They arrived one day in November as Santa Ana winds pounded downtown Redlands. The dozen or so men and women walked into the red-brick headquarters of 1st Centennial Bank on State Street, then marched up the stairs to the executive offices.
Jeff Blake, a senior vice president of the bank, knew this couldn't be good. The tellers downstairs might have thought the visitors were part of the parade of potential buyers who had been kicking the tires on the troubled bank for months now.
Blake knew better. They were bank examiners, showing up unannounced.
"You're talking a lot of black suits," he recalled. "They're starting to line the coffin."
Two months later, 1st Centennial was seized by regulators and turned over to new owners, costing the Federal Deposit Insurance Corp. $163 million. It was one of 140 banks that failed last year, sticking the FDIC with a record bill of $38.2 billion.
The mortgage meltdown of 2007-08 may be best remembered for the financial giants it brought down — Bear Stearns, Lehman Bros., Washington Mutual. But the carnage reached Main Street as well. Most of the banks that failed last year were community institutions, places where tellers greeted customers by name and bank executives served on charitable boards and sponsored Little League teams.
When times were good at 1st Centennial, locals shared in the bounty. The construction loan division ordered in catered lunches for its employees from Cuca's Restaurant down the street. Roofers, electricians and drywall hangers became familiar faces as they stopped in to draw down loans.
Tellers would keep their windows open five minutes past closing time if a business needed to make a deposit to meet payroll.
Yet when it all came crashing down, the pain was muted, the repercussions muffled. Federal regulators moved in so swiftly and efficiently that hardly anyone noticed until it was over. The new owners cleaned out the management ranks, but tellers and new-account specialists — the public face of the institution — stayed on. There was no run on the bank. Only a handful of uninsured depositors lost money.
Ruined lives and public disgrace were staples of the classic 1930s narrative of a bank failure. In the new century, the shame and suffering have been obscured by bigger forces, subsumed in abstractions: the global credit squeeze, the liquidity crisis.
Tom Vessey, fired as chief executive five months before 1st Centennial failed, pointed out to those who asked that the bank's board never accused him of any wrongdoing. He continued to allow his Italianate mansion to be used for fundraisers, showing off his garage filled with Route 66 memorabilia and awards won by his half-Arabian show horse, Ring O Fyre.
It was founded in 1990 as Redlands Centennial Bank, and its two-story brick headquarters, though hardly ostentatious, projected stability amid the storefronts on deeply shaded State Street.
Renamed 1st Centennial after expansion into other cities, the bank made real estate loans its specialty, and as home values soared, its fortunes rose. In 2007, near the peak of the housing boom, it reported a record profit of $9.3 million. By that time, its loan portfolio had swollen to $522 million, up from $191 million just four years earlier.
One of the bank's biggest borrowers was E. Wayne Simmons, a Calimesa developer whose upscale housing projects included JP Ranch, at a former egg farm in the blustery San Gorgonio Pass, and Eagle Ridge, on a pine-covered slope facing Lake Arrowhead Country Club.
Simmons and other developers found 1st Centennial eager to finance Inland Empire housing projects — not surprising, since the bank had positioned itself as the local player in an industry dominated by giants such as Bank of America and Wells Fargo.
Owned by about 400 local shareholders,1st Centennial filled its board with local luminaries and sent staff members to teach personal finance to high school students.
The bank directors made community involvement a factor in their annual performance review of Vessey, who joined 1st Centennial in 2002 and was named chief executive in 2004. That was no problem for the CEO, who sat on the boards of the local YMCA, the Redlands Symphony Assn. and the Family Service Assn. of Redlands.
"1st Centennial provided us a lot of cash and was highly supportive," said Deborah Crowley, treasurer of the board at Family Service, a group that helps struggling working families and that benefited from the bank's charity.
This approach played well in Redlands, which prides itself on its history and distinctive character. Founded in 1881 in the foothills east of San Bernardino, the city boasts a 60-year-old symphony and elaborate late-Victorian mansions built by citrus ranchers and wintering Easterners. The local literary club is said to be the second-oldest in the country.