One West Bank acquires failed First Federal Bank

First Federal Bank of California and Imperial Capital Bank of La Jolla closed

Both are sold immediately to other Southern California institutions. Regulators have closed 140 U.S. banks this year, 16 in California.

  • Related By E. Scott Reckard
  • December 19, 2009

Two more loss-battered Southern California banks were shut down by regulators Friday and immediately sold to two of the largest financial institutions based in the region.

Stung by defaults on tricky adjustable mortgages, 80-year-old First Federal Bank of California was closed by federal savings and loan regulators, with its 39 branches to reopen today as part of OneWest Bank.

Pasadena-based OneWest, created early this year from the ashes of collapsed home lender IndyMac Bank, agreed to assume all of First Federal’s deposits, so no customers will lose money, the Federal Deposit Insurance Corp. said.

In Friday’s other California failure, Imperial Capital Bank of La Jolla, rocked by troubled loans for apartments and commercial mortgages, was dealt off by the FDIC to City National Bank of Los Angeles, which is emerging as one of the survivors of the banking industry’s near-meltdown.

Like OneWest, City National agreed to assume all of the acquired bank’s deposits, even amounts that exceeded the FDIC’s caps on insurance coverage.

Imperial Capital’s nine branches — six in California, one in Maryland and two in Nevada — are to reopen Monday as City National offices.

City National was the largest commercial bank with headquarters in Southern California until Pasadena’s East West Bank agreed last month to take over a failed rival in the Chinese American niche, San Francisco’s United Commercial Bank. That deal beefed up East West, giving it $19 billion in assets to City National’s $18 billion.

The latest combinations gives City National more than $21 billion in assets and OneWest about $24 billion, although such comparisons matter little given the fact that the acquirers will have to spend much of their time downsizing by working through portfolios of distressed loans. Indeed, OneWest’s balance sheet is still stuffed with IndyMac loans that had been targeted for sale before the private market for mortgages dried up, although the FDIC is sharing losses on those loans.

The failures bring to 140 the number of U.S. banks that have gone under this year as many loans made during the housing boom earlier this decade have soured.

Of California’s 16 bank failures this year, First Federal and Imperial Capital rank No. 3 and No. 4, respectively, based on total assets.

OneWest is owned by a group of private equity investors that teamed up this year to buy IndyMac Bank from the FDIC months after the Pasadena thrift failed under the weight of defaults on lightly documented loans. The investors had said they hoped to buy nearby banks that also had run into problems with residential mortgages.

First Federal, a savings and loan originally based in Santa Monica, fit that description, having booked $547 million in losses over the last seven quarters on so-called pay-option adjustable-rate mortgages. Such loans, also known as option ARMs, allowed borrowers to pay so little each month that their loan balances could increase.

Babette Heimbuch, chief executive of First Federal and its parent company, FirstFed Financial Corp., tendered her resignation last week. The S&L had $6.1 billion in total assets and $4.5 billion in deposits as of Sept. 30.

In addition to assuming all of the deposits of the failed bank, OneWest agreed to purchase essentially all of the assets, with the FDIC absorbing some of the losses on them.

OneWest also announced that it would join in what is becoming an industry-wide moratorium on home foreclosures during the holiday season.

City National, which recently moved its headquarters from Beverly Hills to Los Angeles, serves mostly wealthy individuals and small businesses. It has remained well-capitalized despite recent losses on construction and commercial lending.

Imperial Capital, with $4 billion in assets and $2.2 billion in deposits, failed to meet a Dec. 14 deadline set by state regulators to raise $200 million in capital. It had lost $112 million in the first three quarters of this year.

City National is taking on about $3.4 billion of Imperial Capital’s assets. The FDIC agreed to assume a portion of future losses on those assets. The agency said it would keep the remainder of Imperial Capital’s portfolio for now.

“Imperial Capital Bank is a very good fit for City National, given that eight of its nine locations are in communities we serve,” Russell Goldsmith, chief executive of the bank and its parent company, City National Corp., said in a statement.

Because some of Imperial Capital’s branches are close to City National locations, Goldsmith said he expected that some branches would be closed. But others, such as Imperial’s San Francisco site, will be added to City National’s existing 64-branch network, he said.

“We haven’t made any final determinations yet,” he said.

