We Moved

We’ve been gone for awhile as we were in the process of re launching our website and blog. Please visit us at http://www.lighthouseas.com/blog/ for up to date industry information.

Going to Las Vegas for the 1 Credit Union Conference 7/11/-7/14

We will be at booth 250.  Stop by and say hi to the Guys!

Bank Failures HIT 81!!! 3 banks SHUT DOWN!

On Friday, June 4, 2010, THREE BANKS were CLOSED by U.S. regulators. The three failed institutions were located in Mississippi, Illinois, and Nebraska. This brings the total number of US Bank Failures to 81 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 three bank failures had total ASSETS of approximately $2.9 BILLION and total deposits of approximately $2.3 billion. The Federal Deposit Insurance Corporation (“FDIC”) estimates the cost of the three bank closures to its Deposit Insurance Fund (“DIF”) will be approximately $313.6 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 three failed banks are:

First National Bank – Rosedale, Mississippi, was closed by the Office of the Comptroller of the Currency, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with The Jefferson Bank – Fayette, Mississippi, to assume all of the deposits of First National Bank.  As of March 31, 2010, First National Bank had approximately $60.4 million in total assets and $63.5 million in total deposits. The Jefferson Bank did not pay the FDIC a premium for the deposits of First National Bank. In addition to assuming all of the deposits of the failed bank, The Jefferson Bank agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $12.6 million. First National Bank is the 79th FDIC-insured institution to fail in the nation this year, and the first in Mississippi. The last FDIC-insured institution closed in the state was Bank of Falkner, Falkner, on September 29, 2000.

Arcola Homestead Savings Bank – Arcola, Illinois was closed by the Illinois Department of Financial Professional Regulation – Division of Banking, which appointed the FDIC as receiver. The FDIC approved the payout of the insured deposits of the bank. The FDIC was unable to find another financial institution to take over the banking operations of Arcola Homestead Savings Bank. As a result, checks to the retail depositors for their insured funds were mailed on Monday, June 7, 2010. As of March 31, 2010, Arcola Homestead Savings Bank had approximately $17.0 million in total assets and $18.1 million in total deposits. At the time of closing, there did not appear to be any uninsured funds. The FDIC estimates that the cost to the DIF will be $3.2 million. Arcola Homestead Savings Bank is the 80th FDIC-insured institution to fail in the nation this year, and the 12th in Illinois. The last FDIC-insured institution closed in the state was Midwest Bank and Trust Company, Elmwood Park, on May 14, 2010.

TierOne Bank – Lincoln, Nebraska, was closed by the Office of Thrift Supervision, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Great Western Bank – Sioux Falls, South Dakota, to assume all of the deposits of TierOne Bank. As of March 31, 2010, TierOne Bank had approximately $2.8 billion in total assets and $2.2 billion in total deposits. Great Western Bank will pay the FDIC a premium of 1.5% to assume all of the deposits of TierOne Bank. In addition to assuming all of the deposits of the failed bank, Great Western Bank agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $297.8 million. TierOne Bank is the 81st FDIC-insured institution to fail in the nation this year, and the first in Nebraska. The last FDIC-insured institution closed in the state was Sherman County Bank, Loup City, on February 13, 2009.

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)

5 banks CLOSE DOWN LAST WEEK!! Bank Failures TOP 78 for the year!

On Friday, May 28, 2010, FIVE BANKS were SHUT DOWN by U.S. regulators. The five failed institutions were located in Nevada, California, and Florida. This brings the total number of US Bank Failures to 78 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 Corp. (“FDIC”) estimates the cost of the five bank closures to its Deposit Insurance Fund (“DIF”) will be approximately $317.0 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:

