FDIC Losses Total $252 Million On Failure Of 3 Small Banks

133 Banking Failures As Of December 11, 2009

The FDIC was appointed as receiver for three small banks closed by federal regulators on December 11, 2009.   The three failed banks in Florida, Arizona and Kansas had a total of 11 branches with $984.4 million in assets.  Although the estimated losses to the FDIC on these three bank closings were relatively small at $252 million, the losses as a percentage of failed bank assets were large at 26%.

FDIC losses on failed banks during 2009 have averaged  approximately 25% of failed bank’s assets.   In 1990 when 381 financial institutions failed, the average FDIC loss as a percentage of failed bank assets was only 15%.  It remains subject to debate if the larger losses observed on failed banks during 2009 are due to regulator’s reluctance to close struggling banks quickly or because of the fact that the current downturn in real estate far exceeds the 1990’s experience.

All deposits  of the failed banks were purchased by the acquiring banks under purchase and assumption agreements with the FDIC.  Despite providing generous guarantees against losses, the FDIC was forced to retain $166 million of failed bank assets which could not be sold; these assets will be disposed of at a later date by the FDIC.   Of the $819 million in failed bank assets that were sold to the acquiring banks, the FDIC entered into loss-share transactions on 80% ($652 million) of the assets sold.  The loss-share transactions protect the banks that purchase failed banking assets since the FDIC agrees to be responsible for a large share of any future losses on the purchased assets.

Failed Banks For December 11, 2009

Republic Federal Bank, N.A., Miami, Florida  – Number 131

Republic Federal Bank, National Association, Miami, Florida, was closed today by the Office of the Comptroller of the Currency (OCC), which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with 1st United Bank, Boca Raton, Florida, to assume all of the deposits of Republic Federal Bank, N.A.

As of September 30, 2009, Republic Federal Bank, N.A. had total assets of approximately $433.0 million and total deposits of approximately $352.7 million. 1st United Bank will pay the FDIC a premium of 1.2 percent to assume all of the deposits of Republic Federal Bank, N.A. In addition to assuming all of the deposits of the failed bank, 1st United Bank agreed to purchase $267.1 million of the failed bank’s assets.

The FDIC and 1st United Bank entered into a loss-share transaction on approximately $210.4 million of Republic Federal Bank, N.A.’s assets.

Republic Federal had four branches and is the 13th banking failure in Florida this year.   The cost to the FDIC to close Republic Federal is estimated at $122.6 million.

Valley Capital Bank, N.A., Mesa, Arizona  –  Number 132

Valley Capital Bank, National Association, Mesa, Arizona, 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 Enterprise Bank & Trust, Clayton, Missouri, to assume all of the deposits of Valley Capital Bank.

As of September 30, 2009, Valley Capital Bank had total assets of approximately $40.3 million and total deposits of approximately $41.3 million. Enterprise Bank paid the FDIC a 2 percent premium for the right to assume all of the deposits of Valley Capital Bank. In addition to assuming all of the deposits of the failed bank, Enterprise Bank agreed to purchase essentially all of the failed bank’s assets.

The FDIC and Enterprise Bank entered into a loss-share transaction on approximately $29.8 million of Valley Capital Bank’s assets.

Valley Capital had one branch and is the 4th banking failure in Arizona this year.  Estimated loss to the FDIC for closing Valley Capital is $7.4 million.

SolutionsBank, Overland Park, Kansas  –  Number 133

SolutionsBank, Overland Park, Kansas, was closed today by the Office of the State Bank Commissioner of Kansas, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Arvest Bank, Fayetteville, Arkansas, to assume all of the deposits of SolutionsBank.

As of September 30, 2009, SolutionsBank had total assets of $511.1 million and total deposits of approximately $421.3 million. Arvest Bank did not pay the FDIC a premium for the deposits of SolutionsBank. In addition to assuming all of the deposits of the failed bank, Arvest Bank agreed to purchase essentially all of the assets.

The FDIC and Arvest Bank entered into a loss-share transaction on approximately $411.3 million of SolutionsBank’s assets.

SolutionsBank had six branches and is the 3rd banking failure in Kansas this year.  The estimated cost to the FDIC for the failed SolutionsBank is $122.1 million.

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