October 23, 2009

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.

32 comments:

  1. If there's been 106 bank failings this year, how come we haven’t been hearing about it in the national news? Is there also a government plot to eat up small banks with big ones and then take them over too? Oh, wait, haven’t they already done that?

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  2. It's a loss to the community. We always kept a little money in that bank because we appreciated what Jess Levin was trying to do in this town, helping to finance several projects that were socially worthwhile, though perhaps not the best credit risks.

    Sorry it didn't work out better.

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  3. "If there's been 106 bank failings this year, how come we haven’t been hearing about it in the national news?"

    Because you aren't paying attention. Every bank failure is reported, even though your TV news maybe doesn't cover it. Since you obviously have Internet access maybe you should look there instead. Google News currently has 1,023 articles discussing this week's failures.

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  4. Scott S., If more banks fail in the city you do business it will impact your business. Don't wish failure upon any business in these times, I sure you wouldn't want someone doing it to you. Question, if you have tons of assets and income, why don't sell your assets and pay of your note?

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  5. There were some comments about Bank of Elmwood posted Friday night the 23rd around 9:30 or 10:00 by Post advertiser and supporter Scott Sebastian. Some time over the night they were scrubbed from the site along with one or two other comments from anonymous posters. It must have taken place after 1:31am, because Anon at 1:31 refers to Scott S. The Sebastian posts could best be described as similar to the reaction Rush Limbaugh expressed when Chicago failed to get the 2016 Olympic bid. Gloating.

    This is not the first time the Post has scrubbed comments. Earlier this year Kelly Gallaher, another Post pal, made very disparaging personal remarks about former State Senator Kathy Stepp. Those comments were either removed or altered at a later time. According to Pete posters using an identity can edit their own comments. That’s fine. People cool down, sober up, have a change of heart or realize how stupid they’ve made themselves look. That people whose comments have been scrubbed have been pals or Post advertisers is perhaps just coincidental. Readers can decide that one for themselves. When other totally harmless posts (no swearing, no race baiting, no name calling or personal attacks) disappear without explanation, that should be a cause for concern.

    Probably not many people saw the string of Sebastian comments, along with others that seem to have disappeared. After all it was late Friday night. Some, like Anon 1:31 obviously did. Those Friday night readers deserve an explanation. Saturday readers and beyond should hope this comment doesn’t disappear and that Pete offers an explanation of what happened in the wee hours of Saturday morning.

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  6. The bank's troubles I think can be traced back to the Imagamum. In no way do I think that the bank did anything wrong, I do think The Post should look into the real story of what happened to the players.
    Jess Leven deserves a telling of the story as do all the kids who tossed in change to help make what would have been a great museum

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  7. The bank's problems can be traced back to their liberal loan policies of the last few years. They made a number of loans during the boom of a few years ago that shouldn't have been made. That is why they had a very high non-performing loan rate. When people either take advantage of the programs and run with the money, or now can't repay the loans because of the economic conditions, the bank fails. They took too big of a risk. It's that simple. It's unfortunate, but the reality.

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  8. 7:51

    See the Dicker team is up early. Like a Phoenix, thinking this will not play out well in the months to come.
    Best of Luck to Mr. Leven

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  9. I asked to have my comments removed because I wanted to soften the tone of my post. Being technologically challenged I asked Pete to remove it for me. I will re-post my thoughts when I have more time and I will choose my words more carefully.

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  10. 7:16

    Well said. I completely agree. I was upset when this occurred with the kelly gallagher post. She pulled a Jody Harding on that one, and no one really called her on it.

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  11. GREAT! Now where is my $25.34? I can only get $20 or $40 out of the ATM and who is going to cash a Bank of Elmwood check? I just call last week to ask them how they were doing and they said 'Fine'. This is where your trust in ANYONE goes way down hill! Damn

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  12. When my note came up for renewal I wanted to keep my business local, The first bank I thought of was Elmwood. With the economic mess I thought a good credit worthy customer with plenty of assets and an long outstanding track record wood be attractive to any bank.

    I was dismayed when during my initial inquiry I was told flat out "we don't lend money to restaurants". The conversation was over before I could even give them my name.

    I've been bitter about it ever since.

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  13. Scott, life is too short to be bitter. Don't take it personally, they didn't single you out but rather the industry you are in. I'm sure a different firm was willing to take the risk.

    Sassa, I'm sure you can close your account at BoE or cash you BoE check at a Tri City Bank office. I have a few accounts, mortgages, and LoC with them and I'm not worried about it at all even though I doubt we have more than $100 cash on hand/at home. The sky is NOT falling in the least bit.

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  14. Scott Sebastian lose his temper? NEVER! (lmao)

    The person that told him no to a loan is lucky Scott didn't have a hot frying pan to chuck at him.

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  15. Anon 12:03 Kudos to you!

    I would think in these economic times the majority of people don't have the disposable income to indulge as an establishment such as Sebastians. Same thing that caused the demise of the Yellow Rose. Foot in mouth not gonna help bring anyone more through the door huh?

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  16. This comment has been removed by a blog administrator.

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  17. Anon 12:13 and others of this ilk:

    Give it a rest. Scott asked that his comment be removed, and I complied -- as I would do for anyone. The two anonymous comments that followed his then made no sense. Had they not been anonymous, I would have tried to contact the senders.

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  18. Well I guess this paper has resorted to full free will censorship of comments now. I have been a long time reader of this site and my opinion of it has been in serious decline lately. I think its time to remove it from my favorites.

