Regulators closed five banks today in Florida, Missouri, New Mexico, Washington and Oregon. The five failed banks had total assets of $3.2 billion and total deposits of $2.6 billion. The total cost to the FDIC Deposit Insurance Fund for the five failed banks is estimated at $531.7 million or 17% of total assets. The cost to the FDIC Deposit Insurance Fund for the 9 banking failures to date in 2010 now total $1.37 billion. Two of this weeks failed banks were acquired from the FDIC by private investors using newly chartered banks as a vehicle for the failed bank acquisitions.
Many analysts are predicting that banking failures in 2010 will exceed last year’s total of 140 institutions as loan defaults continue to climb amid rising unemployment and a struggling economy. As of September 30, 2009, the latest FDIC Quarterly Banking Profile revealed that there are 552 problem banks, the most since the fourth quarter of 1993 when there were 575 institutions on the list.
The five failed banks for January 22, 2010 are as follows:
Premier American Bank, Miami, FL – Number 5
Failed Premier Bank’s deposits and essentially all of its assets were taken over by Premier American Bank, National Association, a newly chartered national bank, which is a subsidiary of Bond Street Holdings, LLC, Naples, Florida. Bond Street Holdings was allowed to established the new national bank for the express purpose of purchasing failed banks. Bond Street has raised over $400 million from private investors for the purpose of investing in failed banks.
As the FDIC has struggled to find healthy banks suitable or capable of acquiring failed banks, it has allowed private investor groups to acquire failed banks. Private investment groups are expecting a handsome return on their investment if property markets and the economy recover. In addition, the FDIC provides generous protection to the private purchasers of failed banks through a loss-share transaction. In the case of Premier Bank, the FDIC has entered into a loss-share transaction on $300 million of the failed banks $350 in assets.
The FDIC estimates its loss on the closing of Premier Bank at $85 million.
Bank of Leeton, Leeton, MI – Number 6
The FDIC entered into a purchase and assumption agreement with Sunflower Bank, N.A. of Kansas. Sunflower Bank will assume all deposits of the failed bank. Bank of Leeton had total assets of $20.1 million and total deposits of $20.4 million. The asset quality of the failed bank did not interest Sunflower Bank and the FDIC retained the failed bank’s assets for later disposition. The loss to the FDIC on the closure of Leeton is estimated at $8.1 million.
Charter Bank, Santa Fe, NM – Number 7
The FDIC entered into a purchase and assumption agreement with Charter Bank, Albuquerque, New Mexico to assume all the deposits and most of the assets of failed Charter Bank.
Charter Bank, New Mexico, is a newly chartered federal savings bank and a subsidiary of Beal Financial Corp of Plano, Texas. The new bank was chartered for the purpose of allowing private investors to purchase failed banks from the FDIC. Beal Financial has previously purchased other failed banks from the FDIC.
Charter Bank had total assets of $1.2 billion and total deposits of $851.5 million. The FDIC entered into a loss-share transaction on $805.5 million of Charter Bank’s assets. The expected loss to the FDIC on the closing of Charter Bank is $201.9 million.
Evergreen Bank, Seattle, WA – Number 8
The FDIC entered into a purchase and assumption agreement with Umpqua Bank, Roseburg, Oregon, to assume all of the deposits and essentially all of the assets of failed Evergreen Bank. At the time of closing, Evergreen had assets of $488.5 million and $439.4 in deposits. The FDIC agreed to a loss-share transaction on $379.5 million of Evergreen’s assets.
The FDIC expects a loss of $64.2 million on the closing of Evergreen Bank, but may recover some of the loss due to a cash participant instrument with Umpqua Bank. The instrument serves as additional compensation to the FDIC which will benefit if Umpqua’s stock price rises in a specified period of time after the acquisition.
Columbia River Bank, The Dalles, Oregon – Number 9
The FDIC entered into a purchase and assumption agreement with Columbia State Bank, Tacoma, WA to assume all deposits and most of the assets of failed Columbia River. Columbia River had $1.1 billion in assets and $1.0 billion in deposits at the time of closing. The FDIC agreed to a loss-share transaction on $697.4 million of the failed bank’s assets. The FDIC expects a loss of $172.5 million on the closing of Columbia River Bank.