After taking off a week from bank closings due to the fourth of July holiday weekend, regulators came back to work, closing two banks in Colorado and one in Illinois.
The largest banking failure of the week was the failure of First Chicago Bank & Trust with almost $1 billion in assets. The FDIC loss on the closing of First Chicago came in at $284 million or 30% of total assets. First Chicago was the fifth banking failure in Illinois this year.
Regulators also closed two banks in Colorado – Signature Bank and Colorado Capital Bank.
The loss on Colorado Capital Bank came in at $283.8 million, a very substantial 40% of total assets. Regulators had given this insolvent Bank additional time to pursue a futile capital raising program. Investors are very reluctant to invest additional capital into problem banks due to distrust over the stated value of their assets, weak property markets and a poor lending environment.
The second banking failure in Colorado was the tiny Signature Bank which had only $66.7 million in assets. Signature commenced operations right at the inception of the real estate boom, expanded its loan portfolio rapidly and then collapsed under the weight of nonperforming loans.
The total assets of this week’s three failed banks amounted to $1.74 billion and the total loss to the FDIC came in at $632.6 million.
At March 31, 2011, there were a total of 888 Problem Banks, the highest amount since March 1993. Almost 12% of all banks are on the FDIC Problem Bank List.
At March 31, 2011, the FDIC Deposit Insurance Fund had a negative fund balance of $1 billion. The empty Deposit Insurance Fund currently insures deposits of $6.4 trillion. If another financial crisis is in our immediate future, as predicted by many analysts, depositors should keep their money in only the most strongly capitalized institutions.