The First State Bank in Barboursville, West Virginia, is amongst the first financial entities to shut down operations during the COVID-19 outbreak. The Federal Deposit Insurance Corporation (FDIC) announced the news yesterday, noting that it has brokered the sale to MVB Bank.
West Virginia Bank Shutting Down
The West Virginia state regulator closed the First State Bank in Barboursville yesterday. The FDIC was appointed receiver and later brokered the sale of all assets and all four branches to the $1.9 billion-asset MVB Financial in Fairmont, West Virginia.
MVB bank paid no premium for the deposits, according to a regulatory filing. All branches will open today as MVB locations, operating in regular business hours. The agency, however, informed that customers have to follow the “social distancing and utilize online and electronic banking capabilities,” as the COVID-19 pandemic continues.
The coronavirus is affecting world economies, stock markets, businesses, and some financial entities. However, the FDIC reassured that the First State Bank’s closure is not related to the novel virus:
“This bank failure was not a result of the current health emergency. Financial issues were longstanding.”- FDIC Gov Tweeted.
The West Virginia bank struggled with serious financial difficulties since 2015, the agency added. Even more, it hadn’t turned a profit since 2013. Only in 2019, the bank lost about $3.7 million. Its core capital leverage ratio hovered around 1.3%, which is significantly less than other banks in the same asset group – 11.68%.
The First Of Many?
The First State Bank’s closure might not be directly linked to the COVID-19 outbreak, but the world is feeling the effects. Over 1.1 million confirmed cases, close to 60,000 deaths in just a few months.
To retain the novel virus, governments are implementing lockdowns, and people have to stay home. Consequently, this means closed businesses, a lot more jobless citizens, and drastically lower consumption.
Prominent experts and commentators are hinting that the next financial crisis is coming if it’s not here already. They also refer to the recession of 2008, and some even warn that this one will be much worse.
During the 2008 financial crisis, over 400 banks shut down because of the economic calamity, including the giant Lehman Brothers. Hundreds of others had to be bailed out from governments. Now, the tourist sector seems to be the most harmed as significant airline companies are requesting bailouts. However, if the situation worsens, more banks could follow shortly.
Needless to say, the peer-to-peer nature of Bitcoin and other cryptocurrencies exists to prevent situations of the kind. Bitcoin’s network is designed in a way that doesn’t require intermediaries or third-parties such as a bank to operate and, as such, it emerges as an alternative.