Regulators shut down South Carolina's only minority- owned bank over the weekend and sold its deposits and some assets to African-American investors.

Victory State Bank, a $14 million-asset, one-office institution in Columbia, had a capital ratio of less than 2% when it was closed by the Federal Deposit Insurance Corp. According to the FDIC, the bank was beset by "excessive insider compensation" and bad loans.

The FDIC received 14 bids for the failed institution's holdings. The winning bid was made by a group of 50 local investors, nearly all of whom are African-American. It obtained a state bank charter over the weekend and opened Monday as South Carolina Community Bank. Historically black Benedict College owns the largest chunk of the new bank, about 20%.

David H. Swinton, president of Benedict College and chairman of the new bank, said he wants to build South Carolina Community to $250 million to $500 million of assets within 10 years by reaching out to the state's "underserved" minority communities.

"We will be able to see the opportunities that other banks-who are more distant and much, much larger-are not really able to," Mr. Swinton said in an interview. "We do have a niche market and are very much interested in exploiting that niche."

Victory State was the first federally insured financial institution to fail since Q Bank of Fort Benton, Mont., in August. Tom Felder, a small- business lending expert with NationsBank, will serve as the new bank's interim president until a permanent chief is named.

The FDIC retained Victory's $1.7 million in nonperforming assets and sold the remaining $12.2 million to South Carolina Community's owners for a premium of $404,000. The new bank also will assume Victory's $11.6 million of deposits, which are spread through 1,500 accounts. The FDIC does not expect the receivership to affect the Bank Insurance Fund.

Founded in 1921, Victory suffered substantial operating losses in recent years. At closing, about 12% of its assets were nonperforming. But an FDIC spokesman said "compensation paid to the chairman is the main cause of the operating loss."

In July, the failed bank consented to a cease-and-desist order from the FDIC, which charged the bank with unsafe management practices, excessive bad loans, hazardous lending practices, and inadequate loan-loss reserves. It also said the bank could not compensate Timothy R. McConnell-its president, chief executive officer, board chairman, and majority shareholder-more than $100,000 per year. Mr. McConnell could not be reached for comment.

Victory was one of only 54 African-American owned banks and thrifts nationwide, said William Michael Cunningham, CEO of Creative Investment Research, an investment advisory firm. Victory was the smallest black-owned bank in the country, Mr. Cunningham said.

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