This came from a BusinessWeek Article written by Phil Mattingly
March 28 (Bloomberg) — U.S. regulators shut down four banks in Arizona, Georgia and Florida, bringing the total for the year to 41 as small lenders struggle with bad loans tied to commercial real estate.
The banks seized March 26, including Desert Hills Bank of Phoenix, Arizona, had total assets of $1.24 billion and deposits of $1.1 billion, according statements from the Federal Deposit Insurance Corp. Regulators have seized 181 U.S. lenders since the start of 2009.
“You’re going to continue to see smaller institutions fail because they have no access to capital and they have too much concentration in residential construction and commercial real estate,” said Paul J. Miller, an analyst at FBR Capital Markets in Arlington, Virginia.
U.S. lenders are collapsing at the fastest pace in 17 years amid losses on loans made at the height of the market. The number of banks on the FDIC’s “problem” list climbed to the highest level since 1992 in the fourth quarter. FDIC Chairman Sheila Bair said on Feb. 23 that the pace of failures will exceed last year’s total of 140.
The latest closings will drain $320.3 million from the FDIC’s deposit insurance fund, the agency said. The FDIC and the four banks acquiring the shut-down lenders agreed to share losses on $870.9 million of assets.
McIntosh Commercial, Unity National
The other banks closed were McIntosh Commercial Bank of Carrollton, Georgia; Unity National Bank of Cartersville, Georgia; and Key West Bank of Key West, Florida.
Desert Hill’s $426.5 million of deposits will be assumed by New York Community Bank in Westbury, New York, under a loss- sharing agreement with the FDIC. CharterBank of West Point, Georgia, takes over $343.3 million of deposits of McIntosh Commercial, also under a loss-sharing accord.
Bank of the Ozarks, in Little Rock, Arkansas, will take over $264.3 million of deposits of Unity National. Centennial Bank of Conway, Arkansas, takes over Key West Bank’s deposits of $67.7 million. Those two are also under similar loss-share agreements with the FDIC.
The FDIC introduced loss-sharing agreements during the savings-and-loan crisis in 1991 and resumed using them in 2008 amid bank failures stemming from the collapse of the subprime mortgage market. The agreements are designed to help attract investors wary of the quality of bank assets being offered amid more than $1.7 trillion in writedowns and credit losses at financial companies since the 2007.
“FDIC-insured institutions still hold the largest share of commercial mortgage debt outstanding, and their dollar volume exposure to CRE loans stands at a historic high,” Martin J. Gruenberg, the FDIC’s vice chairman, said in Feb. 26 testimony to the House Financial Services Committee.
