Failed Banks for May 1, 2009

Failed Banks: America West Bank, Citizens Community Bank, Silverton Bank

There were 3 more failed banks on May 1st – America West Bank, Citizens Community Bank and Silverton Bank.   2009 has now seen 7 more failed banks than occurred for all of 2008.  The FDIC closure of 3 more banks on May 1st  brings total banking failures for 2009 to 32 banks.  The FDIC estimate that the three banks that were closed will cost the FDIC over $1.4 billion in losses as follows:

1.  America West Bank, Layton, Utah.  All of America West’s deposits were assumed by Cache Valley Bank of Logan, Utah.  Customers of America West should face minimal disruption of banking services as all America West branches will reopen as Cache Valley branches.

America West had total assets of $300 million for which Cache Bank paid a discount of $352,000.  The FDIC is expecting a loss to the FDIC insurance fund on the America West closure of approximately $120 million.

2.  Citizens Community Bank, Ridgewood, New Jersey.  Citizen’s deposits were assumed by the North Jersey Community Bank of Englewood Cliffs, New Jersey.   Citizens was a small one branch bank.  The FDIC expects to lose over $18 million on the closure of Citizens Bank.

3.  Silverton Bank, Atlanta, Georgia.   The FDIC established a “bridge” bank to take over Silverton and will run Silverton until a buyer can be found or the banking operations liquidated.  The new banking entity taking over Silverton will be known as Silverton Bridge Bank.

Silverton was not a retail bank, but rather a commercial bank providing banking services to over 1,400 clients in 44 states.  As such, Silverton took no deposits from the general public nor did it loan to consumers.   Silverton provided various banking services such as credit card operations, investments, clearing accounts and buying and selling loans for the banks that it serviced.   Silverton experienced heavy losses on commercial real estate lending and development, especially in Florida and Georgia.

With assets of $4.1 billion at the time of its shutdown, the FDIC is estimating losses of $1.3 billion on the liquidation or sale of Silverton.  The FDIC prefers not to take over the daily management of closed banks but rather to sell them to another institution.   Apparently, there were no interested parties for taking over Silverton and the FDIC was forced to assume operational control.

With many banking analysts expecting mounting losses in commercial real estate lending, expect more banks with heavy exposure in this area to face closure as 2009 progresses.

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