Friday, July 23, 2010

Bank Failure #103: Home Valley Bank of Grant Pass OR closes

Friday, July 23, 2010, 6:40pm PDT

Portland Business Journal - by Andy Giegerich Business Journal staff writer

The Oregon Department of Consumer and Business Services has closed Home Valley Bank of Grant Pass.

All deposit accounts — including those that exceeded Federal Deposit Insurance Corp.’s $250,000 limit — have been transferred to South Valley Bank & Trust of Klamath Falls.

Home Valley becomes the fourth Oregon bank to fail since the start of 2009 and the second to close this year. The Oregon Department of Consumer and Business Services and the Federal Reserve Bank of San Francisco issued a cease-and-desist order against Home Valley for unsafe and unsound banking practices in November of last year.

South Valley will take over Home Valley’s five branches when they reopen Monday and has also acquired the failed institution’s loans.

“Home Valley Bank was an important part of the Grants Pass community, and we are saddened to see it close,” said Cory Streisinger, director of the Department of Consumer and Business Services, in a statement. “However, it is fortunate that South Valley Bank & Trust is acquiring Home Valley to continue to serve the area. Customers should see no disruption.”

Customers of Home Valley can continue to access their money by writing checks or using ATM or debit cards, according to the FDIC, and loan customers should continue to make their payments as usual.

Home Valley Bank was founded in 1980. As of March 31, Home Valley had total assets of approximately $258 million and total deposits of $229 million.

South Valley Bank & Trust has total assets of about $600 million and total deposits of $500 million. Before the move, South Valley Bank & Trust had 18 offices, with locations in Klamath Falls, Lakeview, Central Oregon, and the Rogue Valley.

The FDIC and South Valley Bank & Trust entered into a loss-share transaction on $211.6 million of Home Valley Bank’s assets. South Valley Bank & Trust will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction would “maximize returns on the assets covered by keeping them in the private sector,” according to the FDIC.

Oregon regulators noted that declining real estate values and general economic weakness continue to pose problems for all banks. Home Valley’s capital levels had dropped so low that the bank became insolvent, said David Tatman, administrator of the department’s Division of Finance and Corporate Securities. Tatman blamed the failure on Home Valley’s heavy dependence on construction project loans.

“Despite efforts by the Home Valley Bank management to turn things around, the bank was not able to recover in this current economic environment,” Tatman said in a statement.

Tatman added that nonperforming real estate loans have particularly taxed Oregon’s banks. Many lenders provided money to construction project developers who have been unable to make payments during the economic downturn.

Home Valley is the 103rd FDIC-insured institution to fail this year and one of seven banks to close today. The others included Sterling Bank of Lantana, Fla., Crescent Bank and Trust Company of Jasper, Ga., Williamsburg First National Bank of Kingstree, S.C., Thunder Bank of Sylvan Grove, Kan., Community Security Bank of New Prague, Minn. and Las Vegas-based SouthwestUSA Bank.

The FDIC expects its insurance fund to pay out around $60 billion for bank failures between 2010 and 2014.

Before the failures of Community First Bank of Prineville, and Silver Falls and Pinnacle banks last year, no Oregon lender had failed for 17 years.

Illinois has experienced the most bank failures since Jan. 1, 2009, with 33 institutions going under. Georgia and Florida are next with 29 and 26, respectively.

Pennsylvania, the country’s sixth-largest state, has had just one bank close in the last 17 months. | 503-219-3419