Bank of Florida – Southeast, Fort Lauderdale, Florida; Bank of Florida – Southwest, Naples, Florida; and Bank of Florida – Tampa Bay, Tampa, Florida, were all closed by the Florida Office of Financial Regulation, which appointed the FDIC as receiver. The three failed banks were owned by the same holding company, Bank of Florida Corporation, which was not part of this transaction. EverBank – Jacksonville, Florida, acquired the banking operations, including all the deposits, of three Florida-based institutions. As of March 31, 2010, Bank of Florida – Southeast had total assets of $595.3 million and total deposits of $531.7 million; Bank of Florida – Southwest had total assets of $640.9 million and total deposits of $559.9 million; and Bank of Florida – Tampa Bay had total assets of $245.2 million and total deposits of $224.0 million. Besides assuming all the deposits from the three Florida banks, EverBank will purchase essentially all of their assets. The FDIC estimates that the cost to the DIF for Bank of Florida – Southeast will be $71.4 million; for Bank of Florida – Southwest, $91.3 million; and for Bank of Florida – Tampa Bay, $40.3 million. The three closings bring the total number of failed banks in the nation so far this year to 76 and the total in Florida to 13. The last bank closed in the state was Bank of Bonifay, Bonifay, on May 7, 2010.

Granite Community Bank, N.A. – Granite Bay, California, was closed by the Office of the Comptroller of the Currency, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Tri Counties Bank – Chico, California, to assume all of the deposits of Granite Community Bank, N.A. As of March 31, 2010, Granite Community Bank, N.A. had approximately $102.9 million in total assets and $94.2 million in total deposits. Tri Counties Bank did not pay the FDIC a premium for the deposits of Granite Community Bank, N.A. In addition to assuming all of the deposits of the failed bank, Tri Counties Bank agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $17.3 million. Granite Community Bank, N.A. is the 77th FDIC-insured institution to fail in the nation this year, and the sixth in California. The last FDIC-insured institution closed in the state was 1st Pacific Bank of California, San Diego, on May 7, 2010.

Sun West Bank – Las Vegas, Nevada, was closed by the Nevada Financial Institutions Division, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with City National Bank – Los Angeles, California, to assume all of the deposits of Sun West Bank. As of March 31, 2010, Sun West Bank had approximately $360.7 million in total assets and $353.9 million in total deposits. City National Bank will pay the FDIC a premium of 0.67% to assume all of the deposits of Sun West Bank. In addition to assuming all of the deposits of the failed bank, City National Bank agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $96.7 million. Sun West Bank is the 78th FDIC-insured institution to fail in the nation this year, and the second in Nevada. The last FDIC-insured institution closed in the state was Carson River Community Bank, Carson City, on February 26, 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.

The Pace of Bank FAILURES slows, 1 Bank Fails last week

On Friday, May 21, 2010, 1 BANK was SHUT DOWN by U.S. regulators. This failed institution was located in Saint Paul, Minnesota. This brings the total number of US Bank Failures to 73 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. The Federal Deposit Insurance Corp. (“FDIC”) estimates the cost of the bank closure to its Deposit Insurance Fund will be approximately $6.0 million.

Pinehurst Bank located in St. Paul, Minnesota, was closed by the Minnesota Department of Commerce, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC entered into a purchase and assumption agreement with Coulee Bank, La Crosse, Wisconsin, to assume all of the deposits of Pinehurst Bank. As of March 31, 2010, Pinehurst Bank had approximately $61.2 million in total assets and $58.3 million in total deposits. Coulee Bank will pay the FDIC a premium of 1.33% to assume all of the deposits of Pinehurst Bank. In addition to assuming all of the deposits of the failed bank, Coulee Bank agreed to purchase essentially all of the assets. Pinehurst Bank is the 73rd FDIC-insured institution to fail in the nation this year, and the sixth in Minnesota. The last FDIC-insured institution closed in the state was Access Bank, Champlin, on May 7, 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.

Credit Unions VS. Banks (Part 2)

We started out discussing the major differences between banks and credit unions.  Now let’s see how the regulators  review them.  Credit Unions are governed by the National Credit Union Administration (“NCUA”) while banks are governed by the Federal Deposit Insurance Corporation (“FDIC”).   The NCUA uses the Capital Adequacy, Asset Quality, Management, Earnings, and Liquidity/Asset-Liability Management rating system (“CAMEL”), while the FDIC uses Uniform Bank Performance Report (“UBPR”).  We are going to focus on CAMEL in this post and UBPR on another.

