Failed Bank of Asheville, NC, Sold By FDIC To Bank Owing TARP Money

January 21, 2011 – The Bank of Asheville, Asheville, NC,was closed today by the North Carolina Office of Commissioner of Banks, which named the FDIC as receiver.  The FDIC sold the failed bank to First Bank, Troy, North Carolina, which assumed all deposits.

The Bank of Asheville had five branches which will all reopen on Monday as branches of First Bank.  All depositors of the failed bank will automatically become depositors of First Bank.  Customers of The Bank of Asheville will have full access to their funds over the weekend.  The Bank of Asheville had total assets of $195.1 million at September 30, 2010.

The FDIC continues the somewhat troubling practice of selling failed banks to banks that still owe TARP money to the U.S. taxpayers.  First Bancorp, holding company for First Bank, has an outstanding TARP loan to U.S. Treasury of $65 million.  Common sense would lead one to conclude that banks unable to payback assistance from the U.S. taxpayer would certainly not be classified as the soundest banks in the country. First Bank, for example, has a troubled asset ratio of 54%, which is 3.6 times the national average of 15.

Last year the FDIC sold 18 failed banks to banks that still owe $1.2 billion in TARP money.  Why would the FDIC sell failed banks to other banks that are arguably weak, as indicated by the fact that they have still not repaid TARP funds?

By allowing weaker banks that still owe TARP funds to purchase failed banks, the FDIC’s strategy may be an attempt to avoid additional bank failures.  The acquiring institution gains access to low cost deposits of the failed bank at a small or zero premium.   In addition, many of the failed bank acquisitions have resulted in significant gains for the purchasers, thanks in part to the use of loss-share transactions with the FDIC that protects the acquiring bank from losses.  The strategy of combining dead banks with weak banks may produce great results if the economy booms and real estate values soar – time will tell.

First Bancorp’s press release on the acquisition noted that “Substantially all of the loans being purchased are covered by loss share agreements between the FDIC and First Bank which provide First Bank with reimbursement on 80% of the losses it incurs. The net assets were purchased from the FDIC at a discount of $23.9 million, with no deposit premium paid.”  Many recent failed bank purchases have resulted in immediate substantial gains to the acquiring banks and are accretive to earnings going forward.

First Bank is the sixth largest bank in North Carolina with assets of $3.3 billion. First Bank previously acquired another failed bank, Cooperative Bank in June 2009.


The Bank of Asheville was established in 1997.  The Bank’s website acknowledged the challenges that they faced but said they were optimistic about the future.

Since its founding, Bank of Asheville has asked people to put their money where their heart is—in a local community bank that is focused on the needs of their community.

And you have done that. In partnership with thousands of local customers, we built Bank of Asheville into one of the best community banks in America.

Now, in a difficult economy, Bank of Asheville faces some challenges—like many of our customers and others in our community. We want you to know that we have a comprehensive plan for working through these challenges. There is no doubt about it, we are optimistic about our future, as well as the future of our community.

Weststar Financial Services, the holding company for The Bank of Asheville, has seen its stock price crash from $15 per share in mid 2007 to 26 cents at the closing of trading on Friday.


The loss to the FDIC Deposit Insurance Fund is $56.2 million.  The Bank of Asheville is the sixth  banking failure this year and the first in North Carolina.


  1. T Williams says:

    This was a locally owned bank of over 70 yrs, bankrupted by poor judgement in the real estate market. Look deeper into the loans this bank made to, who defaulted, the amt, and why it was allowed to happen. Look for a local Cpa, past Weaverville mayor,Woodfin Crest Mt. developer, Advantage West board member. All in Western NC.

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