Regulators on Friday seized HarVest Bank of Maryland and turned over its deposits to McLean-based Sonabank, ending the Gaithersburg institution’s two-year struggle to raise capital.
The Federal Deposit Insurance Corp. entered into an agreement with Sonabank to assume HarVest’s $145.5 million in deposits and four branches. The locations will reopen on Monday as Sonabank, which will now have more than $610 million in deposits on hand.
Officials from Sonabank and HarVest could not be reached for comment.
Regulators have pressed HarVest since 2010 to boost capital and reduce the amount of delinquent loans on its books. The bank has been hemorrhaging money for several years because of a portfolio of mortgages it purchased from now defunct Countrywide Home Loan in 2006.
Regulators considered HarVest, with $164.3 million in assets, undercapitalized, a determination based on leverage and risk ratios. For the past 24 months, bank officials have tried to raise $16 million to recapitalize the institution.
In October 2010, former banker Mehrdad Elie offered to buy $5 million in common stock contingent on HarVest raising the remaining amount from other investors. Other investors, including Rockville financier Robert Senko, have floated money to the bank.
Things were looking up at the end of last year as California financier Mahnaz Khazen joined the effort. She tried to raise $5 million through an immigration program, known as EB-5, that grants visas to immigrants in exchange for an investment of $500,000 to $1 million in a U.S. business. HarVest needed regulatory approval for that deal to fly.
In the meantime, Khazen wrangled another group of investors to buy some of HarVest’s $25 million in troubled loans. The bank locked down an additional $5 million from another group of investors last month, only to have the deal fall apart a week later.