Failed Andover bank under new ownership

1st Regents Bank of Andover has been locally owned since it opened in 2001. That changed Friday (Jan. 18).

The Minnesota Department of Commerce closed 1st Regents Bank in Andover Jan. 18, but the bank remains open under the new ownership of First Minnesota Bank. Photo by Eric Hagen

The Minnesota Department of Commerce closed 1st Regents Bank in Andover Jan. 18, but the bank remains open under the new ownership of First Minnesota Bank. Photo by Eric Hagen

First Minnesota Bank, which is based in Minnetonka, reached a purchase and assumption agreement with the Federal Deposit Insurance Company (FDIC) to buy 1st Regents Bank after the Minnesota Department of Commerce closed the bank.

1st Regents Bank Jan. 18 became the first Minnesota bank to fail in 2013. The last FDIC-insured bank failure in Minnesota was First Commercial Bank in Bloomington in September 2012.

The bank’s drive-through re-opened Saturday (Jan. 19) under normal business hours, but the lobby did not re-open until Tuesday (Jan. 22) due to the Martin Luther King, Jr. holiday.

First Minnesota Bank’s name will be on the building and bank statements and letters, but customers will still pay off their loans as usual, the automated teller machines and online service will remain available, checks will be processed and direct deposits and automatic withdrawals will be transferred to the new bank.

Deposits will continue to be insured by the FDIC, so there is no need for customers to change banks in order to retain their deposit insurance coverage up to applicable limits, the FDIC stated.

“Customers really won’t notice any difference in their banking,” First Minnesota Bank owner Lowell Wakefield said.

Wakefield said all the current employees will be retained.

Mayor Mike Gamache said 1st Regents Bank was one of the first developments that came in when the Bunker Lake Boulevard business corridor was being redeveloped.

“It’s never a positive thing. They’ve been a good, strong business for a long time,” said Peter Turok, executive director of the Anoka Area Chamber of Commerce of which 1st Regents Bank was a member.

First Minnesota Bank was first chartered as First National Bank of Glencoe in 1881. In 1995, the First National Bank of Glencoe merged with First Bank of Minnesota of Hutchinson and became First Minnesota Bank.

Andover will be its 12th branch location and the only bank it has purchased through the FDIC, according to Wakefield.

First Minnesota Bank purchased a bank on the private market 18 months ago in Mound. Its closest location to Andover is in Champlin.

“We’re very pleased to have the opportunity to come into this area,” Wakefield said. “We’re very optimistic.”

First Minnesota Bank paid the FDIC a premium of 2 percent to assume the deposits, according to the FDIC.

Wakefield said 1st Regents Bank appears to have had a good customer base and good deposit base over the years. He said the loan portfolio still appears to be good and the location is in an area that is still developing, so there is a lot of future growth potential.

First Minnesota Bank has had a secondary mortgage division for many years that it will be bringing to Andover. It also has a sizeable Fannie Mae loans portfolio in which people in the Andover area may be interested, according to Wakefield.

Customers with a Fannie Mae loan through First Minnesota Bank could make payments at the bank. The loans are not sold off, Wakefield said.

The agreement that First Minnesota Bank reached with the FDIC was to assume all deposits and essentially all the assets of 1st Regents Bank. 1st Regents Bank had approximately $50.2 million in total assets and $49.1 million in total deposits as of Sept. 30, 2012, according to the FDIC.

First Minnesota Bank had assets of $392 million as of September 2012.

Information from the banks’ Dec. 30, 2012 financial statements was not available because financial institutions have one month after the end of a quarter to complete financial reports.

What went wrong?

From the beginning of 2008 through the end of September 2012, 1st Regents Bank had aggregated losses totaling approximately $10.7 million, largely due to troubled loans, according to the Minnesota Department of Commerce.

The bank’s provisions for loan and lease losses during that period were approximately $8.4 million, a department of commerce email stated.

The department of commerce also noted that the Tier 1 Leverage Capital ratio fell below 2 percent for the quarter ending Sept. 30, 2012. The bank thus met the FDIC rules and regulations definition of “critically undercapitalized.” When 1st Regents Bank was unable to correct the issue, it closed.

According to reports on the FDIC website, the leverage capital ratio for 1st Regents Bank was 1.61 percent on Sept. 30, 2012. In prior years, the ratio was 2.81 percent in September 2011, 5.54 percent in September 2010, 8.77 percent in September 2009, and 12.24 percent in September 2008.

1st Regents Bank was owned by Alliance Bank Shares Corporation, which has an Andover address not far from the bank.

Eric Hagen is at eric.hagen@ecm-inc.com

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