Main Street Bank Closed; U.S. Invests $250 Billion in Banks  

By BILL PERRY  

LANSING – Main Street Bank in Northville was closed last month by the Michigan Office of Financial and Insurance Regulation (OFIR), and the Federal Deposit Insurance Corp. (FDIC) was named receiver. The continued downturn in the economy and the problems in the financial industry was more than the bank could fight against. Main Street Bank was the fourteenth bank closure to occur nationally this year. In Michigan , only nine banks, including Main Street Bank, have closed since 1970. Prior to the Main Street closing, the last Michigan bank to shutter its doors was New Century Bank in Shelby Township in 2002.  

OFIR Commissioner, Ken Ross, explained that all of the deposits of Main Street Bank have been acquired by Monroe Bank and Trust (MB&T) in Monroe, All deposit customers of Main Street are now depositors of Monroe Bank and Trust and have uninterrupted access to their funds.  

“This is a good deal for customers--no depositor will lose a penny,” Ross said. “The dramatic downturn in the residential real estate market unfortunately knocked the wind out of this institution, despite the best efforts of a creative management team.”  

Michigan Association of Community Bankers President and CEO, Judi Sullivan, said the closing of a MACB member bank is unfortunate for the management and staff of the bank who pulled together and worked so hard to start the bank, build it, and then through a series of unforeseeable factors had to close it.  “However, we commend the leadership of Monroe Bank and Trust for stepping up to acquire the deposits of Main Street Bank,” she said.   

Sullivan concurred with the OFIR commissioner’s statement that not one depositor will lose a single penny.  “The bank’s offices are now operating as branches of Monroe Bank and Trust and MBT will undoubtedly develop a solid presence in those two great communities of Northville and Plymouth .”  

With the closing and take over by MB&T, Main Street Bank depositors automatically became customers of Monroe Bank and Trust. The bank’s offices reopened as branches of MB&T. Deposit customers of Main Street continued to have access to their money by writing checks or using ATM or debit cards through the take over process. All checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.  

At the end of September, Main Street Bank had $98.3 million in total assets, $85.8 million in deposits and net loans in the amount of $79.1 million. It was wholly owned by Main Street Bancorp and was headquartered in Northville. It operated one branch in Plymouth . The bank opened over four years ago and was closed when the Federal Deposit Insurance Corporation (FDIC) was appointed receiver by Ingham County Circuit Court.

Monroe Bank & Trust has agreed to pay a total premium of one percent for the failed bank's deposits. In addition, Monroe Bank & Trust will purchase approximately $16.9 million of Main Street 's assets, and have a 90-day option to purchase approximately $1.1 million in premises and fixed assets. The FDIC will retain the remaining assets for later disposition.

The FDIC estimates that the cost to its Deposit Insurance Fund will be between $33 million and $39 million. Monroe Bank & Trusts' acquisition of all deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the failed bank's franchise.

Challenges Ahead

With Main Street Bank the first casualty of the financial crisis in Michigan , Sullivan also addressed efforts in Washington to stabilize the banking industry with its announcement to invest up to $250 billion in banks.  She noted that the policies are different than anything ever offered by the federal government.  

Sullivan believes that the U.S. Treasury was compelled to implement the actions for the good of the economy and the American financial system.  “These Treasury bank programs can help banks to shore up their balance sheets, deal with troubled assets and have access to reasonably priced capital through the issuance of preferred stock to the U. S. Treasury.”   

Treasury also announced that it will provide a debt guarantee program including interbank lending and other debt instruments.  “This will improve the liquidity of the financial system and should make loans available to consumers and small business,” Sullivan added.  

She said the media tends to paint all banks with the same brush, and not all banks were a part of causing this current financial crisis.  “Wall Street is not Main Street , and there are some 5,000 community bankers in our nation that are ‘common sense lenders.’  They live and work and do business in their market areas.  They take pride in working on solutions to help their customers with credit problems, and they will do all that they can to help in this current situation as well.”  

She emphasized that no one appears to like the Emergency Stabilization Act of 2008. “However, as bad as it may seem at first blush, the situation would have escalated quickly and been much worse in the long run had it not been passed.”  

Cynthia Blankenship, chairman of the Independent Community Bankers of America (ICBA), agreed and supported coordinated federal efforts to restore confidence in the nation’s financial system:  

“ICBA greatly regrets these actions have to be taken, but these are extraordinary times and we understand that these are necessary steps given the stress in our financial system and world financial markets. ICBA supports efforts to restore public confidence in our financial system,” she said.  

“The vast majority of community banks continue to remain well-capitalized and have shown resiliency during the current economic downturn due to their safe, common-sense business practices. Nonetheless, ICBA is pleased community banks who choose to participate in this voluntary program will be able to do so. Throughout this crisis, our goal has been to ensure parity for community banks so they are not hampered in their ability to continue serving local communities,” Blankenship concluded.  

“These Treasury bank programs can help banks to shore up their balance sheets, deal with troubled assets and have access to reasonably priced capital through the issuance of preferred stock to the U. S. Treasury.”  

goneil@michiganbankermag.com