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State regulators seized a third bank unit of Capitol Bancorp., $31.6 million-asset Central Arizona Bank in Scottsdale, Ariz, in a rare Tuesday failure.
May 14 -
Regulators on Friday seized two banks owned by the $1.6 billion-asset company. The failures could tangle the Lansing, Mich., company in what the Federal Deposit Insurance Corp. calls the cross-guarantee liability, meaning that the agency has the ability to charge Capitol's nine surviving banks with the cost of the failures.
May 10 -
A court deadline this week and the failure of two of Capitol's banks last week have added to the Lansing, Mich., company's increasingly tense bankruptcy.
May 13 -
In its waning hours on June 5, Bank of Lincolnwood sent a state judge an SOS.
June 12
A last-minute legal maneuver bought Central Arizona Bank a few extra days of life before the bell tolled for the troubled unit of Capitol Bancorp.
The Arizona Department of Financial Institutions
"It was delayed through a legal challenge, but the [Arizona banking] superintendent prevailed in the matter," said Greg Hernandez, a spokesman for the Federal Deposit Insurance Corp.
A call to Capitol Bancorp, the bank's $1.6 billion-asset parent, was not returned. The Arizona superintendent, Lauren W. Kingry, did not respond to questions.
The specifics of the legal challenge are unknown. Maneuvers to stop regulators from shutting a bank are rare and rarely successful.
In 2009 the
"The only way to stop a failure, absent doing the things that actually need to get done, is to seek recourse from the courts," says Benjamin Shapiro, an attorney with Roetzel & Andress in Chicago, who represented Lincolnwood in its attempt. "You try to get a delay to get time to bring in some more capital."
Even if a bank is able to find a judge willing to delay its closure, someone has to be found to recapitalize it. Bank seizures, of course, do not happen without behind-the-scenes warnings, so if the bank has not managed to find capital in the months or years it has been struggling, a few extra days likely will not help.
"We've looked many a time of a way to delay it, and you may find a local judge who is willing to sleep on it," says Walt Moeling 4th, a partner at the law firm Bryan Cave. But regulators usually fail a bank after most other options have been exhausted.
"You know the failure is coming, you've been looking for capital, but there is not a thing you can do about it," Moeling said.
Capitol Bancorp, in Lansing, Mich., has been searching for ways to recapitalize its multistate franchise for at least four years. In the absence of fresh equity, the company turned to selling most of its former 64-bank empire to prop up its remaining, struggling banks.
The failure of Central Arizona culminated months of oversight, the Arizona regulator said in a press release.
State officials and the FDIC "have been coordinating the examination and supervision of this bank for months," the press release said. The Arizona regulator "sought the receivership because the bank's financial condition was unsafe and unsound."
Its $21.9 million-asset Pisgah Community Bank in Asheville, N.C., and the $60.8 million-asset Sunrise Bank in Valdosta, Ga., failed last week.
The banking regulator in New Mexico has been pressuring Capitol's Sunrise Bank of Albuquerque to recapitalize itself. After a failed attempt to sell the bank, Capitol infused the bank with $1 million of equity to boost its leverage ratio to more than 4% in February.
The failures jeopardize the organization because the FDIC has the ability to bill survivors for the hits to the Deposit Insurance Fund. However, several of the banks are significantly undercapitalized.
