By Margaret Chadbourn
March 27 (Bloomberg) — Omni National Bank of Atlanta was seized by federal regulators, the 21st U.S. bank to fail this year, as foreclosures rise amid the recession and the highest unemployment in a quarter century.
Omni National, with $956 million in assets and $796.8 million in deposits, was shut today by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. was named receiver, the OCC said in a statement. SunTrust Banks Inc. of Atlanta will operate the lender’s six branches in four states and wind down the bank by April 27, the FDIC said.
“The bank had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices,” the OCC said. The losses “depleted most of its capital” and there was no “reasonable prospect” the levels would rise without government action.
The U.S. has lost 4.4 million jobs since the recession began in December 2007 and unemployment jumped to 8.1 percent in February, the highest in more than 25 years, crippling homeowners trying to pay off their mortgages. The Obama administration’s $787 billion stimulus package is aiming to create or save 3.5 million jobs and boost the economy.
The failed bank had branches in Georgia, Illinois, Florida and Texas, and two loan offices in Alabama and Pennsylvania, the OCC said. The lender, owned by Omni Financial Services Inc., opened in 2000.
The Federal Reserve on March 17 ordered the bank, which is controlled by of Atlanta, to bolster its capital and make improvements in accounting controls within 30 days.
Transition Period
Omni National customers must transfer accounts by April 27, or get a check from SunTrust after the branches are closed, the FDIC said. SunTrust said it received about $400 million in insured deposits as part of the transaction.
The cost to the agency’s deposit insurance fund is estimated to be $290 million, the agency said.
U.S. banks lost $32.1 billion from October through December, the first aggregate quarterly loss since 1990. The agency’s deposit insurance fund, used to reimburse customers of closed banks, tumbled 45 percent to $18.9 billion in the quarter from $34.6 billion in the preceding period following the closing of 25 lenders last year.
“I’m starting to get more optimism,” FDIC Chairman Sheila Bair said this week in an interview on Bloomberg Television. “I think we are seeing some signs of thawing, some signs of improvement. Many banks are making money.”
Obama Rescue Plan
The FDIC is preparing to sell devalued mortgages and commercial real-estate loans that are clogging banks’ balance sheets and preventing lending, Bair said. The initiative is part of the Obama administration’s effort to restart lending by reviving the credit markets.
All banks are being encouraged to participate in the program, the FDIC said yesterday in a conference call with bankers. The agency, which is proposing a one-time fee on banks to replenish the deposit insurance fund, will divert profits from sales in the program to its reserves.
Congress is considering expanding the agency’s borrowing authority from the Treasury Department. An FDIC official told U.S. lawmakers this week the levy of 20 cents per $100 of insured deposits may be cut in half if the credit line is expanded. The FDIC is considering calculating the fee based on a bank’s assets, rather than domestic deposits, so larger lenders will bear more of the cost.
Community lenders have said the one-time fee may significantly reduce 2009 earnings. The Independent Community Bankers of America said more than 1,000 bank executives complained, by letter, about the extra fees in the week after the charges were announced.
The FDIC insures deposits at 8,305 institutions with $13.9 trillion in assets. The 252 lenders on the FDIC’s “problem list” had assets of $159 billion at the end of the fourth quarter, about 1.1 percent of total asserts, an increase from the $116 billion at the end of the third quarter, the agency said on Feb. 26.
To contact the reporter on this story: Margaret Chadbourn in Washington at mchadbourn@bloomberg.net