Failed Banks For July 17, 2009

Banking Failures – 57 and Counting

There were four more failed bank this week:

  1. First Piedmont Bank, Winder, Georgia
  2. Bank First, Sioux Falls, South Dakota
  3. Vineyard Bank, National Association, Rancho Cucamonga, CA
  4. Temecula Valley Bank, Temecula, CA

2009 has now seen a total of 32 more failed banks than occurred for all of 2008.  The latest banking closure by the FDIC brings total banking failures for 2009 to 57.  The four latest banking failures are:

First Piedmont Bank

Piedmont Bank, Winder Georgia was closed today and the FDIC entered into a purchase and assumption agreement with First American Bank and Trust Company, Athens, Georgia to assume all of Piedmont’s deposits and most of its assets.

First Piedmont Bank was a relatively small bank with total asset of $115 million and total deposits of $109 million.  Approximately $114 million of First Piedmont’s assets were purchased by First American.  A certain percentage of any losses by First American on the acquired assets will be absorbed by loss-share transaction between the FDIC and First American.

The FDIC estimates that the latest banking failure will cost the FDIC Deposit Insurance Fund (DIF) $29 million.  First Piedmont Bank, Winder Georgia was the 10th failed bank in Georgia this year.  Georgia now accounts for almost 20% of the total banking failures the nation has seen this year (see How Georgia Became the Failed Bank Capital of the US.

Bank First, Sioux Falls, South Dakota

Bank First was closed today.  To protect depositors, the FDIC entered into a purchase and assumption agreement with Alerus Financial, National Association, Grand Forks, North Dakota, to assume all deposits of Bank First.

As of April 30, 2009 Bank First had total assets of $275 million and deposits of $254 million.  This latest closure may reflect the degree to which it has become more difficult for the FDIC to convince another bank to take on the deteriorated loan portfolio of a failed bank.  Alerus Financial is acquiring only $72 million of Bank First assets that have minimal credit risk, being comprised of cash, securities and loans secured by deposits.  Beal Bank, specializing in the purchase of loans and portfolios of loans in the secondary market is purchasing the bulk of the remaining assets.

The FDIC entered into a separate agreement with Beal Bank Nevada, Las Vegas, Nevada to acquire $177 million of failed Bank First’s assets.   The remaining $26 million of Bank First assets, probably of minimal value, will be held and later disposed of by the FDIC.  The cost of closing Bank First for the FDIC is estimated at $91 million.  This loss estimate reflects the severe extent to which the Bank First assets had become impaired.  A loss of $91 million on the assets being acquired Beal Bank ($177 million) and the FDIC ($26 million) gives a rough approximation of a huge 44% expected loss ratio on Bank First’s assets.

Alerus Financial Corporation is one of the largest and oldest independent banking and financial services companies in the upper Midwest.  North Dakota-based Alerus Financial has total bank assets exceeding $790 million, $5.5 billion in customer assets under management and administration and $350 million in brokerage assets.  Alerus Financial celebrated 75 years of service in 2008.

Beal Bank, Nevada – At Beal Bank Nevada, we specialize in offering deposit customers competitive rates on term deposit accounts through certificates of deposit (CDs), money market accounts, and other products, all insured by the FDIC up to $250,000 per depositor.

We do not offer such retail services as checking accounts and consumer loans, and we work to keep costs low so we can provide the personalized service missing in many banks today.

Beal Bank Nevada does not originate commercial or residential loans, but the Bank is active in the secondary market for the purchase of loans and portfolios of loans.

Beal Bank Nevada has capital in excess of $1.8 billion and assets in excess of $4.1 billion as of March 31, 2009. Beal Bank Nevada is an affiliate of Beal Bank.

Bank First is the first bank to fail in South Dakota.  The last banking failure in the state was in 1992.

Vineyard Bank, National Association, Rancho Cucamonga, CA

Vineyard Bank was closed today and to protect depositors, the FDIC entered into a purchase and assumption agreement with California Bank & Trust,  San Diego, CA to assume all deposits, excluding brokered deposits, from Vineyard Bank.  Brokered deposits of $134 million will be paid off by the FDIC directly to the brokers.

Vineyard Bank had 16 offices.  As of March 31, 2009, Vineyard had total deposits of $1.6 billion and total assets of $1.9 billion.  California Bank & Trust agreed to purchase $1.8 billion of assets, leaving the FDIC with $100 million in assets to hold for later deposition.   California Bank & Trust and the FDIC entered into a loss-share transaction on $1.5 billion of Vineyard Banks assets, whereby California Bank & Trust will share in the losses on the assets purchased.

The cost of closing Vineyard Bank is estimated by the FDIC at $579 million.  Vineyard Bank is the 56th FDIC bank closing this year and the seventh in California.

California Bank & Trust is a major regional bank with over $10 billion in assets and branches throughout the State of California.

Temecula Valley Bank, Temecula, California

Temecula Valley Bank was closed today and the FDIC appointed as receiver.  All deposits, except for brokered deposits, will be assumed by First-Citizens Bank and Trust Company, Raleigh, North Carolina.  Brokered deposits of $304 million will be paid off directly by the FDIC.

Temecula Valley Bank had eleven offices and as of May 31, 2009 had total assets of $1.5 billion and total deposits of $1.3 billion.  First-Citizens agreed to purchase virtually all of the assets of Temecula Valley Bank, subject to a loss-share transaction with the FDIC on $1.3 billion of Temecula’s assets.

The FDIC estimates the loss to the Deposit Insurance Fund (DIF) at $391 million.  Temecula Valley Bank is the 57th banking failure this year and the eight in California.

First Citizens BancShares Inc. (NASDAQ: FCNCA) is the financial holding company for the First Citizens Bank and IronStone Bank subsidiaries, which provide a broad range of financial services through a network of more than 400 branch offices in 17 states from coast to coast.

We’re one of the top 100 financial services providers in the nation, recognized for our strength, stability and attention to the needs of our clients.

Headquartered in Raleigh, North Carolina, BancShares is the second largest family-controlled financial holding company in the United States and has consolidated assets of more than $17 billion.

BancShares’ First Citizens Bank subsidiary was founded in 1898 and today serves customers in North Carolina, Virginia, West Virginia, Tennessee, Maryland and California.

Banking Failures Cost Grows

The latest 4 banking failures will cost the FDIC Deposit Insurance Fund at least another $1.09 billion per the FDIC loss estimates.  At this loss rate, the Deposit Insurance Fund will be depleted within roughly four weeks.   Recently passed legislation has increased the FDIC’s line of credit with the Treasury to $100 billion.

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