Anatomy of a Closing: Takeover of 100th Failed Bank Was a Routine Operation of Experienced FDIC Team, (Federal Deposit Insurance Corp.)

Article excerpt

HOUSTON -- Just after 3 p.m. last Friday, at the information and reception desk of the Northshore Bank, Lillian Offield struggled to keep pace with a rush of incoming telephone calls. On her switch-board, all 10 lines were blinking like a string of Christmas tree lights.

Typically, Friday afternoons at the bank have been slow. But Nov. 8 was not typical.

"Good afternoon, Federal Deposit Insurance Corp.," answered Ms. Offield, reading from a note paper-clipped to a message tray on her desk. She paused for breath, and the caller, initially, probably surmised from the way Ms. Offield answered the telephone that he or she had reached not the bank but a wrong number.

Then Ms. offield, in the calming, pleasant-sounding voice that almost surely helped her earn the Northshore Bank October employee-of-the-month award, continued reading the prepared message: "Northshore Bank was taken over by the Federal Deposit Insurance Corp. as of 3 p.m. today."

She went on reading, saying that the FDIC is attempting to find another buyer for the bank, that deposits of up to $100,000 at Northshore Bank are insured by the FDIC, and advising the caller to stay tuned to local radio and television news broadcasts for additional information.

That call completed, Ms. Offield punched another button on the blinking switchboard. There was no letup from the incoming calls as word swept through this sprawling Texas coastal city that Northshore Bank, which opened in 1963 in a blue-collar, chemical, and industrial business area near the Houston Ship Channel, had failed.

Northshore, the third bank to fail so far this year in Houston and the 11th in Texas, lost in the high-stakes game of speculative real estate lending. About 55% of the bank's $37 million loan portfolio was calssified by federal and state bank examiners.

Only 40 minutes after the FDIC took control of Northshore Bank, Ms Offield had gotten her handling of the nonstop calls down to a mechanical routine. Appearing more relaxed, she rejected an offer from another bank employee to take over for her.

It was evident, too, that the FDIC had fallen into a routine for handling bank failures. The message Ms. Offield was reading to telephone callers, for example, is a photocopy of one that the same FDIC closing staff takes along to each failed bank. There is a blank space on the photocopy for the name of the failed bank.

Standardized Procedures

The note gave instructions on how to answer the telephone, and the name of the FDIC official to whom media inquiries and calls from other bank regulatory agencies should be referred.

Also brought along were photocopied signs directing the FDIC staff to where key individuals are stationed. By 4 p.m., an hour after the FDIC was left with the pieces of the failed Northshore Bank, signs reading "assets," "closing supervisor" were taped to the windows of offices off the bank's lobby that previously were occupied by Northshore Bank executives.

Other FDIC personnel were assigned space on the second floor in what had been the offices of the bank's top executives. Some offices were so lavishly decorated that some FDIC staffers said they thought they were inside a $400 million-asset bank instead of one with only $47 million in assets.

By 6:15 p.m., Ken Gorham, a supervisory liquidation specialist from the Dallas FDIC office and the closing manager of the Northshore Bank, had finished his on-camera interviews with reporters at Houston television stations. And his closing staff of 60 was well on its way to completing one of the major tasks of closing day -- counting the cash on hand at the bank.

The FDIC has had plenty of practice. The Northshore Bank was the 100th insured commercial bank to fail so far in 1985. As in the 99 previous failures of the year, the FDIC was appointed receiver. The agency insures deposits at member commercial banks and regulates them, but does not itself close a bank. …