In a press release announcing its takeover of the institution, the California Department of Financial Institutions said it had been "closely monitoring the bank and had ordered it to increase its capital reserves to a safe and sound level. But efforts by the bank to do so were unsuccessful." TheStreet.com Ratings had assigned First Bank of Beverly Hills an E-minus (Very Weak) financial strength rating in March, a downgrade from the D (Weak) rating that was assigned in September. The bank was included in TheStreet.com's list of undercapitalized banks and thrifts since a fourth-quarter net loss of $83 million left it with tier 1-leverage and total risk-based capital ratios of 3.37% and 6.45%, respectively. These ratios need to be at least 5% and 10%, respectively, for a bank to be considered well capitalized under ordinary circumstances. Most of the net losses sprang from charge-offs of nonperforming residential and commercial construction loans. Since the agency didn't line up a buyer for the failed institution, the FDIC arranged to pay out all of the its deposits. Checks were to be mailed to retail depositors Monday, except for an estimated $179,000 in uninsured deposits. Brokered deposits were to be directly to the brokers. The FDIC estimated the cost to its insurance fund would be $394 million.
Michigan Heritage Bank
Michigan Heritage Bank had approximately $195 million in total assets and $152 million in deposits. While Michigan regulators didn't provide details in their press release announcing the institutions failure, the institution was also included in TheStreet.com's list of undercapitalized banks and thrifts since it was critically undercapitalized as of Dec. 31, with a tier 1-leverage ratio of 1.61% and a risk-based capital ratio of 3.18%.