Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, March 7, 1992 TAG: 9203070138
SECTION: BUSINESS PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Medium
The savings and loan was broken into pieces and sold to 10 Virginia competitors.
CorEast depositors may conduct business with the bank which acquired the deposits of their CorEast branch. All checks drawn on CorEast accounts will be honored.
Depositors were advised, however, to visit their new institution during the next several weeks to discuss continuation of specific services.
Most of the deposits in the Roanoke Valley went to First Virginia Bank-Southwest. All the Roanoke CorEast branches will close, except for one on Colonial Avenue which will do business as First Virginia. Other accounts will be transferred to First Virginia branches.
Resolution Trust Corp. sold 63,000 insured consumer accounts to the 10 separate financial institu The ultimate cost to taxpayers of the government's seizure, holding and sale of CorEast is estimated at $225 million. tions.
RTC said uninsured deposits are "believed to be nominal." They consist primarily of accrued interest on deposits exceeding the $100,000 limit on federal deposit insurance.
The government will pay off deposits of brokers and other similar insured deposits directly. Checks will be mailed this weekend for a total of another $47.5 million.
RTC said 13 of CorEast's 29 offices statewide will remain open. Accounts at the other 16 branches will switch to a branch at another bank.
RTC said it has received payments totaling $4.7 million for sale of the insured deposits.
It will advance about $360 million to the acquiring banks and retain about $445 million of CorEast's assets. It said it expects to recover a portion of its advance through the sale of assets.
The ultimate cost to taxpayers of the government's seizure, holding and sale of CorEast is estimated at $225 million.
RTC solicited 546 bids and received 16 proposals. It said accepting the bids was the least costly resolution of CorEast's failure.
First Virginia Bank Group, headquartered at Falls Church, paid $2.87 million for 32,304 accounts totaling $280 million.
Central Fidelity Bank of Richmond purchased $18 million in 1,929 accounts at the Blacksburg branch, paying $445,000.
Eight Richmond branches went to a variety of competitors.
Douglas Waters, Roanoke regional executive officer for NationsBank, said the purchases "almost by definition have no net effect" on the competitive situation locally.
First Virginia stresses consumer deposits, he pointed out, so it has a natural interest in consumer business at a thrift. And Central Fidelity has been aggressive in its growth objectives in Southwest Virginia, Waters said.
Even so, Waters said, the purchases do not change the overall deposit picture in the Roanoke Valley. "I don't think it's going to change the competitive marketplace."
But he said it's a good thing for the valley for the business to move from government control into the hands of private banks. Government control distorts the marketplace, he said.
But it may be bad news for CorEast depositors. Waters said RTC has paid higher-than-average interest in order to retain deposits at CorEast. He said those rates should fall back to the general market level.
David Caudill, president of Dominion Bankshares Corp., said the purchases will not affect other banks in southwest Virginia. It's a share that other competing banks don't have, he said.
CorEast was founded in 1917 as Roanoke Mutual Building & Loan Association.
Renamed First Federal Savings & Loan Association in 1935, it grew into one of Roanoke's largest financial institutions.
In 1979, First Federal converted from a mutual association, owned by its depositors, into a stock company, owned by investors.
In the mid-1980s, a group of investors from New York, New Jersey and California began to speculate in First Federal stock. Their share was estimated variously at 12 to 22 percent of outstanding shares.
Arthur Cohen, a New York real estate developer who already owned Colonial Savings & Loan Association in Richmond, began buying the stock in 1985. By the following April, Cohen acquired all of the stock and owned First Federal outright. The Roanoke thrift began to invest in New York real estate projects.
The name CorEast was born when Cohen merged his Roanoke and Richmond thrifts in May 1988.
Federal regulators seized CorEast on Feb. 1, 1991. They attributed its problems to "over-concentration" in New York apartment conversions, a market that had deteriorated, and to its large concentration of brokered deposits at high interest rates.
CorEast had lost $50 million for its last full fiscal year. Its ratio of capital to assets, the most usual measure of capital strength, was a negative 2.5 percent.
Two other thrifts with Roanoke branches, Trustbank and Investors, remain under supervision of the RTC.
by CNB