For the third time this year, the Federal Deposit Insurance Corp. took over a small, money-losing, Philadelphia-area bank and sold it to another local institution.
Friday's victim was Earthstar Bank in Southampton, Bucks County, which was founded in 2001 and grew quickly to $187 million in assets before bad loans got the better of it. Losses eroded Earthstar's capital to $2.2 million at the end of September from $15.6 million four years earlier.
The buyer was Polonia Bank, a Huntingdon Valley institution with $214.7 million in assets that was founded in 1923 in Philadelphia. It has five branches.
Earthstar's four branches will open Saturday as Polonia branches, the FDIC said. Polonia is assuming Earthstar's $104.5 million in deposits without paying a premium.
Polonia agreed to buy $77.1 million of Earthstar's $112.6 million in assets, but the FDIC will share in any losses on $45.8 million of them.
The FDIC estimated that the failure of Earthstar, which was founded by Philadelphia-area investors that initially contributed $8 million in capital, would cost the Deposit Insurance Fund $22.9 million.
While Earthstar had a substantial chunk of its loans in riskier commercial real estate, including construction and development loans, Polonia stuck to plain-vanilla mortgages and home equity loans.
The FDIC on Friday also closed Paramount Bank in Farmington Hills, Mich. Level One Bank in the same city assumed Paramount's $213.6 million in total deposits and bought most of Paramount's $252.7 million in assets.
So far this year, the FDIC has closed 151 institutions. Last year's total was 140.
The two area banks closed earlier were Allegiance Bank of North America, Bala Cynwyd, on Nov. 19, and ISN Bank, Cherry Hill, on Sept. 17. Vist Financial bought Allegiance, and New Century Bank bought ISN.