Beach First played key role in its collapse

While there have been a growing wave of bank failures nationwide over the past year, South Carolina’s only failed institution to date played a key role in its own demise.

A detailed story in the Myrtle Beach Sun News autopsied the death of Beach First National Bank, the first SC institution to be closed by regulators in 11 years and concluded that while the recession played a part, the bank also was hurt by the fact it didn’t always make solid loans or track loan problems.

The paper quoted Conway attorney Richard Lovelace as saying an order issued in February by bank regulators indicated that Beach First’s loan tracking systems “were flawed, if they even existed.”

Beach First’s failed loan portfolio included single-family mortgages, loans for condominium construction and purchases, business startups, commercial ventures, and even a yacht.

It became apparent in late 2007 that the bank was going to see some loan losses, and over the next two years board members and bank executives worked to keep Beach First going, the Sun News wrote.

“Beach First reached out to some borrowers and encouraged them to sell property before there were even greater losses, but most did not,” according to the paper. “The bank slowed lending in 2008 and by early 2009 it had largely stopped making new loans other than the very best loans or loans to existing customers.”

The bank began trying to raise capital in 2008 and thought it had deals several times, but none panned out. As bank failures mounted nationwide and bank stock prices plummeted and bank earnings plunged, it became increasingly difficult to find interested investors.

The paper added that an attempt to get federal assistance through the Troubled Asset Relief Program did not come through. The $15 million to $20 million Beach First requested may have helped buy more time for the market to turn around, work through problems and prevent failure.

However, TARP money generally has not been given out to institutions seen as being in danger of collapse. The public is usually unaware of which banks have been turned down for relief.

Beach First, which lost at least $30 million in 2009 and had recently announced it would have to take an additional $14 million charge for the first three months of 2010, was shuttered by the Office of the Comptroller of the Currency April 9.

The Bank of North Carolina, based in Thomasville, N.C., agreed to assume the assets and deposits of the failed bank.

It was the first failure of a bank in South Carolina since Columbia-based Victory State Bank went under in 1999.