Washington Mutual Seized and Sold Simultaneously

Washington Mutual, in the space of 24 hours has become America's largest ever bank failure, seized by regulators and sold to JPMorgan for $!.9bn. The rescue is the second by JPMorgan to help the US taxpayer avoid shelling out for assuming $31bn in losses.

The Federal Deposit Insurance Corporation protected WaMu' account holders to a $100,000 limit. Additional deposits are guaranteed by JPMorgan. Shareholders and bondholders are not likely to feel so well. Branches in New York and Chicago are likely to feel the cold as an expected 10% of WaMu's branches are closed.

This institution was a big question mark about the health of the deposit fund,” Sheila C. Bair, the chairwoman of the F.D.I.C., said on a conference call Thursday. “It was unique in its size and exposure to higher risk mortgages and the distressed housing market. This is the big one that everybody was worried about.”

Bank seizures by regulators usually occur on Fridays. WaMu's took place on Thursday due to the rapidly deteriorating state of the company's finances.

Not even hiring Goldman Sachs to help look for a bidder saved the bank. Massive exposure to the subprime debacle meant that none of the four rumoured bidders could make the figures add up.

Zions Acquires Nevada State Bank

Zions Bancorporation (NASDAQ:ZION) subsidiary, Nevada State Bank has acquired the insured deposits of failed Henderson, Nevada-based Silver State Bank. The State of Nevada, Financial Institutions Division found that Silver State Bank was unable to meet the demands of its depositors in the ordinary course of its business. The transaction includes insured deposits of more than $800 million. All former branches of Silver State Bank will open Monday morning as branches of either Nevada State Bank or National Bank of Arizona, subsidiaries of Zions. Silver State Bank operated 13 full service branches in southern Nevada, which will become part of Nevada State Bank, and four full service branches in the Phoenix/Scottsdale, Arizona area, which will become part of National Bank of Arizona. The FDIC will retain most of Silver State's loan portfolio.

"We want to assure depositors of Silver State Bank that their insured deposits are safe and will be accessible when the branches open for business as usual Monday morning as Nevada State Bank and National Bank of Arizona," said Harris Simmons, chairman and CEO of Zions Bancorporation. "We look forward to welcoming former customers of Silver State Bank and earning their business and trust. We are committed to operating locally managed banks with a strong focus on service to our customers and the communities in which we do business."

Simmons added, "This acquisition is consistent with Zions' strategy to use our strong balance sheet to take advantage of opportunities in the current economic environment."

Downey Financial Reaches Agreement with OTS

Downey Financial Corp. (NYSE:DSL) today announced that the Company and its subsidiary, Downey Savings and Loan Association, F.A. (the "Bank"), have reached agreement with the Office of Thrift Supervision (OTS) on Consent Orders which, to a large extent, formalize certain measures previously announced by the Company to enhance the Bank's financial strength. As a direct result of these measures, the Company also announced the sale of certain non-core real estate assets to a third party for aggregate cash proceeds of $110 million. Downey expects to report a net pre-tax gain of approximately $68 million from this sale. That gain, combined with a dividend to the Bank from a wholly owned subsidiary of the Bank, will result in an immediate increase in the Bank's regulatory capital of approximately $109 million.

"We have been working closely with our regulators to aggressively address the challenges Downey has been facing in this unprecedented financial environment and are pleased to have reached agreement on a formal plan that addresses the OTS' concerns," said Michael Bozarth, Downey's Chairman of the Board. "The Orders reflect a number of measures that Downey has already undertaken and, in some cases, is close to completing. Having reached agreement on these Orders, and having successfully raised a significant amount of new capital, Downey has made substantial progress."

"Our customers can rest assured that the Orders do not restrict us from meeting their banking needs and providing the services and customer care they have come to expect," added Mr. Bozarth. "Downey continues to serve its customers with its full range of lending and retail banking services."

The Orders require, among other things, that the Bank meet and maintain a minimum Tier One Core Capital ratio of 7% and a minimum Total Risk-Based Capital ratio of 14% at each quarter end. In addition, the Bank must complete a capital raising initiative by December 31, 2008. Downey has already made substantial progress on this capital plan and has enhanced the Bank's regulatory capital by approximately $176 million through the real estate sale and the subsidiary dividend described above and previously disclosed contributions of capital from the Bank's parent company. The Orders also require that, within 45 days, the Bank submit for OTS review and non-objection a comprehensive classified asset reduction plan, a long-term business plan, a real estate owned disposition plan, and a plan to strengthen executive management.