CHARLESTON, W.Va. - For the second time in 10 years, McDowell County is the scene of a major bank failure.

On Friday evening, federal regulators announced they were taking over Ameribank Inc. because of a series of bad debts tied to the foreclosure crisis.

The bank has five branches in McDowell County and three in eastern Ohio. It employs about 60 people and has more than $115 million in assets, according to the FDIC.

Pioneer Community Bank of Iaeger has purchased Ameribank's McDowell County assets and branches, and The Citizens Savings Bank of Martins Ferry, Ohio has taken over the three branches there.

The FDIC is saying Ameribank customers will receive the full amount of their deposits - even deposits over the $100,000 FDIC insured limit.

Branches in West Virginia are expected to reopen Monday. During the weekend, customers can access their money by writing checks or using ATM or debit cards, and checks drawn on the banks will be processed normally, the FDIC said in a press release.

The takeover is expected to cost the FDIC $42 million. It is the 12th bank failure in the U.S. so far this year.

If this sounds familiar, it should. In 1999, First National Bank of Keystone collapsed after federal investigators discovered massive embezzlement and risky investments there.

Then, Ameribank took over Keystone's local assets and branches. No one is accusing Ameribank officials of wrongdoing, but risky investments brought down both banks.

Flip this house

Ameribank is based in one of the nation's poorest counties: McDowell County. Its Ohio banks were located in areas with stagnant or declining population.

In 2003, bank officials decided they needed to expand to a high-growth area. It was "the thing we need to do for survival," said bank vice chairman Jim Sutton.

They opened their ninth branch in Palm Beach Gardens, Fla.

Ameribank affiliated itself with a mortgage broker called Lending One, which made high-interest loans to speculators who bought up properties, fixed them and sold them for a profit.

If you ever watched the show "Flip This House," you'll recognize the scheme.

It worked as long as housing prices went up. But when the housing bubble burst, the loans went bad, and Ameribank found itself in a world of hurt.

David Hartman, president of Ameribank, blamed the bank's troubles on its previous leadership in a July interview with West Virginia Public Broadcasting.

CHARLESTON, W.Va. - For the second time in 10 years, McDowell County is the scene of a major bank failure.

On Friday evening, federal regulators announced they were taking over Ameribank Inc. because of a series of bad debts tied to the foreclosure crisis.

The bank has five branches in McDowell County and three in eastern Ohio. It employs about 60 people and has more than $115 million in assets, according to the FDIC.

Pioneer Community Bank of Iaeger has purchased Ameribank's McDowell County assets and branches, and The Citizens Savings Bank of Martins Ferry, Ohio has taken over the three branches there.

The FDIC is saying Ameribank customers will receive the full amount of their deposits - even deposits over the $100,000 FDIC insured limit.

Branches in West Virginia are expected to reopen Monday. During the weekend, customers can access their money by writing checks or using ATM or debit cards, and checks drawn on the banks will be processed normally, the FDIC said in a press release.

The takeover is expected to cost the FDIC $42 million. It is the 12th bank failure in the U.S. so far this year.

If this sounds familiar, it should. In 1999, First National Bank of Keystone collapsed after federal investigators discovered massive embezzlement and risky investments there.

Then, Ameribank took over Keystone's local assets and branches. No one is accusing Ameribank officials of wrongdoing, but risky investments brought down both banks.

Flip this house

Ameribank is based in one of the nation's poorest counties: McDowell County. Its Ohio banks were located in areas with stagnant or declining population.

In 2003, bank officials decided they needed to expand to a high-growth area. It was "the thing we need to do for survival," said bank vice chairman Jim Sutton.

They opened their ninth branch in Palm Beach Gardens, Fla.

Ameribank affiliated itself with a mortgage broker called Lending One, which made high-interest loans to speculators who bought up properties, fixed them and sold them for a profit.

If you ever watched the show "Flip This House," you'll recognize the scheme.

It worked as long as housing prices went up. But when the housing bubble burst, the loans went bad, and Ameribank found itself in a world of hurt.

David Hartman, president of Ameribank, blamed the bank's troubles on its previous leadership in a July interview with West Virginia Public Broadcasting.

"For three or four years, it all worked fine," Hartman said. "But with the sub-prime market starting to dry up, the end buyers of these homes went away.

"I've never thought that loans made outside a bank's normal market area is a good idea," he said. "Banks should make loans within their local market. That way, you know your borrowers."

There were other signs the bank was in trouble. In July, a labor-backed group ranked Ameribank fourth on its list nationally of troubled banks. Washington D.C.-based Research Associates of America said Ameribank has a high ratio of nonperforming loans compared to its assets and returns.

It's called the Texas Ratio, and it was invented after the savings and loan collapse in the late 1980s that hit Texas so hard. A ratio over 100 is considered dangerous territory.

Ameribank had a ratio of 154. To put that in perspective, the recently failed IndyMac Bank - the one where depositors almost rioted trying to get their money out - had a better Texas Ratio  than Ameribank.

There were other signs of trouble at the bank. It lost $6.9 million in the last quarter. And the value of its past-due loans increased from $7 million to $33 million in the last year, according to the bank's most recent report to the FDIC.

Bankruptcy déjà vu

 It's a familiar story to the people of McDowell County. In the early 1990s, the Bank of Keystone was struggling to survive amid played-out coal mines and a declining population.

Outsiders from Pennsylvania took over leadership, and began buying, packaging, and selling sub-prime loans throughout the nation. The bank grew from about $100 million in assets to more than $1 billion.

But its success was built largely on fraud. In 1999, the bank collapsed as federal officials discovered massive embezzlement by top bank officials, risky investments and shoddy record-keeping.

Local residents lost tens of millions because they put more than the federal-insured $100,000 limit in the bank. Taxpayers spent $557 million bailing out the bank, according to the FDIC. And several top bank officials ended up behind bars.

The town of Keystone has suffered a lot in the 10 years since the bank failure. Its population has declined by half since the bank failure - some because of the bank, but mostly because of a series of devastating floods.

Cal Kent, director of Marshall University's Center for Business and Economic Research, said this Ameribank takeover shouldn't be as painful as Keystone's.

And he doesn't see trouble on the horizon for most of West Virginia's largest banks. Most of them bundled and sold their most risky loans to institutions like Lehman Brothers, which went bankrupt last week.

"This will get some national attention, but a small bank in Southern West Virginia is just a little blip on the radar," Kent said.

"There's been an increase in foreclosures, especially in the Eastern Panhandle, but most of our local banks are doing O.K."

Reach Scott Finn at sf...@wvgazette.com or 348-5100.