So what is CAMEL? The CAMEL rating system is based upon an evaluation of five critical elements of a credit union’s operations:

1. Capital Adequacy,
2. Asset Quality,
3. Management,
4. Earnings,
5. and Liquidity/Asset-Liability Management

CAMEL is designed to take into account and reflect all significant financial, operational, and management factors examiners assess in their evaluation of a credit union’s performance and risk profile.

Unlike UBPR, examiners rate credit unions based on their assessment of the individual credit union rather than against peer averages.  The CAMEL ratings should reflect the condition of the credit union regardless of peer performance.  Examiners are expected to use their professional judgment and consider both qualitative and quantitative factors when analyzing a credit union’s performance.

Part of the examiner’s qualitative analysis includes an assessment of the credit union’s risk management program.  In Risk Focused Examinations (RFEs), examiners assess the amount and direction of risk exposure in seven categories:  Credit, Interest Rate, Liquidity, Transaction, Compliance, Reputation, and Strategic (seven risk categories) and determine how the nature and extent of these risks affect one or more CAMEL components.

Although the CAMEL composite rating should normally bear a close relationship to the component ratings, Examiners consider the interrelationships between CAMEL components when assigning the overall rating.  Some of the evaluation factors are reiterated under one or more of the components to reinforce the interrelationships between components.

Below are the definitions from the NCUA of the five composite ratings:

Rating 1 – Credit unions in this group are sound in every respect and generally have components rated 1 and 2.  Any weaknesses are minor and can be handled in a routine manner by the board of directors and management.  These credit unions are the most capable of withstanding unpredictable business conditions and are resistant to outside influences such as economic instability in their trade area.  These credit unions are in substantial compliance with laws and regulations.  As a result, they exhibit sound performance and risk management practices relative to the credit union’s size, complexity, and risk profile, and give no cause for supervisory concern.

Rating 2 – Credit unions in this group are fundamentally sound.  For a credit union to receive this rating, generally no component rating should be more severe than a 3.  Only moderate weaknesses are present and are well within the board of directors’ and management’s capabilities and willingness to correct.  These credit unions are stable and are capable of withstanding business fluctuations.  These credit unions are in substantial compliance with laws and regulations.  Overall risk management practices are satisfactory relative to the credit union’s size, complexity, and risk profile.  There are no material supervisory concerns and, as a result, the supervisory response is informal and limited.

Rating 3 – Credit unions in this group exhibit some degree of supervisory concern in one or more of the component areas.  These credit unions exhibit a combination of weaknesses that may range from moderate to severe; however, the magnitude of the deficiencies generally will not cause a component to be rated more severely than 4.  Management may lack the ability or willingness to effectively address weaknesses within appropriate time frames.  Credit unions in this group generally are less capable of withstanding business fluctuations and are more vulnerable to outside influences than those rated a composite 1 or 2.  Additionally, these credit unions may be in significant noncompliance with laws and regulations.  Risk management practices may be less than satisfactory relative to the credit union’s size, complexity, and risk profile.  These credit unions require more than normal supervision which may include enforcement actions.  Failure appears unlikely, however, given overall strength and financial capacity of these credit unions.

Rating 4 – Credit unions in this group generally exhibit unsafe and unsound practices or conditions.  There are serious financial or managerial deficiencies that result in unsatisfactory performance.  The problems range from severe to critically deficient.  The weaknesses and problems are not being satisfactorily addressed or resolved by the board of directors and management.  Credit unions in this group generally are not capable of withstanding business fluctuations.  There may be significant noncompliance with laws and regulations.  Risk management practices are generally unacceptable relative to the credit union’s size, complexity, and risk profile.  Close supervisory attention is required, which means, in most cases, enforcement action is necessary to address the problems.  Credit unions in the group pose a risk to the National Credit Union Share Insurance Fund (NCUSIF).  Failure is a distinct possibility if the problems and weaknesses are not satisfactorily addressed and resolved.

