Banking Failures – 98 And Counting
2009 has now seen a total of 73 more failed banks than occurred for all of 2008. The latest banking closures bring total banking failures for 2009 to 98. The latest three failed bank on October 2, 2009 had total assets of $634 million and total losses to the FDIC Deposit Insurance Fund (DIF) are estimated at $293 million – a massive 46% of the failed bank’s total assets.
The latest three failed bank are as follows:
Warren Bank, Warren, Michigan – Number 96
Warren Bank was closed today and the FDIC as receiver, entered into a purchase and assumption agreement with The Huntington National Bank, Columbus, Ohio, to assume all deposits of the failed bank.
Warren Bank, as of July 31, 2009, had total deposits of $501 million and total assets of $538 million. Huntington National will purchase only $83 million of the failed bank’s assets, with the balance of $455 million to be retained by the FDIC for later disposition. The fact that Huntington National would purchase only 15% of the failed bank’s assets indicates that the quality of Warren Bank’s assets was extremely poor. There was no loss share transaction between the FDIC and Huntington National on the purchase of the failed bank’s assets.
The estimated loss to the FDIC Deposit Insurance Fund (DIF) is estimated at $275 million. Warren Bank is the second banking failure this year in Michigan.
The size of the FDIC loss on the closure of Warren Bank is remarkable – a stunning 51% of the Warren Bank’s total assets are effectively worthless. There are foreclosure web sites advertising “thousands” of Warren Bank foreclosed homes for sale. Granted, Michigan leads the country with the highest unemployment rate of almost 10%, but for a bank to lose over half of the value of all loans made takes a special talent. Warren Bank’s underwriting standards and lending policies had to have major deficiencies which apparently were not corrected by regulators in time to prevent huge loan losses.
Warren Bank had entered into a Written Agreement with the Federal Reserve and the Michigan Office of Financial and Insurance Regulation on September 18, 2008 to maintain the financial soundness of Warren Bank and correct numerous violations of sound lending policies. The Board of Governors of the Federal Reserve System had issued a Prompt Corrective Action Directive to Warren Bank on July 28, 2009.
Warren Bank is yet another example of a bank that made a huge number of poor loans with inadequate regulatory oversight and that should have been closed long before today.
Jennings State Bank, Spring Grove, Minnesota – Number 97
Jennings State Bank was closed today and the FDIC entered into a purchase and assumption agreement with Central Bank, Stillwater, Minnesota, to assume all deposits and purchase all the assets of the failed bank.
Jennings Bank had total assets of $56.3 million and total deposits of $52.4 million. The FDIC and Central Bank entered into a loss-share transaction on $37.7 million of the failed bank’s assets.
The FDIC estimates the cost to the DIF at $11.7 million or 21% of assets. Jennings Bank is the fourth banking failure in Minnesota this year.
Southern Colorado National Bank, Pueblo, Colorado – Number 98
Southern Colorado was closed today and the FDIC entered into a purchase and assumption agreement with Legacy Bank, Wiley, Colorado, to assume all deposits and purchase all assets of the failed bank.
Southern Colorado had total assets of $39.5 million and total deposits of $31.9 million. The FDIC and Legacy Bank entered into a loss-share transaction on $25.5 million of the failed bank’s assets.
The cost to the FDIC DIF for closing Southern Colorado is estimated at $6.6 million or 17% of the failed bank’s assets. Southern Colorado is the third banking failure in Colorado this year.