Banking Regulators Wake Up – 7 Small Banks Closed For October 23, 2009

Banking Failures – 106 And Counting

Banking regulators have been closing banks at a leisurely pace over the past two weeks despite the fact that many analysts expect upwards of 1,000 additional banks to fail based on their poor financial condition and mounting loan losses.  The FDIC Problem Bank List currently includes 416 banks with total assets of $300 billion.

Over the previous two weeks, only one small bank (San Joaquin) was closed by regulators.  The strategy of delaying bank closings seems at odds with regulators recent admission that a severe deterioration in loan credit quality continues.

Banking regulators finally arose from their slumber this week with the closure of 7 failed banking institutions.  All seven banks were relatively small regional or community banks.  The largest closure was the Bank of Elmwood with 5 branches and $327 million in assets.  The smallest failed bank this week was Partners Bank of Naples, Florida with only $65.5 million in assets and 2 branches.

Total assets of this week’s 7 failed banks amounted to $1.2 billion with estimated FDIC losses of $357 million.  By comparison, the tenth largest banking failure of 2009 – New Frontier Bank, Colorado on April 10th had assets of $2 billion and losses to the FDIC of $670 million.

2009 has now seen a total of 81 more failed banks than occurred for all of 2008.  The latest banking closures bring total banking failures for 2009 to 106.  The latest seven failed banks on October 23, 2009 had total assets of $1.2 billion and   total losses to the FDIC Deposit Insurance Fund (DIF) are estimated at $356.7  million representing a substantial 31% of the failed banks total assets.

The FDIC, as receiver, entered into purchase and assumption agreements with other banks for all seven failed institutions.   All deposits and the most of the assets of the failed banks were assumed by the acquiring banks.   The FDIC also entered into loss-share agreements with the acquiring bank on 4 of the seven failed banks.  In order to induce other institutions to acquire assets of the failed banks, the FDIC has been offering very favorable terms on the amount of losses that the FDIC agrees to absorb on the failed bank’s assets.

The latest seven failed banks are as follows:

Partners Bank, Naples, Florida – Number 100

Partners Bank, Naples, Florida, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stonegate Bank, Fort Lauderdale, Florida, to assume all of the deposits of Partners Bank.

As of September 30, 2009, Partners Bank had total assets of $65.5 million and total deposits of approximately $64.9 million. Stonegate Bank did not pay the FDIC a premium for the deposits of Partners Bank. In addition to assuming all of the deposits of the failed bank, Stonegate Bank agreed to purchase essentially all of the assets.

The closing of Partners Bank will cost the FDIC an estimated $28.6 million.  Partners is the seventh banking failure in Florida this year.

American United Bank, Lawrenceville, Georgia – Number 101

American United Bank, Lawrenceville, Georgia, was closed today by the Georgia Department of Banking & 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 Ameris Bank, Moultrie, Georgia, to assume all of the deposits of American United Bank.

As of August 11, 2009, American United Bank had total assets of $111 million and total deposits of approximately $101 million. Ameris Bank will pay the FDIC a premium of 1.02 percent to assume all of the deposits of American United Bank. In addition to assuming all of the deposits of the failed bank, Ameris Bank agreed to purchase essentially all of the assets.

The FDIC and Ameris Bank entered into a loss-share transaction on approximately $92 million of American United Bank’s assets.

The cost to the FDIC to close American United is estimated at $44 million.  American United is the twentieth banking failure in Georgia this year (see How Georgia Became The Failed Bank Capital Of The US).

Hillcrest Bank Florida, Naples, Florida – Number 102

Hillcrest Bank Florida, Naples, Florida, was closed today by the Florida Office of Financial Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stonegate Bank, Fort Lauderdale, Florida, to assume all of the deposits of Hillcrest Bank Florida.

As of October 1, 2009 , Hillcrest Bank Florida had total assets of $83 million and total deposits of approximately $84 million. Stonegate Bank will pay the FDIC a premium of 0.50 percent to assume all of the deposits of Hillcrest Bank Florida. In addition to assuming all of the deposits of the failed bank, Stonegate Bank agreed to purchase $28 million of the failed bank’s assets. The FDIC will retain the remaining assets for later disposition.

Hillcrest Bank will result in losses to the FDIC of $45 million.  Hillcrest Bank is the eight banking failure in Florida this year.

Flagship National Bank, Bradenton, Florida – Number 103

Flagship National Bank, Bradenton, Florida, 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 First Federal Bank of Florida, Lake City, Florida, to assume all of the deposits of Flagship National Bank.

As of August 31, 2009, Flagship National Bank had total assets of $190 million and total deposits of approximately $175 million.

The FDIC and First Federal Bank of Florida entered into a loss-share transaction on approximately $130 million of Flagship National Bank’s assets. First Federal Bank of Florida will share in the losses on the asset pools covered under the loss-share agreement.

The closing of Flagship is expected to cost the FDIC $59 million.  Flagship is the ninth banking failure in Florida this year.

Bank of Elmwood, Racine, Wisconsin – Number 104

Bank of Elmwood, Racine, Wisconsin, was closed today by the Wisconsin Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Tri City National Bank, Oak Creek, Wisconsin, to assume all of the deposits of Bank of Elmwood.

As of September 30, 2009, Bank of Elmwood had total assets of $327.4 million and total deposits of approximately $273.2 million. Tri City National Bank did not pay the FDIC a premium for the deposits of Bank of Elmwood. In addition to assuming all of the deposits of the failed bank, Tri City National Bank agreed to purchase essentially all of the assets.

The failure of Elmwood is expected to cost the FDIC DIF $101 million.  Elmwood is the first banking failure in Wisconsin this year.

Riverview Community Bank, Otsego, Minnesota – Number 105

Riverview Community Bank, Otsego, 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 Central Bank, Stillwater, Minnesota, to assume all of the deposits of Riverview Community Bank.

As of August 31, 2009, Riverview Community Bank had total assets of $108 million and total deposits of approximately $80 million. In addition to assuming all of the deposits of the failed bank, Central Bank agreed to purchase essentially all of the assets.

The FDIC and Central Bank entered into a loss-share transaction on approximately $75 million of Riverview Community Bank’s assets.

The failure of Riverview is expected to cost the FDIC DIF $20 million.  Riverview is the  fifth banking failure in Minnesota thisyear.

Banking failures can represent an opportunity for other banks that are in a strong financial position.   The acquisition of failed Riverview by Central Bank is not the first time that Central Bank has acquired failed institutions according to the Wall Street Journal.

The chief executive of tiny Stillwater, Minn.-based Central Bank has been on an acquisition spree since August, buying two failed banks and adding them to his 16-branch network. He has just received the government’s blessing to purchase another bank that is about to fail — though he won’t name it before the deal is announced.

“We’ve owned a lot of banks in different places. This is not a new situation for us,” said Mr. Morrison, who estimates he has bought and sold nearly 100 branches in his 40-year banking career.

First Dupage Bank, Westmont, Illinois – Number 106

First Dupage Bank, Westmont, Illinois, was closed today by the Illinois Department of Financial & Professional Regulation – Division of Banking, 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 Midwest Bank, Itasca, Illinois, to assume all of the deposits of First Dupage Bank.

As of July 31, 2009, First Dupage Bank had total assets of $279 million and total deposits of approximately $254 million.

The FDIC and First Midwest Bank entered into a loss-share transaction on approximately $247 million of First Dupage Bank’s assets. First Midwest Bank will share in the losses on the asset pools covered under the loss-share agreement.

The failure of Dupage Bank is expected to cost the FDIC $59 million.  Dupage Bank is the seventeenth banking failure in Illinois this year.

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