NEW YORK (AP) - Regulators on Friday closed Silver Falls Bank in Silverton, Ore. - the 14th federally insured institution to fail this year, and the second based in Oregon.
Silver Falls Bank, a community bank that opened in May 2000, had $131.4 million in assets and $116.3 million in deposits as of Feb. 9. The last Oregon-based bank to close was Beaverton-based Pinnacle Bank last week.
Citizens Bank of Corvallis, Ore., is assuming Silver Falls Bank's deposits. It also is taking over its three branches and buying about $13 million in assets, including cash, securities and overdraft loans.
The Federal Deposit Insurance Corp., appointed receiver of Silver Falls Bank, will retain the bank's remaining assets.
The FDIC estimated that the cost of Silver Falls Bank's failure to the federal deposit insurance fund will be $50 million.
Regular deposit accounts are insured up to $250,000.
The bank failure wave began last year, when 25 U.S. banks were seized by regulators - more than in the previous five years combined. As home prices plunge and layoffs escalate, banks have seen loan defaults soar. And the trend has only been worsening as the recession deepens.
The FDIC has estimated that through 2013, the deposit insurance fund will lose as much as $40 billion, including an $8.9 billion loss from the failure of IndyMac Bank last July. To replenish the fund - which now stands at a five-year low of about $35 billion - the agency has raised the insurance premiums banks and thrifts must pay.
Of the roughly 8,500 federally insured banks and thrifts, the FDIC had 171 on its confidential list of troubled institutions as of Sept. 30. That was a nearly 50 percent jump from the second quarter and the highest tally since late 1995.
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Silver Falls Bank customers with questions can call the FDIC at 800-760-3639. LEARN MORE
The Oregon Department of Consumer and Business Services issued the following press release Friday on the closure:
(Salem) — The Oregon Department of Consumer and Business Services today ordered the closure of Silver Falls Bank and announced the acquisition of its deposits by Citizens Bank. The department appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver of Silver Falls Bank.
Silver Falls Bank’s main office is in Silverton, and it has branch offices in Salem and Oregon City. All deposit accounts of Silver Falls Bank are being transferred to Citizens Bank, and will be available immediately. On Monday, Silver Falls Bank branches will reopen as Citizens Bank. In the meantime, depositors of Silver Falls Bank can continue to access their accounts through automated teller machine transactions, checks, and debit transactions. Loan customers should make their payments as usual.
“Loss of a bank is difficult, particularly for the employees and the communities they serve, but sometimes it’s a necessary step to protect the public,” said Cory Streisinger, director of the department. “We are pleased that Citizens Bank of Corvallis is buying Silver Falls’ deposits, to ensure that customers see no disruption in service.”
Silver Falls Bank was founded in 2000. As of Feb. 9, 2009, Silver Falls Bank had total assets of approximately $131.4 million and total deposits of $116.3 million. Based in Corvallis, Citizens Bank opened its doors in 1957. Citizens Bank has 11 branches in the mid Willamette Valley, $380 million in assets, and $293 million in deposits.
Under the terms of the transaction with Citizens Bank, all deposits will be transferred to Citizens Bank. There will be no losses for any Silver Falls Bank depositors.
David Tatman, administrator of the Department’s Division of Finance & Corporate Securities, said Silver Falls Bank had been experiencing critically low levels of capital, and ultimately, became insolvent. The bank’s problems resulted primarily from a heavy dependence on commercial construction loans, many of which were of poorer quality and were not performing or being repaid when the economy deteriorated.
“Despite many efforts, such as a recent stock offering, Silver Falls Bank management was not able to address these significant problems in a timely manner,” Tatman said.
Silver Falls initiated a stock offering last month in an attempt to raise capital. Funds from the recent stock offering – totaling $525,000 – were held in an escrow account and are being returned to those investors.
The downturn in the economy, particularly the housing market, has had a significant impact on banks across the nation. During the housing boom, many banks focused on real estate loans that funded construction and development of residential properties. When the real estate market dropped, these banks were faced with an increasing number of nonperforming loans, which has reduced capital and earnings. Oregon banks had been experiencing significant growth leading up to the recession, and, while the majority of Oregon banks still have strong fundamentals, many of them are facing challenges.
This is the second Oregon bank to close this year and the 14th bank in the nation to close this year. Last week, Pinnacle Bank in Beaverton closed and Washington Trust Bank of Spokane, Wash., purchased its assets. The timing of these two bank closures is coincidental, Streisinger said, and no other Oregon banks are in immediate danger of closing.
“We are confident Oregon’s banking industry will emerge from this downturn and continue to support their communities,” Streisinger said. “However, there still may be some additional consolidation as banks find ways to adjust to these rapidly changing economic times.”
The FDIC has established a Web site and a toll-free phone number to answer questions from depositors, creditors, and other interested parties regarding the receivership of Silver Falls Bank. The Web site is
http://www.fdic.gov/bank/individual/failed/silverfalls.html, and the toll-free phone number is 1-800-760-3639. The phone number will be operational this evening until 9 p.m., PST; on Saturday from 9 a.m. to 6 p.m., PST; on Sunday from noon to 6 p.m., PST; and thereafter from 8 a.m. to 8 p.m., PST.
Deposits of all banks are now insured by the FDIC up to $250,000. Special rules are in place for accounts held in trust status, joint accounts, and non-interest bearing transaction accounts that may further expand deposit insurance coverage. You can find additional information on FDIC Deposit Insurance and other protections for your financial accounts at
http://egov.oregon.gov/DCBS/safe_money.shtml.
The Department of Consumer and Business Services is Oregon’s largest business regulatory and consumer
protection agency. The department’s Division of Finance and Corporate Securities regulates Oregon financial
institutions. For more information on Oregon banks as well as frequently asked questions about today’s transaction, visit
www.dfcs.oregon.gov.
