From appearances, Nova Bank might have looked like one of the survivors among the Philadelphia-area banks jostling for borrowers and depositors in a tough, low-interest-rate market policed by freshly chastened government regulators.
Until Friday, the Berwyn-based bank controlled nearly a half-billion dollars in loans and investments, spread through a network of offices from the Main Line to Center City and South Jersey.
Unlike its upstart rivals, Nova even had a pedigree: It could trace its roots back 125 years, to Peoples' Thrift Building & Loan Association in Norristown. During the period it was led by Kenneth Tepper, that bank was one of the nation's pioneer online lenders, raising millions from investors and advertising on the Howard Stern radio show as USABancShares.com.
But on Friday, Nova became the largest Philadelphia-area bank to fail since before the financial crisis of 2008 - and one of the few that failed so badly it closed completely, its Berwyn headquarters and 12 branches vacant, its 107 staffers jobless, instead of getting taken over by another lender.
Nobody wanted Nova. The Federal Deposit Insurance Corp. declared itself "unable to find another financial institution to take over the banking operations." More than 95 percent of the nearly 500 banks that have failed in the last five years were able to attract buyers, FDIC data show.
Nova depositors are insured - up to $250,000 - but the FDIC estimates it will cost $91 million to bail them out, mail their money back, and cover other costs. That expense won't fall on taxpayers but on other FDIC-insured institutions, which will pass the cost along to investors and bank customers.
What went wrong? Nova president Brian Hartline was busy securing his Montgomery County home against Hurricane Sandy when I called Monday morning, and he couldn't talk. But Nova's financial distress was no secret. Federal bank regulators in 2010 barred the company from taking on more debt or paying shareholder dividends, restricted the bank from expanding, and urged directors to find a buyer.
Nova's capital ratio was low; in its FDIC report, Nova showed a loss of $5 million in the three months ending June 30 after setting aside millions to cover projected loan losses.
The bank reorganized in the early 2000s, after the bursting of the dot.com bubble, under a new board of Main Line business owners headed by real estate broker Edward DiMarcantonio. They planned to add traditional branches and business lines, plus the new name and star logo, reflecting the Villanova University background of some of its principals.
The bank's high-water mark might have come just before the 2008 crash, when Nova expanded in Center City and South Jersey, paying a modest $11 million for the Fellheimer family's Philadelphia Business Bank.
"The loan portfolio I gave them was pretty clean at that time," said veteran Philadelphia lawyer Alan Fellheimer, that bank's founder.
But the financial crisis started a run of bad news. Initial plans called for Philadelphia Business Bank boss Anthony Renzo to take over as Nova president. Instead, Renzo left amid a bout of cost-cutting. He's now at Stonebridge Bank. Nova director Barry Bekkedam arranged for a group of Florida investors to help recapitalize Nova, but they lost millions in a pyramid scheme and made only a fraction of their planned investment. Bekkedam, a former Villanova basketball player, is no longer a director.
Additionally, Nova had to struggle with a capital structure inherited from the bank's dot.com period: high-rate borrowing that proved difficult to refinance.
Even after the 2008 blow-up, small-business lenders like Valley Green Bank and Tri-State Capital Bank have been able to raise new capital. Nova, with its fiscal baggage, proved a tougher sell. Finally, the government stepped in.
"Banking is tough today," Fellheimer said. "I'm so happy to be out of it, I can't tell you."
Contact Joseph N. DiStefano at 215-854-5957, JoeD@phillynews.com, or @PhillyJoeD on Twitter.