The federal Office of Thrift Supervision shut down Dwelling House Savings and Loan yesterday after reporting that the minority-owned bank located in the Hill District "was in an unsafe and unsound condition, was critically undercapitalized and had no reasonable prospect of recovering."

The OTS appointed the Federal Deposit Insurance Corp. as receiver, which announced that the troubled thrift will reopen on Monday under its new owner, PNC Financial Service Group.

"We are disappointed at this closing on behalf of Pittsburgh, but especially for the Hill District and other predominately African-American communities in the city where Dwelling House has played such a significant role," said Doug Root, a spokesman for the Heinz Endowments.

The Heinz Endowments along with Dollar Bank and three other Pittsburgh charitable foundations had offered to supply the necessary capital to keep the 119-year-old thrift alive.

Depositors will continue to be insured by the FDIC, which estimates the transaction will cost its fund $6.8 million.

Over the weekend, depositors of Dwelling House can access their money through the normal channels. Loan customers should continue to make payments as usual. Customers should continue to use the sole office at Centre and Herron avenues until PNC can fully integrate the deposit records of Dwelling House into its own system.

As of March 31, Dwelling House had total assets of $13.4 million and total deposits of about $13.8 million, according to the FDIC. The OTS said the thrift had nine employees. PNC Bank will assume all of the deposits of the failed bank and has agreed to purchase about $3 million of Dwelling House's assets. The FDIC will retain the remaining assets for later disposition.

Dwelling House was the lender of first and last resort for two generations of black families in the Pittsburgh community, but it suffered a severe blow to its stability late last year when federal auditors discovered that about $3 million had been drained out of its capital account and the bank was actually operating with $500,000 in negative equity. Bank officers blamed the heavy losses on the work of a ring of cyber thieves. Pittsburgh police and FBI agents are investigating the case, but no charges have been filed.

Community leaders rallied around the thrift in an effort to preserve a treasured Pittsburgh institution. Members of the general public joined the campaign to save Dwelling House, but there was to be no happy ending.

The OTS fined five directors of Dwelling House over the last two weeks for failing to take steps to protect the minority-owned institution even after they had been warned five years ago of its vulnerable predicament.

Former Dwelling House president and CEO Robert M. Lavelle, who was fired in November by order of the OTS, also was fined $5,000 last week for his role in the gross negligence that ultimately brought down the bank.

Board members Barry Balliet, Everett Blanton, David Lendt, Johnnie Monroe and Robert Thornton were fined $1,000 each for multiple violations of a 2006 OTS order that required the institution to adopt money laundering preventions.

The institution has been the focus of scrutiny by federal regulators for at least five years. Regulators were concerned about Dwelling House's role in providing banking services to prison inmates.

The thrift has long been one of the few financial institutions in the nation that managed such accounts. However, regulators thought the bank was failing to properly monitor the accounts, and they suspected some were being used for money laundering and criminal activity.

Ultimately, federal authorities restricted the bank from opening new prisoner accounts and restricted all existing accounts to $25 maximum deposits. Regulators prohibited any more electronic transactions involving prison inmates, and also required Dwelling House three years ago to submit to a mentoring arrangement with executives at Dollar Bank.

Dwelling House is the 73rd U.S. bank to fail this year. The only Pittsburgh area bank to fail in recent years is Metropolitan Savings Bank in Lawrenceville, which had $12 million in deposits. It was taken over by the FDIC on Feb. 2, 2007, and subsequently sold to Allegheny Valley Bancorp Inc.

In 1984, there were 79 thrifts in the country classified as minority owned, which includes African-American as well as Hispanic- and Asian-owned thrifts. With the failure of Dwelling House, today there are only 20 left, including only 11 African-American thrifts.

Customers who have questions about the change at Dwelling House can call the FDIC toll-free at 1-800-760-3639 today from 9 a.m. to 6 p.m., tomorrow from noon to 6 p.m. and thereafter from 8 a.m. to 8 p.m. Information about the bank failure can also be found on the FDIC Web site at www.fdic.gov/bank/individual/failed/dwelling.html.