Putting down K Bank was a merciful act
K Bank has been teetering on the edge for a long time. We were hearing rumors about an FDIC seizure a year ago. Then again, the FDIC has been quite the busy agency. It beefed up hiring two years ago but still doesn't have nearly enough capacity to close all the zombie banks.
To see why K Bank was on their to-do list, look no further than its capital. This is a financial institution that had $538 million in assets as of Sept 30 but only $7 million in bank equity. Its Tier 1 leverage ratio was 1.02 percent. Tier-1 risk-based capital ratio was 1.53 percent, and total risk-based capital ratio was 2.81 percent. You don't need a finance degree to figure out that these are not ample equity cushions for a bank holding nearly $58 million in overdue mortgages and, hmm, only $6.5 million set aside to cover losses from uncollectible loans.
Cost to the FDIC's insurance fund of the K Bank closure and the M&T takeover: $198 million.
The average Tier 1 Leverage ratio for Maryland banks on Sept. 30 was 9.11 percent, according to the Federal Deposit Insurance Corp.
Comments
Who's next? The FDIC team didn't come into town for just one bank
Posted by: Mortie | November 5, 2010 8:13 PM
We did commercial business with K Bank for a number of years and always found the commercial lenders with whom we worked (non-real estate transactions) to be very capable and careful professionals who made good loans that did not contribute to the bank's demise. We are saddened to see the bank fail.
Posted by: Jim Duncan | November 6, 2010 1:13 PM