Neither acquiring bank released details about layoffs, which normally follow bank mergers because they tend to create overlap not only in the branches but also in back-office operations.

City National said it would keep Imperial Capital’s 140 employees on the payroll, with health benefits, through the holidays while studying the issue.

The failure of First Federal is expected to cost the deposit insurance fund $146.3 million. Losses on Imperial Capital’s failure were estimated at $619.2 million.

Earlier Friday, regulators closed five banks in other states: RockBridge Commercial Bank in Atlanta; New South Federal Savings Bank of Irondale, Ala.; People’s First Community Bank of Panama City, Fla.; Independent Bankers’ Bank of Springfield, Ill.; and Citizens State Bank, New Baltimore, Mich.

scott.reckard@latimes.com

Copyright © 2009, The Los Angeles Times

25.6% of U.S. households use conventional banks little or not at all… And Sheila Bair wonders why…

Read the whole LA Times article about citizen’s decline in the use of banking system.

Read more

The Press Responds to Sheila Bair – Town Hall | LA

The press was out in force to hear Sheila Bair’s presentation at Town Hall | LA on October 27, 2009

Here are their reports:

E. Scott Reckard – FDIC’s Bair offers no comfort to uninsured IndyMac depositors {LA Times}

Karl Denninger – The FDIC Must Be Indicted {The Market Ticker}

Natalie Dolce – FDIC Chairwoman: ‘Too Big to Fail’ Must End {GlobeSt.com}

Jane Sasseen – The FDIC’s Sheila Bair: “There Will Be Losses” {Business Week}

Be sure to read all four stories!

.

FDIC’s Bair offers no comfort to uninsured IndyMac depositors

Town Hall LA held its latest “Industry Outlook Briefing” on Wednesday, Oct 28.   Shiela Bair, Chairman of the FDIC was the keynote speaker.  A group of IndyMac Depositors were in attendance and were allowed to ask questions of the Chairman.  E Scott Reckard of the LA Times was also in attendance and published the following story yesterday:

FDIC’s Bair offers no comfort to uninsured IndyMac depositors

The head of the Federal Deposit Insurance Corp. delivered some bad news personally to uninsured depositors who lost money last year when IndyMac Bank crashed and burned, saying an act of Congress is their only hope for recovering their funds.

Read the full story here.

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Eggs…..and Sheila Bair: Breakfast with Town Hall, Los Angeles

It’s breakfast Wednesday morning, Oct 28, 2009 with FDIC Chairman Sheila Bair as the Keynote speaker.

See the story below from MarketWire and get your tickets if you want to join us.

LOS ANGELES, CA–(Marketwire – October 22, 2009) – An “Industry Outlook Briefing and Conversation with Chairman Bair” will be the focus of a TOWN HALL Los Angeles event hosting Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation (FDIC) on Wednesday, October 28, 2009, at The Regency Club. Bair will shed light on the present economy and financial system and take questions from the audience of Angelenos.

Among the FDIC’s current priorities, Bair has stated, “Resolution authority is clearly at the top of our list. Too big to fail needs to end.” Bair was sworn in as the 19th Chairman of the FDIC on June 26, 2006. She was appointed Chairman for a five-year term, and as a member of the FDIC Board of Directors through July 2013.

Prior to joining the FDIC, she was the Dean’s Professor of Financial Regulatory Policy for the Isenberg School of Management at the University of Massachusetts-Amherst. While there, Bair served on the FDIC’s Advisory Committee on Banking Policy. In 2009 she was named one of TIME Magazine’s 100 most influential people. In 2008, Chairman Bair topped The Wall Street Journal’s annual “50 Women to Watch List.” That same year, Forbes Magazine named Ms. Bair as the second most powerful woman in the world after Germany’s Chancellor Angela Merkel.

Throughout its history, TOWN HALL has hosted numerous leaders in the world of finance, including Christopher Cox, Chairman, US Securities and Exchange Commission; Janet Yellen, President and CEO of the Federal Reserve Bank of San Francisco; Comptroller General of the United States David Walker; and NASDAQ CEO Bob Greifeld.

One the Top 10 Leadership Forums in the nation, TOWN HALL Los Angeles has been a nonprofit, nonpartisan membership organization since 1937, supported by Angelenos, foundations and corporations who believe in open public discussion. We advocate for no side, represent no particular ideology and stand solidly in support of free speech, civility and a belief that knowledge is a priceless commodity. To learn more, visit www.townhall-la.org.

