December 17, 2010 – Community National Bank, Lino Lakes, Minnesota, was closed today by The Office of the Comptroller of the Currency. The FDIC was appointed as receiver and sold the failed bank to Farmers & Merchants Savings Bank, Manchester, Iowa, which will assume all deposits of Community National.
The two branches of Community National will reopen on the weekend as branches of Farmers & Merchants with no interruption in FDIC deposit insurance coverage.
Community National was a very small independent community bank with only $31.6 million in assets and $28.8 million in deposits, but at the heart of a troubled $1.3 billion dollar development default and scandal as reported by the Twin Cities Press.
Community National was the lead bank in a $35 million loan development deal involving 20 banks that would fund Ramsey Town Center, which was envisioned as a $1.3 billion mixed-use development but ran into trouble when the developer defaulted. The development has since been renamed COR, for City of Ramsey, and plans adjusted.
Three of the bank’s former top officers were indicted on dozens of federal fraud charges in connection with the deal. William Sandison, the bank’s former president, his son Ross Sandison, also a top officer, ended up pleading guilty to one count of conspiracy last year. Curtis Martinson, another top officer, also pleaded guilty in the case.
Farmers & Merchants agreed to purchase all of the assets without the benefit of a loss-share agreement with the FDIC but did not pay a premium for the deposits.
Farmers & Merchants has a long history, being established in 1925, and still operated as a locally owned bank with over $256 million in assets and a strong capital position, as described by the Bank.
Our quality growth has continued at F & M through the last year. While we avoided many of the problems that other banks encountered, we also had our assets grow 11.5% with deposit growth of 12.5% and loan growth of 9.25%. Most impressive was our capital growth…our equity capital and loan loss reserve grew over 18% through 2009 to in excess of $26 million. Earnings for 2009 eclipsed $3.1 million, down from our 2008 earnings, but very competitive for a bank our size.
The failure of Community National will cost the FDIC Deposit Insurance Fund an estimated $3.7 million. Community National is the 157th banking failure this year and the 8th in Minnesota.