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September 06, 2010
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TODAY'S HEADLINES
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Thursday, July 29, 2010
Regulators close local bank
By Chuck Kajer, Managing Editor
After months of speculation and rumors, the fate of a New Prague bank was sealed Friday, July 23.
The Minnesota Department of Commerce closed Community Security Bank and appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver. The FDIC, in turn, entered into a "purchase and assumption agreement" with Roundbank of Waseca. The bank reopened Saturday as a branch office of Roundbank.
Officials from the Department of Commerce and FDIC arrived at the bank late Friday afternoon and informed staff of the closure. A short time later, Roundbank officials arrived and they, along with the Department of Commerce and FDIC regulators worked with employees of the former Community Security Bank to document the bank's assets and begin the transfer process. Two Minnesota State Troopers were at the bank throughout the weekend and into this week to provide security. Exterior signs were taken down late Friday and replaced with Roundbank banners.
As word spread, a number of former Community Security Bank customers stopped or phoned the bank on Saturday to learn about the changes at the financial institution.
Larry Thompson, president and chief executive officer of Roundbank, said the purchase was a "whole bank transaction, and included all deposits as well as the building.
"This is the least disruptive type of transaction for the customers and community," he said, explaining that all Community Security Bank customers automatically became customers of Roundbank.
He added that the regulators were expected to finish their work on Wednesday, July 28.
Back in town
"We are pleased to welcome the customers of Community Security Bank and want to assure everyone they are joining a financially safe, strong and secure community bank," Thompson said. "We are excited to become a part of the community. We can proudly claim that we have restored the stability and strength to the bank office."
Thompson said that Roundbank is a people-focused organization and is eager to serve the community.
The transaction brings the Waseca-based bank back into the New Prague market. Roundbank is owned by the same group that had operated American Savings and Loan, an industrial loan and thrift office, in New Prague from 2006 to 2008. When the Savings and Loan closed in 2008, its assets were merged with Roundbank.
"We're excited to be back in New Prague," said Thompson. "We had strategically identified this as a market conducive to growth."
Roundbank history
Roundbank was originally chartered as the People's Bank of Waseca in 1881. The current name was adopted in the 1980s, due to the unique shape of its Waseca office.
"Everyone called us the round bank, so we just made it official," Thompson said. "We were part of the First Bank system, but adopted the Roundbank name when First Bank divested its agriculture-based banks during the farm crisis in the 1980s."
Roundbank also has branches in Waldorf and Farmington.
Changes
Thompson and Jade Prins will be responsible for the day-to-day operation of the New Prague branch of Roundbank. Most of the employees of Community Security Bank will stay on with Roundbank, although there are some management changes. Thompson said some existing Roundbank staff will assist in the transition.
Included in the transaction is the Fintegra Financial Management office, headed by Shannon Brusseau, that had been a part of Community Security Bank. Thompson said Roundbank is already associated with Fintegra in other offices, so there should be a smooth transition.
Thompson didn't anticipate any immediate changes in bank operations. "The two banks use the same data processing systems, so that will ease the transition," he said, adding "the merger provides an opportunity for us to review best practices, see how we have done things and how Community Security has done things, and make changes if we see an opportunity."
He said during the transition period, Community Security Bank customers can continue to use their checks and bank cards issued by Community Security, and use the internet banking as in the past.
Bank's goals
As for the bank, Thompson said that Roundbank's first goal is to reestablish "confidence and trust." He noted that part of the confidence was that the FDIC insured deposits mean that customers will not lose any money, and that the FDIC chose Roundbank to purchase the bank.
"We want to build confidence in the strength and security of Roundbank," he added.
Troubled year
Community Security Bank was served with a "cease and desist "order by the FDIC last year. The bank was cited for "unsound banking practices and having inadequate capital for the volume and kind of loans they were making."
At the time, bank vice president Kim Jacobson Sather said the bank had problems with its commercial and real estate development loan portfolio, which required it to transfer some of its reserves to cover loan losses.
Regulators wanted the bank to shrink its loan portfolio and increase its capital by finding investors. The bank did sell off much of its real estate loan portfolio, but was unable to find enough investors willing to come forward to strengthen the bank.
According to Arvin "Jake" Jacobson, former president of the bank, Community Security had been working as recently as two months ago with several area banks - including Roundbank - trying to form a partnership or merger, but were unable to do so.
Local bank history
Community Security bank was organized approximately 13 years ago as the only locally-owned financial institution. Jacobson, in a press release, said it was formed "for the purpose of serving the financial needs of the New Prague community."
He said the economic downturn caused the bank to take significant losses in its loan portfolio. "The unexpected and severe decline in real estate values, coupled with the losses in the loan portfolio, left the bank without sufficient capital to continue operating.
Jacobson led a group of local investors, known as New Prague Banchares, in forming the bank. Previously, Jacobson had been president of the Marquette Bank (now Wells Fargo) office in New Prague.
"On behalf of myself and the board of directors, we want to thank the bank's customers, shareholders and employees for their tremendous support over the past 13 years," Jacobson said in a press release. "It was an honor to serve the community of New Prague. Although this outcome isn't what anyone would have wanted, we are proud of our accomplishments and look forward to the new owners becoming as much a part of this community as we were."
Financial information
As of March 31, Community Security Bank had approximately $108 million in total assets and $99.7 million in total deposits. Roundbank will pay the FDIC a premium of 0.89 percent to assume all of the deposits of Community Security Bank. In addition to assuming all of the deposits of Community Security Bank, Roundbank agreed to purchase essentially all of the assets.
Customers who have questions about the transaction can call the FDIC toll-free at 1-866-692-8944 weekdays from 8 a.m. to 8 p.m., CDT. Interested parties also can visit the FDIC's Web site for more information. A link to that website can be found at newpraguetimes.com
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $18.6 million. Compared to other alternatives, Roundbank's acquisition was the least costly resolution for the FDIC's DIF.
Community Security Bank is the 101st FDIC-insured institution to fail in the nation this year, and the seventh in Minnesota.
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