Is Sheila Bair jinxed??????

Sheila Bair, widely lauded for her cool regulatory head amid crumbling financial markets and a rising tide of bank failures, says she should stay out of government jobs. She said she’s jinxed.

Read the full story here.

Federal Court House Monday 10-19-2009

Greetings to all:

On Monday 10-19-2009, there will be two FDIC vs. Depositor cases heard; FDIC vs. Henry (Depositor) and FDIC vs. Tams (Depositor).

The Honorable Judge Margaret Morrow will hear these cases in the Federal Court in Down town Los Angeles, CA.

The cases will be heard at 10:00.

Honorable Judge Morrow will expect you to be prompt, quiet, respectful to the court if you expect to attend and hear proceedings.

If you decide to visit the courthouse, a good place to go is the pro se office, which will give you advice on filing in court on your own, as well as a packet of paperwork to fill in for filing a case, and represent yourself.  It looks daunting.  Get the papers, and the advice from the pro se office.

Give yourself time to park, and get through security screening to attend the court proceedings.

This can be a great day for all of us.

Please be respectful to the court, and to the judge, as well as the parties being heard.

Thank you.

Lisa

Avi writes to FDIC and gets the following exchange:

Avi:  I sent an email to the FDIC about getting any dividends from INDYMAC and
this was their response

Linda:  You will need to wait  and hope.  I don’t know if you can take the loss off
your taxes or  not.  You will need to talk to a CPA or your tax advisor.
No one you  can write to.  The assets have to be sold in order to recover
funds to pay  the uninsured depositors.  FDIC is still selling  assets.

Linda  Shaw
Claims  Department

Sent: Thursday, September 24, 2009 11:25  AM
To: Dividends
Subject: Re:  indymac
Avi:  Linda thanks for a  prompt response.What should I do as an uninsured
depositor?  Do I just wait  and hope?  Is there any way I can at least gain tax
benefits from  this?  Is there anyone I can write to and see if the FDIC can
further help  us?

Linda:  At this time we do not  have a dividend scheduled for the rest of the year.
One West did not  purchase all of the assets of IndyMac.  We still have
assets we have to  liquidate.

Linda  Shaw
Claims  Department
Sent: Tuesday, September 22, 2009 9:08  PM
To: Dividends
Subject:  indymac
what will happen to  any dividend uninsured depositors are due now that
indy mac bank has  sold

Anniversary Protest/Demonstration July 13th 2009

Greetings to all!

On July 13, 2009, we as Indymac depositors marked the anniversary of being robbed right out of our bank accounts by demonstrating our frustration, anger (your word here)in front of the FDIC Western Headquarters at 40 Pacifica in Irvine, CA.

We still have no answers, but that we are supposed to be grateful to the FDIC for graciously giving us 50% of our deposits back, while mortgage holders get their loans restructured & GM gets bailed out of bankruptcy.

Since Congress passed the Stimulus package, which has not stimulated anything, except anger among those paying for it we have seen a further decline in consumer confidence, employment and the overall business climate is still very chilly. In this Stimulus package,a increased insurance amount of $250,000 passed 10 weeks after the FDIC took over Indymac. The increase was double and a half the old protection! Now it has been made permanent (You may search H.R. 786 for more on this). Built into this package is increases for inflation and a decrease in cost to the government over the next 10 years, to eventually show a surplus.

The FDIC shall be held accountable for not funding their insurance. We will continue to pursue this until we prevail, either by legislation, or in the court system. The FDIC is using our money to pay its attorneys to defend its position against us. What an ironic situation.

The FDIC can just enter a bank, own the accounts & give you what the erroneous bank records shows it should owe you, even if the bank made horrific mistakes in record keeping, and giving advice on structuring accounts for insurance protection.

I guess William Black’s book entitled “The Best Way To Rob a Bank Is To Own One” kind of summarizes how I feel about the FDIC, for taking over a bank not on the wtch list, fire selling it & retaining some of the assets for itself.

52 pick up?

Year to date 2009, the FDIC has closed 52 banks. Smell fishy to you? How many of these underfunded critters are out there? Could my new bank be next?

Just follow the money trail….