East banks take strike three.

• Position: Eastern

In June, the N.C. Office of the Commissioner of Banks shuttered Waccamaw Bank, the first financial institution in the state closed by regulators this year. The Whiteville-based bank's demise makes three failures in the East since the recession began, more than in any other region of the state. Waccamaw's former headquarters is about 45 miles west of Wilmington, where regulators closed Cape Fear Bank and Cooperative Bank within months of each other in 2009. "It's a geographic footprint problem," says Ray Grace, acting commissioner of banks. The value of coastal real estate skyrocketed during the early and mid-2000s, leaving banks with unmanageable development loans when the market bottomed out. The only other two bank failures in North Carolina since the recession occurred in the mountains ("Out of Order," June 2011, mid Regional Report, December 2011).

[ILLUSTRATION OMITTED]

Nearly 15-year-old Waccamaw's capital levels deteriorated amid mounting troubled assets, which totaled $50.9 million as of March, according to Bank Tracker, an American University investigative project. That gave it a troubled-asset ratio well above the national median. Federal Deposit Insurance Corp. was named receiver of Waccamaw, and Bluefield, Va.-based First Community Bancshares Inc, acquired its 16 branches, $515 million of its $533 million in assets and $428 million in deposits.

FDIC is suing executives and directors of Cape Fear and Cooperative, though it's too soon to know if it will follow suit against Waccamaw. The regulator alleges. Cape Fear's leaders engaged in speculative growth centered on commercial real estate and opened five branches that were not properly monitored, according to the suit, which claims that those decisions cost the Deposit Insurance Fund $141 million in losses. The FDIC wants even more money from Cooperative officials. In 2001, the bank, which was more than 100 years old, started an aggressive expansion effort to reach $1 billion in assets. The suit cites a "lax loan-approval process" as a main factor behind its demise.

[ILLUSTRATION OMITTED]

WORKING CAPITAL EASTERN Employed: 1,028,997 YTD change: 16,682...