Shareholders of Nexity Financial Corp, the holding company for Nexity Bank, saw all hope for a recovery in their investment evaporate today as regulators closed Nexity Bank.
Nexity Bank was closed by the State of Alabama Banking Department which appointed the FDIC as receiver. To protect depositors, the FDIC sold Nexity Bank to Alostar Bank of Commerce, Birmingham, AL, which will assume all deposits of Nexity.
Nexity Bank had been operating under a Cease and Desist Order issued by the FDIC on March 20, 2009 which cited the Bank for “unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Bank”.
Specific unsafe or unsound practices cited by the FDIC in the Cease and Desist Order included, operating with a large volume of poor quality loans, operating with inadequate capital and numerous other deficiencies. More than two years after issuing the Cease and Desist, the Bank was unable to comply with regulatory orders and closed. Nexity had an abundance of nonperforming loans and a troubled asset ratio of almost 700%. Most failed banks have a troubled asset ratio of 100% or greater.
At December 31, 2010, Nexity had total assets of $793.7 million and total deposits of $637.8 million.
AloStar Bank agreed to purchase all of Nexity’s assets, subject to a loss-share transaction with the FDIC which will protect AloStar against losses on $384.2 million of the asset pool purchased from Nexity.
Nexity Bank was a provider of commercial banking services to consumers, small businesses and community banks.
AloStar Bank was specifically chartered to acquire failed Nexity Bank and was founded by former banking executives from Wells Fargo and Suntrust.
The loss to the FDIC Deposit Insurance Fund for the failure of Nexity is $175.4 million. Nexity is the nation’s 31st banking failure and the first in Alabama.