The River Bank, Wyoming, Minnesota, was closed today by the Minnesota Department of Commerce. The FDIC was appointed as receiver and sold the failed bank to Central Bank, Stillwater, MN. All deposits of The River Bank will be assumed by Central Bank.
The River Bank was originally founded as The Bank of Osceola by businessman Charles Oakey in 1894. In 1995 the Bank changed its name to The RiverBank. Business gradually expanded as The RiverBank opened new branches, purchased the Chicago State Bank in 1999 and expanded mortgage lending activities.
In 2002, The RiverBank built an impressive new building for their “Financial Store” which featured an espresso bar where customers could apply for mortgages. In 2006 at the peak of the real estate market, The RiverBank opened another financial store. A bank that survived numerous economic downturns, wars, business panics and the Great Depression of the 1930’s would soon wind up failing, the victim of aggressive lending policies and a real estate collapse.
The RiverBank massively expanded its loan portfolio during the real estate boom. Total assets of The RiverBank grew from about $100 million in 2005 to almost $500 million in 2008. In the aftermath of the financial crisis and subsequent crash in real estate values, The RiverBank experienced rapid deterioration in its loan portfolio and delinquencies soared. The latest figures show that The RiverBank had a troubled asset ratio of 414% which made a financial recovery impossible. The majority of institutions with a troubled asset ratio in excess of 100% wind up failing.
The RiverBank was issued a cease and desist order by the FDIC in March 2009. Regulators cited The RiverBank for numerous regulatory and financial weaknesses, including “operating with a board of directors that has failed to provide adequate supervision over management, operating with an inadequate level of capital, operating with an inadequate allowance for loans and lease losses, engaging in hazardous lending and lax collection practices and operating with inadequate policies to monitor and control asset growth.”
At June 30, 2011, The RiverBank had total assets of $417.4 million and total deposits of $379.3 million. The Central Bank agreed to purchase all of the assets of The RiverBank, subject to a loss-share agreement with the FDIC that covers $339.3 million of the assets purchased.
All six branches of The RiverBank will reopen on Saturday as branches of Central Bank. Central Bank was chartered in 1988 and is an independent locally owned bank with approximately $800 million in assets. Central Bank previously acquired 5 other failed banks.
The RiverBank closing will cost the FDIC Deposit Insurance Fund $71.4 million. The RiverBank is the nation’s 75th banking failure and the second in Minnesota.