Regulators close SunFirst Bank
 
By Kevin Jenkins
kevin@thespectrum.com
The Spectrum
 
ST. GEORGE — State banking regulators closed St. George-based SunFirst Bank on Friday following a review of the value of the bank's assets, but the three Washington County branches will reopen today under new ownership.

"We just want to get the word out there that everybody's money is safe," Federal Deposit Insurance Corporation Ombudsman Barbara Brunson said Friday evening.

The Utah Department of Financial Institutions closed the troubled bank, which has two branches in St. George and one in Hurricane, and appointed the FDIC as the receiver for the bank's deposits.

The bank failure is the first in Utah this year, and the 87th nationwide as financial institutions continue to cope with the effects of the recession, particularly the collapse of the real estate market. A bank in Nebraska was also closed Friday, but the industry is on track to end the year below last year's peak of 157 closed banks.

To protect the bank's depositors, the FDIC entered into an agreement with Cache Valley Bank of Logan to take over most of the bank's deposits.

"It's a whole-bank transaction," Brunson said, adding that about $15 million of the bank's deposits were frozen before the bank's failure and are being retained by the FDIC pending possible external litigation.

According to an FDIC press release, the three branches will reopen during normal business hours today as Cache Valley Bank and depositors' accounts will automatically transfer to the new bank. The deposits will continue to be insured by the FDIC.

Bank customers can continue to use their SunFirst account checks as if no change had occurred and loan customers should continue to make their regular payments, according to the FDIC release.

As of Sept. 30, SunFirst had more than $198 million in assets and more than $169 million in deposits. Cache Valley assumed all the deposits and agreed to purchase about $177.3 million of the failed bank's assets. The remainder will be retained by the FDIC for now, according to the press release.

"We are fortunate to have strong and vibrant banks in Utah to step in and assist in SunFirst Bank's unfortunate difficulties," said Howard Headlee, president of the Utah Bankers Association.

The FDIC estimates the cost to its Deposit Insurance Fund (DIF) will be $49.7 million.

"Compared to other alternatives, Cache Valley Bank's acquisition was the least costly resolution for the FDIC's DIF," the FDIC said.

Federal regulators issued a corrective action order in July instructing the bank to raise additional capital, form a partnership with another bank or sell the bank after concerns about its falling values.

At the time, Gerry Smith, an adviser to SunFirst's board of directors, said the bank experienced losses in recent years when the area's real estate market collapse led to numerous problems with loans.

The bank was also troubled by a scandal earlier this year when part-owner and Vice Chairman of the Board John Campos was arrested on federal charges of money laundering and violation of gambling laws.

Campos allegedly agreed to process gambling transactions in return for a $10 million investment in the bank, according to the U.S. Attorney's Office. Bank officials denied that Campos acted on behalf of the institution.

Brunson said the $15 million held pending possible litigation relates to the online gambling issue but that she was unable to comment further.

Shares in SunFirst were owned by its holding company, SunFirst Corporation, and were not included in the bank closure or receivership.

Bank customers with questions can call the FDIC at (800) 895-0643 today from 9 a.m. to 6 p.m., Sunday from noon to 6 p.m., Monday from 8 a.m. to 8 p.m., and during normal office hours thereafter.
 
TheSpectrum.com
Originally published November 4, 2011
 
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