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Failed West Virginia bank's problems arose long before 2020 pandemic

The second bank to fail in 2020 began having problems long before the current pandemic-induced financial crisis began.

Barboursville, W.Va.-based First State Bank was closed by regulators on April 3, costing the Federal Deposit Insurance Corp. a pricey 30.7% of the bank's 2019 total assets. Bank failures since 2015 have cost the FDIC a median of just 16% of assets.

Founded in 1905, the bank had three active branches reporting deposits in the Huntington, W.Va., metro area, according to FDIC data as of June 30, 2019. The bank had been largely run by the Vallandingham family since it was established, most recently appointing Sam Vallandingham to take over from his father Philip in 2013.

According to a 2018 article in the local magazine Huntington Quarterly, Sam's brother Andrew and sister Stephanie also held leadership positions at the bank.

The bank had been troubled since at least 2015 when it was the subject of an FDIC consent order. The bank's Texas ratio, a measure of nonperforming and past due assets as a percent of tangible equity and loan loss reserves, had been above 100% since mid-2013. At the end of 2019, First State Bank had one of the highest Texas ratios in the country.

Before the 2015 order, the bank had also been the victim of fraud by one of its employees. In 2014, a former vice president pleaded guilty to aiding and abetting the misallocation of bank funds, according to a 2014 article in The (Huntington, W.Va.) Herald-Dispatch. Bank officials estimated the fraud cost $1.7 million, the newspaper reported.

On the whole, bank failures in the U.S. have been light in recent years, totaling four in 2019 and zero in 2018. West Virginia had not seen a bank failure since the 2008 closure of Welch-based Ameribank.

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Click here to view a spreadsheet listing all bank failures in the U.S. since 1998.

The deposits and certain assets of First State Bank were assumed by MVB Financial Corp. unit MVB Bank Inc. First State Bank was a unit of First Bankshares Inc. MVB Financial is based in Fairmont, W.Va., and has 11 branches in West Virginia and Virginia.

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