Office of the Commissioner of Financial Regulation

 

Resolution of NBRS Financial Banks Frequently Asked Questions (FAQs) - October 2014

 

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  • All questions from the media should be directed to Maureen O'Connor, Communications Director, DLLR at 410-913-4061 (c) or Maureen.oconnor@maryland.gov
  • Consumers with questions about deposits or loans should contact Howard Bank toll-free at 844-862-7061.
  • All questions regarding the receivership should be directed to the FDIC toll-free number is 800-930-1848.
  • All questions from the bank and counsel should be directed to the Office of the Commissioner of Financial Regulation's legal counsel, Sandy Small at 410-230-6122 (w), 443-759-0191 (c), or Sandra.Small@maryland.gov

What happened today with NBRS FINANCIAL BANK

  • At 6:00 p.m. on October 17, 2014,, Maryland Acting Commissioner of Financial Regulation Gordon M. Cooley took possession of NBRS Financial Bank, Rising Sun, Maryland ("NBRS"), and the FDIC was immediately appointed as receiver.
  • Howard Bank assumed all deposits and purchased most of the assets from the FDIC.
  • ALL deposits are being assumed by HOWARD BANK and ALL branches will open as scheduled. There will be no losses to depositors or interruption of services.

What does this closure mean for NBRS customers?

  • Most importantly, no depositor will lose a penny.
  • NBRS depositors will automatically become customers of HOWARD BANK, and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks in the same manner as before. Depositors and borrowers with questions can contact Howard Bank toll-free at 844-862-7061until 9:00 p.m. ET this evening, on Saturday, October 18th from 8:30 a.m. to 5:30 p.m. ET, and thereafter Monday through Friday from 8:30 a.m. to 5:30 p.m. ET.
  • Inquiries from NBRS customers or the general public about the closing of NBRS and the receivership can call the FDIC toll-free at 800-930-1848, Friday, October 17th until 9 p.m. Eastern Time ("ET"), Saturday, October 18th from 9 a.m. to 5 p.m. ET, Sunday, October 19th from 12 p.m. to 5 p.m. ET, and thereafter from 8 a.m. to 5 p.m. EDT, or go to the website established by the FDIC.

What is the FDIC's role as receiver?
The FDIC's role and responsibilities as receiver are defined by the Federal Deposit Insurance Act of 1950. The FDIC expedites the liquidation process for banks in order to maintain confidence in the nation's banking system and to maximize the cost-effectiveness of the receivership process to preserve the Bank Insurance Fund.

Why did NBRS close?
NBRS's capital had declined to an unsound level as a result of losses (primarily driven by higher loan charge-offs related to nonperforming assets) that decreased capital. Without sufficient capital, NBRS did not have the financial strength to operate safely.

What did the Office of the Commissioner do to try and prevent this closure?

  • The Commissioner and the Federal Reserve Bank of Richmond originally identified deficiencies that resulted in a formal enforcement action in January, 2010. The Written Agreement  required NBRS to address regulatory concerns These actions were intended to help focus NBRS's board of directors and management attention on the regulatory concerns, and provide a road map for NBRS to return to sound financial condition.
  • The Commissioner and Federal Reserve Bank of Richmond monitored NBRS's progress through joint examinations conducted at least annually, as well as joint on-site visitations conducted every 6-months.
     
    Further, the Commissioner and Federal Reserve Bank of Richmond conducted off-site monitoring, including bi-weekly, and more recently weekly teleconference calls with management and the chairman of the board, and met many times with the Board to discuss the deteriorating capital, need for additional capital, prospect of a sale, and the impact of the eroding capital on NBRS's viability.

What are some of facts about NBRS FINANCIAL BANK?

  • As of June 30, 2014, NBRS had total assets of approximately $188 million, and total deposits of approximately $183 million.
  • NBRS was wholly-owned by Rising Sun Bancorp, Inc., a one bank holding company based in Rising Sun, Maryland. NBRS was headquartered at 6 Pearl Street, and had 5 branches - Rising Sun, Aberdeen, Elkton, and Street, Maryland, and Peach Bottom in Pennsylvania.
  • Chartered as a national bank in 1880, NBRS converted to a Maryland charter in 2002.

What is the recent history of bank closures?

  • NBRS is the 22nd bank nationwide to be closed this year.
  • In Maryland, NBRS is the second bank to be closed this year.
  • This is the 4th Maryland-chartered bank to be closed since 1992.

Are other banks in Maryland safe?

  • All banks, whether state-chartered or national banks are subject to oversight by their primary regulator. The Commissioner and the Federal Reserve Bank of Richmond (if the bank is a member bank), or the FDIC (if the bank is a nonmember bank) perform detailed safety and soundness examinations of all Maryland-chartered banks every 12 to 18 months.
  • The overwhelming majority of Maryland-chartered banks are "well capitalized", the highest of the 5 federal regulator-defined capital categories used to describe a bank's capital strength 
  • MOST IMPORTANTLY, bank depositors can rest assured that every bank in Maryland, regardless of charter, is required to have FDIC insurance, which covers up to $250,000 per depositor.

Many banks in Maryland have a concentration in real estate. If this is what caused NBRS to fail, is this failure one of many?

  • Like most community banks around the country, many banks in Maryland, including NBRS, have concentrations in commercial real estate.
  • Banks do not fail because of loans concentrations, rather banks fail because of insufficient capital. Capital serves as a buffer to absorb unexpected losses. Concentrations increase a bank's risk for unexpected losses, such as the most recent decrease in real estate values.
  • NBRS failed due to insufficient capital.
  • While this failure is unfortunate, we have seen signs of improvement in Maryland's economy, which is generally a good sign for banks located in Maryland. Examples of this improvement include the infusion of new, private capital enabled First Mariner to be successfully acquired, and several Maryland-chartered banks such as Old Line Bank, Shore Bancshares, and EagleBank successfully raised capital through public offerings.

How does a bank lose money?

  • A bank invests its funds primarily in loans, and secondarily in investment securities. A bank regularly takes an expense for loan losses.
  • When the bank's expenses exceed revenue, the bank loses money.
  • This loss is deducted from capital, and after successive years of losses without an infusion of additional capital, a bank becomes undercapitalized.

RESOURCES CONCERNING INSURED DEPOSITS:

  1. Is My Account Fully Insured 
  2. Are my deposits insured? What are the deposit insurance limits?
  3. Your Insured Deposits and Frequently Asked Questions (FDIC)
  4. Electronic Deposit Insurance Estimator (FDIC)
  5. Insured or Not Insured (FDIC)
  6. How do I get help with a specific deposit insurance question?
  7. When a bank fails (FDIC)
  8. Borrowers guide to bank failures (FDIC)