Illinois Rocked By 7 Banking Failures

Illinois Rocked By 7 Banking Failures – Coincidence or FDIC Strategy?

Regulators focused on Illinois this week as seven failed banks in that state were closed.  An FDIC spokesman suggested that multiple bank closings in one particular state enhanced the bidding process for the failed banks, thus reducing FDIC losses.  Whether or not this explanation makes sense remains to be seen.  Of the seven failed Illinois banks closed today, only two were purchased by the same buyer and, as usual, the remaining banks were purchased by other area banks.

This week’s banking failures saw the closing of two more banks with assets in excess of $1 billion – Amcore Bank, N.A. of Rockford, IL with $3.8 billion in assets and Broadway Bank of Chicago with $1.2 billion in assets.  These two large banking failures accounted for $614 million of this week’s total losses to the FDIC Deposit Insurance Fund of $974 million.  The total assets of the 7 failed banks amounted to $6.3 billion.  The estimated losses on the closing of these failed banks indicates that 15% of the “assets” held by them were essentially worthless.  A total of 10 banks in Illinois have been closed this year, accounting for over 17% of the nation’s bank failures.

Although the pace of this year’s banking failures is only slightly ahead of last year’s rate, the number of Problem Banks reported by the FDIC has expanded greatly.  As of the latest report released by the FDIC there were 702 problem banks at December 31, 2009 up from 252 at the end of  2008.  Total assets held by the troubled institutions is $402.8  billion, up from $159.0 billion at the end of 2008.   This large increase in Problem Banks seems to be at odds with the FDIC’s forecast that the number of banking failures will peak this year and not greatly exceed the 140 banking failures of 2009.   Perhaps the FDIC is counting on a fast recovery in market values of residential and commercial real estate values, which would greatly reduce banking losses.   With default rates continually increasing on commercial real estate and estimates of up to another 5 million residences heading towards foreclosure, the FDIC’s optimistic forecasts may prove to be unrealistic.

The assets and deposits of all seven 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 entered into a loss-share agreement with the acquiring banks to protect them from losses on the purchase of the failed banks’ assets.

Of notable interests, Broadway Bank, one of this week’s largest failed banks is owned by the family of Democratic Illinois Senate candidate Alexi Giannoulis.  Kirsten Kukowski, spokeswoman for the Republican Illinois Senate candidate, Mark Kirk, blamed the failure of Broadway Bank on “reckless decision making”.  In addition, Ms. Kukowski added that “While years of risky lending schemes, hot money investments and loans to organized crime led to today’s failure, it’s a sad day for Broadway Bank employees who may lose their jobs due to Mr. Giannoulias’ reckless business practices”.  

Based on the huge banking losses and failures of the past several years, it is obvious that Broadway Bank did not have a monopoly on obviously reckless lending policies that most banks engaged in.  Although it is now obvious to all why large numbers of banks have failed, it is not easy to comprehend the lack of accountability for such actions.   Despite the SEC’s recent high profile charges against Goldman Sachs, little seems to have been done to hold anyone responsible for the banking crisis that has cost American taxpayers trillions of dollars.

Amcore Bank, N.A., Rockford, IL – Banking Failure #51

Amcore Bank, National Association, Rockford, Illinois, 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 Harris National Association, Chicago, Illinois, to assume all of the deposits of Amcore Bank, National Association.

As of December 31, 2009, Amcore Bank, National Association had approximately $3.8 billion in total assets and $3.4 billion in total deposits. Harris National Association will pay the FDIC a premium of 0.01 percent to assume all of the deposits of Amcore Bank, National Association. In addition to assuming all of the deposits of the failed bank, Harris National Association agreed to purchase essentially all of the assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $220.3  million.

Broadway Bank, Chicago, IL – Banking Failure #52

Broadway Bank, Chicago, Illinois, was closed today by the Illinois Department of Financial and 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 MB Financial Bank, National Association, Chicago, Illinois, to assume all of the deposits of Broadway Bank.

As of December 31, 2009, Broadway Bank had approximately $1.2 billion in total assets and $1.1 billion in total deposits. MB Financial Bank, National Association did not pay the FDIC a premium for the deposits of Broadway Bank. In addition to assuming all of the deposits of the failed bank, MB Financial Bank, National Association agreed to purchase essentially all of the assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $394.3 million.

Citizens Bank&Trust Company of Chicago, Chicago, IL – Banking Failure #53

Citizens Bank&Trust Company of Chicago, Chicago, Illinois, was closed today by the Illinois Department of Financial and 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 Republic Bank of Chicago, Oak Brook, Illinois, to assume all of the deposits of Citizens Bank&Trust Company of Chicago.

As of December 31, 2009, Citizens Bank&Trust Company of Chicago had approximately $77.3 million in total assets and $74.5 million in total deposits. Republic Bank of Chicago will pay the FDIC a premium of 0.00013 percent to assume all of the deposits of Citizens Bank&Trust Company of Chicago. The FDIC as receiver will retain most of the assets from Citizens Bank&Trust Company of Chicago for later disposition.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $20.9 million.

New Century Bank, Chicago, IL- Banking Failure#54

New Century Bank, Chicago, Illinois, was closed today by the Illinois Department of Financial and 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 MB Financial Bank, National Association, Chicago, Illinois, to assume all of the deposits of New Century Bank.

As of December 31, 2009, New Century Bank had approximately $485.6 million in total assets and $492.0 million in total deposits. MB Financial Bank, National Association did not pay the FDIC a premium for the deposits of New Century Bank. In addition to assuming all of the deposits of the failed bank, MB Financial Bank, National Association agreed to purchase essentially all of the assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $125.3 million.

Lincoln Park Savings Bank, Chicago, IL – Banking Failure #55

Lincoln Park Savings Bank, Chicago, Illinois, was closed today by the Illinois Department of Financial and 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 Northbrook Bank and Trust Company, Northbrook, Illinois, to assume all of the deposits of Lincoln Park Savings Bank

As of December 31, 2009, Lincoln Park Savings Bank had approximately $199.9 million in total assets and $171.5 million in total deposits. Northbrook Bank and Trust Company will pay the FDIC a premium of 0.4 percent to assume all of the deposits of Lincoln Park Savings Bank. In addition to assuming all of the deposits of the failed bank, Northbrook Bank and Trust Company agreed to purchase essentially all of the assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $48.4 million.

Peotone Bank and Trust Co, Peotone, IL – Banking Failure #56

Peotone Bank and Trust Company, Peotone, Illinois, was closed today by the Illinois Department of Financial and 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 Peotone Bank and Trust Company

As of December 31, 2009, Peotone Bank and Trust Company had approximately $130.2 million in total assets and $127.0 million in total deposits. First Midwest Bank will pay the FDIC a premium of 1.0 percent to assume all of the deposits of Peotone Bank and Trust Company. In addition to assuming all of the deposits of the failed bank, First Midwest Bank agreed to purchase essentially all of the assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $31.7 million.

Wheatland Bank, Naperville, IL – Banking Failure #57

Wheatland Bank, Naperville, Illinois, was closed today by the Illinois Department of Financial and 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 Wheaton Bank & Trust, Wheaton, Illinois, to assume all of the deposits of Wheatland Bank.

As of December 31, 2009, Wheatland Bank had approximately $437.2 million in total assets and $438.5 million in total deposits. Wheaton Bank & Trust will pay the FDIC a premium of 0.4 percent to assume all of the deposits of Wheatland Bank. In addition to assuming all of the deposits of the failed bank, Wheaton Bank & Trust agreed to purchase essentially all of the assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $133.0 million.

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