Bay National Bank, Ideal Federal closed by federal regulators
Federal banking regulators shut down two troubled Baltimore-area banks Friday, Bay National Bank and Ideal Federal Savings Bank, marking six Maryland banks felled by the collapse of the real estate market.
Bay National’s deposits are being assumed by a new entity called Bay Bank FSB. Its two branches will reopen Monday as Bay Bank branches, the Federal Deposit Insurance Corp. said. Bay National depositors will automatically become depositors of Bay Bank, of Lutherville.
Bay Bank will led by CEO Kevin B. Cashen, a bank consultant and former executive with Chevy Chase Bank and Signet Bank.
Bay National first faced federal regulatory scrutiny 18 months ago, with regulators citing problem loans that drained the bank’s liquidity and capital. Despite talk of turning the bank around by raising new capital and a stock offering, the bank never was able to right itself.
Meanwhile, Ideal was in an “unsafe and unsound condition to transact business and was undercapitalized, with no reasonable prospect of becoming adequately capitalized, ” the Office of Thrift Supervision said.
No other bank was willing to take over Ideal’s operations, the Federal Deposit Insurance Corp. said. The deposits held by the bank will be transferred to the M&T Bank branch at 715 N. Howard Street, where customers can pick up their money.
Hopes were higher for Bay National until it canceled a planned stock offering last month, citing “current public market conditions and the company’s current capital position,” as the reason.
Throughout the bank’s ordeal with regulators, CEO Hugh Mohler has remained quiet. The usually press friendly banker has refused to give interviews in the past three months. He could not be reached for comment Friday.
Mohler, a former Mercantile Bankshares executive, founded the bank in 2000 to focus on business lending in Greater Baltimore fast cash advance loan.
Mohler said in an earlier interview the bank ran into problems when the once hot real estate market in Canton and Federal Hill cooled and borrowers who had taken out loans to rehab houses in those neighborhoods had trouble repaying their loans.
As of March 31, Bay National Bank had $282.2 million in deposits and $276.1 million in deposits.
The bank, which banking regulators considered “critically undercapitalized,” was under orders to raise capital. Bay National Corp., the bank’s corporate parent, said in a May 17 Securities and Exchange Commission filing that there was “substantial doubt” about the company’s and the bank’s ability “to continue as going concerns for a reasonable period of time.”
The shutdown of Bay National will cost the FDIC’s insurance fund $17.4 million, the agency said.
Bay National Bank is the fourth bank in Maryland to be closed by regulators in the past 16 months, and the 87th FDIC-insured bank to be closed in 2010.
The Office of Thrift Supervision approved the charter for Bay Bank Friday. The new bank is owned by Jefferson Bancorp, a new holding company in Washington, D.C.
Bay Bank CEO Cashen said in a statement the bank "has a strong board of directors and management team with deep experience in the local market." No names were mentioned.
Ideal had a single branch, on Druid Hill Avenue, two employees, assets of $6.3 million and deposits of $5.8 million.
The minority-owned bank was opened in 1920 to serve Baltimore’s African-American community.