Ogden » Centennial Bank's parking lot was full Saturday. Not with customers, but with employees and federal regulators working through the weekend to cut insurance checks to depositors in the wake of the bank's failure.
Those checks should be in the mail Monday, said Richard Schmalzer, regional ombudsman with the Federal Deposit Insurance Corp., who directed Saturday's operation.
Centennial was closed Friday afternoon by state regulators and handed over to FDIC officials. Schmalzer and other banking experts blamed the bank's demise primarily on bad loans made during a more-than-2-year-old slide in the real estate market.
"The bank incurred significant losses in ADC loans" -- acquisition, development and construction, Schmalzer said. "Centennial Bank was identified [by FDIC] as a problem bank for more than a year."
While most of the failed bank's accounts are insured, up to $1.8 million in deposits might not be, Schmalzer said. Those accounts would exceed the $250,000 limit guaranteed by the federal agency.
The bank, with branches in Ogden, Layton, Clinton, South Jordan and Orem, had about 3,000 depositors, a large number of them either brokered or Internet accounts, he said. The final total of uninsured deposits could be lower as regulators continue digging into the details of Centennial's accounts.
"We're in the process of fully identifying which accounts may be uninsured," Schmalzer said. "The ones we need more information on, we'll be in touch with those depositors.
"Our role is to wind down the affairs of the institution," he said. "This is not a functioning bank any more."
Centennial has about 70 employees.
Utah Department of Financial Institutions Commissioner Ed Leary, whose agency declared the bank insolvent Friday afternoon to pave the way for the FDIC's takeover, acknowledged Centennial's failure -- the second of a Utah community bank this year -- might not be the last in the foreseeable future.
"Given the state of our economy now, the banks' conditions [leading to failure] were not unexpected," he said Saturday. "It is evident to most of the world that we are in a bad economy. [These failures] are just more examples of that."
Centennial was one of nine community banks recently identified by the FDIC as having asset issues, primarily due to overdue and defaulted real estate development and construction loans. Barnes Bank of Kaysville went under in January. In all, four banks and one credit union in Utah have failed since January 2008.
In all those cases, the financial institutions had gambled on speculative real estate construction and land loans, records show.
With Centennial now in FDIC receivership, eight Utah banks remain in peril, according to FDIC data compiled by the American University School of Communications Investigative Reporting Workshop: First Utah, of Salt Lake City; Holladay Bank and Trust, Holladay; SunFirst, St. George; Village Bank, St. George; Gunnison Valley, Gunnison; Western Community, Orem; Capital Community, Provo; and Prime Alliance, Woods Cross.
Efforts to reach Larry Grant, a senior lending officer with Centennial's Ogden branch, were unsuccessful Saturday.
However, Grant recently told The Tribune that the bank's fortunes had begun to decline in September 2007 when the bottom fell out of the state's real estate market.
Nonetheless, Centennial's investors had taken hope in a turnaround when, in September, Vision Bankcard of Orem announced yet-to-be-finalized plans to take a controlling interest and bring in new capital.
Howard Headlee, president of the Utah Bankers Association, said he had hoped Centennial's fortunes could be salvaged.
"It's sad that it turned out this way," he said.
Headlee praised the FDIC system for working flawlessly through the recent recession and said depositors have no reason to panic.
"The Utah banking industry is working in a joint effort to help Centennial customers transition to other FDIC-insured institutions," Headlee said. "The next few days will be centered on helping them -- and evaluating what could have been done differently with Centennial."
Zions Bank has agreed to accept Centennial's direct deposits from the federal government, including Social Security and veterans' payments. Zions served a similar role when Barnes Bank of Kaysville closed in January.
Both Schmalzer and Headlee urged people to use the Electronic Deposit Insurance Estimator on the FDIC Web site at http://www.fdic.gov/deposit/deposits/index.html" Target="_BLANK">http://www.fdic.gov/deposit/deposits/index.html to determine if their accounts are structured to be well-protected.