Another Wilmington, NC, bank has been seized by regulators.
The Cooperative Bank, a subsidiary of Cooperative Bancshares, was closed by the Federal Deposit Insurance Corp. Friday. In April, regulators shuttered Cape Fear Bank, also based in Wilmington.
Cooperative’s branches will reopen Monday at part of Troy, NC-based First Bank, part of a deal negotiated by the FDIC. Cape Fear’s branches were taken over by First Federal Savings and Loan of Charleston, SC.
Cooperative, which had assets of $970 million, had 21 branches in North Carolina and three in South Carolina.
The collapse of the local home construction market is at the heart of Cooperative’s failure and that of Cape Fear Bank as well, according to The Wilmington Star News.
“Cooperative lent heavily to builders and developers in the Wilmington area as the real estate boom sent land values soaring,” the paper reported. “When the boom went bust, builders couldn’t sell their homes, and those acquisition and development loans went sour.”
As Cooperative’s loan losses climbed and the value of the collateral on those loans – land and empty homes – slid rapidly, the paper reported. “Under accounting rules, Cooperative had to write down the value of those assets, sometimes to zero.”
In the end, Cooperative was left undercapitalized.