Regulators Hit Snooze Button – One Tiny Bank Closed

One Tiny Bank Seized

Regulators continued their leisurely pace of bank closings this week, shuttering only a tiny one branch bank in Florida.  With hundreds of banks technically insolvent, loan credit quality declining and non performing loans at all time highs, regulators seem to be hoping that zombie banks can somehow recover if they are left open.   This seems to be an overly optimistic attitude especially in view of the latest stats on mortgage delinquencies.

The latest data from the Mortgage Bankers Association reports that a record breaking one in seven (14%) of all households are 30 days or more overdue on mortgage payments or in foreclosure.  Mortgage defaults have steadily increased since 2006 and show no signs of slowing – not exactly a good omen for the banking industry.

Failed Bank For November 20, 2009

Commerce Bank of  Southwest Florida, Fort Meyers, FL – Number 124

FDIC Press Release: Commerce Bank of Southwest Florida, Fort Myers, 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 Central Bank, Stillwater, Minnesota, to assume all of the deposits of Commerce Bank of Southwest Florida.

As of August 28, 2009, Commerce Bank of Southwest Florida had total assets of $79.7 million and total deposits of approximately $76.7 million. In addition to assuming all of the deposits of the failed bank, Central Bank agreed to purchase essentially all of the assets.

The FDIC and Central Bank entered into a loss-share transaction on approximately $61 million of Commerce Bank of Southwest Florida’s assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $23.6 million. Commerce Bank of Southwest Florida is the 124th FDIC-insured institution to fail in the nation this year, and the twelfth in Florida.

As has been the case with most failed banks, the FDIC has had to guarantee to the acquiring bank that a significant portion of the expected losses on acquired assets of the failed bank would be covered by the FDIC under a loss-share arrangement (see Loss- Share Agreements – Is The FDIC Postponing Losses).

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