FDIC Announces First Bank Failure of Coronavirus Crisis in West Virginia

A West Virginia bank was closed by its state regulator Friday afternoon in the industry's second failure of 2020.

The Federal Deposit Insurance Corp. was appointed receiver for First State Bank in Barboursville. The bank and all four of its branches were assumed by the $1.9 billion-asset MVB Financial in Fairmont, W.Va.

MVB disclosed in a regulatory filing that it paid no premium for the deposits. It bought the branches for about $1.5 million.

First State, with $152.4 million in assets and $139.5 million in deposits, had struggled for several years. Its capital levels fell below legal limits under state and federal law after the fourth quarter, the FDIC said.

Agency officials said the failure was not connected to the recent economic shocks from the spread of the coronavirus. "This bank failure was not a result of the current health emergency," the FDIC said on Twitter Friday. "Financial issues were longstanding."

The FDIC said in a press release that the bank operated with “financial difficulties” since 2015, while agency data shows it hadn’t turned a profit since 2013. In 2019, the bank lost about $3.7 million. Its core capital leverage ratio hovered around 1.30%, much lower than the 11.68% average for banks with $100 million to $300 million is assets.

Despite First State’s small size, the closing is expected to take a meaty bite from the FDIC’s Deposit Insurance Fund; the agency estimated the failure would cost the DIF about $46.8 million, representing nearly a third of the bank’s assets. The hit is the largest since late 2017, when the failure of Washington Federal Bank for Savings in Chicago cost the DIF more than $80 million.

First State’s branches will reopen as MVB locations on Saturday morning during normal business hours. But the agency pointed to guidance from the Centers for Disease Control and Prevention and encouraged customers to follow “social distancing and utilize online and electronic banking capabilities” as the COVID-19 pandemic continues.

West Virginia issued a statewide stay-at-home order last week, leading the FDIC to advise depositors that they enter bank branches only if absolutely essential and after making an appointment with branch staff.

MVB agreed to buy about $147.2 million of First State’s assets. The FDIC said it would hold the remaining $5 million in assets for later disposition.

MVB said in its filing that it bought the assets at a roughly $28.2 million discount to book value. The company said it bought some other real estate owned for 47.5% of their book value.