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Friday, August 26, 2011

Bank Failure Friday: No FDIC Seizures This Week! (Charts) *2011 Totals: Failures 68, Cost $5.7 Billion*

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2010 bank failures were 157 and 2009 bank failures were 140


The FDIC did not close any banks on Friday, August 26, 2011. Total bank failures for 2011 remain at 68. This was the 8th week of the 34 weeks in 2011 that the FDIC has not seized at least 1 bank.  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: Alabama 2, Arizona 2, California 3, Colorado 5, Florida 10Georgia 17, Illinois 7, Indiana 1, Kansas 1, Michigan 2, Minnesota 1, Mississippi 1, Nevada 1, New Mexico 1, North Carolina 1, Oklahoma 2, Pennsylvania 1, South Carolina 3, Virginia 1, Washington 3, Wisconsin 3.

FDIC Losses The total estimated cost to the FDIC Deposit Insurance Fund for the 2011 bank closures year-to-date is $5.71 billion (see chart below). The mostly costly banks to the Deposit Insurance Fund in 2011 year-to-date:
1) The Park Avenue Bank, Valdosta, GA $306.1 million
2) Lydian Private Bank, Palm Beach, FL $293.2 million
3) Chicago Bank and Trust, Chicago, IL $284.3 million
4) Colorado Capital Bank, Castle Rock, CO $283.8 million
5) Atlantic Southern Bank, Macon, GA $273.5 million
6) First Community Bank, Taos, NM $260.0 million
7) Superior Bank, Birmingham, AL $259.6 million
8) FirsTier Bank, Louisville, Ky $242.6 million
9) Bank of Choice, Greeley, CO $213.6 million
10) Community Central Bank, Mount Clemens, MI $183.2 million
11) Integra Bank N.A., Evansville, IN $170.7 million

The next FDIC bank closings, if any, will most likely be announced on Friday, September 2.

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 data from 2004 through 2010. Bank failures for 2011 are estimated by extrapolating 2011 actual closures based on a 52-week year.
Year, Total Bank Failures
2004: 4
2005: 0
2006: 0
2007: 3
2008: 25
2009: 140
2010: 157
2011: 68 actual, 104 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 direct 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 Quarter The FDIC problem bank list dipped slightly from 888 at 3-31-11 to 865 at 6-30-11. The total problem banks remain elevated. The total assets of the problem banks from the year-ends 2004 through 2010 were $28B, $7B, $8B, $22B, $159B, $403B, $390B, respectively. The total assets of the current (6/30/2011) 865 problem banks is $372B, or an average of $430 million in total assets per problem bank. The FDIC reports the total problem banks on a quarterly basis.
Date, Total Problem Banks
12/31/2005: 52
12/31/2006: 50
12/31/2007: 76
12/31/2008: 252
12/31/2009: 702
12/31/2010: 884
6/30/11: 865



About the FDIC
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 7,575 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.


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Wednesday, August 24, 2011

FDIC Deposit Insurance Fund Balance Turns Positive (Chart) *Previously negative for 7 quarters*

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FDIC Quarterly Banking Profile


DIF Balance Turns Positive (FDIC, August 23, 2011) The condition of the Deposit Insurance Fund (DIF) continues to improve. The DIF increased by $4.9 billion during the second quarter of 2011 to $3.9 billion (unaudited), the sixth consecutive quarterly increase. This is the first positive quarter-end balance since June 30, 2009. Assessment income of $3.2 billion and a $2.1 billion negative provision for insurance losses were the primary contributors to the improvement in the DIF balance. Interest earnings, combined with unrealized gains on available-for-sale securities and other net revenue, increased the fund by another $144 million. Operating expenses reduced the fund balance by $463 million.

FDIC Deposit Insurance Fund The FDIC Deposit Insurance Fund balance was +$3.92 billion at the quarter ending 6-30-11. This is the first positive balance since the QE 6-30-09 (+$10.37 billion) and after 7 consecutive negative quarters. The peak balance was +$52.84 billion at QE 3-31-08. This was before the 2008 USA financial system crisis and Great Recession. The low balance was -$20.86 billion at the QE 12-31-09. The Provision for Insurance Losses (PIL), the cost of seizing and liquidating failed banks, was -$2.1 billion, a negative expense, at the QE 6-30-11 and has been negative 4 of the past 5 quarters. The PIL peaked at +$21.69 billion for the QE 9-30-09. Prior to the QE 3-31-08, the PIL was an immaterial amount, positive or negative, of less than $100 million.



Conclusion The FDIC Deposit Insurance Fund (DIF) balance and related Provision for Insurance Losses (PIL) indicate continued improvement through the three months ended June 30, 2011. The DIF balance has turned positive after 7 consecutive quarters with a negative balance. The PIL has been negative, a negative expense, 4 of the past 5 quarters. The PIL is increased, and therefore the DIF decreased, as a result of bank failures and the resulting costs of seizure and liquidation. However, the FDIC problem bank list remains extremely high which indicates ongoing bank failures and DIF costs. Bank failures and the related charts of total failures and cost to the FDIC Deposit Insurance Fund are posted weekly on this blog.


About the FDIC

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 7,575 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.


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Neo Solomon
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