By Kirk Johannesen and Boris Ladwig, The Republic
johannesen@therepublic.com; bladwig@therepublic.com
Irwin Union Bank has failed. All 27 branches, including 12 in Indiana, were taken over by state because the bank was "operating in an unsafe and unsound manner."
The branches will reopen as normal today and Monday under the Hamilton, Ohio-based First Financial Corp. banner.
Government and FFB officials said all deposits are safe, and customers can continue to use their accounts, checks and credit cards.
Most Irwin Union bank employees will be retained by First Financial Corp., said FFB President and Chief Executive Officer Claude Davis, who is a former president of Irwin Union Bank and former Columbus resident.
Friday evening, about 175 employees of Federal Deposit Insurance Corp. descended upon all Irwin Union branches across the nation, including about 50 in Columbus, said FDIC spokeswoman Roberta Valdez as she stood on the north side entrance of Irwin Union's downtown branch.
Around 5 p.m. Friday, FDIC employees steadily trickled into the building. Most FDIC representatives carried white badges, and many were pulling small suitcases with telescopic handles.
Bartholomew County Sheriff's deputies provided security at the branch entrance, while FDIC and bank employees inside began working to convert Irwin Union branches into First Financial branches.
Valdez said some bank and FDIC employees would work until after midnight to take inventory of deposits, assets and claims and produce balance sheets for First Financial and FDIC.
Irwin Union Bank has its roots in a mercantile store that was launched by J.I. Irwin in 1850. Irwin established the bank in 1871.
The bank's parent corporation, Irwin Financial Corp., has lost more than $450 million in the last six quarters, in part because people have struggled to repay loans, particularly high-risk home equity loans and mortgage loans in western markets that were heavily affected by the recession.
Federal and state regulators on Friday also took over IFC's thrift bank, Irwin Union Bank FSB, which operated the bank's branches outside of Indiana.
The two Irwin banks are the first Indiana banks to fail since Rushville National Bank failed on Dec. 18, 1992.
Including the Irwin banks, 94 banks have failed in the nation this year.
The takeover
First Financial will pay FDIC about $21 million to assume roughly 63,000 Irwin Union Bank deposit accounts of $2.1 billion. FFB also will assume the thrift's $441 million in deposits.
First Financial also purchased $2.5 billion in Irwin Union loans at a price of about 75 percent of the loan value. FFB bought only performing loans. The rest remain in possession of FDIC.
IUBT had assets of $2.7 billion and the thrift $493 million as of Aug. 31.
First Financial had assets of $3.8 billion as of June 30, and operated 107 banking offices in Ohio, Indiana and Kentucky.
Depositors of the failed banks automatically become depositors at First Financial, and their deposits continue to be insured by FDIC. Customers can continue to do business as normal, said Valdez.
A deal between First Financial and FDIC was reached Thursday Valdez said. First Financial purchased the Irwin banks through a bid process.
"We are pleased to welcome the clients of Irwin to First Financial and want to assure them that their deposits are safe, secure, and readily accessible. Since all deposits are being assumed by First Financial Bank, there will be no losses to any depositor," Davis said in a news release.
"Clients will recognize familiar banking center associates from Irwin who will continue to take care of their banking needs."
Problems too sizable
Indiana Department of Financial Institutions took possession of Columbus-based IUBT at 5 p.m. Friday for the purpose of receivership and liquidation, according to an IDFI news release.
"Irwin Union Bank and Trust was operating in an unsafe and unsound manner, and its failing liquidity position left the bank in imminent danger of insolvency," IDFI Director David H. Mills said.
"We are pleased that the Columbus community, and other markets of the bank, will continue to be provided banking services by First Financial Bank."
The Office of Thrift Supervision closed Louisville, Ky.-based Irwin Union FSB, which began operating in 2000.
An OTS news release read that the savings bank was operating "in an unsafe and unsound condition to conduct business because of its deteriorating asset quality, weak earnings and inability to develop an acceptable operating plan."
The state and federal chartering agencies named FDIC as the receiver of both banks.
IFC executives had tried to reduce the corporation's size and refocus on serving individual and small-business customers. However, the last step in the restructuring, raising capital, proved insurmountable.
IFC recently withdrew its request with federal regulators to raise capital through a stock offering.
On Wednesday, IFC agreed to a Cease and Desist order with the Federal Reserve System and the Indiana Department of Financial Institutions.
The order required that IFC and IUBT achieve certain capital levels by Sept. 30 and reduce their reliance on brokered deposits, which are riskier than traditional deposits generated at bank branches.
"The corporation and IUBT believe that there is no realistic prospect of achieving the required capital levels," IFC wrote in the filing with the Securities and Exchange Commission.
Analysts said the filing indicated that the days of the corporation and the banks were numbered.
IFC Chairman and Chief Executive Officer Will Miller, a fifth-generation descendent of the bank's founder, could not be reached Friday evening.
IFC's shares fell 2 cents or 4 percent Friday in heavy trading and closed at 48 cents.
In after-hours trading, shares dropped 43.75 percent to 27 cents.