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.
Assuming that the banks that close had a sea of bad real estate debt (relative to their size) how is that reported in the following quarter I wonder. Most of the time a stronger regional bank takes the deposits but they don’t always have the burden of non-accrual at least not without FDIC participation. So what I wonder is, how then is the non-accrual reported in the future, or does it just disappear from quarterlies? The most recent reports show a 20%+ drop in residential construction non-accrual and I wonder if thats because it goes into an abyss or if it was actually processed.