SCB Bank of Indiana Fails Under Weight Of Bad Loans

SCB Bank, Shelbyville, Indiana, was closed today by the Office of the Comptroller of the Currency,which appointed the FDIC as receiver.   Acting as receiver, the FDIC sold the failed bank to First Merchants Bank, National Association, Muncie, Indiana.

SCB Bank had been struggling under the weight of nonperforming loans since 2009.  The Bank had a large concentration of its loan portfolio in commercial and industrial loans which were particularly hard hit since real estate values began collapsing in 2008.

On May 16, 2011, SCB Bank was issued a cease and desist order by the Office of Thrift Supervision (OTS) for operating in an unsafe and unsound manner.  The Bank was cited for numerous operational and management deficiencies and ordered to raise additional capital.  The weak financial condition of SCB Bank made it impossible to attract additional capital and regulators were forced to seize the Bank when it became critically undercapitalized.

All four branches of SCB Bank will reopen on Saturday as branches of First Merchants Bank. Depositors of SCB Bank will continue to be covered by FDIC deposit insurance up to the applicable limits.  Over the weekend, depositors of SCB Bank will have full access to their money through checking, ATM and debit cards.

At December 31, 2011, SCB Bank had total deposits of $171.6 million and total assets of $182.6 million.  In addition to assuming all deposits, First Merchants agreed to purchase all assets of the failed bank.  This was the first purchase of a failed bank by First Merchants.

First Merchants, whose history goes back to 1893, has over $4 billion in assets and is the largest financial services company in Central Indiana with over 70 branches.  First Merchants stock, which traded as high as $30 in 2008 closed on Friday at $10.19.

FRME - courtesy yahoo.com

The estimated loss to the FDIC Deposit Insurance Fund for the failure of SCB Bank is estimated at $33.9 million.  SCB Bank is the 9th banking failure of 2012 and the first in Indiana.  SCB Bank was owned by its holding company Blue River Bancshares, Inc.