Rating 5 – Credit unions in this group exhibit extremely unsafe and unsound practices and conditions; exhibit a critically deficient performance; often contain inadequate risk management practices relative to the credit union’s size, complexity, and risk profile; and are of the greatest supervisory concern.  The volume and severity of problems are beyond management’s ability or willingness to control or correct.  Immediate outside financial or other assistance is needed in order for the credit union to be viable.  Ongoing supervisory attention is necessary.  Credit unions in this group pose a significant risk to the NCUSIF and failure is highly probable.

Below depicts the number of Federally Insured Credit Unions that are rated 3 or higher

Year	CAMEL 3	CAMEL 4	CAMEL 5	Total CUs	% of Total (CAMEL 4 & 5)	% of Total Shares (CAMEL 4 &5)
2004	1,745	239	8	9,014	2.74	0.79
2005	1,674	261	8	8,693	3.09	0.99
2006	1,510	228	12	8,360	2.87	0.93
2007	1,421	209	3	8,101	2.62	0.91
2008	1,526	243	11	7,804	3.25	2.31

According to a Credit Union Times article dated May 5, 2010, NCUA Chief Financial Officer Mary Ann Woodson said 13.4% of insured shares were in CAMEL 3 and 5.6% of shares were at CAMEL 4 & 5.  Not surprisingly the number of credit unions receiving CAMEL 4 & 5 ratings has gone up over the recent years.

Now I wish I can show the percentage based on total assets, but that information is not readily available.  As soon as I find it, I will post another chart. (to be continued)

Bank FAILURES SURGE past 70 for the year!!

On Friday, May 14, 2010, FOUR BANKS were SHUT DOWN by U.S. regulators. The four failed institutions were located in Georgia, Michigan, Missouri and Illinois. This brings the total number of US Bank Failures to 72 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 four bank failures had total ASSETS of approximately $3.5 BILLION and total deposits of approximately $2.8 billion. The Federal Deposit Insurance Corp. (“FDIC”) estimates the cost of the four bank closures to its Deposit Insurance Fund (“DIF”) will be approximately $301.7 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 four failed banks are:

Satilla Community Bank, Saint Mary’s, 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 Ameris Bank, Moultrie, Georgia, to assume all of the deposits of Satilla Community Bank. As of March 31, 2010, Satilla Community Bank had approximately $135.7 million in total assets and $134.0 million in total deposits. Ameris Bank will pay the FDIC a premium of 0.19% to assume all of the deposits of Satilla Community Bank. In addition to assuming all of the deposits of the failed bank, Ameris Bank agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $31.3 million. Satilla Community Bank is the 69th FDIC-insured institution to fail in the nation this year, and the eighth in Georgia. The last FDIC-insured institution closed in the state was Unity National Bank, Cartersville, on March 26, 2010.

New Liberty Bank, Plymouth, Michigan, was closed by the Michigan Office of Financial and Insurance Regulation, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Bank of Ann Arbor, Ann Arbor, Michigan, to assume all of the deposits of New Liberty Bank. As of March 31, 2010, New Liberty Bank had approximately $109.1 million in total assets and $101.8 million in total deposits. Bank of Ann Arbor did not pay the FDIC a premium for the deposits of New Liberty Bank. In addition to assuming all of the deposits of the failed bank, Bank of Ann Arbor agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $25.0 million. New Liberty Bank is the 70th FDIC-insured institution to fail in the nation this year, and the third in Michigan. The last FDIC-insured institution closed in the state was CF Bancorp, Port Huron, on April 30, 2010.

Southwest Community Bank, Springfield, Missouri, was closed by the Missouri Division of Finance, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Simmons First National Bank, Pine Bluff, Arkansas, to assume all of the deposits of Southwest Community Bank. As of March 31, 2010, Southwest Community Bank had approximately $96.6 million in total assets and $102.5 million in total deposits. Simmons First National Bank will pay the FDIC a premium of 0.50% to assume all of the deposits of Southwest Community Bank. In addition to assuming all of the deposits of the failed bank, Simmons First National Bank agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $29.0 million. Southwest Community Bank is the 71st FDIC-insured institution to fail in the nation this year, and the fourth in Missouri. The last FDIC-insured institution closed in the state was Champion Bank, Creve Coeur, on April 30, 2010.

