First Banking Failure In New York Brings 2010 Total To 27
Banking regulators closed LibertyPointe Bank of New York, NY today, the first banking failure in New York this year. As of December 31, 2009 LibertyPointe had total assets of $209.7 million and total deposits of $209.5 million. The cost to the FDIC Deposit Insurance Fund (DIF) for this week’s banking failure is estimated at $24.8 million. The cost to the FDIC Deposit Insurance Fund for the 27 banking failures to date in 2010 now totals $4.7. billion.
The FDIC typically closes failed banks on Friday evening at the close of business. This unusual Thursday night closure is due to the fact that LibertyPointe’s clientele is primarily Orthodox Jews. The Jewish Sabbath begins at sundown Friday and many of the banks Orthodox Jewish employees do not work on the Sabbath which includes Friday and Saturday. In a typical bank closing, FDIC examiners will work the weekend with the failed bank’s staff in order to transition a smooth opening under new ownership on Monday.
LibertyPointe Bank, New York, NY – Banking Failure Number 27
The FDIC, as receiver, entered into a purchase and assumption agreement with Valley National Bank, Wayne, New Jersey, to assume all of the deposits and to purchase all of the assets of LibertyPointe Bank. The failed bank was relatively small with only 3 branches, serving customers in Brooklyn and Manhattan.
The FDIC entered into a loss-share transaction with Valley National on $181.5 million of LibertyPointe’s assets, which will limit future potential losses to Valley National. The loss to the FDIC on closing LibertyPointe Bank is estimated at $24.8 million. LibertyPointe is the first bank to fail in New York this year.
Banking analysts are predicting that banking failures in 2010 will greatly exceed last year’s total of 140, which is the largest amount of banking failures since 1992. Banking institutions continue to collapse as loan defaults soar and residential and commercial property values continue to erode. As of December 31, 2009, the latest FDIC Quarterly Banking Profile revealed that there are 702 Problem Banks, up from 252 at the end of 2008, a 178% increase.
Ultimately, depositors are protected by the FDIC Deposit Insurance Fund. The standard insurance amount of $250,000 per depositor is in effect through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor. The old standard coverage limit of $100,000 per depositor had been temporarily increased due to turmoil in the financial markets.