Friday, January 21, 2011

Bank Failure Friday: FDIC Seizes 4 Banks (Charts) *2011 YTD: Failures 7, Cost $641 million*

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2010 bank failures were 157, 2009 bank failures were 140

Bank Failure Friday: FDIC Seized 4 Banks

The FDIC closed 4 banks on Friday, January 21, 2011 to increase the 2011 total to 7. Annual charts of USA bank seizures, FDIC Deposit Insurance Fund Cost for Failed Banks, and the FDIC problem bank list are below. States where banks have been closed in 2011 are: Arizona 1, Colorado 1, Florida 1, Georgia 2, North Carolina 1, South Carolina 1.

Total assets of the 4 closed banks were $2,786,600,000 ($2.7866 billion), based on the September 30, 2010 call report (regulatory financial statements). All but Enterprise Banking Company were merged via purchase and assumption agreements into other banks. The FDIC took direct control of Enterprise Banking Company.

Overall, United Western Bank was by far the largest with $2.05B in total assets. CommunitySouth Bank was next largest, a mid-sized community bank, with $440.6M in total assets. Enterprise Bank ($100.9M) and The Bank of Asheville ($195.1M) were small community banks.

The estimated cost to the FDIC Deposit Insurance Fund for the 4 bank closures this week was $454.9 million. The 2011 YTD total cost is now $641.2 million. (See chart below).

#4 Enterprise Banking Company, McDonough, GA
* No other bank assumed the deposits
* FDIC created the Deposit Insurance National Bank of McDonough (DINB), which will remain open until January 28, 2011, to allow depositors access to their insured deposits and time to open accounts at other insured institutions.
* As of September 30, 2010, Enterprise Banking Company had $100.9 million in total assets
* The FDIC as receiver will retain all the assets from Enterprise Banking Company for later disposition
* The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $39.6 million

#5 CommunitySouth Bank and Trust, Easley, SC
* CertusBank, National Association, Easley, South Carolina, to assume all of the deposits
* As of September 30, 2010, CommunitySouth Bank and Trust had approximately $440.6 million in total assets
* CertusBank, N.A. agreed to purchase essentially all of the assets.
* The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $46.3 million.

#6 The Bank of Asheville, Asheville, NC
* First Bank, Troy, North Carolina, to assume all of the deposits
* As of September 30, 2010, The Bank of Asheville had approximately $195.1 million in total assets
* First Bank agreed to purchase essentially all of the assets.
* The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $56.2 million.

#7 United Western Bank, Denver, CO
* First-Citizens Bank & Trust Company, Raleigh, North Carolina
* As of September 30, 2010, United Western Bank had approximately $2.05 billion in total assets
* First-Citizens Bank & Trust Company agreed to purchase essentially all of the assets.
* The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $312.8 million

The next FDIC bank closings, if any, will most likely be announced on Friday, January 28. There will probably be several seizures in January after the halt for the Christmas and New Year's holidays. However, the 7 FDIC closures so far in 2011 are slightly lower than we expected.

USA Failed Banks by Year

Bank failures and therefore FDIC seizure of banks, dramatically increased in 2009 and 2010 - a 2-year total of 297 compared to 0 in both 2005 and 2006. As noted below regarding total problem banks, bank failures in 2011 are expected to continue at a high rate and be 100+. The chart below is the actual data from 2005 through 2010. Bank failures for 2011 are estimated by extrapolating 2011 actual closures based on a 52-week year. Actual 2011 bank failures will be included on the chart later this year as the closures accumulate to a higher level.
Year, Total Bank Failures
2005: 0
2006: 0
2007: 3
2008: 25
2009: 140
2010: 157
2011: 7 actual, 121 estimated

FDIC Deposit Insurance Fund Cost of Failed Banks

Failed banks and the seizure by the FDIC cost money. The seized banks' deposits are usually assumed by another bank as are most of the assets. However, not all assets of the failed bank have value (usually the worst performing loans, non-performing loans, repossessions, and foreclosures). The FDIC may enter into a loss-share agreement with another bank to manage the questionable assets or take possession of the assets and attempt to dispose of them. Upon seizure of a bank, the FDIC estimates the loss to the Deposit Insurance Fund. The Deposit Insurance Fund is normally funded by the banking community through FDIC assessments to each FDIC insured bank based on insured deposits, plus special assessments. Below is a chart of the estimates by the FDIC of costs (losses) incurred upon seizure of banks in 2011. The chart is by week for 2011 and shows the accumulated losses as the year goes along.

FDIC Problem Banks by Year

The FDIC problem bank list continues to rise, actually skyrocket, although the total assets of these banks has leveled off. From the year-ends 2005 through 2009, the total problem banks were 52, 50, 76, 252, and 702, respectively. Now at 9/30/2010 the total is an astronomical 860. The total assets of the problem banks from the year-ends 2005 through 2009 were $7B, $8B, $22B, $159B, and $403B, respectively. The total assets of the current (9/30/2010) 860 problem banks is $379B, indicating most of these are small to medium community banks. Chart data, from YE 2005 through the QE September 30, 2010, is:
Date, Total Problem Banks
12/31/2005: 52
12/31/2006: 50
12/31/2007: 76
12/31/2008: 252
12/31/2009: 702
9/30/2010: 860

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