Midwest Bank and Trust Company, Elmwood Park, Illinois, was closed by the Illinois Department of Financial Professional Regulation – Division of Banking, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Firstmerit Bank, National Association, Akron, Ohio, to assume all of the deposits of Midwest Bank and Trust Company. As of March 31, 2010, Midwest Bank and Trust Company had approximately $3.17 billion in total assets and $2.42 billion in total deposits. Firstmerit Bank, National Association will pay the FDIC a premium of 0.4% to assume all of the deposits of Midwest Bank and Trust Company. In addition to assuming all of the deposits of the failed bank, Firstmerit Bank, National Association agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $216.4 million. Midwest Bank and Trust Company is the 72nd FDIC-insured institution to fail in the nation this year, and the eleventh in Illinois. The last FDIC-insured institution closed in the state was New Century Bank, Chicago, on April 23, 2010.

Congress created the FDIC in 1933 to restore public confidence in the nation’s banking system. The FDIC insures deposits at the nation’s 8,012 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. When a bank fails, the FDIC reimburses customers for their deposits of up to $250,000 per account. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.

Credit Unions VS. Banks (Part I)

Over the past 12 months, Lighthouse Advisory Services (“LAS”) has been working a lot with credit unions to evaluate their member business loan portfolios and assisting them in creating an effective on-going monitoring system. Our growth in the credit union space is due to the tremendous growth credit unions are experiencing from increase in deposits created by the many closures in small community and regional banks. The theory is the credit unions are safer than banks. On a weekly basis, this blog discusses the many banks that were closed by the FDIC in the previous week. As of today, 68 banks were closed in 2010 and 140 in 2009. According to the National Credit Union Administration, 15 credit unions were liquidated in 2009 and seven for 2010. What a staggering difference between banks and credit unions. So are credit unions that much better than banks? For the next several months we are going discuss this issue and we are looking forward to our readers comments.

Before we can discuss which is better, we need to discuss what they are and their differences first.

Credit Unions	Banks
Credit unions have members, not customers. Each person who deposits money in a credit union becomes a member of the credit union because his deposit is considered his share of the ownership. That means credit unions are member-owned. Each member is also an owner of the credit union.	Banks can serve anyone in the general public. Banks have customers who have no voice in how the bank is operated. Banks are owned by small groups of investors who expect a certain return on their investments.
Credit unions are democratically controlled. They are run by a volunteer board of directors elected by and from the membership. Each member has one vote in electing board members and certain committee members and can run for election to the board or committees.	At banks, only the investors have voting privileges. Customers don’t have voting rights, cannot be elected to the board, and have no authority in the overall governance of their bank.
Credit unions are not-for-profit. This doesn’t mean that they do not or should not make a profit. After expenses are paid and reserves are set aside, surplus earnings are returned to members in the forms of higher dividends, lower loan rates and free or low-cost services.	In banks, only the investors get a share of the profits.
Federally chartered and many state-chartered credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF), which is managed by the National Credit Union Administration, an agency of the federal government. As a federal deposit insurance fund, the NCUSIF is backed by the full faith and credit of the U.S. government. The NCUSIF is the only deposit insurance fund that operates on a pay-as-you-go system, which prevents the accumulation of annual losses. The NCUSIF has never had to use taxpayers’ money.	Banks are insured by the federal government. Their insurance fund is called the Federal Deposit Insurance Corp. Part of this fund, which covers savings and loans, had to be bailed out by using billions of dollars of taxpayers’ money. The FDIC is not operated on a pay-as-you-go system.
Credit unions are part of a worldwide support network that includes credit unions, state credit union leagues, a national trade association (CUNA) and a worldwide credit union organization ( WOCCU). They share ideas, information and resources.	Most banks belong to state and national organizations. However, banks usually are reluctant to share ideas, information and resources with each other.

