PARKERSBURG, W.VA. -- Magnet Bank's four Parkersburg branches opened for an unusual day of business Saturday as thousands of customers lined up to redeposit money they had withdrawn during a panicky run on the thrift the day before.
Friday's run, which saw customers pulling their deposits at the rate of $1 million an hour, was sparked by rumors that Magnet was about to close. The rumors "spread like wildfire" through the Ohio River city, said John Rowley, vice president of the savings and loan association's statewide branches.
The run prompted the chairman of the Federal Home Loan Bank Board to issue a statement squelching rumors of Magnet's imminent closure.
"The facts are that Magnet has reported some earnings loss," FHLB Chairman M. Danny Wall said in a statement. "Federal regulators are aware of these losses and are working with the institution's management to overcome these problems." Magnet recently reported a $10.7 million loss in the first nine months of 1987 and a $5.7 million loss in the third quarter.
Magnet's problems were reminiscent of what happened at Old Court Savings and Loan in Maryland. In May 1985, reports of mismanagement sparked a run on deposits that spread to other thrifts, sparking a statewide thrift crisis. The state froze thrift accounts to stop the run on deposits and have been attempting to pay back depositors.
In the Parkersburg incident, rumors began circulating Friday morning that merchants no longer were accepting Magnet checks, sending waves of customers into the thrift's four branches. In three hours, about $3 million was withdrawn.
"There appears to have been a common factor behind the rumors -- it was merchant-related. A group of merchants got panicked and rumors starting flying that no one was accepting Magnet checks," Rowley said.
"We have had problems over the years, but nothing like this," said John Brown Jr., another Magnet official. "There's never been a run. There's never been this volume of calls."