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April 4, 2020, 4:22 p.m. EDT

FDIC closes small West Virginia bank, moves deposits to MVB Bank

FDIC officials said the failure was not connected to the recent economic shocks from the spread of the coronavirus

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By Greg Robb, MarketWatch


AFP/Getty Images

A small bank in West Virginia has failed and been taken over by the FDIC after experiencing difficulties since 2015 and its 2019 capital levels were too low, the Federal Deposit Insurance Corp. announced Friday.

FDIC officials said the failure was not connected to the recent economic shocks from the spread of the coronavirus.

The First State Bank of Barboursville with $152 million in total assets was closed Friday by the West Virginia Division of Financial Institutions. The bank’s $139.5 million in deposits will be acquired by MVB Bank Inc. of Fairmont, W.Va. The four branches of The First State Bank will reopen as branches of MVB Bank on Saturday, the FDIC said.

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

MVB Bank was founded in 1999 with headquarters located in Fairmont, West Virginia. It handles $2 billion in assets along with deposits totaling $1 billion.

“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 bite from the FDIC’s Deposit Insurance Fund. The FDIC 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 was expected to reopen as MVB locations on Saturday 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.

During the “Great Recession” caused by the 2008 financial crisis, more than 400 banks shut down.

Greg Robb is a senior reporter for MarketWatch in Washington. Follow him on Twitter @grobb2000.

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