03/30/2012 08:29 pm ET Updated May 30, 2012

Bank Closure in Dearborn: A Sad Ending for Fidelity's Long Struggle

Dearborn, Mich. -- The FDIC closed Fidelity Bank today following almost two years of being undercapitalized as the result of a collapsing market in mortgages and commercial real estate. It's parent holding company Dearborn Bancorp, Inc. had been struggling with capital woes since March of 2010. It had failed to satisfy bank regulators with its recapitalization plan and troubles with the Securities and Exchange Commission in the summer of 2011 resulting in the parent company being de-listed from NASDAQ last November. Driven into OTC Pink Sheet dungeon, the company had not been able to attract capital.

It is a particularly sad story because operationally Fidelity had done much to improve operations. According to the IRA Bank Monitor, it had returned to modest quarter by quarter profitability by March 2011. The institution's Bank Stress Index (BSI) rating, a measure of forward looking stresses for operating the business, had recovered from an F back into the A/B range. Fidelity's Counter Party Quality Score (CQS), a measure of the ability to meet current business obligations had also risen from the 4 range where banks are normally closed by the FDIC back up to a 7, just one notch below the highest rating. Alas, even as management struggled to rebuild the bank, confidence in the bank continue to drain shrinking the bank by over $100 million dollars on both the assets and deposit sides of the books. As the good money abandoned it, the troubled assets that remained began to play a larger and larger role in the ratios that spoke ill of Fidelity's balance sheet condition. It's Texas Ratio, a measure of how much strength the bank had to absorb losses, degraded materially even though the size of the troubled book itself was in fact diminishing. The straw that broke the CAMEL'S back -- that's a pun referring to the examination regimen used by regulators -- looks to be a new round of upturns in 30-89 day delinquent assets the emerged beginning in the fourth quarter of 2011.

The fatal combination of being on the outs with Wall Street and the atrophy of the size of the business proved insurmountable and culminated in today's failure.

The numerical tale of the tape can be seen here:

I'm spending more time on the narrative this week because this is in fact one of the very unusual cases in the history of these bank failures since 2008. The numbers speak of very hard work by this bank to try to survive and I believe that there are times it is important to write an epitaph to honor what was tried and lost.

The remains of Fidelity will re-open on Monday as part of The Huntington National Bank. It's likely one of the better bargains that's come on the market this year.