4 BANKS CLOSED by the FDIC Last week. TALLY hits 68 for the YEAR.

On Friday, May 7, 2010, FOUR more BANKS were SHUT DOWN by U.S. regulators. The four failed institutions were located in Florida, Minnesota, Arizona and California. This brings the total number of US Bank Failures to 68 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 four bank failures had total assets of approximately $730.9 million and total deposits of approximately $666.6 million (This number is a total coincidence). The Federal Deposit Insurance Corp. (“FDIC”) estimates the cost of the four bank closures to its Deposit Insurance Fund (“DIF”) will be approximately $213.7 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 four failed banks are:

The Bank of Bonifay, Bonifay, Florida, was closed by the Florida Office of Financial Regulation, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with First Federal Bank of Florida, Lake City, Florida to assume all of the deposits of The Bank of Bonifay. As of March 31, 2010, The Bank of Bonifay had approximately $242.9 million in total assets and $230.2 million in total deposits. First Federal Bank of Florida did not pay the FDIC a premium for the deposits of The Bank of Bonifay. In addition, First Federal Bank of Florida will purchase approximately $78.1 million of The Bank of Bonifay’s assets, consisting of cash and cash equivalents. The FDIC will retain the remaining assets for later disposition. The FDIC estimates that the cost to the DIF will be $78.7 million. The Bank of Bonifay is the 65th FDIC-insured institution to fail in the nation this year, and the tenth in Florida.

Access Bank, Champlin, Minnesota, was closed by the Minnesota Department of Commerce, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with PrinsBank, Prinsburg, Minnesota, to assume all of the deposits of Access Bank. As of March 31, 2010, Access Bank had approximately $32.0 million in total assets and $32.0 million in total deposits. PrinsBank will pay the FDIC a premium of 0.02% to assume all of the deposits of Access Bank. In addition to assuming all of the deposits of the failed bank, PrinsBank agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $5.5 million. Access Bank is the 66th FDIC-insured institution to fail in the nation this year, and the fifth in Minnesota.

Towne Bank of Arizona, Mesa, Arizona, was closed by the Arizona Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC entered into a purchase and assumption agreement with Commerce Bank of Arizona, Tucson, Arizona, to assume all of the deposits of Towne Bank of Arizona. As of March 31, 2010, Towne Bank of Arizona had approximately $120.2 million in total assets and $113.2 million in total deposits. Commerce Bank of Arizona will pay the FDIC a premium of 0.3% to assume all of the deposits of Towne Bank of Arizona. In addition to assuming all of the deposits of the failed bank, Commerce Bank of Arizona agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $41.8 million. Towne Bank of Arizona is the 67th FDIC-insured institution to fail in the nation this year, and the second in Arizona.

1st Pacific Bank of California, San Diego, California, was closed by the California Department of Financial Institutions, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with City National Bank, Los Angeles, California, to assume all of the deposits of 1st Pacific Bank of California. As of March 31, 2010, 1st Pacific Bank of California had approximately $335.8 million in total assets and $291.2 million in total deposits. City National Bank will pay the FDIC a premium of 1.62% to assume all of the deposits of 1st Pacific Bank of California. In addition to assuming all of the deposits of the failed bank, City National Bank agreed to purchase essentially all of the assets. The FDIC estimates that the cost to the DIF will be $87.7 million. 1st Pacific Bank of California is the 68th FDIC-insured institution to fail in the nation this year, and the fifth in California.

Congress created the Federal Deposit Insurance Corporation (FDIC) in 1933 to restore public confidence in the nation’s banking system. The FDIC insures deposits at the nation’s 8,012 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. When a bank fails, the FDIC reimburses customers for their deposits of up to $250,000 per account. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.

Bank FAILURES TOP 64 for the year. Another 7 Banks FAIL last week.

