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FDIC closes more banks

First Heritage and First National will reopen Monday as part of Mutual of Omaha, federal regulators say.

July 26, 2008|E. Scott Reckard | Times Staff Writer

Bad loans to developers and home builders in Arizona and Nevada led to the failure Friday of an Arizona company's two banks, including First Heritage Bank in Newport Beach.

The Federal Deposit Insurance Corp. seized the banks late in the day and turned over operations to Mutual of Omaha Bank, part of the large Mutual of Omaha insurance company.

All depositors, including those with deposits in excess of the FDIC's insurance limits, will have their accounts switched to Mutual of Omaha Bank and will be covered for all their funds, the federal agency said.

"Customers should just think of it as two banks merging," said FDIC spokesman David Barr.

Ten banks and thrifts have failed in the last 18 months, mostly because of the collapse of real estate markets inflated by years of easy-money lending by mortgage originators. The largest specialist in so-called alt-A loans -- made to borrowers whose risk profile fell between prime and subprime -- was IndyMac Bank, which collapsed this month and is being operated by the FDIC.

First Heritage and First National of Nevada were owned by First National Bank Holding Co. of Scottsdale, Ariz.

First Heritage, established in 2005, was mainly a deposit-taking franchise, specializing in homeowners associations, property managers such as condominium companies and similar enterprises.

It had three branches in Newport Beach, Los Angeles and Ontario but few retail accounts.

It was something of a "virtual bank" with its backroom operations handled from Scottsdale, Anaheim banking consultant Gary Findley said.

First National Bank of Nevada, chartered in 1987, had operated as First National Bank of Arizona with 25 branches, but the two were merged at the end of June, Barr said.

The operation's strategy was to gather deposits in three regions -- Arizona, Nevada and Southern California -- and lend to developers and home builders riding the boom in housing in Arizona and Nevada, Findley said.

"They were great spots to be in two years ago," he said, "just not now."

The FDIC said First Heritage had total assets -- loans and securities -- of $254 million and total deposits of $233 million as of June 30. First National of Nevada had total assets of $3.4 billion and total deposits of $3 billion.

Bill Uffelman of the Nevada Bankers Assn. said Friday that the FDIC action was "a reflection of the times for the banks. It's a poor economy."

Uffelman cautioned against the sort of consumer concern that prompted many customers of IndyMac Bank branches to wait for hours in line to withdraw funds across Southern California last week after the Pasadena thrift was seized by federal regulators. All FDIC-insured bank deposits are guaranteed up to $100,000, he noted.

Nevada Gov. Jim Gibbons said the bank takeover would be closely monitored there "to ensure there's minimal disruption to business and that employees' jobs are protected as much as possible."

Arizona Gov. Janet Napolitano's spokeswoman, Shilo Mitchell, said the FDIC's takeover of First National was not indicative of the overall banking climate in Arizona.


The Associated Press was used in compiling this report.

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