    Good day to you sir!

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  19. Anon 12:24: And to you.

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  20. Scott, probably the best restaurateur in this area, appears to have cooled down. On the other hand Pete seems to just be getting started.

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  21. The Bank of Elmwood wasn't an innocent victim in all this. Due to "questionable management practices" and Jess Levin's poor judgment in a number of back room manipulations and deals,BoE had been scrutinized and chastized by both the Wisconsin banking oversight agency and the Federal Reserve. Continuing to swim with the sharks, the bank got what it deserved and earned for itself: eaten by other predators.

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  22. Sometimes bad things happen to good people! It is sad that this this has happened in our community, and sad that this will continue to happen to small banks across the US. Our communities were built with the help of these banks understanding the communities needs and goals, with personal interest, specifically from Jess Levin. Bank of Elmwood provided this for 50 years! I believe the bank would have survived if not for the intervention of the government and its polices favoring the large banking institutions.

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  23. I haven't seen any comments here from the angry guy attempting to blame this on the Johnson family. He must be out of town.

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  24. Dime:

    If Pete and Dustin were to do an actual story about the Imaginarium "Players" as you request, they would have to mention their hero , our current Mayor Dickert, and cast him in a negative light. You know what would have to freeze over before they EVER did that.....Keep wishing and throw a penny in for me, OK??

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  25. Advertisers get extra cover, film at 11.

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  26. Sometimes it's friendship. Sometimes it's philosophy. Sometimes it's the money.

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  27. The Translator10/25/2009 3:27 PM

    Could someone, ANYONE in the press hold Jess Levin down until he explains where the donated Imaginarium money went.

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  28. Translator: Maybe I'm reading the tone of your posting wrong, but it sounds to me as though you and others hold Jess Levin responsible for the Imaginarium's collapse.

    Nothing could be further from the truth. The money raised, including $500,000 in federal block grant funds from the city and two million pennies from local school kids, went to a non-profit board which got a -- if memory serves; this all took place between '95 and '00 -- $2.5 million loan from the Bank of Elmwood, bought the former Zahn's building and hired Bukacek Construction to renovate it -- what everyone thought would be a $4 million project that needed some $2.5 million in donations. They also hired Tony Gazzana, former WRJN general manager, as executive director/fund-raiser. I don't remember any involvement from John Dickert; I do remember that the first board chair was the director of DRC at the time.

    When things collapsed -- contractors were owed some $600,000 -- Gazzana "resigned" and was paid $32,000 of his $85,000 contract, Bukacek sued for $450,000, the building went into foreclosure and was "bought" by Bank of Elmwood. Only then did Jess become board president, trying to salvage the mess; they hoped someone would buy the building and lease space for the museum.

    Whatever money had been collected was spent on the renovation, which stopped when the funds ran out.

    Jess was left holding the bag -- a partly completed renovation designed to be a children's museum -- and owed over $2 million. Over the years the bank tried to sell it -- I vaguely remember a hotel project that went nowhere.

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  29. Translator: Maybe I'm reading the tone of your posting wrong, but it sounds to me as though you and others hold Jess Levin responsible for the Imaginarium's collapse.

    Nothing could be further from the truth. The money raised, including $500,000 in federal block grant funds from the city and two million pennies from local school kids, went to a non-profit board which got a -- if memory serves; this all took place between '95 and '00 -- $2.5 million loan from the Bank of Elmwood, bought the former Zahn's building and hired Bukacek Construction to renovate it -- what everyone thought would be a $4 million project that needed some $2.5 million in donations. They also hired Tony Gazzana, former WRJN general manager, as executive director/fund-raiser. I don't remember any involvement from John Dickert; I do remember that the first board chair was the director of DRC at the time.

    When things collapsed -- contractors were owed some $600,000 -- Gazzana "resigned" and was paid $32,000 of his $85,000 contract, Bukacek sued for $450,000, the building went into foreclosure and was "bought" by Bank of Elmwood. Only then did Jess become board president, trying to salvage the mess; they hoped someone would buy the building and lease space for the museum.

    Whatever money had been collected was spent on the renovation, which stopped when the funds ran out.

    Jess was left holding the bag -- a partly completed renovation designed to be a children's museum -- and owed over $2 million. Over the years the bank tried to sell it -- I vaguely remember a hotel project that went nowhere.

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  30. Some claim that Tony Gazzana forged names to get his $32,000 before skiping town. Is that true.

    Note none of the mess IMHO was Jess's fault

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  31. It is too bad for Jess, he got caught up with his own concerns for people in the city. I'm sure he was trying to do the right thing as many banks do not. It was a matter of time before things would come crashing down.

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  32. The biggest problem that hit Bank of Elmwood was their exposure in the automobile market. When the credit market collapsed and several of their "dealer" clients left them holding the bag on their notes the writing was on the wall. If memory serves correctly, I believe Bank of Elmwood was told to find a buyer or shore up their assets by the end of August, something that was damn near impossible to do at this stage of the game. They gambled on businesses that they though would provide them a high rate of return and liquid cash flow, but no one is buying cars and not a lot of people have the cash to keep making their payments when they haven't got the sales to cover the interest.

    As for Scott Sebastian's comments, brother I can relate. I too had approached Bank of Elmwood looking to partner with them many years ago to also be told that my business wasn't a viable candidate for service from them, yet the company that I was looking to purchase at that time was financed by them.

    The management there had some seriously screwed up ideas when it came to "Fairness and Equality in lending" as required by regulators.

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