Magazine article American Banker

Thrift's Future in Doubt as OTS Deadline Looms

Magazine article American Banker

Thrift's Future in Doubt as OTS Deadline Looms

Article excerpt

Byline: Bonnie McGeer

Suburban Federal Savings Bank's hope for survival is dissipating.

The deeply troubled thrift in Crofton, Md., has until Friday to find a buyer that would restore it to adequate capitalization under an order from the Office of Thrift Supervision. The $354 million-asset Suburban had not announced a deal by late Wednesday, and officials there did not return a call seeking comment on whether one might be imminent.

If regulators opt to shut down Suburban, it would be the first bank or thrift failure in Maryland since 1992.

The thrift had a potential buyer in Aegon NV, but the Dutch insurance giant terminated the deal last month.

Aegon is among the handful of insurers that announced plans to acquire a bank or thrift so they could qualify for a capital infusion through the Treasury Department's Troubled Asset Relief Program. But Aegon said on Dec. 15 that, after strengthening its capital position, it decided against seeking Tarp funds after all. It withdrew an application for a thrift charter and abandoned the idea of buying Suburban.

Aegon had applied for the capital through Transamerica Corp., its U.S. subsidiary, but questions had been raised about whether it would be eligible to participate. The government program's terms disqualify financial institutions controlled by a foreign company.

Suburban has been operating under a cease-and-desist order since March, but its condition has worsened since then as the real estate crisis deepened.

The thrift reported that 11.45% of its loans were noncurrent at Sept. 30, up from 4.43% a year earlier, according to Federal Deposit Insurance Corp. data.

With a total risk-based capital ratio of 3.09% at Sept. 30, it is considered critically undercapitalized.

Kenneth Thomas, an economist and bank consultant in Miami, said that, with a new administration in Washington, it is difficult to say how regulators might handle Suburban. …

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