The Office of Thrift Supervision closed TierOne Bank of Lincoln on Friday afternoon and appointed the Federal Deposit Insurance Corp. as receiver. The FDIC is assuring TierOne customers their money is safe and accessible, and all TierOne bank branches were scheduled to be open Saturday.
TierOne is the largest Nebraska-based bank to fail since the FDIC was created in 1934 and the biggest in the state's history. In fact, TierOne's $2.82 billion in assets is more than the combined assets of all the 51 other FDIC-insured Nebraska banks that have failed since federal deposit insurance was started during the Great Depression.
In a news release, the FDIC said it entered a purchase agreement with Great Western Bank of Sioux Falls, S.D., to assume all of the deposits of TierOne Bank.
The closing brought to a climax the troubles TierOne has had from its expansion into real estate development and construction lending in states most damaged by the real estate bubble that led to the current recession.
TierOne Bank got its start as Fidelity Savings and Loan Association in 1907. Among other achievements noted during its 2007 centennial celebration were its pioneering of electronic funds transfers and being among the first to offer bill-paying over the telephone.
The OTS said TierOne has 764 employees, 59 branches in Nebraska, nine branches in Iowa and one in Kansas.
Outside the bank's headquarters at 13th and N streets early Friday evening, its news ticker read as if nothing unusual had happened: "Open a checking account today and receive three free stainless steel Subzero water bottles."
The scene inside said otherwise.
A news release from the FDIC was taped to the inside door.
About 25 men in white shirts and ties and women wearing skirts could be seen inside the bank.
TierOne employees trickled out of the bank around 7 p.m. but deferred comment to FDIC officials.
FDIC officials at the 13th and N streets branch also declined to comment Friday night. And TierOne officials did not return phone calls and e-mails seeking comment.
The branches of TierOne Bank will reopen during normal business hours Saturday as branches of Great Western Bank.
Depositors of TierOne Bank automatically will become depositors of Great Western Bank. Deposits will continue to be insured by the FDIC, so the FDIC said there is no need for customers to change their banking relationship to retain their deposit insurance coverage.
Customers of TierOne Bank should continue to use the branches they normally use until they receive notice from Great Western Bank that it has completed systems changes to allow other Great Western Bank branches to process their accounts as well, the FDIC said.
Depositors of TierOne Bank can access their money by writing checks or using ATM or debit cards normally through the weekend, the FDIC said.
Checks drawn on the bank will continue to be processed, the agency said, and loan customers should continue to make their payments as usual.
As of March 31, TierOne Bank had approximately $2.8 billion in total assets and $2.2 billion in total deposits.
The FDIC said Great Western Bank will pay a premium of 1.5 percent to assume all of the deposits of TierOne Bank.
In addition to assuming all of the deposits of the failed bank, Great Western Bank has agreed to purchase essentially all of the assets.
The FDIC said Great Western Bank entered into a loss-share transaction on $1.9 billion of TierOne Bank's assets. Great Western Bank will share in the losses on the asset pools covered under the loss-share agreement.
The loss-share transaction is supposed to maximize returns on the loans covered by keeping them in the private sector.
The FDIC estimates the cost to the Deposit Insurance Fund will be $297.8 million.
Great Western Bank's acquisition of all of the deposits was the "least costly" resolution for the FDIC's insurance fund compared to all alternatives, the FDIC said.
"TierOne Bank had substantial loan losses, negative earnings in 10 of the last 11 quarters and insufficient capital," the OTS said. "The bank failed to submit an acceptable capital restoration plan to the OTS, and its attempts to recapitalize, sell or merge were unsuccessful."
TierOne Bank is the 81st FDIC-insured institution to fail in the nation this year and the first in Nebraska. The last FDIC-insured institution closed in the state was Sherman County Bank of Loup City on Feb. 13, 2009.
TierOne Bank's closing came a day after its regulator posted on its website agreements with the bank giving it more time to restore its capital, which had been depleted by losses in real estate development and construction lending, especially in states hurt most by the recession.
OTS officials could not be reached Friday to explain why the bank was closed so soon after the agency gave the bank and its holding company another month and a half to show a plan to recover.
In early May, a New York law firm sued TierOne and several current and former company officials, alleging the company filed false and misleading financial statements to inflate the price of its stock.