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North Carolina's Cape Fear Bank closed by regulators

North Carolina suffered its first bank failure of the financial crisis last week, but officials still expect the state's financial institutions to fare better than those in areas facing deeper real estate crunches.

State banking regulators on Friday closed Wilmington-based Cape Fear Bank after loan losses ballooned and its capital levels fell below regulatory requirements. Its eight branches reopened Monday under the ownership of Charleston-based First Federal Savings and Loan Association, which agreed to assume most of its deposits and assets.

Cape Fear is an example of a community bank bitten by a heavy concentration of loans to developers, who have seen their projects falter in the housing downturn. The 11-year-old bank's collapse wasn't a major surprise: It was one of three institutions in the state under regulatory orders to improve its financial footing. It was the first N.C.-based bank to fail since 1993 and only the third since 1980.

N.C. Banking Commissioner Joseph Smith on Monday said Cape Fear's troubles should not be projected onto the rest of the state's banks. As a whole, they have enough capital and management know-how to withstand the fallout from the housing bust and the recession, he said, although he couldn't guarantee Cape Fear would be the last to fall.

"I'm confident most of them will work through it," Smith said. "I'm hopeful we won't have more."

To read the complete article, visit www.charlotteobserver.com.

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