Two More Banks Fail; C&D Loans to Blame

The Federal Deposit Insurance Corp. took over two additional banks last Friday, bringing the total number of bank failures this year to 25; both were very small banks, heavily leveraged into construction and development loans, as has been the trend throughout much of this year thus far. $572 million Haven Trust Bank, in Duluth, Georgia, saw North Carolina’s Branch Banking & Trust (BB&T to most of us), assume all deposits over the weekend; BB&T agreed to assume all of the deposits for just $112,000, the FDIC said. The banking regulator said the failure would likely cost the deposit insurance fund $200 million. And tiny Sanderson State Bank in Texas, with total assets of just $37 million, saw its deposits head over to The Pecos County State Bank, in Fort Stockton, Tex.; the failure will cost the FDIC $12.5 million, the banking regulator said in a statement. A common thread The failure of Haven Trust follows a common thread for failed community banks thus — heavy exposure into construction and land development loans, as well as a heavy dose of so-called “nonfarm nonresidential” properties. The “nonfarm nonresidential” category is reserved for loans where the primary or a significant source of repayment is derived from rental income associated with the property, per the FDIC. Haven Trust held $133 million in C&D loans and a whopping $185 million in “nonfarm nonresidential” investment properties, totalling well more than half of total assets at the failed bank, according to FDIC call report data. Total loans and leases represented $476 million of the bank’s $572 million in total assets. As for tiny Sanderson State, $31 million of the bank’s $37 million in assets were in loans and leases; $15.4 million in closed-end first liens on residential property, and $7.2 million in C&D loans. Write to Paul Jackson at

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