Newspaper article THE JOURNAL RECORD

City Bank to Buy 6.7% of First City Loans

Newspaper article THE JOURNAL RECORD

City Bank to Buy 6.7% of First City Loans

Article excerpt

City Bank and Trust Co. will purchase $3.7 million worth of loans made by the failed First City Bank, Paul Heafy, chief liqui dator for the Federal Deposit Insurance Corp., said Tuesday.

Of the $55 million in First City loans assumed by the FDIC, City Bank will buy 85 loans, or 6.7 percent, Heafy said.

When the bank failed, its portfolio was valued at $66 million, Heafy said. At that time, City Bank purchased $11 million in loans as part of the stock assumption agreement, he said.

City Bank will purchase fewer loans than usual for a new institution, Heafy said.

"The figure is a little lower than usual - a lot of the loans that look like separate individuals are inter-related in different businesses," he said

The combined debt resulting from related loans was considered too great for purchase in some cases, Heafy said.

"Normally when a bank buys one person's debt, they want all of it," Heafy said, thereby avoiding a situation where the FDIC is also a creditor.

"It appears to us that a lot of the loans are inter-related," he said.

Robert Y. Empie, Oklahoma Bank Commissioner, agreed that the number of loans to be purchased by City Bank is relatively small.

"Banks usually find 10 to 15 percent of the failed bank's loans desirable for purchase," he said.

Generally, both the FDIC and the reopened bank want to keep as many as possible of the failed bank's loans with the new institution, Heafy said.

The FDIC is less flexible than a bank to debtors as a rule, he said, and it encourages people to re-finance their debts with a new bank.

The reason, Heafy said, is when a borrower has problems meeting payments, the FDIC will foreclose on the loan.

"Whenever possible, we will try to force liquidation of a loan or collateral," he said, while a bank will often allow renewal and refinancing of a loan.

A "large portion" of First City loans were classified as lost or substandard, he said. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.