The first indication Becky McClain had that something out of the ordinary was happening at Home Savings of America Feb. 24, was the number of white papers posted on the front doors, and the bank lobby thick with people. From her vantage point across the street at Lin Furniture, she wondered if the bank were under new ownership.
Unfortunately for many Morrison County residents, that was not the case. VFW manager Chris Eix, whose son was employed by Home Savings, said the afternoon of Friday, Feb. 24, 75 Federal Deposit Insurance Corporation (FDIC) employees and 20 Minnesota State Troopers appeared and announced that the FDIC was taking over the bank.
Her son called her in an attempt to find someone to pick up his children from day care, because he was not yet cleared to leave the bank. “He could not afford the $75 per hour late fee for missing their pickup time,” Eix said. After at least four phone calls looking for someone with two car seats, he found help.
Jeanne Brastad found out something was wrong when she tried to use her bank card late that Friday, and was surprised when it was declined. When her husband’s card would not work either, they drove past Home Savings and saw all the cars and men in suits. The bank was closed.
“We knew we’d have to get into a new bank and get things all set up,” she said. The Brastads went in Saturday to get the contents of their safety deposit box. “The FDIC told us they would cover our money, and we would receive a check within five to seven days,” she said.
Cheryl Zarns was checking her e-mail Friday night and found one from the FDIC explaining the situation.
“I got a cold kind of feeling. It could have been a hoax or it could have been true.” After finding out that her daughter had received the same e-mail, Zarns knew it was true.
Jeff Jelinski received a phone call Sunday, Feb. 26, requesting he come to the bank to empty his safety deposit box. “Everything was very orderly, very matter-of-fact at the bank,” he said.
State Patrol Lieutenant Dave ZumBerge was on duty at the bank entrance Monday morning. He explained that the State Patrol had contracted with the FDIC to secure the building.
“The FDIC took ownership at 4:30 Friday afternoon, Feb. 24, and we will probably be here providing security until late in the week, when safety deposit boxes are emptied,” he said.
Home Savings of America failed because of “substantial dissipation of assets and earnings due to unsafe or unsound practices,” according to a press release from the Office of the Comptroller of the Currency (COC). Home Savings had also “incurred losses that depleted its capital, was critically undercapitalized, and there is no reasonable prospect that the institution will become adequately capitalized without federal assistance.”
Because a buyer could not be found, the COC then closed the bank and asked the FDIC to serve as receiver and to pay off depositors. Ray Rudnicki, FDIC senior ombudsman specialist, said, “We spent the weekend reviewing records and figuring interest on depositors’ accounts through Friday. Twelve thousand checks were sent to depositors from Dallas Monday morning.”
The FDIC insures deposits up to $250,000 on interest-bearing accounts. Rudnicki said that possibly 30 accounts total from all four Home Savings branches (Little Falls and three in California) were above the insured limit.
Price Waterhouse, an international accounting firm, is also serving as a contractor to supplement the number of people working on accounts at the bank, Rudnicki said. They have the specialized skills necessary. Rudnicki said that there will be a small number of FDIC employees in Little Falls for 90 days or longer, until all loans have been cleared up. Deb Boelz, Little Falls Area Chamber of Commerce president and CEO, who also owns West Side Bar with her husband, said, “We made sure that employees did not accept any checks written on Home Savings accounts. It’s hard since so many people had their paychecks direct deposited on Friday before the bank closed.”
Linda LeMieur of Bob LeMieur Roll-offs, Refuse and Recycling said they were called Sunday morning, Feb. 26, with a request to empty the dumpster at Home Savings. A truck was quickly sent out and the job done. The FDIC called Monday and LeMieur stopped in to find payment waiting for her.
“They couldn’t have been any nicer. They were friendly and professional,” she said.
Monday morning Zarns was concerned about how to do the payroll for Zarns Oil, the business she owns with her husband. Opening a new business account takes time and a lot of paperwork, but it was done in about two hours.
“The bank did a great job getting checks ready,” Zarns said, but she still needed to find a deposit which would cover the payroll, since the business cash flow was in limbo. She said she was fortunate in that one of the business deposits had not been made yet and could be used for that.
There were still phone calls to be made to redirect electronic fund transfers for business supplies. New account information had to be supplied to service companies for automatic debits. But Zarns knows, “It will all get straightened away. Everyone we saw was taking it in stride; everyone had a smile on their face.”
Lobbies at local banks were full Monday. Boelz said, “We did not attempt to go to a bank because they were very busy.” Zarns said her bank was also “super busy.”
Some employees were not able to go for lunch Monday, so Domino’s Pizza owner Shane Cole found himself delivering pizza to three banks. “One delivery was made at nearly 3 p.m., where they had not had lunch yet. All banks were very busy,” he said.
Nicole Garrison, vice president for corporate public relations for US Bank, said that US Bank was chosen to receive social security and other government deposits for those people who were receiving them at Home Savings. “US Bank has a very good working relationship with the FDIC and has worked on a number of acquisitions with them.” Social Security funds will be available on their regularly scheduled day.
Greg Hernandez of the Office of Public Affairs in Washington, D.C., said, “The FDIC routinely investigates why a bank has closed. On average those investigations take 18 months to complete. “If a potential lawsuit is cost-effective and has merit, the FDIC will file a civil lawsuit against the directors and officers of the bank who may have played a role in the failure,” he said.
People wanting to check on the health of their bank can check with Bauer Financial, an independent private rating company. According to an area banker, they are very reliable and provide a star rating for free online at www.bauerfinancial.com. For a fee, additional reports are available and they are consumer-friendly. The more financially savvy person can go to www.FDIC.gov, where more in-depth reports can be found. Bank status is also shown on the FDIC Web site.
Rudnicki wants people to know, “The important thing is that all insured deposits are being paid. No one has ever lost a penny since FDIC began 77 years ago. Everyone should keep their money in insured accounts for the safety of their deposits.”
“This is quite wide-reaching across town; it affects not just businesses, but individuals and non-profits,” Deb Boelz said. “It’s disheartening, and I hope that another institution will see the benefits of locating in that spot and will give residents another opportunity.”
Zarns described the pride felt in what was originally a locally-owned hometown bank. “It’s sad it had to go this way and fail. With the economy the way it is, it’s not surprising; you just don’t expect it to be in your hometown.”
Eix said, “We are seeing how good our community is. We have a strong community, and we will get through this.”