HOME BANK, SIGNAL HILL, CALIFORNIA, ASSUMES INSURED DEPOSITS OF MECHANICS NATIONAL BANK, PARAMOUNT, CALIFORNIA: MONEY-DESK DEPOSITS
FOR IMMEDIATE RELEASE
(FDIC) David Barr (202) 898-6992
(OCC) Frank Vance (202) 874-4700
Home Bank, Signal Hill, California, has assumed the insured
deposits of Mechanics National Bank, Paramount, California, after
Mechanics was closed today by the Office of the Comptroller of the
Currency (OCC) and the FDIC was named receiver. The failed bank's
money-desk deposits, which totaled about $37.0 million in 373
accounts, will be paid out, up to the $100,000 federal insurance
limit. At the same time, Home Bank entered into separate purchase
and assumption agreements to sell selected Mechanics National
branches and assets to six other banking institutions.
Mechanics National, with assets of about $165.8 million, was
closed because the OCC found that the bank was in an unsafe and
unsound condition to transact business and had incurred losses that
depleted all of its capital. In addition, the bank demonstrated no
likely prospects of becoming adequately capitalized.
Mechanics National Bank assets became highly concentrated in
real estate loans, loans to service stations and Small Business
Administration (SBA) loans over the past five years. The bank grew
rapidly without adequate expertise, controls, policies or
procedures. The bank's loan underwriting, administration and
collection practices were poor. Many of these loans eventually
became losses for the bank when the borrowers defaulted. The
bank's board signed a consent order with the OCC in 1991, agreeing
to ensure implementation of effective controls in the bank, but the
bank did not comply with that order. Due to continued losses, the
OCC placed Mechanics National Bank under a prompt corrective action
directive in August of 1993. That directive required the bank to
dismiss certain officers and raise capital. While the bank
dismissed these officers, capital was never raised.
The bank's net losses over the past two years exceeded $21.0
million. Mechanics National Bank received a national bank charter
on January 28, 1965.
Of the failed bank's eight offices, the Paramount office will
reopen on Monday, April 4, 1994, as an office of Home Bank. The
failed bank's Torrance office will not reopen, but customers can
access their accounts on Monday at Home Bank's office at 2860 W.
Sepulveda Blvd., Torrance.
Of the six remaining offices:
* The Downey branch will reopen as a branch of Pacific Western National Bank, Pico Rivera.
* The Huntington Park branch will open as a branch of Cerritos Valley Bank, Norwalk.
* The Mira Loma branch will reopen as a branch of De Anza
National Bank, Riverside.
All offices will reopen Monday.
The following three failed bank branches will not reopen, but
customers can access their accounts as follows:
Customers can access accounts Monday at:
Landmark Bank, 390 N. Brea Blvd., Brea
California United Bank, N.A. 16030 Ventura Blvd., Encino
Foothills Independent Bank, 569 N. Mountain Ave., Upland
The failed banks' depositors automatically will become
depositors of their respective assuming banks. Customers of the
failed bank's money desk will have their deposits, up to the
federal $100,000 insurance limit, mailed to them beginning Monday,
April 4, 1994.
Home Bank will assume about $107.6 million in about 13,800
deposit accounts. At the time the bank failed, about 130 accounts
totaling $4.8 million exceeded the federal insurance limit of
$100,000 and will not be assumed by Home Bank.
The FDIC Board of Directors also voted to make a prompt
advance payment to uninsured depositors equal to 62 percent of
uninsured claims. Uninsured depositors can call an FDIC claims
agent at the failed bank's main office beginning Saturday, April 2,
1994, to arrange payment.
The assuming bank will pay a premium of $55,000 for the right
to receive the failed bank's deposits and will purchase $20.5
million of the failed bank's assets.
The failure of Mechanics National is the first bank failure of
1994. In the first three months of 1993, seven banks failed, and
35 banks failed during the same period of 1992. Mechanics National
Bank had no affiliation with similarly named Mechanics Bank,
The Board of Directors approved the deposit assumption under
its authority to do so whenever it determines that such a
transaction will reduce the potential loss to the FDIC. The FDIC
notes that its claim on recoveries from the sale of the failed
bank's assets will have priority over non-depositor creditors of
the failed bank.