November 12, 2010 – Copper Star Bank, Scottsdale, Arizona, was closed today by the Superintendent of the Arizona Department of Financial Institutions, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Stearn Bank, N.A., St. Cloud, Minnesota, to assume all deposits and purchase all of the failed bank’s assets.
All three branches of Copper Star will reopen on Monday as branches of Stearns Bank and all depositors of Copper Star will automatically become depositors of Stearns Bank with no interruption in FDIC deposit insurance coverage.
Copper Star was a relatively new bank that expanded rapidly during the real estate boom in Arizona. According to Copper Star’s website,
On May 22, 2000 Copper Star Bank (formerly known as Scottsdale Community Bank) opened its doors for business serving the Scottsdale Airpark area. After the first two years of business and the move to its new corporate offices at 7555 E Redfield Road, Paul V. Brodt joined the Bank as President & CEO in September of 2002. Under Brodt’s direction and with his new management team the Bank began a very successful period of growth, growing by more than 300% in less than three years.
Copper Star Bank (CSB) is a commercial business bank serving the needs of small to medium-sized companies and their employees.
At September 30, 2010, Copper Star had total assets of $204.0 million and total deposits of $190.2 million. Stearns Bank paid the FDIC a premium of 1% to assume the deposits of Copper Star.
The FDIC and Stearns Bank entered into a loss-share transaction covering $165.2 million or 80% of Copper Star assets acquired by Stearns Bank. It is common with the purchase of failed banks for the FDIC to provide substantial loss protection to the acquiring bank through the use of loss-share transactions. According to the FDIC the use of loss-share transactions is projected to maximize return on the failed bank’s assets by keeping them in the private sector.
Stearns Bank Sees Opportunity In Failed Banks
According to the Stearns Bank website:
Stearns Financial Services, Inc. is an independently owned bank holding company with approximately $1.4 billion in assets. We are an online banking service provider based in the Midwest, with banks located in Minnesota, Arizona, Florida, Georgia, and a nationwide Equipment Finance Division.
Stearns Bank was originally chartered in 1912 and has grown to a nationwide full service financial services and online banking company.
Stearns Bank has a very strong Tier I capital ratio of 20.3%. The latest purchase of failed Copper Star will expand Stearns presence in the State of Arizona. Stearns Bank’s management had the foresight to anticipate and prepare for tough economic times and is now able to capitalize on opportunities to acquire failed bank assets.
This is not the first time that Stearns Bank has been involved with the FDIC. In February 2009, Stearns acquired a $730 millon loan portfolio from the FDIC which was viewed an opportunity by Stearns Chairman and CEO Norman C. Skalicky
February 27, 2009. Stearns Bank, N.A. acquired a $730 Million loan portfolio from the FDIC. The purchased loans are for properties in the states of Arizona, Nevada, California and New Mexico and came from the former First National Bank of Arizona and Nevada.
Stearns Bank and the FDIC are partnering on these loans and they will be serviced and managed by Stearns Bank. When asked about taking on such a risk during these economic times, Chairman and CEO Norman C. Skalicky stated, “We have been preparing for opportunities, such as this, since late 2006. We began to curtail lending and increase our capital ratios and really focused on this beginning in August 2007. One of our main strategies during that time was to be prepared to capitalize on opportunities prior to the end of this banking cycle.” Skalicky went on to say, “We think that it’s the noble thing to do to contribute to our Nation’s overall economy. These distressed assets need to be flushed out of the system.”
The acquisition of Copper Star is the sixth failed bank acquisition by Stearns Bank in the last two years. Stearns has expanded its banking presence in Florida, Georgia and Minnesota with the purchase of failed First State Bank of Florida, Community National Bank of Florida, ebank of Georgia and Horizon Bank of Minnesota.
Copper Star is the 146th banking failure of the year and the fourth in Arizona. The estimated cost to the FDIC Deposit Insurance Fund to close Copper Star is $43.6 million.