On Friday, July 30, 2010, FIVE BANKS were CLOSED by U.S. regulators. The five failed institutions were located in, Georgia, Florida, Washington and Oregon. This brings the total number of US Bank Failures to 108 so far in 2010, compared to 140 in 2009, 25 in 2008 and 3 in 2007. If bank failures continue at this pace, an estimate of over 190 banks will fail in 2010. These five bank failures had total ASSETS of approximately $1.9 BILLION and total deposits of approximately $1.8 BILLION. The Federal Deposit Insurance Corporation (“FDIC”) estimates the cost of the five bank closures to its Deposit Insurance Fund (“DIF”) will be approximately $334.7 million.
Although the economy is showing signs of a gradual recovery with the larger financial institutions stabilizing, tumbling home prices, soaring loan defaults in residential and commercial real estate and rising unemployment continue to take their toll on small banks. In the fourth quarter of 2009, the number of banks on the FDIC’s list of problem institutions grew to 702 from 552 in the third quarter of 2009. This is the highest number of problem institutions since the savings and loan crisis in the early 1990′s. Increasing loan losses on commercial real estate are expected to cause hundreds more bank failures in the next few years. The FDIC anticipates bank failures to cost over $100 billion over the next three years.
The FIVE failed banks are:
- NorthWest Bank and Trust – Acworth, Georgia was closed by the Georgia Department of Banking and Finance, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with State Bank and Trust Company – Macon, Georgia, to assume all of the deposits of NorthWest Bank and Trust. As of March 31, 2010, NorthWest Bank and Trust had approximately $167.7 million in total assets and $159.4 million in total deposits. State Bank and Trust Company did not pay the FDIC a premium for the deposits of NorthWest Bank and Trust. In addition to assuming all of the deposits of the failed bank, State Bank and Trust Company agreed to purchase essentially all of the failed bank’s assets. The FDIC and State Bank and Trust Company entered into a loss-share transaction on $107.6 million of NorthWest Bank and Trust’s assets. State Bank and Trust Company will share in the losses on the asset pools covered under the loss-share agreement. The FDIC estimates that the cost to the DIF will be $39.8 million. NorthWest Bank and Trust is the 104th FDIC-insured institution to fail in the nation this year, and the 11th in Georgia. The last FDIC-insured institution closed in the state was Crescent Bank and Trust Company – Jasper, on July 23, 2010.
- Bayside Savings Bank – Port Saint Joe – Florida and Coastal Community Bank – Panama City Beach, Florida were closed by federal and state banking agencies, which then appointed the FDIC as receiver for both institutions. The FDIC entered into purchase and assumption agreements with Centennial Bank – Conway, Arkansas, to assume all the deposits and essentially all the assets of the two failed institutions. Bayside Savings Bank was closed by the Office of Thrift Supervision, and Coastal Community Bank was closed by the Florida Office of Financial Regulation. As of March 31, 2010, Bayside Savings Bank had total assets of $66.1 million and total deposits of $52.4 million. Coastal Community Bank had total assets of $372.9 million and total deposits of $363.2 million. Centennial Bank did not pay the FDIC a premium for the deposits of the failed banks. In addition to assuming all the deposits from the two Florida institutions, Centennial Bank will purchase virtually all their assets. The FDIC and Centennial Bank entered into loss-share transactions on $48.3 million of Bayside Savings Bank’s assets and $302.8 million of Coastal Community Bank’s assets. Centennial Bank will share in the losses on the asset pools covered under the loss-share agreement. The FDIC estimates that the cost to the DIF will be $16.2 million for Bayside Savings Bank and $94.5 million for Coastal Community Bank. These two closings bring total closures for the year to 106 banks in the nation, and the 19th and 20th in Florida. Prior to these failures, the last bank closed in Florida was Sterling Bank – Lantana, on July 23, 2010.
- The Cowlitz Bank – Longview, Washington was closed by the Washington Department of Financial Institutions, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Heritage Bank – Olympia, Washington, to assume all of the deposits of The Cowlitz Bank. As of March 31, 2010, The Cowlitz Bank had approximately $529.3 million in total assets and $513.9 million in total deposits. Heritage Bank paid the FDIC a premium of 1.0% for the deposits of The Cowlitz Bank. In addition to assuming all of the deposits of the failed bank, Heritage Bank agreed to purchase approximately $280.0 million of the failed bank’s assets. The FDIC will retain the remaining assets for later disposition. The FDIC and Heritage Bank entered into a loss-share transaction on $160.9 million of The Cowlitz Bank’s assets. Heritage Bank will share in the losses on the asset pools covered under the loss-share agreement. The FDIC estimates that the cost to the DIF will be $68.9 million. The Cowlitz Bank is the 107th FDIC-insured institution to fail in the nation this year, and the eighth in Washington. The last FDIC-insured institution closed in the state was Washington First International Bank – Seattle, on June 11, 2010.
- LibertyBank – Eugene, Oregon was closed by the Oregon Division of Finance and Corporate Securities, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Home Federal Bank – Nampa, Idaho, to assume all of the deposits of LibertyBank. As of March 31, 2010, LibertyBank had approximately $768.2 million in total assets and $718.5 million in total deposits. Home Federal Bank paid the FDIC a premium of 1.0% for the deposits of LibertyBank. In addition to assuming all of the deposits of the failed bank, Home Federal Bank agreed to purchase approximately $419.7 million of the failed bank’s assets. The FDIC and Home Federal Bank entered into a loss-share transaction on $300.0 million of LibertyBank’s assets. Home Federal Bank will share in the losses on the asset pools covered under the loss-share agreement. The FDIC estimates that the cost to the DIF will be $115.3 million. Compared to other alternatives, Home Federal Bank’s acquisition was the least costly resolution for the FDIC’s DIF. LibertyBank is the 108th FDIC-insured institution to fail in the nation this year, and the third in Oregon. The last FDIC-insured institution closed in the state was Home Valley Bank – Cave Junction, on July 23, 2010.
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation’s banking system. The FDIC insures deposits at the nation’s 7,932 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.
(Source: Federal Deposit Insurance Corporation).
