Bank of Elmwood fails

UPDATE, Oct. 24: It was business as usual at the Bank of Elmwood Saturday morning. Customers were coming and going, making deposits, withdrawals and loan payments. The only thing that was different was the number of men in suits -- bankers from Tri City National Bank -- walking around the bank lobby, reassuring customers that all is well.

Tri City, which was founded in 1963, took over Bank of Elmwood last night, and is doing what it can to make the transition smooth. "All Bank of Elmwood's employees are staying," said Tri City senior vice president John Kis. "It's very important to us when people show up they see the employees they're familiar with," added Matt Weiss, a Tri City vice president.

Kis, a banker for 36 years, noted that Tri City "doesn't have a huge presence here," but already had two branches in Racine: the one on Durand Avenue, across from Milaegers, has been open for nine years; the other, at the Pick 'n Save at Spring Street and Hwy 31 for two years. Tri City, he said, is a "strong, local, community bank," with $800 million in assets, $600 million in loans and $700 million in deposits. This is Tri City's first bank acquisition, although Kis, whose specialty is business development and commercial lending, said he had been involved in three of them: two on the acquiring side and one as a seller.

Original post:

The Bank of Elmwood, founded in 1960, was closed today by the Wisconsin Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase agreement with Tri City National Bank, Oak Creek to assume all of the Bank of Elmwood's deposits.

This was a bad day for banks across the U.S.. When the day started there had been 99 bank failures this year; by evening, the number was up to 106, most since 1992. The Bank of Elmwood was the 105th. Although no specific reasons were cited in the FDIC notice, Bank of Elmwood was told by regulators in July to increase its capitalization, or merge with another institution by Sept. 1, but by that date no changes were announced. One of the Bank of Elmwood's more public failures was its loan for the Imaginarium children's museum, that was to occupy the former site of Zahn's Department Store on Monument Square. The bank has tried unsuccessfully to sell that building for $2.5 million for years.

Bank of Elmwood's five branches will reopen Saturday as branches of Tri City National Bank. Depositors will automatically become depositors of Tri City National Bank. A memo to that effect is posted by the drive-up window on the Durand Avenue Motor Branch, along with signs limiting individual withdrawals to $1,500.

Deposits will continue to be insured by the FDIC, said a press release from the FDIC, "so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branch until Tri City National Bank can fully integrate the deposit records of Bank of Elmwood."

At the bank's main office, on Lathrop Avenue, the parking lot was full at 9:30 p.m. Workers were in both the data center and the main bank, under the watchful eyes of Racine County Sheriff's deputies, as FDIC examiners went over the books, trying to determine the exact financial numbers, according to Richard Schmalzer, FDIC's regional ombudsman.

Schmalzer said bank employees were told of the failure after close of business Friday, at 5 p.m., by FDIC personnel. Then they were introduced to executives from Tri City National. But Schmalzer said the closure and turnover has been in process for about a month, although executives at Bank of Elmwood didn't know definitively until Friday when the FDIC arrived and called employees together.

Asked what caused the failure, he cited only "out-of-market" under-performing loans.

Schmalzer also offered reassurance to depositors, saying that all deposits are fully safe, even those whose accounts are over the traditionally insured limit, which is $250,000 per account.

Over the weekend, Bank of Elmwood depositors can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments.

As of September 30, the bank had total assets of $327.4 million and total deposits of approximately $273.2 million. Tri City National Bank did not pay the FDIC a premium for the deposits. In addition to assuming all of Bank of Elmwood's deposits, Tri City National Bank agreed to purchase essentially all of the assets.

Customers who have questions can call the FDIC toll-free at 1-800-234-9027, from from 9 a.m. to 6 p.m. Saturday; on Sunday from noon to 6 p.m., and thereafter from 8 a.m. to 8 p.m. There is also more information on the FDIC's website.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $101.1 million. Tri City National Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. Bank of Elmwood's failure is the first in Wisconsin this year; the last FDIC-insured institution closed in the state was The First National Bank of Blanchardville, Blanchardville, on May 9, 2003.

The FDIC has a question and answer guide for depositors here.