Four Banks Fail – FDIC Losses Approach $1 Billion On YTD Bank Closings

Regulators closed four banks in Tennessee, Minnesota and Florida, bringing the total for the year to seven.

Tennessee, with two bank closings, had previously not had a single bank failure since 2002.  The combined assets of the two failed banks in Tennessee totaled $1.5 billion.  Tennessee Commerce Bank of Franklin, TN, became the first billion dollar bank failure of 2012.  Last year, a total of 7 failed banks had assets in excess of $1 billion.

Various statistics prove that regulators are allowing hopelessly insolvent banks to remain open as detailed in Problem Bank List At 20 Year High As Regulators Let Zombie Banks Remain Open.   The banks closed so far during 2012 have been in much worse shape than those closed during 2011.

For all of 2011, the ratio of total FDIC losses on failed banks as a percentage of total failed bank assets was 20%.  For 2012 to date, total FDIC losses on 7 failed banks totaled $850.8 million and total assets of the 7 failed banks totaled $2.58 billion, for a loss ratio of 32.9%.

The four failed banks for the week ending January 27,  2012 are listed below.  Total losses taken by the FDIC on this week’s four failed banks totaled $607 million.  Total year to date losses for 2012 are $850.8 million.

Please click on the link for detailed information of each bank closing.

Bank Failure #4 – First Guaranty Bank and Trust Company of Jacksonville, Jacksonville, FL

First Guaranty, a 62 year old institution, is the second bank failure in Florida this year.   First Guaranty’s website said that “We are highly capitalized, profitable and FDIC insured”.

Bank Failure #5 – Tennessee Commerce Bank, Franklin, TN

Tennessee Commerce had $1.2 billion in assets and is the largest bank failure of 2012.  The loss to the FDIC Deposit Insurance Fund was $416.8 million.

The quality of assets at Tennessee Commerce Bank was so poor that the acquiring institution purchased only $203.9 million (17%) of the failed Bank’s assets.  The FDIC, which is already holding $30 billion of failed bank assets, got stuck with the balance of $854 million of junk loans to be disposed of later.

Bank Failure #6 – Patriot Bank of Minnesota, Forest Lake, MN

Patriot Bank Minnesota was a small locally owned bank that had been in business since 1998.

Bank Failure #7 – BankEast, Knoxville, TN

BankEast was one of two banks closed in Tennessee this week.  BankEast had been in business since 1968 but recklessly expanded lending during the real estate bubble.