Banks do fail, which is exactly what happened today to Miami Valley Bank in Ohio.
The Ohio Superintendent of Financial Institutions and the Federal Deposit Insurance Corp. announced the $86.7 million Miami Valley Bank’s closing and the transfer of its insured deposits to The Citizens Banking Co., of Sandusky, Ohio. TheStreet.com Ratings provided advance notice of Miami Valley Bank’s weak condition, as its rating was downgraded to an E- (very weak financial strength) in June 2007.
Like with last week’s failure of NetBank, formerly a unit of NetBank Inc., the Lakeview, Ohio-based Miami Valley customers with deposits exceeding FDIC insurance limits are on the hook. At the time it was closed down, Miami Valley Bank had about $14 million in uninsured deposits, in 269 accounts.
Folks, no matter how big or small your bank is, keep your accounts within the FDIC limits! You might have to wait to get your money, but it’s better than not getting anything back at all. Let’s see if we can find out what the major cause of their doom was:
After showing a steady rise in nonperforming assets, which comprised 3.27% of total assets as of Dec. 31, 2006, things really got out of hand in the first quarter. Nonperformers shot up to 12.80% of total assets, an amazingly high figure for a very small bank specializing in residential mortgage lending.
It appears that too many eggs were placed in one basket, and in this unfortunate incident that basket was residential mortgage lending. I’m no financial expert, but the signs were there even back in 2002 that something unusual and unsustainable was well underway. The bubblicious party was too good not to participate in (even for an institution like a bank), and it seems there was a lot of Kool-Aid going around. Drinking is Believing!
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