7 Banks Collapse – Stunning 42% Loss On Failed Bank Assets For FDIC

2010 Banking Failures Increase To 37 As Seven More Banks Fail

March 19 – The banking crisis continues as regulators closed seven failed banks, the largest number of lenders to collapse in one week this year.   The seven failed banks for March 19, 2010 had total assets of $3.3 billion and total deposits of $3.1 billion.  The cost to the FDIC Deposit Insurance Fund (DIF) for these latest banking failures  is estimated at $1.282  billion.   The cost to the FDIC DIF for the 37 banking failures to date in 2010 now totals $6.2 billion.

The assets and deposits of six of the failed banks were taken over by other institutions under purchase and assumption agreements with the FDIC.   As has been the case with almost all recent banking failures, the FDIC agreed to absorb a portion of the  losses on purchased failed bank assets through a loss-share agreement with the acquiring banks.

The FDIC failed (for the fourth time this year) to find a purchaser for a failed bank.  Advanta Bank Corp, the largest banking failure of the week with $1.6 billion in dubious assets,  failed to attract any buyers.  Accordingly, the FDIC will directly payout all insured deposits of Advanta and place the assets in a liquidating receivership.   Advanta Corp, the parent of Advanta Bank, had declared bankruptcy last November after suffering staggering losses on their credit card business.

The FDIC estimates the cost of the Advanta Bank collapse at $635.6 million or a staggering  40% of Advanta’s assets.  The FDIC’s definition of the estimated loss on a bank failure is  “the difference between the amount disbursed from the Deposit Insurance Fund (DIF) to cover obligations to insured depositors and the amount estimated to be ultimately recovered from the liquidation of the receivership estate. ”  The implication of a 40% writedown by the FDIC on Advanta’s assets  implies that Advanta’s valuation of assets far exceeding market value, bolstering the claims of critics that bank balance sheets do not reflect the economic reality of probable future loan losses.

The second largest banking failure of the week, Appalachian Community Bank, Ellijay, GA, also resulted in huge losses  of $419.3 million to the FDIC Deposit Insurance Fund, representing 42% of Appalachian Bank’s $1.0 billion in assets.

Banking institutions continue to collapse as loan defaults soar and residential and commercial property values continue to erode.   As of December 31, 2009, the latest FDIC Quarterly Banking Profile revealed that there are 702 Problem Banks, up from 252 at the end of 2008, a 178% increase.  Based on the large number of bank closings to date in 2010 and the huge increase in Problem Banks, expect the number of bank closings in 2010 to far exceed the 140 banking failures of 2009.

American National Bank, Parma, Ohio – Banking Failure # 31

American National Bank, Parma, Ohio, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with The National Bank and Trust Company, Wilmington, Ohio, to assume all of the deposits of American National Bank.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $17.1 million. American National Bank is the 31st FDIC-insured institution to fail in the nation this year, and the first in Ohio.

Century Security Bank, Duluth, Georgia – Banking Failure # 32

Century Security Bank, Duluth, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Bank of Upson, Thomaston, Georgia, to assume all of the deposits of Century Security Bank.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $29.9 million.  Century Security Bank is the 32nd FDIC-insured institution to fail in the nation this year, and the third in Georgia.

Advanta Bank Corp., Draper, Utah – Banking Failure # 33

The Federal Deposit Insurance Corp. (FDIC) approved the payout of the insured deposits of Advanta Bank Corp., Draper, Utah. The bank was closed today by the Utah Department of Financial Institutions, which appointed the FDIC as receiver.

The FDIC was unable to find another financial institution to take over the banking operations of Advanta Bank Corp. As a result, checks to depositors for their insured funds will be mailed on Monday.

As of December 31, 2009, Advanta Bank Corp. had approximately $1.6 billion in total assets and $1.5 billion in total deposits. At the time of closing, the bank had an estimated $247,000 in uninsured funds.

Advanta Bank Corp. is the 33rd FDIC-insured institution to fail this year and the third in Utah since Centennial Bank, Ogden, was closed on March 5, 2010. The FDIC estimates the cost of the failure to its Deposit Insurance Fund to be approximately $635.6 million.

Appalachian Community Bank, Ellijay, Georgia – Banking Failure # 34

Appalachian Community Bank, Ellijay, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Community & Southern Bank, Carrollton, Georgia, to assume all of the deposits of Appalachian Community Bank.

As of December 31, 2009, Appalachian Community Bank had approximately $1.01 billion in total assets and $917.6 million in total deposits. In addition to assuming all of the deposits of the failed bank, Community & Southern Bank agreed to purchase essentially all of the assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $419.3 million. Appalachian Community Bank is the 34th FDIC-insured institution to fail in the nation this year, and the fourth in Georgia.

Bank of Hiawassee, Hiawassee, Georgia – Banking Failure # 35

Bank of Hiawassee, Hiawassee, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Citizens South Bank, Gastonia, North Carolina, to assume all of the deposits of Bank of Hiawassee.

As of December 31, 2009, Bank of Hiawassee had approximately $377.8 million in total assets and $339.6 million in total deposits.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $137.7 million.  Bank of Hiawassee is the 35th FDIC-insured institution to fail in the nation this year, and the fifth in Georgia.

First Lowndes Bank, Fort Deposit, Alabama – Banking Failure # 36

First Lowndes Bank, Fort Deposit, Alabama, was closed today by the Alabama Banking Department, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Citizens Bank, Luverne, Alabama, to assume all of the deposits of First Lowndes Bank.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $38.3 million.  First Lowndes Bank is the 36th FDIC-insured institution to fail in the nation this year, and the first in Alabama.

State Bank of Aurora, Aurora, Minnesota – Banking Failure # 37

State Bank of Aurora, Aurora, Minnesota, was closed today by the Minnesota Department of Commerce, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Northern State Bank, Ashland, Wisconsin, to assume all of the deposits of State Bank of Aurora.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $4.2 million.  State Bank of Aurora is the 37th FDIC-insured institution to fail in the nation this year, and the fourth in Minnesota.




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