Many Of These Problem Banks Will Fail – FDIC Discloses Enforcement Actions

October 30, 2010 – The FDIC recently released a list of orders of administrative enforcement actions taken against banks in September, including 30 “Consent Orders” (formerly called “cease and desist consent orders”) and 5 Prompt Corrective Actions.

Formal enforcement actions are publicly disclosed by regulators and used to address severe deficiencies or when regulators have limited confidence in an institution’s  ability to implement required changes.  Under Section 38 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) regulators must take increasingly severe supervisory actions as capital levels deteriorate.  Generally, regulators are required to close critically undercapitalized institutions within 90 days.

A cease and desist order (consent order) is issued when the FDIC has “determined that it had reason to believe that the Bank engaged in unsafe or unsound banking practices and violations of law and/or regulations.”  A prompt corrective action directive by the FDIC is a “formal action that requires an institution to take one or more specified actions to return to required minimum capital standards”.

It is highly likely that banks  issued cease and desist orders or prompt corrective actions are on the Problem Bank List.  The Problem Bank List contains the names of institutions that have weak capital positions caused by large loan losses or operational deficiencies that usually lead to failure. The FDIC does not publicize the list for fear of causing depositor withdrawals and bad publicity which would only serve to hasten the bank’s closing.

As of the latest report released by the FDIC there were 829 problem banks at June 30, 2010 up from 702 at the end of  2009.  Total assets held by troubled institutions is $403.2  billion at June 30, 2010, up from $402.8 billion at the end of 2009.

Given the serious financial issues cited by the FDIC for the banks listed below, expect many of these institutions to wind up on the Failed Bank List. Banking depositors with balances in excess of the FDIC deposit insurance limit should consider this list as “fair warning” from the FDIC and take appropriate action to avoid potential losses.

FINAL ORDERS ISSUED PURSUANT TO SECTION 8(b), 12 U.S.C. §1818(b)
(Consent Orders)

Bank of Alameda, Alameda, CA; FDIC-10-546b; Issued 9/17/10 – PDF
Monterey County Bank, Monterey, CA; FDIC-09-081b; FDIC-10-221k; Issued 9/29/10 – PDF
Monterey County Bank, Monterey, CA; FDIC-10-633b; Issued 9/1/10 – PDF
Charter Oak Bank, Napa, CA; FDIC-10-635b; Issued 9/2/10 – PDF
Colorado Capital Bank, Castle Rock, CO; FDIC-10-514b; Issued 9/9/10 – PDF
County Bank, Rehoboth Beach, DE; FDIC-10-454b; Issued 9/20/10 – PDF
Old Harbor Bank, Clearwater, FL; FDIC-10-463b; Issued 9/1/10 – PDF
CNLBank, Orlando, FL; FDIC-10-493b; Issued 9/20/10 – PDF
The Elgin State Bank, Elgin, IL; FDIC-10-439b; Issued 9/9/10 – PDF
Princeville State Bank, Princeville, IL; FDIC-10-491b; Issued 9/16/10 – PDF
AmericaUnited Bank and Trust Company USA, Schaumburg, IL; FDIC-10-457b; Issued 9/24/10 – PDF
Farmers State Bank of Sublette, Sublette, IL; FDIC-10-531b; Issued 9/16/10 – PDF
Premier Bank, Wilmette, IL; FDIC-10-233b; Issued 9/3/10 – PDF
Bloomfield State Bank, Bloomfield, IN; FDIC-10-497b; Issued 9/17/10 – PDF
Community Shores Bank, Muskegon, MI; FDIC-10-397b; Issued 9/2/10 – PDF
Village Bank, St. Francis, MN; FDIC-10-426b; Issued 9/10/10 – PDF
Minnwest Bank South, Tracy, MN; FDIC-10-509b; Issued 9/27/10 – PDF
Patriot Bank Minnesota, Wyoming, MN; FDIC-10-476b; Issued 9/29/10 – PDF
Lone Summit Bank, Lake Lotawana, MO; FDIC-10-574b; Issued 9/27/10 – PDF
First Security Bank of Nevada, Las Vegas, NV; FDIC-10-547b; Issued 9/1/10 – PDF
Service 1st Bank of Nevada, Las Vegas, NV; FDIC-10-512b; Issued 9/1/10 – PDF
Citizens State Bank – Midwest, Cavalier, ND; FDIC-10-550b; Issued 9/27/10 – PDF
Washington Financial Bank, Washington, PA; FDIC-10-506b; Issued 9/3/10 – PDF
Insouth Bank, Brownsville, TN; FDIC-10-468b; Issued 9/30/10 – PDF
Community State Bank, Austin, TX; FDIC-10-494b; Issued 9/9/10 – PDF
Foundation Bank, Bellevue, WA; FDIC-10-058b; Issued 9/17/10 – PDF
Bank of Fairfield, Fairfield, WA; FDIC-10-627b; Issued 9/28/10 – PDF
First Savings Bank Northwest, Renton, WA; FDIC-10-524b; Issued 9/24/10 – PDF
Westside Community Bank, University Place, WA; FDIC-10-450b; Issued 9/24/10 – PDF
ISB Community Bank, Ixonia, WI; FDIC-10-344b; Issued 9/14/10 – PDF

(Prompt Corrective Actions)

Charter Oak Bank, Napa, CA; FDIC-10-749PCAS; Issued 9/30/10 – PDF
First Vietnamese American Bank, Westminster, CA; FDIC-10-691PCAS; Issued 9/28/10 – PDF
FirsTier Bank, Louisville, CO; FDIC-10-224PCAS; Issued 4/21/10 – PDF
Valley Community Bank, St. Charles, IL; FDIC-10-637PCAS; Issued 9/8/10 – PDF
Nevada Commerce Bank, Las Vegas, NV; FDIC-10-688PCAS; Issued 9/14/10 – PDF

NOTICES ISSUED
(Note: A Notice is a proposal enforcement action and is not a final decision or order by the FDIC)

Notices of Charges and of Hearing
Pacific Rim Bank, Honolulu, HI; FDIC-10-471b; Issued 9/17/10 – PDF
Community South Bank, Parsons, TN; FDIC-10-264b; Issued 9/10/10 – PDF

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