Friday’s failure of CommunitySouth Bank and Trust marked an inglorious finale for a bank which began with the largest initial public stock offering for a community bank company in South Carolina history.
In 2005, CommunitySouth’s parent company, CommunitySouth Bancshares Inc., reported that its IPO generated $32.5 million in stock sales – $2.5 million more capital than it could accept. It sold 3 million shares to approximately 1,300 shareholders, according to the Greenville News.
That made CommunitySouth’s IPO the largest ever for a state-chartered bank at the time, according to a spokesman for the state Treasurer’s Office, the News added.
But less than six years later, CommunitySouth’s stock was trading for just 5 cents a share when its was closed by the South Carolina State Board of Financial Institutions. The company had has lost nearly $30 million over the past three years and was deemed critically undercapitalized by regulators late last year.
FDIC spokeswoman Edith Gray told the News that, “The problems here arose from commercial real estate loans and acquisition and development lending and the economy. With the soft real estate market we are in, a lot of those loans were not able to be repaid which consequently caused the bank’s capital to be eroded.”
For the nine months ended Sept. 30, 2010, the bank recorded a provision for loan losses of $5 million and net loan charge-offs of $6.5 million. That compares with a $6.3 million provision for loan losses and net loan charge-offs of $4.1 million during the same period last year.
Impaired loans doubled between Dec. 31, 2009, and Sept. 30, 2010, to $68.2 million from $34.2 million, according to SEC filings.
All of CommunitySouth’s deposits and nearly all its assets were taken over by CertusBank, a newly chartered bank subsidiary of Blue Ridge Holdings Inc. of Charlotte.
Blue Ridge, led by former Bank of America and Wachovia executives, is part of a limited group of banks and investment firms looking to purchase troubled smaller banks, according to the Charlotte Observer.
Certus raised $500 million from investors and received a “shelf charter” from the Office of the Comptroller of the Currency last year, the publication added.
The last South Carolina bank of be closed by regulators was Williamsburg First National Bank of Kingstree, on July 23, 2010. Five South Carolina banks have failed since the beginning of 2009.
Also last Friday, the Bank of Asheville was closed by the North Carolina Office of Commissioner of Banks. Three North Carolina banks have failed since the beginning of 2009.