Friday, May 1, 2009

City pitches in on First Bank failure

Credit lines, contributions a concern

Express Staff Writer

First Bank of Idaho’s name remains on the doors and ATM at its Ketchum branch, but the tellers inside wear U.S. Bank badges. U.S. Bank purchased the deposits of First Bank of Idaho after the FDIC closed First Bank on Friday. Photo by David N. Seelig

The takeover of First Bank of Idaho by the Federal Deposit Insurance Corp. last Friday has left many Wood River Valley businesses and nonprofit organizations worried about their survival.

One of the largest problems that has arisen in the immediate aftermath of the bank's failure is the inability for small businesses to access lines of credit, all of which have frozen by the FDIC.

First Bank of Idaho was ordered closed April 24 by the Office of Thrift Supervision, an agency of the Department of the Treasury that regulates federal savings associations. The FDIC carried out that action and was the receiver of the bank's assets, selling $280 million in retail deposits for approximately $1.5 million.

"The frozen lines of credit at First Bank of Idaho have sent somewhat of a panic through the business community," Ketchum Mayor Randy Hall said. "This has necessitated immediate action from the city."

According to Hall, at least half a dozen local businesses are in "dire straits" without credit available to help weather the slow "slack" season.

"Our number one priority is not to see a single business fail because of the bank closure," Hall said. "We're working hard to explore all options and find lines of credit."

Hall, Community and Economic Development Director Lisa Horowitz and City Administrator Gary Marks have already met with members of the FDIC and representatives from other area banks, including U.S. Bank, Zion's Bank and Mountain West Bank. Hall said he is scheduled to meet with John Evans, CEO of D.L. Evans, next week.

It was clear from these meetings that the surviving banks are eager to step in to capture a portion of the suddenly available business, Hall said.

According to the FDIC, First Bank of Idaho had just under 44 percent of the market share of all deposits in Blaine County.

"The closure left a big hole and all the banks are seeing this as an opportunity," Hall said. "With U.S. Bank, they made a big investment here and will see that go up in smoke if they aren't able to retain their portfolio."

While First Bank of Idaho customers are now clients of U.S. Bank, they are still able to use the checks and debit cards of the former. An indication of U.S. Bank's success at customer retention could possibly be seen when it comes time to switch over to U.S. Bank checks, Horowitz said.

Hall asked that business owners with concerns about credit lines call his cell phone at 720-5318 so that he can help put them in touch with the proper bank official.

"We want everyone to know that there are resources out there and the city is here to help find solutions for these needs," Hall said.

Another reason for hope is the federal Small Business Administration, which received nearly $650 million for loans through the government's economic stimulus package. Hall said this would likely help ease liquidity problems for local businesses, as the SBA insures 90 percent of SBA-approved loans, making it easier to receive lending from banks.

Becky Kearns, president of Resort Banking at Zion's Bank, based in Utah, said that her bank is the No. 1 lender of SBA loans in Idaho and has already brought in a team of employees to help process new loans and lines of credit.

In addition, she said that if the demand is great enough, the bank would likely be hiring new employees, good news for First Bank of Idaho workers who are facing unemployment.

The approximately 60 First Bank of Idaho employees in the Wood River Valley are currently on the payroll of the FDIC. Hall said that U.S. Bank has committed to keeping them on for 90 days.

In addition to businesses and bank employees, local nonprofit organizations are also facing uncertainty, as First Bank of Idaho was well known for its philanthropic efforts throughout the community.

Don Wiseman, executive director of the Sun Valley Ski Education Foundation, said the bank was an important supporter of the Janss Pro-Am ski race, both with funding and volunteer personnel. As the bank was not the title sponsor, Wiseman said that the event has enough support to continue, but that the bank's generosity played an important role that will be difficult to duplicate.

U.S. Bank has already agreed to take up some of the slack left by the closure, agreeing to honor First Bank of Idaho's $5,000 commitment to the Ketch'Em Alive summer concert series.

"They needed good public relations and this made good sense to U.S. Bank to start generating good will," Ketch'Em Alive organizer Will Caldwell said.

Jon Duval:

Feds shed light on closure

First Bank of Idaho was losing an average of $2.7 million per business day since April 9, according to the Office of Thrift Supervision, an agency of the Department of the Treasury that regulates federal savings associations.

This led to an untenable financial situation that resulted in the bank's closure on Friday.

William Ruberry, a spokesman for the OTS, said the agency ordered the FDIC to take over the bank because it was in danger of running out of cash by the end of the month.

On April 24, the day the bank closed, that agency stated in a report that First Bank of Idaho "is in an unsafe and unsound condition as a result of its severe liquidity strain, deteriorating asset quality, and negative earnings with no realistic prospects for raising capital quickly enough to ensure that it can repay all of its liabilities, including deposits."

Wilson McElhinny, chairman of the First Bank of Idaho board, said that a deal with a hedge fund for nearly $10 million would likely have been completed this week and another $15 million in assets were set to be removed from the bank's books.

However, Ruberry said the OTS could not take the chance of having the bank run out of cash in case those deals did not go through.

"In general, the OTS has seen many letters of intent that never end up happening," Ruberry said. "It's not necessarily funds in hand."

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