Federal regulators seized Suburban Federal Savings Bank in Crofton late yesterday - marking the first Maryland bank failure since 1992 - after executives were unable to find a buyer to help them offset millions of dollars in bad loans.
The FDIC arranged the sale of all of Suburban's deposits and its seven branches to the Bank of Essex in Tappahannock, Va. That means Suburban's business will go on as normal today, though under a different name.
The Virginia bank also bought most of Suburban's assets at a discounted price and many of its loans, according to the Federal Deposit Insurance Corp. Suburban, which was founded in 1955, had assets of $360 million and deposits of $302 million as of Sept. 30.
The deal is expected to cost the FDIC $126 million, or 35 percent of Suburban's assets, an amount some banking experts described as costly.
Suburban Federal is the latest financial institution to fail after getting caught up in the mortgage crisis. It was among three banks that the FDIC seized yesterday, bringing the total failed banks to six this year.
About 50 FDIC employees descended on the bank's headquarters shortly after it closed at 6 p.m. yesterday carrying in computers and other items. Two officers stood guard at the door. A short time later, a man wheeled in cookies, sandwiches and water for employees who were expected to work well into the night. Employees could be seen gathered in the lobby.
Suburban Federal depositors will automatically become customers of the Bank of Essex and will be able to write checks or use ATM or debit cards to access their money throughout the weekend, the FDIC said. Loan customers also should continue to make payments.
"No customers, no depositors are going to lose any money as a result of this action," said FDIC spokesman David Barr, who was at Suburban Federal's stately headquarters building last night. "They should look at this as a simple merger of two banks."
An executive from Community Bankers Trust Corp., a financial holding company based in Richmond, Va., and the parent of the Bank of Essex, said he doesn't expect to cut any of Suburban's staff, which totals about 60 people.
"While we do not anticipate staff reductions, we do anticipate certain additions to and changes in management," said Gary Simanson, vice chairman of Community Bankers Trust.Robert L. Morrison Jr., Suburban's president and grandson of its founder, could not be reached for comment yesterday. FDIC officials said at the bank headquarters last night that no one from Suburban was available for comment.
