West Virginia's First State Bank closes in 2nd failure of 2020

Dive Brief:

The West Virginia Division of Financial Institutions closed First State Bank in Barboursville, West Virginia, on Friday, in the second U.S. bank failure of the year.
All four of the bank’s branches opened Saturday under the MVB Bank banner. The Fairmont, West Virginia-based lender assumed all $139.5 million of First State’s deposits and $147.2 million of its assets — all but $5.2 million, which the Federal Deposit Insurance Corp. will retain for later disposition.
First State had been operating through "capital and asset quality issues" since 2015, the FDIC said in a press release Friday. The regulator stated in a tweet Friday the closing was not related to the coronavirus pandemic.

Dive Insight:

First State Bank’s "December 31, 2019 financial reports indicated capital levels were too low to allow continued operations under federal and state law," the FDIC said in its press release. The bank lost about $3.7 million in 2019 and hadn't turned a profit since 2013, American Banker reported.

The closing will cost the Deposit Insurance Fund (DIF) about $46.8 million, the steepest such bill since the fund took a hit of more than $80 million in the 2017 failure of Chicago’s Washington Federal Bank for Savings.

MVB bought the assets at a discount of about $28.2 million and acquired other real estate owned for 47.5% of book value, the bank said in a filing Friday.

The FDIC emphasized new MVB customers should follow social distance guidelines set forth during the coronavirus outbreak and, when possible, use online or electronic banking tools. "In keeping with West Virginia Governor Jim Justice's Stay-at-Home Order, customers should visit a bank branch only if an in-person visit is essential and only after making an appointment," the regulator said.

The only other U.S. bank to fail this year is Nebraska’s Ericson State Bank, which a state regulator shuttered in February. The FDIC and the Nebraska Department of Banking and Finance issued consent orders last fall, with the federal regulator seeking more than a dozen corrective actions, including that Ericson name a new CEO, devise a one-year and a three-year strategic plan to return to solvency, and add at least two independent board members. Two other Nebraska banks, Eagle State Bank and Tri Valley Bank, announced a three-way merger with Ericson in November that never went through.