11.2
3/31 $8.2

Charge Offs
2006 $1.4 ($1.1 commercial and industrial loans, $211,000 other loans, $1-4 family, $28,000, etc.)
2007 $291,000 ($210,000 other loans, $87,000 consumer loans, -$6,000 commercial)
2008 $923,000 ($732,000 commercial/industrial, $56,000 1-4 family, $71,000 other loans, $43,000
indiv.)
2009 $1.7 ($805,000 commercial/industrial, $544,000 nonfarm nonind., $353,000 farmland, $31,000 consum.)
2010 $2.1 ($822,000 1-4 family, $564,000 commercial industrial, $385,000 farmland, $327,000 nonfarm nonres., -$253,000 other loans)
2011 $7.3 ($6.4 commercial industrial, $920,000 farmland, $46,000 1-4 family, $19,000 indiv.)
3/31 -$39,000 (-$35,000 1-4 family, -$12,000 commercial industrial, $8,000 loans to indiv.)

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

As of March 31, 2012, First Capital Bank had approximately $46.1 million in total assets and $44.8 million in total deposits. F & M Bank will pay the FDIC a premium of 7.65 percent to assume all of the deposits of First Capital Bank. In addition to assuming all of the deposits of the failed bank, F & M Bank agreed to purchase approximately $40.7 million of the failed bank’s assets. The FDIC will retain the remaining assets for later disposition.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $5.6 million

http://www.fdic.gov/news/news/press/2012/pr12064.html

The two branches of Carolina Federal Savings Bank, Charleston, South Carolina were closed with Bank of North Carolina, Thomasville, North Carolina, to assume all of the deposits. Founded August 22, 1960, there were 16 full time employees March 31, 2012 at their offices in Charleston and Mount Pleasant. In 2006, they had 31 full-time employees.

Certainly property values as well as both 1st and 2nd mortgage charge offs played a major roll in this banks value. Net equity went from $6.2 million to $1.1 million by year-end 2012, as well as the bank lost $2.5 million the same year end as non-current loans remained high in March 31, 2012 at $7.3 million

In six years they cut full time employees almost in half to 16 by March 31, 2012 as well as trying to collect loans as well as handling charge offs.

Tier 1 risk-based capital ratio 2.80%.

(in millions, unless otherwise)

Net Equity
2006 $6.2
2007 $5.8
2008 $5.6
2009 $4.7
2010 $3.5
2011 $1.1
3/31 $1.1

Profit
2006 $3,000
2007 -$343,000
2008 -$243,000
2009 -$931,000
2010 -$1.1
2011 -$2.5
3/31 $30,000

Non-Current Loans
2006 $1.2
2007 $732,000
2008 $1.4
2009 $5.3
2010 $9.2
2011 $7.3
3/31 $7.3

Charge Offs
2006 $159,000 ($151,000 1-4 family residential properties, $18,000 loans to individuals, $1,000 commercial)
2007 $184,000 ($148,000 1-4 family, $36,000 loans to individuals)
2008 $18,000 ($14,000 loans to individuals, $4,000 commercial and industrial)
2009 $17,000 ($15,000 individuals, $4,000 construction/dev, -$2,000 1-4 family)
2010 $989,000 ($877,000 1-4 family, $64,000 construction, $35,000 commercial, $13,000 consumer)
2011 $1.8 ($1.3 1-4 family homes, $75,000 nonfarm nonrs., $40,000 commerce, $13,000 multifamily, $12,000 consumer
3/31 $12,000 ($14,000 1-4 family homes, -$1,000 commercial, -$1,000 consumer)

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

As of March 31, 2012, Carolina Federal Savings Bank had approximately $54.4 million in total assets and $53.1 million in total deposits. In addition to assuming all of the deposits of the failed bank, Bank of North Carolina agreed to purchase approximately $41.0 million of the assets. The FDIC will retain the remaining assets for later disposition.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $15.2 million.

http://www.fdic.gov/news/news/press/2012/pr12065.html

The two branches of Farmers’ and Traders’ State Bank, Shabbona, Illinois were closed with First State Bank, Mendota, Illinois, to assume all of the deposits. Founded August 5, 1905 as of March 31, 2012 they had 12 full time employees at their offices in Shabbona and Waterman.

Shabbona is a village, which “…takes its name from the Potawatomi chief and peacemaker Shabbona. Chief Shabbona traveled through the Fox Valley warning the white people about the approaching war Black Hawk was going to wage. He was hailed as the “Whiteman’s Friend”. When Shabbona was in Kansas visiting relatives, his land was appropriated. 2000 census shows 929 people.”

http://en.wikipedia.org/wiki/Shabbona,_Illinois

Lake Shabbona is nearby with reported great bass fishing.

Chicago is to the East, a one hour twenty minute drive and Springfield to the south, almost a three hour drive, according to Google.

Records shows there has not be much single family homes built, as well as home sales have been down.

http://www.city-data.com/city/Shabbona-Illinois.html

It is difficult to understand why this long time bank has so many construction and land development loan charge offs, especially in the big hit in 2011. There is certainly more to the story of this bank’s demise.

Charge Offs
2006 -$4,000 (-$3,000 commercial/industrial, -$1,000 individual)
2007 $35,000 ($20,000 individuals, $15,000 commercial/industrial)
2008 $16,000 ($16,000 individuals)
2009 $110,000 ($100,000 construction/land development, $10,000 individuals)
2010 $55,000 ($29,000 commercial and industrial loans, $26,000 individuals)
2011 $1.6 ($1.1 construction/land, $413,000 commercial/industrial, $31,000 individuals)
3/31 $1.3 ($629,000 construction/land, $634,000 other loans, $297,000 1-4 family, $14,000 individual, $12,000 commercial/industrial)

Tier 1 risk-based capital ratio 2.38%

(in millions, unless otherwise)

Net Equity
2006 $4.7
2007 $4.9
2008 $5.0
2009 $4.9
2010 $5.2
2011 $1.3
3/31 $577,000amaw Ban

Profit
2006 $32,000
2007 -$197,000
2008 $35,000
2009 -$196,000
2010 $576,000
2011 -$1.3
3/31 -$782,000

Non-Current Loans
2006 $45,000
2007 0
2008 $9,000
2009 $1.3
2010 $1.2
2011 $7.7
3/31 $7.7

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

As of March 31, 2012, Farmers and Traders State Bank had approximately $43.1 million in total assets and $42.3 million in total deposits. In addition to assuming all of the deposits, First State Bank agreed to purchase essentially all of the failed bank’s assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $8.9 million.

http://www.fdic.gov/news/news/press/2012/pr12066.htm

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