BURLINGTON - First Banking Center, a Burlington-based bank with 17 branches and $750.7 million in assets, is now a failed bank.
Federal and state regulators came in at 6 p.m. Friday and took over the 90-year-old bank which had been under orders by the Federal Reserve to improve its financial condition.
First Michigan Bank of Troy, Mich. is assuming all of the deposits and agreed to buy "essentially all" of the failed bank's assets, the Federal Deposit Insurance Corp., or FDIC, reported.
All 17 branches will reopen Saturday morning at their normal hours as branches of First Michigan Bank.
First Banking Center was put under the intense scrutiny of the Federal Reserve Bank and Wisconsin Department of Financial Institutions, or DFI, in October 2009. The bank was ordered to improve its financial footing including increasing its capital ratio - the book value of the stock in the bank divided by total assets.
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However, the bank continued losing money this year - $21 million through October. At that time, its capital ratio stood at 1.60 percent which is far below the acceptable industry minimum of 5 percent.
On Aug. 11 regulators turned up the heat, having found that on July 30 the bank was still "significantly undercapitalized." The Federal Reserve gave the Burlington bank 60 days to take "prompt corrective action." That was to include the sale of shares to increase equity or enter into a contract to be acquired by another financial institution.
Between 5 p.m. and 6 p.m. Friday, FDIC and DFI officials entered the headquarters First Banking Center, 400 Milwaukee Ave., and were let into the closed bank.
At 6:04 p.m., the FDIC issued a news release which said the DFI had closed the bank and turned it over to the FDIC as receiver.
The FDIC also announced the arrangement with First Michigan Bank to assume all deposits of the former Burlington bank.
The FDIC said First Michigan Bank will pay a premium of 0.5 percent to FDIC for the deposits.
The two parties entered into a loss-share transaction on $515.6 million of First Banking Center's assets. That means First Michigan Bank will share in the losses on assets covered by the agreement.
Compared with other alternatives, First Michigan Bank's acquisition was the least-costly resolution for the FDIC, it said. It estimated the bank failure will cost the Deposit Insurance Fund an estimated $142.6 million. That fund is not supported by taxpayers, but by the nation's banks.
First Banking Center has three Burlington locations including branches at 501 E. State St. and 100 E. Washington St. Its other branch locations include Union Grove, Wind Lake, Kenosha, Walworth, Monroe and Lake Geneva.
Customers were advised to use their regular bank branch until First Michigan Bank has completed system changes to allow them to use other bank branches as well.
First Banking Center was the second Racine County-based bank to fail in about the past 13 months, following the demise of Racine's Bank of Elmwood. Oak Creek-based Tri City National Bank now owns those assets.
According to First Banking Center's website, on April 26, 1920, a group of Burlington area businessmen and farmers laid the foundation for the bank.
In 1968, when "branch banking" was introduced in the state of Wisconsin, First Banking Center was one of the first banks to open offices in the surrounding communities.
The bank also states that no shareholders have a significant percentage of ownership, making it a true "community-owned bank."