By Russ Lay on September 23, 2011
Bank of the Commonwealth was closed Friday by the Virginia State Corporation Commission, according to the Federal Deposit Insurance Corporation website.
The FDIC was appointed as receiver. To protect depositors, the FDIC entered into a purchase and assumption agreement with Southern Bank and Trust Co. of Mount Olive, N.C, to assume the deposits of Bank of the Commonwealth.
The 21 branches of Norfolk-based Bank of the Commonwealth will reopen beginning Saturday as branches of Southern Bank and Trust Co. Depositors of Bank of the Commonwealth will automatically become depositors of Southern Bank and Trust.
Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage up to applicable limits. Customers of Bank of the Commonwealth should continue to use their existing branch until they receive notice from Southern Bank and Trust that it has completed systems changes to allow other Southern Bank and Trust branches to process their accounts as well.
This evening and over the weekend, depositors of Bank of the Commonwealth can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.
As of June 30, 2011, Bank of the Commonwealth had approximately $985.1 million in total assets and $901.8 million in total deposits. In addition to assuming all of the deposits of the failed bank, Southern Bank and Trust agreed to purchase approximately $924.3 million of the failed bank’s assets. The FDIC will retain the balance of the assets for later disposition.
The FDIC and Southern Bank and Trust entered into a loss-share transaction on $798.2 million of Bank of the Commonwealth’s assets. Southern Bank and Trust will share in the losses on the asset pools covered under the loss-share agreement.
The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. For more information on loss share, please visit:http://www.fdic.gov/bank/individual/failed/lossshare/index.html.
This marks the third bank with operations on the Outer Banks that has failed since the banking crisis became acute after the real estate-based recession of 2007. Previously, Cooperative Bank, headquartered in Wilmington, N.C. failed, as did Bank of Currituck.
Cooperative Bank’s operations were taken over by First Bank, of Troy, N.C., which is currently constructing a new retail branch in Kill Devil Hills where the former Cooperative Bank stood. Bank of Currituck’s operations were assumed by Towne Bank of Norfolk, Va., which created a new division called TowneBank of Currituck to operate the former Bank of Currituck branch locations.
Customers with questions about today’s transaction should call the FDIC toll-free at 1-800-423-6395. You can also go to the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/boc-va.html.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $268.3 million. Compared to other alternatives, Southern Bank and Trust Company’s acquisition was the least costly resolution for the FDIC’s DIF.
Bank of the Commonwealth is the 72nd FDIC-insured institution to fail in the nation this year, and the second in Virginia. The last FDIC-insured institution closed in the state was Virginia Business Bank, Richmond, on July 29, 2011.