Deadline Nears for Theft-Wracked Dwelling House Savings and Loan

Jun. 29--Four scenarios are possible for Dwelling House Savings and Loan Association, as a Tuesday deadline to raise capital nears, experts said.

One outcome to the Hill District financial icon's effort to raise money to recover from an electronic theft would be that the time limit comes, and goes, with no action taken. The other possibilities: to close, merge or sell the Herron Avenue thrift.

"Nothing will happen on Tuesday, period," said Phil Van Doorn, senior banking analyst with TheStreet.com in West Palm Beach, Fla.

Van Doorn said even if Dwelling House's primary regulator, the Office of Thrift Supervision, decides to take action against the thrift, odds are it wouldn't happen until a Friday. Most of 40 institutions closed this year did so on Fridays, he said.

Other banks and savings and loans, of varying sizes, have responded with "no comment" when questioned about whether they might consider taking over Dwelling House.

Bank officials continue negotiating with financial institutions that officials have said cyber thieves manipulated. Someone outside the bank siphoned more than $3 million from Dwelling House through the Automated Clearing House system.

The thrift was negotiating with one large, unidentified bank that, if it remitted the money that passed through it during the scam, would put Dwelling House over its capital hurdle. Clearing House transactions typically allow financial institutions to transfer money among institutions.

Dwelling House recouped about $1 million of the $3 million stolen, and the Office of Thrift Supervision told the financial institution it needed to bring in another $1 million.

"We continue to make progress with banks, in remitting back to us the funds that were stolen," Dwelling House director Barry Balliet said. "We also have a number of entities trying to remit to us nonwithdrawable deposits."

He wouldn't elaborate, but said those who perpetrated the fraud were "cunning." Authorities have said they are investigating what happened.

Nonwithdrawable deposits can't be withdrawn by the person or organization making the deposit. The money would be counted toward Dwelling House's capital, or money remaining once all depositors are paid.

Board member David Lendt said that although Dwelling House sought money amicably, legal action is an option.

"It's costly, but it's something to consider," Lendt said.

Van Doorn said it wouldn't be unusual for regulators let Tuesday's deadline slide without taking action.

"Look at what happened with BankUnited -- that situation went on for months, until a group of investors was found to take over the institution," Van Doorn said.

Federal regulators seized Coral Gables, Fla.-based BankUnited FSB last month, the biggest bank failure this year. The Federal Deposit Insurance Corp. sold the company's banking operations to a private-equity team. The sale protected depositors.

BankUnited had $12.8 billion in assets and $8.6 billion in deposits, and regulators said it was critically undercapitalized, like Dwelling House.

Investors agreed to pump $900 million in capital into the bank and to acquire $12.7 billion of the bank's assets and $8.3 billion of certain deposits considered less risky. The FDIC agreed to absorb most future losses on a $10.7 billion pool of assets the investment team will manage.

"Our relationship with all of our regulators -- the state Department of Banking, the OTS, the FDIC that insures our deposits -- is one of cooperation," Lendt said. "So long as we are making progress in recouping funds, my feeling is we will continue to work with them. It would surprise me if they came in and shut Dwelling House down."

Even Van Doorn said he hopes the Office of Thrift Supervision takes into consideration the effort Dwelling House executives and people in the community put into trying to save the institution.

"I hope they let them coast," he said. "I wish them the best."

Rick Stouffer can be reached via e-mail or at 412-320-7853.

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