Short, sharp fall

Eager to compete in the overheated housing market, Suburban Federal Savings Bank abandoned caution

On Jan. 30, regulators seized Suburban and sold most of its assets to Bank of Essex, a Virginia bank that quickly renamed its branches. Essex bought almost all of Suburban's loans and other assets, at a $45 million discount. The total cost to the Federal Deposit Insurance Corp. to transfer the business and clean up Suburban's balance sheet was roughly $126 million, more than one-third of Suburban's asset base.

Gary Simanson, vice chairman of Essex's parent company, said the new owner is still sifting through the portfolio to decide what to do with each of Suburban's loans. But one thing is certain, he said: The lending business will be much more stringent.

"We will use our credit underwriting standards, as opposed to what their underwriting standards were," Simanson said. "The old policies and procedures no longer exist."

Demeria looks at an unfinished house in a development he has in Potomac and is reminded of Suburban's demise. The bank foreclosed on the house in January and bought it at auction for $700,000. It was once valued at more than $2 million.

But Demeria still has compassion for Suburban and its founders, who he said did nothing different from what most bankers were doing.

"It's unfortunate [Morrison] got caught up in something that anyone of us could have got caught up in," he said. "The entire U.S. is caught up in it."