Bank Depositors Lose Millions As FDIC Finds No Buyers For 2 Failed Banks

Banking Failures in Florida, Illinois, Maryland and Utah Bring 2010 Total To 26

The weekly banking failures continue as regulators closed four more failed banks.   The four failed banks for March 5, 2010 had total assets of $1.1 billion and total deposits of $1.0 billion.  The cost to the FDIC Deposit Insurance Fund (DIF) for this week’s banking failures  is estimated at $305 million.   The cost to the FDIC DIF for the 26 banking failures to date in 2010 now totals $4.7. billion.

The FDIC found no buyers for two of the failed banks, Waterfield Bank of  Germantown, MD and Centennial Bank in Ogden, Utah with combined deposits of $361.5 million.  The assets and deposits of the two other 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.

Depositors Lose Millions

Some very unlucky or careless depositors at Waterfield Bank and Centennial Bank face losses of $2.2 million on deposits that were in excess of FDIC insurance limits.  These uninsured depositors will not be reimbursed by the FDIC and may potentially wind up with a zero recovery.   Any future reimbursement will be based on the ultimate recovery value of the failed banks’ assets.   Under Federal Law, depositor claims have first priority at final settlement, followed by general unsecured creditors, subordinated debt and stockholders.  Under the recently expanded FDIC deposit insurance limits, most depositors should be able to obtain full FDIC insurance protection on their savings – (see Are My Savings FDIC Insured?)

Banking analysts are predicting that banking failures in 2010 will greatly exceed last year’s total of  140.   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.

Sun American Bank, Boca Raton, Florida – Banking Failure Number 23

The FDIC, as receiver, entered into a purchase and assumption agreement with First-Citizens Bank & Trust Co, Raleigh, NC, to assume all of the deposits and to purchase all of the assets of Sun American Bank.  At the time of closing, Sun American had $536  million in assets and $444 million in deposits.  Sun American is the second failed bank to be acquired by First-Citizens this year.

The FDIC entered into a loss-share transaction on $433 million of the acquired assets to limit future potential losses to First-Citizens.  The loss to the FDIC on closing Sun American Bank is estimated at $104 million.  Sun American is the fourth bank to fail in Florida this year.

Bank of Illinois, Normal, Illinois – Banking Failure Number 24

Heartland Bank and Trust Co, Bloomington, IL acquired the assets and deposits of failed Bank of Illinois under a purchase and assumption agreement with the FDIC.  Heartland will be protected from certain losses on its purchase of the failed bank’s assets under a loss- share agreement with the FDIC.  At the time of closing, Bank of Illinois had $212 in assets and $198 in deposits.

Heartland Bank paid an unusually high premium of 3.6% on the purchase of the failed bank’s deposits, for which no explanation was provided.   Most failed bank deposits are purchased without a premium.  The loss to the FDIC is estimated at $53.7 million – Bank of Illinois is the third banking failure in Illinois this year.

Waterfield Bank, Germantown, Maryland – Banking Failure Number 25

The FDIC, unable to find a buyer for Waterfield Bank, created Waterfield Bank, FA, a new depository institution to take over Waterfield Bank.  The creation of the new bank allows depositors to access their funds and provide time to move deposits to other institutions.   Checks will be mailed to depositors on Monday for IRA and CD deposits.   Waterfield FA will close on April 5, 2010 and any customers with unclosed accounts will have checks mailed to them by the FDIC.

Waterfield had assets of $156 million and deposits of $156 million at closing.  At the time of closing, deposits of $407,000 exceeded FDIC insurance coverage.  Depositors with uninsured funds will need to contact the FDIC about possible future recovery.  The loss to the FDIC on closing Waterfield is estimated at $51 million.  Waterfield Bank is the first banking failure in Maryland this year.

Centennial Bank, Ogden, Utah – Banking Failure Number 26

The FDIC, as receiver, was unable to find a buyer for Centennial Bank and insured depositors will be mailed checks on Monday.  At the time of closing, Centennial had $215 million in assets and $205 million in deposits, of which $1.8 million was not covered by FDIC insurance.

Centennial Bank is the second banking failure in Utah this year and the loss to the FDIC is estimated at $96.3 million.