Suburban Federal Savings Bank's hope for survival is dissipating.
The deeply troubled thrift in Crofton, Md., has until Friday to find an acquirer that would restore it to adequate capitalization, under an order from the Office of Thrift Supervision. The $354 million-asset Suburban had not announced a deal by late Wednesday, and officials there did not return a call seeking comment on whether one might be imminent.
If regulators opt to shut down Suburban, it would be the first bank or thrift failure in Maryland since 1992.
The thrift had a deal with Aegon NV, but the Dutch insurance giant terminated it last month.
Aegon is among the handful of insurers that announced plans to acquire a bank or thrift so they could qualify for a capital infusion through the Treasury Department's Troubled Asset Relief Program. But Aegon said on Dec. 15 that, after strengthening its capital position, it decided against seeking Tarp funds after all. It withdrew an application for a thrift charter and abandoned the idea of acquiring Suburban.
Aegon had applied for the capital through Transamerica Corp., its U.S. subsidiary, but questions had been raised about whether it would be eligible to participate. The government program's terms disqualify financial institutions controlled by a foreign company.
Suburban has been operating under a cease-and-desist order since March, but its condition has worsened since then as the real estate crisis deepened.
The thrift reported that 11.45% of its loans were noncurrent at Sept. 30, up from 4.43% a year earlier, according to Federal Deposit Insurance Corp. data.
With a total risk-based capital ratio of 3.09% at Sept. 30, it is considered critically undercapitalized.
Kenneth Thomas, an economist and bank consultant in Miami, said that, with a new administration in Washington, it is difficult to say how regulators might handle Suburban. But given that its problem loans have reached the double digits, he said that its prospects for survival look dim.
"It's hard to be optimistic about a situation like that," he said.
Five other insurance companies — Genworth Financial Inc., Lincoln National Corp., Hartford Financial Services Group Inc., Phoenix Cos. Inc., and Protective Life Corp. — have deals in the works to acquire a troubled bank or thrift so they could qualify for Tarp funds.
Genworth has a deal for the $895 million-asset Inter Savings Bank in Minneapolis; Lincoln has one for the $7 million-asset Newton County Savings Bank in Goodland, Ind.; and Hartford has one for the $637 million-asset Federal Trust Corp. in Sanford, Fla. Phoenix has a letter of intent to acquire the $194 million-asset American Sterling Corp. in Sugar Creek, Mo., and Protective Life has one for the $242 million-asset Bonifay Holding Co. Inc. in Florida. All five of these acquisition targets have been struggling for survival.
Each deal hinges on the insurance company's getting approval for a government capital infusion. None had done so by Wednesday, though all but Genworth have regulatory approval to become a bank or thrift holding company.
Genworth said Jan. 15 that its application was still being considered by the OTS; it has given no updates since.
But Jan. 15 was the deadline the Treasury set for publicly traded companies to get bank or thrift holding company approval and be eligible for a capital infusion. An OTS spokeswoman confirmed Wednesday that Genworth's application is still pending. She said it would no longer be able to qualify for Tarp, since it had not received holding company approval yet. But an OTS spokesman recanted that Thursday, saying Genworth has applied for an extension of the Jan. 15 deadline. "The door isn't closed at this point," he said. Calls to the Treasury went unanswered.
