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)
