Greystone Bank has voluntarily called it quits.
Around midday Friday, David Rupp, the bank's chief executive, handed over Greystone's charter with only a $700 loan remaining on the balance sheet. Though it was an unfortunate end to the six-year-old community bank in Raleigh, N.C, Rupp seems almost relieved after spending two grueling years liquidating the $720 million-asset bank.
"The work is mentally challenging" but "it's very satisfying for us in a strange way," Rupp said in an interview Friday. "We're satisfied that we did the right thing."
Greystone was like many struggling banks that had hoped to hit an economic rebound but are quickly running out of options. Very few of those banks have voluntarily handed over their charter.
Thad Woodard, the president and chief executive of the North Carolina Bankers Association, said that Greystone has done "a very honorable thing" by winding itself down. "As far as we know, it was the first liquidation of its kind in the country," he said. "I don't know what it saved the FDIC in the end …but I'm sure it was major, major millions."
Woodard said while other struggling banks may consider such a liquidation, it was easier for Greystone to do it because it had only one shareholder to approve the plan.
New York businessman David Rosenberg had formed and capitalized the bank with $10 million in 2005. At the time, the business plan was to use wholesale deposits to fund a portfolio entirely of multifamily mortgages. That model, which was totally dependent on the housing market, was doomed by the recession and eventually became a black mark to bank buyers when Greystone tried to sell itself.
"It was a good idea at the time but the business model fell out of favor and then it hit a double whammy of the severe financial crisis," Rupp said. Now "if you're not diversified, then your core competency and core platform of the banking model comes into question" by both the market and regulators.
Management and the board decided it was time to either sell or liquidate the bank within a month after Rupp joined the bank in late 2009. With no buyer wanting to pay what Rupp called a "reasonable" price, they began to liquidate everything.
"It took literally twice as long as we thought" partly because of the prolonged economic downturn and "we thought we would move the loans a little faster," he said. "But with these things, you learn as you go and you find it's tough to the finish."
The bank went through every single loan on the books and slowly worked down the assets mostly through refinancing as well as individual and bulk loan sales. The proceeds from those sales were used to refund their online certificate of deposits as it came due.
Despite a regulatory scrutiny on the bank's business model, Rupp praised the state regulator and the FDIC for helping them through an unprecedented liquidation process.
Greystone's last $700 loan will be repaid on Monday. Though Rupp will be unemployed, along with 40 other employees, he has not sworn the industry off entirely. "I'm certainly interested in staying in the banking business," he said.