Regulators close bank in Otsego

Federal and state regulators on Friday closed another Minnesota bank - this one in the northwest Twin Cities metro.

The two branches of Riverview Community Bank of Otsego, which had about $108 million in assets at the end of August, will reopen Saturday as branches of Stillwater-based Central Bank.

Central Bank had $431 million in assets as of June 30. But three recent acquisitions will push Central Bank over the $1 billion mark. The bank picked up eight Twin Cities locations from the failed Mainstreet Bank of Forest Lake in September as well as Jennings State Bank's Stillwater and Spring Grove locations this month.

Riverview brings the number of U.S. banks to fail this year to 106. It is the fifth bank in Minnesota to fail this year. A sixth, South Dakota-based BankFirst, was owned by a Minneapolis parent and operated a branch there.

Horizon Bank in Pine City, Forest Lake-based Mainstreet Bank, Brickwell Bank in Woodbury and Jennings State Bank of Spring Grove have also been closed by regulators this year.

Riverview Community Bank slipped into critically undercapitalized territory last quarter, reporting a core capital ratio of 1.94 percent and a loss of $3.2 million.

When Riverview opened in March 2003, co-founder Chuck Ripka told the Pioneer Press that God told him to get the bank going.

"He said, 'Chuck, if you do all the things I told you to do, I promise you I will take care of the bottom line,"' Ripka said in 2004.

And for a while, that was true. As a startup, Riverview expanded faster and became profitable more quickly than its peers at the time.

In 2005, three bank workers were killed in an office building the bank occupied in Ramsey after a wrongly installed pipefitting led to a gas leak and explosion.

But the bank's heavy real estate lending focus proved to be its downfall. As of June 30, 90 percent of the bank's loan portfolio was classified as real estate, and commercial real estate represented the biggest chunk.

Riverview reported its last profit in September 2007. Mary Kiffmeyer, former Minnesota secretary of state, was on the bank's board of directors, according to the Minnesota Bankers Association's bank directory.

The bank had a large chunk of problem loans. Assets in nonaccrual status - loans no longer generating interest for the bank - stood at $6.5 million at the second quarter. Net charge-offs, which are loans the bank has written off as uncollectible, were almost $2 million.

Riverview might not be the last bank in the state to fail.

At a hearing earlier this month, regulators from the Minnesota Department of Commerce revealed that 71 of the state's banks - or 22 percent of the total - are on an internal watch list. That's up from 65 in the spring.