7 Banking Institutions Closed On December 18, 2009 – FDIC Forced To Retain $1.9 Billion In Failed Bank Assets – Depositors Lose $3.2 Million
As the number of banking failures increase, the FDIC appears to be encountering increasing difficulty in finding buyers for failed banks, despite agreeing to cover a large percentage of potential losses by acquiring banks.
The vast majority of the banking failures this year were resolved by the FDIC and an acquiring bank entering into a purchase and assumption agreement, whereby the acquiring bank assumes the deposits and assets of the failed bank. In protect depositors and arrange a speedy resolution of a failed bank, the FDIC has agreed in most banking failures this year to enter into a loss-share transaction with the acquiring bank. The loss-share transaction typically involves the FDIC agreeing to absorb a large percentage of losses that an acquiring bank may experience on the purchase of a failed bank’s assets.
Despite the generous FDIC guarantees against loss, three of this week’s seven failed banks found no buyers and left the FDIC holding $1.9 billion of failed bank assets to be held for later disposition. As of September 30, 2009, the FDIC was already holding $30.3 billion in failed assets for future resolution and disposition.
This week’s banking failures also highlight the untenable financial condition of many banks that regulators have allowed to remain open. FDIC losses (as a percentage of assets) on two of the failed banks that could not be sold were shocking. The loss to asset ratio at Rockbridge Commercial Bank was 42% and at Citizens State Bank 45%. The question of how many other zombie banking institutions are still being allowed to operate becomes a reasonable question as we look at the deplorable financial condition of the most recent banking failures.
The seven failed banking institutions had a combined $14.4 billion in assets and $11.2 billion in deposits. The estimated total loss to the FDIC Deposit Insurance Fund (DIF) is $1.8 billion. The FDIC was not alone in taking losses on this week’s banking failures. Losses to depositors who held funds in excess of FDIC insurance coverage are estimated at $3.2 million.
Four of the failed banks were acquired by other banks under purchase and assumption agreements between the FDIC and the acquiring bank. Every one of the acquiring banks also entered into a loss-share agreement with the FDIC which limits any potential losses by the acquiring bank (see Loss-Share Agreements – Losses Postponed?). The FDIC believes that the loss-share transactions minimize losses by keeping the covered assets in the private sector.
This week’s seven failed banks are as follows:
Rockbridge Commercial Bank, Atlanta, GA – Number 134
The Federal Deposit Insurance Corporation (FDIC) approved the payout of the insured deposits of RockBridge Commercial Bank, Atlanta, Georgia. The bank was closed today by the Georgia Department of Banking and Finance, which appointed the FDIC as receiver.
The FDIC was unable to find another financial institution to take over the banking operations of RockBridge Commercial Bank. As a result, checks to the retail depositors for their insured funds will be mailed on Monday.
As of September 30, 2009, RockBridge Commercial Bank had approximately $294.0 million in total assets and $291.7 million in total deposits. At the time of closing, the bank had an estimated $2.1 million in uninsured funds.
The FDIC estimates the cost of the failure to its Deposit Insurance Fund to be approximately $124.2 million.
Peoples First Community Bank, Panama City, FL – Number 135
Peoples First Community Bank, Panama City, Florida, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Hancock Bank, Gulfport, Mississippi, to assume all of the deposits of Peoples First Community Bank.
As of September 30, 2009, Peoples First Community Bank had approximately $1.8 billion in total assets and $1.7 billion in total deposits. Hancock Bank agreed to purchase approximately $1.6 billion of the failed bank’s assets. The FDIC retained the remaining assets for later disposition.
The FDIC and Hancock Bank entered into a loss-share transaction on approximately $1.4 billion of Peoples First Community Bank’s assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $556.7 million.
Citizens State Bank, New Baltimore, Michigan – Number 136
Citizens State Bank, New Baltimore, Michigan, was closed today by the Michigan Office of Financial and Insurance Regulation, which then appointed Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC created the Deposit Insurance National Bank of New Baltimore (DINB), which will remain open for approximately 45 days to allow depositors access to their insured deposits and time to open accounts at other insured institutions.
All insured depositors of Citizens State Bank are encouraged to transfer their insured funds to other banks.
Under the FDI Act, the FDIC may create a deposit insurance national bank to ensure that depositors have continued access to their insured funds where no other bank has agreed to assume the insured deposits.
As of September 30, 2009, Citizens State Bank had $168.6 million in total assets and $157.1 million in total deposits. At the time of closing, deposits of approximately $803,000 potentially exceeded the insurance limits.
The cost to the FDIC’s Deposit Insurance Fund is estimated to be $76.6 million.
New South Federal Savings Bank, Irondale, Alabama – Number 137
New South Federal Savings Bank, Irondale, Alabama, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Beal Bank, Plano, Texas, to assume all of the deposits of New South Federal Savings Bank.
As of September 30, 2009, New South Federal Savings Bank had approximately $1.5 billion in total assets and $1.2 billion in total deposits.
The FDIC and Beal Bank entered into a loss-share transaction on $1.2 billion of New South Federal Savings Bank’s assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $212.3 million.
Independent Bankers’ Bank, Springfield, IL – Number 138
The Federal Deposit Insurance Corporation (FDIC) created a bridge bank to take over the operations of Independent Bankers’ Bank, Springfield, Illinois, after the bank was closed today by the Illinois Department of Financial and Professional Regulation—Division of Banking, which appointed the FDIC as receiver. The newly created bank is Independent Bankers’ Bank Bridge Bank, National Association.
Independent Bankers’ Bank did not take deposits directly from the general public nor did it make loans to consumers. It was a commercial bank that provided correspondent banking services to its client banks.
Independent Bankers’ Bank had approximately 450 client banks in four states, and operated one regional office.
As of September 30, 2009, Independent Bankers’ Bank had approximately $585.5 million in assets and $511.5 million in deposits. At the time of closing, the bank had an estimated $269,000 in uninsured funds.
The FDIC estimates that the cost to the Deposit Insurance Fund will be $68.4 million.
Imperial Capital Bank, La Jolla, CA – Number 139
Imperial Capital Bank, La Jolla, 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 Imperial Capital Bank.
As of September 30, 2009, Imperial Capital Bank had approximately $4.0 billion in total assets and $2.8 billion in total deposits.
The FDIC and City National Bank entered into a loss-share transaction on $2.5 billion of Imperial Capital Bank’s assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $619.2 million.
First Federal Bank of California, Santa Monica, CA – Number 140
First Federal Bank of California, a Federal Savings Bank, Santa Monica, California, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with OneWest Bank, FSB, Pasadena, California, to assume all of the deposits of First Federal Bank of California.
As of September 30, 2009, First Federal Bank of California had approximately $6.1 billion in total assets and $4.5 billion in total deposits.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $146.3 million.
I AM STARTING MY OWN NETWORK OF AMERICAN BANKS AS AN ‘EXTRA CREDIT’ IN THE BUSINESS I WOULD LIKE TO BE MORE INFORMED ON HOW TO BUY FAILED BANKS OR QUESTION THE TRADE AS BEING VALUABLR TO BANKING OWNERSHIP.