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Regulators Seize Three Banks, Thrift

TheStreet.com Ratings had assigned Michigan Heritage Bank an E-minus (Very Weak) financial strength rating in December, a downgrade from an E rating assigned in September. The institution's capital was wiped out because of loan charge-offs across its diversified portfolio.

The FDIC sold Michigan Heritage's retail deposits to Level One Bank, and the failed bank's three offices were set to reopen as Level One branches on Monday.

Once again, brokered deposits were not acquired, and were to be paid directly to brokers.

Level One Bank took on $46 million of the failed bank's assets, with the FDIC retaining the rest for later disposition. The agency estimated the cost to its insurance fund would be $71.3 million.

Free, Conservative Bank Financial Strength Ratings

On a Friday that saw the FDIC's insurance fund incur costs of nearly $700 million, most depositors made out rather well, as only one of the four failed institutions had uninsured deposits and these totaled only $179,000. But then again, to the depositors losing that money, it probably didn't seem like such a small amount.

Losses on uninsured deposit balances are much more likely when the FDIC is unable to find a buyer for a failed institution. This scenario has become more common, with the agency failing to line up a buyer for four failed banks since March 20.

This week's four failures also foisted great inconvenience on customers who made deposits through brokers. These depositors will probably wait several weeks to receive their money, since the brokers must provide information to the FDIC and then receive payouts from the agency. The depositors will then need to shop for new parking places for the cash, probably at much lower rates than the ones they'd locked in.

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