Four Banks Fail In Four States
May 7, 2010 – The Federal Deposit Insurance Corporation (FDIC) closed four more banks in Florida, Arizona, Minnesota and California. The total number of failed banks for the year is now 68, double the number of failures at this point during 2009. During 2009, 140 banks failed in the United States, the most since 1992.
The latest banking failures were relatively small. The four failed banks had only 14 branches and total assets of $731 million. The losses to the FDIC amounted to $241 million, also relatively small compared to total loses on failed banks to date of $16.2 billion. What was not small and continues to be a concern is the large loss to asset ratio of failed banks. Almost 30% of the assets of this week’s failed banks were essentially declared to be worthless by the FDIC. Despite this obvious impairment of asset value the failed banks, prior to being closed, carried assets on their balance sheets at amounts far in excess of their realizable values. A large markdown in asset value at closing has been the norm with almost all failed banks and does not inspire confidence in regulators or the financial accounting methods of banks.
The noteworthy banking failure of the week was The Bank of Bonifay, Bonifay, Florida with $243 million in assets and $230 million in deposits. Despite being described as a purchase and assumption transaction by the FDIC, the reality of this bank failure was that the FDIC could not find a bank that would purchase Bonifay. Although the First Federal Bank of Florida assumed failed Bank of Bonifay’s deposits, the only assets “purchased” by First Federal were cash and cash equivalents of $78 million, leaving the FDIC stuck with $165 million of very questionable Bonifay’s assets. The loss on closing Bonifay Bank was estimated at $78.7 million, implying a loss on Bonifay’s portfolio of loan assets of a staggering 48%.
With default rates continually increasing on commercial real estate and estimates of up to another 5 million residences heading towards foreclosure, it is not surprising that this year’s banking failures is expected to exceed last year’s total. In addition, 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.
Details on this week’s banking failures are as follows:
The Bank of Bonifay, Bonifay, FL – Banking Failure #65
The Bank of Bonifay, Bonifay, Florida, was closed today by the Florida Office of Financial Regulation, 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 Federal Bank of Florida, Lake City, Florida, to assume all of the deposits of The Bank of Bonifay.
As of March 31, 2010, The Bank of Bonifay had approximately $242.9 million in total assets and $230.2 million in total deposits. First Federal Bank of Florida did not pay the FDIC a premium for the deposits of The Bank of Bonifay. In addition, First Federal Bank of Florida will purchase approximately $78.1 million of The Bank of Bonifay’s assets, consisting of cash and cash equivalents. The FDIC will retain the remaining assets for later disposition.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $78.7 million. First Federal Bank of Florida’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to all alternatives. The Bank of Bonifay is the 65th FDIC-insured institution to fail in the nation this year, and the tenth in Florida.
Access Bank, Champlin, MN – Banking Failure #66
Access Bank, Champlin, Minnesota, was closed today by the Minnesota Department of Commerce, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with PrinsBank, Prinsburg, Minnesota, to assume all of the deposits of Access Bank.
As of March 31, 2010, Access Bank had approximately $32.0 million in total assets and $32.0 million in total deposits. PrinsBank will pay the FDIC a premium of 0.02 percent to assume all of the deposits of Access Bank. In addition to assuming all of the deposits of the failed bank, PrinsBank agreed to purchase essentially all of the assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $5.5 million. PrinsBank’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to all alternatives. Access Bank is the 66th FDIC-insured institution to fail in the nation this year, and the fifth in Minnesota.
Towne Bank of Arizona, Mesa, AZ – Banking Failure #67
Towne Bank of Arizona, Mesa, Arizona, was closed today by the Arizona Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Commerce Bank of Arizona, Tucson, Arizona, to assume all of the deposits of Towne Bank of Arizona.
As of March 31, 2010, Towne Bank of Arizona had approximately $120.2 million in total assets and $113.2 million in total deposits. Commerce Bank of Arizona will pay the FDIC a premium of 0.3 percent to assume all of the deposits of Towne Bank of Arizona. In addition to assuming all of the deposits of the failed bank, Commerce Bank of Arizona agreed to purchase essentially all of the assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $41.8 million. Commerce Bank of Arizona’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to all alternatives. Towne Bank of Arizona is the 67th FDIC-insured institution to fail in the nation this year, and the second in Arizona.
1st Pacific Bank of California, San Diego, CA – Banking Failure #68
1st Pacific Bank of California, San Diego, California, was closed today by the California Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with City National Bank, Los Angeles, California, to assume all of the deposits of 1st Pacific Bank of California.
As of March 31, 2010, 1st Pacific Bank of California had approximately $335.8 million in total assets and $291.2 million in total deposits. City National Bank will pay the FDIC a premium of 1.62 percent to assume all of the deposits of 1st Pacific Bank of California. In addition to assuming all of the deposits of the failed bank, City National Bank agreed to purchase essentially all of the assets. The FDIC and City National Bank entered into a loss-share transaction on $275.7 million of 1st Pacific Bank of California’s assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $87.7 million. City National Bank’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to all alternatives. 1st Pacific Bank of California is the 68th FDIC-insured institution to fail in the nation this year, and the fifth in California.
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