7 more banks failed last week bringing the total number of US Bank FAILURES to 64 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. Three banks were located in Puerto Rico, Two in Missouri, one in Michigan and One in Washington. These 7 institutions had a total asset value of $25.6 Billion and will cost the FDIC’s Deposit Insurance Fund over $7.3 Billion. The following banks acquired the assets of these failed institutions: Union Bank National Association headquartered in San Francisco, CA, Community First Bank headquartered in Butler, MO; BankLiberty headquartered in Liberty, MO; First Michigan Bank headquartered in Troy, MI; Banco Popular de Puerto Rico located in Hato Rey, PR;  Scotiabank de Puerto Rico located in San Juan, PR and  Oriental Bank and Trust located in San Juan, PR. Read a Zacks Equity Research article listed below for additional information.

———————————————————————————————————-

On Friday, seven more banks were shuttered by U.S. regulators. Out of the seven failed banks, three were in Puerto Rico, two in Missouri and one each in Michigan and Washington. This brings the total number of bank failures to 64 so far in 2010, compared to 140 in 2009, 25 in 2008 and 3 in 2007.

Although the economy is showing signs of a gradual recovery with large financial institutions stabilizing, tumbling home prices, soaring loan defaults and rising unemployment continue to take their toll on small banks.

While we expect the economic recovery to gain momentum soon, there remain lingering concerns in the banking industry. Failure of both residential and commercial real estate loans as a result of the credit crisis has primarily hurt banks. As the industry tolerates bad loans made during the credit explosion, the trouble in the banking system goes even deeper, increasing the possibility of more bank failures. The failed banks are:

San Juan, Puerto Rico-based Eurobank, with total assets of $2.56 billion and deposits of $1.97 billion.

Hato Rey, Puerto Rico-based R-G Premier Bank, with $5.92 billion in total assets and $4.25 billion in total deposits.

Mayaguez, Puerto Rico-based Westernbank, with total assets of $11.94 billion and deposits of $8.62 billion.

Port Huron, Michigan-based CF Bancorp, with assets of $1.65 billion and total deposits of $1.43 billion.

Creve Coeur, Missouri-based Champion Bank, with total assets of $187.3 million and deposits of $153.8 million.

BC National Banks of Butler, Missouri, with $67.2 million in total assets and $54.9 million in total deposits.

Everett, Washington-based Frontier Bank, with $3.5 billion in total assets and $3.1 billion in total deposits.

These bank failures will deal another blow to the Federal Deposit Insurance Corporation’s (FDIC) fund meant for protecting customer accounts, as it has been appointed receiver for these banks.  When a bank fails, FDIC reimburses customers for their deposits of up to $250,000 per account. The outbreak of bank failures has significantly stretched the regulator’s deposit insurance fund.

However, the FDIC has about $66 billion in cash and securities available in reserve to cover losses arising from bank failures. Also, the FDIC has access to the Treasury Department’s credit line of up to $500 billion.

The seven failed banks together would cost the FDIC’s Deposit Insurance Fund about $7.3 Billion.

Eurobank is expected to cost the deposit insurance fund about $743.9 million, R-G Premier Bank will cost about $1.2 billion, Westernbank will cost about $3.3 billion, CF Bancorp will cost about $615.3 million, Champion Bank will cost about $52.7 million, BC National Banks will cost about $11.4 million and Frontier Bank will cost around $1.4 billion.

San Juan, Puerto Rico-based Oriental Bank and Trust will assume all the assets and deposits of Eurobank.

San Juan, Puerto Rico-based Scotiabank de Puerto Rico agreed to buy all the assets and deposits of R-G Premier Bank

San Juan, Puerto Rico-based Banco Popular de Puerto Rico agreed to acquire Westernbank’s deposits and assets.

Troy, Michigan-based First Michigan Bank will assume all the assets and deposits of CF Bancorp.

Liberty, MO-based Missouri BankLiberty has agreed to acquire the deposits and assets of Champion Bank.

Butler, Missouri-based Community First Bank will acquire all the assets and deposits of BC National Banks.

San Francisco-based Union Bank will assume the assets and deposits of Frontier Bank.

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. This is the highest 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 about $100 billion over the next three years.

We expect loan losses on the commercial real estate portfolio to remain high for banks that hold large amounts of high-risk loans.