Another failed bank is just another opportunity for Tappahannock-based Bank of Essex.
On Saturday, the Bank of Essex assumed operations of Suburban Federal Savings Bank in Crofton Md. after it was seized by federal regulators on Friday.
The Bank of Essex, which is owned by Community Bankers Trust Corporation in Glen Allen, purchased all $312 million of Suburban Federal’s deposits from the FDIC. The bank received a $45 million discount on the purchase. The bank also acquired $348 worth of loans and other assets. Suburban Federal’s seven branches have begun operating under the name Essex Bank.
Gary Simanson, vice-chairman of the Community Bankers Trust said the transition is going smoothly and that the Maryland locations are conducting retail business as usual. Simanson said the bank decided to take on Suburban’s branches because it is a highly desirable market.
“It one of the higher growth markets in the country, has a more stable economy than much of the country, better demographics than much of the country, and it’s close to our other franchises,” Simanson said, “It’s only 80 miles from our home office.”
In November, Bank of Essex assumed $600 million worth of deposits from The Community Bank in Logansville, Ga., after Georgia state regulators shut down the bank and turned its assets over to the FDIC. The failed Georgia bank’s four branches now operate as Essex Bank.
Bank of Essex operates 13 branches in Virginia, also under the names Bank of Powhatan, Bank of Goochland, Bank of Louisa, and Bank of Rockbridge. In the Richmond area, the Bank of Essex has branches in Glen Allen and Mechanicsville. Community Trust Corporations combined banking operations include $1.35 billion in assets, $1.12 billion in deposits, and $800 million in loans. The company also received $18 million in funds from the federal government in December under the Troubled Assets Relief Program.
“Given the uncertain times in the banking industry we felt the TARP funding was prudent in order to strengthen the balance sheet,” Simanson said.
Simanson told the Baltimore Sun that the company plans to retain Suburban Federal’s staff of 60, but also planned to make management changes and additions.
Suburban Federal’s trouble stems from aggressive lending practices that began in 2005. According to the Sun, the bank started requiring less documentation from loan applicants, and also expanded into construction and development loans. Suburban Federal had $33 million in bad loans as of September 30. In November, federal regulators warned the bank that they were “critically undercapitalized” and had to find buyer. The troubled bank could not find a buyer before deadline and was seized.
The Bank of Essex worked out a loss-share agreement with the FDIC to mitigate any future defaults on the loans they acquired from Suburban Federal.
According to the FDIC, the seizure and sale of Suburban Federal will drain $126 million from the Deposit Insurance Fund.