May 28, 2010 – Granite Community Bank, N.A. of Granite Bay, California was closed by the Comptroller of the Currency. The FDIC, appointed as receiver, sold Granite Community to Tri Counties Bank, Chico, CA under a purchase and assumption agreement. Tri Counties Bank will assume all of the deposits and purchase essentially all of the assets of Granite Bank. All three of Granite’s branches will reopen on Tuesday as Tri Counties Bank offices. Customers of Granite Bank will have full access to their funds over the weekend via debit cards, checks and ATM locations.
Granite Bank had total assets of $102.9 million and total deposits of $94.2 million at March 31, 2010. Tri Counties did not pay a premium to the FDIC for Granite’s deposits, and potential losses on the purchase of Granite’s assets will be limited by a loss-share agreement between the FDIC and Tri Counties Bank. The loss-share agreement covers $89.3 million (87%) of the purchased assets.
Granite Community Bank had expanded rapidly during the real estate lending mania of the last decade, increasing its assets from under $40 million in 2002 to almost $160 million at the top of the real estate market in 2006. As real estate prices crashed, Granite was overwhelmed by a huge number of non performing loans that made a financial recovery impossible. Based on 2009 year end financial statements, Granite Bank had a very high troubled asset ratio of 284%. For perspective on this number, a large majority of banks that have failed had troubled asset ratios of over 100% (see Troubled Asset Ratio – Good Predictor of Failed Banks).
The estimate loss to the FDIC Insurance Deposit Fund for the closing of Granite Bank is estimated at $17.3 million. Granite is the 77th banking failure of 2010 and the sixth institution to fail in California this year.