It was a whopper of a Bank Failure Friday. The day's carnage took a $698.4 million bite out of the FDIC's dwindling deposit fund. Four banks fell: Michigan Heritage Bank, Georgia's American Southern Bank, First Bank of Idaho and First Bank of Beverly Hills. The total number of bank failures for the year now stands at 29.
Before you start conjuring up images of the Gucci set massing on Rodeo Drive to get their money, First Bank of Beverly Hills is in Calabasas, Calif. The single branch bank seems to have lived and died off California's once red-hot commercial real estate market. The FDIC could not find a buyer, and instead will make out checks to depositors, many of whom are out of state. The bank had deposits of $1 billion, of which only an estimated $179,000 is over the insurance limit of $250,000. The bank's failure represents the largest single hit of the day to the FDIC fund at $394 million.
First Bank of Idaho is another failure that might cause a black eye for the Office of Thrift Supervision, which supervised the bank. On April 6, the bank accepted a cease and desist order from the agency, promising that it wouldn't behave in an "unsafe and unsound" manner. It also vowed to raise more capital. Apparently that plan did not pan out. The regional director for the OTS who signed the cease and desist order was C.K. Lee, the same official who ran the agency team that oversaw AIG's financial unit. (We've been reporting on OTS's failures for months.)
U.S. Bank of Minneapolis agreed to assume all the deposits of the Idaho bank, except for $112.8 million amassed from brokers. The FDIC will pay the brokers directly, a common practice that underscores the dangers of this often high-risk form of deposit. Come Monday morning all seven branches of the bank spread out across Idaho and Wyoming should open as U.S. Bank.
The Bank of North Georgia agreed to take on all deposits, except $48.7 million from brokers, of the failed American Southern Bank. Ten banks have failed in Georgia since the beginning of 2008, a state record on the FDIC's failed bank list.
The FDIC selected Level One Bank of Farmington Hills, Mich., to pick up the pieces from the failure of Michigan Heritage. Level One will assume all of the bank's deposits, except $50 million that came from brokers.
