Vantas Bank in Iowa could become the first banking casualty in the state as a result of this recession, and the first since 2000. The bank was founded in 1923.
Bad loans are the primary culprit with Vantas Bank, and those loans are mostly related to loans made to homebuilders Regency Homes as well as Equitable Building. Regency was the largest homebuilder in Iowa before its failure in 2008.
After the bank released its last quarterly report, it was found that capitalization levels were less than half of what federal regulators look for, and so a cease-and-desist order was filed against Vantus’ parent company First Federal Bankshares on July 31 by the Office of Thrift Supervision.
After submitting a plan to secure further capital to bring its levels up, the OTS didn’t accept the plan, finding it “unacceptable.” Thus the cease-and-desist order.
What that means is now the bank must raise the necessary funds to bring capital to the required levels; either through being bought by or merging with another business entity. They have a deadline of September 30 to make it happen, according to a filing with the U.S. Securities and Exchange Commission.
Vantus has been contacted by the Office of Thrift Supervision that there will be an issuance of a Prompt Corrective Action Directive.
What that means is a regulator is empowered to appoint a receiver to start searching for a buyer for the bank; in most cases the regulator is the FDIC.
Also coming with the Prompt Corrective Action Directive is a number of restrictions concerning former practices which now must be approved before partaken in.
Some of those restrictions involve which loans are allowed to be issued, rates on deposits, forgiving loans, and any merger or acquisition proposal, among other things.
Banks under these circumstances have been closed soon after the directives.
As of the quarter ending June 30, Vantus Bank lost $17.7 million, with an annual net loss of $18.6 million. Last year the net loss for the same quarter was $22.2 million.
Vantus holds a little over $500 million in assets as of June 30.
