Regulators shut down Ameribank in West Virginia

Federal regulators have shut down Ameribank Inc., a small bank in West Virginia, saying it overextended loans for the rehabilitation of distressed properties.

It was the 12th failure this year of a federally insured bank.

The Federal Deposit Insurance Corp. has been appointed receiver of the bank, based in Northfork, W.Va. It had $115 million in assets and $102 million in deposits as of June 30.

The FDIC said Friday the bank's insured deposits will be assumed by Pioneer Community Bank Inc. of Iaeger, W.Va., and Citizens Savings Bank in Martins Ferry, Ohio.

Its branches in West Virginia will reopen Monday as offices of Pioneer Community Bank and its Ohio branches will reopen Sunday as offices of Citizens Savings.

Ameribank ran into trouble because of "excessive growth" in the construction loans for property rehabilitation, mainly in low- and moderate-income housing markets, according to the federal Office of Thrift Supervision, the bank's primary regulator.

The April-June quarter marked the fourth consecutive quarter of net losses and capital erosion for Ameribank, the thrift agency said in a news release. The agency deemed the bank to be "critically undercapitalized" and found it was unable to develop a viable plan to restore capital to an adequate level.

The regulators tagged Ameribank as a troubled institution in May 2007 and issued a formal enforcement order to the bank in October, saying it had failed to comply with their earlier directives.

Construction and development loans have been the fastest-growing category of troubled loans for U.S. banks, and many banks have heavy concentrations of them in their lending portfolios, according to the FDIC. Some small banks are considered especially vulnerable.

The 12 bank failures so far this year compare with three for all of 2007, and federal banking officials have said that more banks are in danger of collapse.

Ameribank has operated five branches in West Virginia and three branches in Ohio.

The FDIC estimated its resolution will cost the federal deposit insurance fund $42 million.

Regular deposit accounts are insured up to $100,000; individual retirement accounts held in banks are insured up to $250,000.

Concern has been growing over the solvency of some banks amid the housing slump and the steep slide in the mortgage market. The pressures of tighter credit, tumbling home prices and rising foreclosures have been battering many banks, large and small, across the nation.

The largest bank failure by far this year has been that of savings and loan IndyMac Bank, which was seized by regulators on July 11 with about $32 billion in assets and deposits of $19 billion.

Pasadena, Calif.-based IndyMac was the largest regulated thrift to fail in the United States and the second-largest financial institution to close in U.S. history, after Continental Illinois National Bank in 1984.

The FDIC has been operating the bank, now called IndyMac Federal Bank, under a conservatorship.

The FDIC plans to raise insurance premiums paid by banks and thrifts to replenish its reserve fund after paying out billions of dollars to depositors at IndyMac. The fund is currently at around $45.2 billion, down from about $53 billion at the end of last year and below the target minimum level set by Congress.

Federal officials expect turbulence in the banking industry to continue well into next year, and more banks to appear on the FDIC's internal list of troubled institutions.

Of the 8,500 or so FDIC-insured banks in the country, 117 were considered to be in trouble in the second quarter - the highest level in about five years and up from 90 in the first quarter. The agency doesn't disclose the banks' names.

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Ameribank customers seeking more information can contact the FDIC at 1-877-894-4710.