Unlike most bank acquisitions, which take months to complete, Sunwest Banks takeover of Boise-based Syringa Bank was nearly instantaneous.
Workers on ladders tacked temporary, vinyl Sunwest signs Monday onto Syringas six local offices, likely confusing arriving customers who didnt yet know Sunwest was now holding their money.
Syringa, which has hemorrhaged more than $52 million since 2008, was closed at 6 p.m. Friday by its principal regulator, the Idaho Department of Finance. By prearranged agreement, ownership immediately passed to the Federal Deposit Insurance Corp. as a receiver and then to Sunwest for less than $10 million, an amount equal to 7.5 percent of Syringa deposits.
How does the change affect Syringa customers?
It does nothing immediately. Chris Walsh, Sunwest president and CEO, said all methods for accessing funds and making payments will remain in place, including Syringa checks, ATM cards and direct deposits. Syringa business customers will not see lines of credit interrupted as customers of First Bank of Idaho did when regulators closed the Ketchum bank in 2009 the last time regulators closed a failing Idaho bank.
For Syringa customers, it should be business as usual, Walsh told the Idaho Statesman on Monday.
Sunwest also assumed ownership of nearly all Syringa mortgages and commercial loans.
Some things could change as time goes on. Sunwest is not beholden to Syringas agreements with customers concerning loan conditions, interest rates or certificates of deposits, said LaJuan Williams-Young, FDIC spokeswoman. She said CD rates would probably change, but other rates and agreements would likely stay as they were with Syringa.
What is Sunwest Bank?
Sunwest is based in Irvine, Calif. Syringa is the fifth failed bank that Sunwest has acquired through bids to the FDIC. The strategy has helped Sunwest expand beyond California into Arizona, Washington and now Idaho.
Sunwest is a commercial bank that targets small and midsize businesses. Syringa had a similar business model, making the acquisition attractive, Walsh said.
As of Sept. 30, Sunwest had 10 branches, about $623 million in assets and $543 million in deposits. The bank reported an $11.8 million profit in 2013, about twice as much as the previous year.
Unlike Syringa, Sunwest doesnt sell single-family residential mortgages. It will honor Syringas mortgages but probably stay away from that market in the Treasure Valley, Walsh said.
Unless you do a lot of volume in that business, you cant make money at it, Walsh said. Well probably just maintain the portfolio.
What happens to Syringas troubled assets?
Sunwest will absorb nearly all of Syringas bad loans. Syringa reported $153.4 million in assets Sept. 30. The FDIC is taking over ownership of only about $200,000 worth of assets, Williams-Young said. Sunwest could decide to take those assets, too. The $200,000 is next to nothing compared with the $191 million in bad loans the FDIC assumed as part of U.S. Banks takeover of First Bank of Idaho five years ago. The FDIC bundles the bad loans together and sells them to recoup whatever losses it can.
Sunwest will not have to repay the $8 million Syringa borrowed from the U.S. Treasury as part of the Troubled Asset Relief Program, Walsh said. That debt was forgiven when the TARP receiver, the FDIC, became Syringas receiver after Syringa was closed by regulators, Walsh said.
What will happen to Syringas employees?
Syringa had about 50 employees at its two Boise branches and branches in Eagle, Meridian, Middleton and Lewiston. Walsh said each employee would be evaluated, and while he expected a small number of layoffs, most will remain.
How did Syringa fail?
Syringa has lost money since the Great Recession began as bad loans saddled the banks lending portfolio. Unpaid loans on residential development projects were especially damaging.
In recent years, the bank worked with the Department of Finance to raise enough money to offset losses from bad loans and still meet its obligations, Gee said.
The bank placed $10 million in escrow, but it couldnt raise an additional $10 million that regulators demanded before it could access the money, Gee said. The escrow money was returned to investors in recent months, he said.
Syringa also tried to find buyers, Gee said. Several prospective buyers were interested but none made an offer, he said.
Gee said he decided to close Syringa once its Tier 1 capital, which measures bank stock and cash reserves. fell under 2 percent.
Regulators want banks recovering banks to have more than 10 percent.
(Less than 2 percent) gives you the worst designation, Gee said. They were critically undercapitalized at that point.
The takeover left nothing for shareholders. Stock prices for Syringa Bancorp, the banks parent company, traded for $14 per share in 2007. The stock closed at 2 cents per share on Friday.
Zach Kyle: 377-6464@IDS_zachkyle