Bluefield Daily Telegraph, Bluefield, WV

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September 20, 2008

FDIC: Ameribank customers shouldn’t feel failure

By Bill Archer

NORTHFORK — The federal Office of Thrift Supervision closed McDowell County-based Ameribank Friday evening, ending months of local speculation that the bank was on the brink of closing.

Ameribank made national headlines in September of 1999 when it acquired $135 million of the insured assets of the failed First National Bank of Keystone from the Federal Deposit Insurance Corporation. The OTS appointed the FDIC to serve as receiver of Ameribank’s $114.9 million in assets. An FDIC spokesman said Ameribank was “critically undercapitalized,” prompting the closure.

The OTS formally closed Ameribank at 7:15 p.m., Friday evening, but by that time, the FDIC had already identified two financial institutions to take over the deposit accounts of the bank. Citizens Savings Bank in Martins Ferry, Ohio acquired the deposit accounts of Ameribank’s three branches located in Ohio and reopened those branches Saturday morning at regular business hours. Iaeger-based Pioneer Community Bank Inc., acquired the deposit accounts of Ameribank’s five West Virginia branches and will reopen all of them for regular banking hours on Monday.

“Customers should look on this as a simple merger,” David Barr, spokesman for the FDIC said. “Customers shouldn’t notice much of a difference. It should be a seamless transition.”

While the OTS did not make a public comment concerning Ameribank prior to its closing, Barr said on Saturday that the bank’s business line was rehabilitation loans. “That business grew rapidly for them, but it didn’t pan out for them in the long run.”

Barr said that most of Ameribank’s rehab loans were in Florida, Louisiana and Ohio where customers were re-building homes and businesses hit by natural disasters like hurricanes and floods. Citizens and Pioneer acquired approximately $23 million of Ameribank’s assets. Barr said the FDIC projects the losses to its insurance fund from Ameribank’s failure to be about $42 million.

“A lot of those loans were from partially-restored homes and businesses that just don’t have much value when you try to sell them,” he said. “The type of loans Ameribank was making grew quickly, but that business just didn’t pan out.”

This marks the 12th U.S. bank failure so far this year, only slightly ahead of the average number of banks that close annually, and nowhere near the 534 bank failures in 1989 during the height of the savings and loan crisis. Barr said that only three banks failed in the U.S. in 2007, and that no banks failed from June of 2004 to February of 2007.

“A lot the bank failures we’ve had over the last two years were tied to banks that made loans to commercial developers,” Barr said. “Because of the larger economic challenges taking place, the builders just couldn’t repay their loans. This one (Ameribank) is mainly tied to rehabilitation loans — people borrowing money to fix their homes or their businesses.”

Barr said that Citizens and Pioneer “took all deposits regardless of the dollar amounts,” and said that the federal auditors view the present situation as a merger. “Banks merge. Cell phone companies merge. Many businesses merge,” Barr said. “The branches that Pioneer acquired will be open for business on Monday and people will be able to write checks, use an ATM machine or their debit cards.”

Barr was in McDowell County on Sept. 1, 1999, when the Office of the Comptroller of the Currency declared FNB Keystone insolvent and closed the bank. “Keystone was an oddity because of the fraud and the fact that we closed quickly and during the week,” Barr said. “Customers should look at this as simply a merger.”

“For a community, it’s not good to have a bank fail, but in this situation, you are taking a troubled institution out of the community and replacing it with a solid institution,” Barr said. “All the depositors are protected.”

Anyone with questions about the developments related to Ameribank, Pioneer or Citizens Saving Bank can call the FDIC call center at 1-877-894-4710 today from 8-5 p.m., and thereafter from 8 a.m., to 6 p.m. All ATM machines and on-line services are operational, interest will be paid at the same rate through Friday, and the acquiring banks will discuss any changes with customers. Loan customers should continue making their loan payments.

Barr said the FDIC has already started its review process of Ameribank’s operations and will continue that for the next few months. “As a receiver, we want to find out why the bank failed,” he said.

— Contact Bill Archer at barcher@bdtonline.com

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