IndyMac Bank Closes, Transfers Operations To Federal Gov't

WASHINGTON -- The IndyMac Bank, headquartered in Pasadena, will be closed and operations will be transferred to the Federal Deposit Insurance Corporation, the Office of Thrift Supervision announced Friday.

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IndyMac had $32.01 billion in assets as of March 31.A successor institution, IndyMac Federal Bank (FSB), will open for business on Monday and be run by the FDIC, according to the OTS, which is part of the U.S Treasury Department.According to the OTS, IndyMac Bank is unlikely to be able to meet continued depositors' demands in the normal course of business and is therefore in "an unsafe and unsound condition."IndyMac is the largest OTS-regulated thrift ever to fail and, according to FDIC data, the second largest financial institution to close in U.S. history.

What Will Happen To My Money?

Depositors will have no access to banking services online and by telephone this weekend, but will continue to have access to their funds this weekend by ATM, through other debit card transactions and by writing checks, according to the OTS.Online banking and phone banking services will be available again on Monday.Depositors' accounts at IndyMac are insured by the FDIC's Deposit Insurance Fund up to the statutory limits. Customer questions regarding the institution, including questions about federal deposit insurance coverage, should be directed to the FDIC at 1-866-806-5919.The hotline's recorded message explains the bank's status. The message states that Internet banking has been suspended for the weekend, but online banking should be available Monday.

This toll-free number will be available during the following hours:

• Friday, July 11 -- 3 to 9 p.m., PDT
• Saturday, July 12 -- 8 a.m. to 8 p.m., PDT
• Sunday, July 13 -- 8 a.m. to 6 p.m., PDT
• Thereafter: 8 a.m. to 8 p.m., PDT

How Could This Happen?

The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Sen. Charles Schumer of New York, according to the OTS. The letter expressed concerns about IndyMac's viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts."This institution failed today due to a liquidity crisis," said OTS Director John Reich. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."According to the OTS, IndyMac had been in a precarious financial situation that was caused, in part, by an unprecedented stress in the residential real estate market, combined with the evaporation of the non-agency secondary mortgage market in August 2007."The OTS had significant concerns with the bank's funding strategy, had directed appropriate changes and was finalizing a new set of enforcement actions to address its numerous problems," the OTS said in a statement released Friday.As a result of an OTS examination that began in January 2008, the OTS deemed IndyMac to be in troubled condition.An overwhelming majority of problem institutions are able to successfully modify their operations and business plans, work closely with their regulator and eventually return to a healthy condition. IndyMac had reacted to market conditions and OTS concerns in November 2007 by changing its operations and business plan to build a foundation for recovery, according to the OTS."IndyMac was actively seeking to arrange a significant capital infusion or find a buyer. The recent release of the senator's letter undermined the public confidence essential for a financial institution and took away the time IndyMac needed to pursue a recovery," the OTS said in Friday's statement.With no viable alternatives and insufficient liquidity, IndyMac was placed into receivership.The OTS has appointed the FDIC as conservator of the newly chartered successor institution and will transfer most of the assets and liabilities of IndyMac to the new thrift.IndyMac specialized in making and selling so-called Alt-A mortgage loans, a category of loans to consumers more credit worthy than subprime borrowers but typically without the complete documentation of income or assets necessary to receive a prime-rate loan.

OTS Fact Sheet: IndyMac Bank

Institution Profile

• Total assets, as of March 31, 2008: $32.01 billion
• Branches: 33 retail branch offices, all located in Southern California
• Employees: On July 7, 2008, announced staff reduction from 7,200 to 3,400

Recent Deposit Flows

• Deposit inflows in the three days prior to June 27, 2008: $31.2 million
• Deposit outflows beginning June 27, 2008: $730.2 million through July 7 and $1.3 billion through July 10

Other Financial Details

• Brokered deposits as of June 30, 2008: $5.97 billion or 32 percent of total deposits
• Federal Home Loan Bank advances as of June 30, 2008: $10.1 billion
• Loans held (March 2008 10-Q statement): $11.9 billion in single family loans held for investment, including $3.4 billion pay-option ARMs (29 percent) and $4.9 billion interest-only (43 percent)
• Loan servicing (March 2008 10-Q statement): $184.5 billion in loans serviced for others, including 16 percent pay-option ARMs, 10 percent reverse mortgages and 39 percent fixed-rate mortgages
• Loan servicing portfolio delinquency rate: 8.26 percent

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