The drum beat continues. Two banks failed last night.
American Sterling Bank of Sugar Creek, Missouri, was the first to be announced by the FDIC. As a savings and loan, American Sterling's primary regulator was the Office of Thrift Supervision.
The OTS reports:
A comprehensive examination of American Sterling that began on June 30, 2008 discovered poor record-keeping, a critical lack of capital and liquidity issues. OTS issued directives to remedy these deficiencies and issued a formal cease-and-desist enforcement order to the Board of Directors in August 2008. Despite these actions, the deficiencies caused American Sterling to be in an unsafe and unsound condition, and unable to continue operations.
The Kansas City Star has more of the story. Owned by Californians, American Sterling feasted off a 32-state network of mortgage brokers it created until the buyers of the loans it was flipping started to send them back, "citing appraisal and documentation problems." It appears the bank eventually drowned under the weight of the bad loans.
Since American Sterling's owners hailed from the Los Angeles area they, of course, also owned an independent film company. It produced the 1999 movie "The Annihilation of Fish," which starred James Earl Jones as Fish, a lonely Jamaican immigrant who falls in love with an American spinster named Poinsettia, played by Lynn Redgrave. The movie received mixed reviews.
Metcalf Bank located in Lee's Summit, Missouri, agreed to take on the deposits of American Sterling Bank and share in the losses on the assets with the FDIC. The bank's failure will cost the FDIC's shrinking Deposit Insurance Fund about $42 million.
Later in the evening, the FDIC shut down Great Basin Bank of Nevada, located in Elko. Oddly, the FDIC estimates this failure will also cost the Deposit Insurance Fund $42 million. The bank chosen by the FDIC to receive Great Basin's deposits and share in the losses is Nevada State Bank of Las Vegas. Nevada State was also picked to vacuum up the deposits last year from the failure of Silver State Bank.
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