Myrtle Beach, SC - MYRTLE BEACH, SC (WMBF) - The FDIC has taken over a Myrtle Beach bank after it determined the seven-branch bank had failed.
The Federal Deposit Insurance Corp. took over Beach First National Bank, based in Myrtle Beach, with $585.1 million in assets and $516 million in deposits. Bank of North Carolina, based in Thomasville, NC, agreed to assume the assets and deposits of the failed bank.
In addition, the FDIC and Bank of North Carolina agreed to share losses on $497.9 million of Beach First National Bank's loans and other assets.
It was the first failure of an FDIC-insured bank in South Carolina since 1999. The resolution of Beach First is expected to cost the deposit insurance fund $130.3 million.
The seven branches of Beach First National Bank will reopen on Monday as branches of Bank of North Carolina. Beach First customers will automatically become depositors of Bank of North Carolina, and deposits will continue to be insured by the FDIC.
"It will be business as usual," said J. W. Devine of the FDIC. "Employees of the failed institution and Bank of North Carolina are working very closely to ensure minimal disruption to customers."
Beach First, which registered triple-digit percentage increases in profit during the real estate boom, suffered a net loss of $24 million for the first nine months of 2009. Beach First invested heavily in the real estate boom in the coastal area, dotted with oceanfront condominiums and upscale projects, and was hit when the market fell. As its losses mounted, the bank attracted scrutiny from regulators.
"Like a lot of banks nationwide, Beach First got over leveraged in the real estate bubble," said MBACC President/CEO Brad Dean. "Thankfully, the Grand Strand has a lot of healthy, well-run banks, particularly community banks. This shouldn't have a long lasting effect on our local economy."
Beach First signed a consent order in November with the U.S. Office of the Comptroller of the Currency, agreeing to boost its capital reserves. The comptroller's office, a Treasury Department agency, closed the bank Friday and named the FDIC as receiver.
BNC Bancorp, the parent of Bank of North Carolina, will have about $2.2 billion in assets when the acquisition of Beach First's assets and deposits is completed.
"This transaction positions our company for the next stage of its development," BNC Bancorp's president and CEO, W. Swope Montgomery Jr., said in a statement. "We see additional opportunities to serve customers in attractive markets in the Carolinas and beyond, and plan to carefully deploy investor capital in the future to maximize long-term shareholder value while taking care of our customers in our communities."
There were 140 bank failures in the U.S. last year, the highest annual tally since 1992 at the height of the savings and loan crisis. They cost the insurance fund more than $30 billion. Twenty-five banks failed in 2008 and only three succumbed in 2007.
The number of bank failures likely will peak this year and will be slightly higher than in 2009, FDIC Chairman Sheila Bair said recently.
As losses have mounted on loans made for commercial property and development, the growing bank failures have sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, hitting a $20.9 billion deficit as of Dec. 31.
The number of banks on the FDIC's confidential "problem" list jumped to 702 in the fourth quarter from 552 three months earlier, even as the industry squeezed out a small profit. Still, nearly one in every three banks reported a net loss for the latest quarter.
The FDIC expects the cost of resolving failed banks to grow to about $100 billion over the next four years.
The agency mandated last year that banks prepay about $45 billion in premiums, for 2010 through 2012, to replenish the insurance fund.
Depositors' money - insured up to $250,000 per account - is not at risk, with the FDIC backed by the government. Apart from the fund, the FDIC has about $66 billion in cash and securities available in reserve to cover losses at failed banks.
Customers who have questions should call the FDIC toll-free at 866-954-9536 between 8 a.m. and 8 p.m.