Financial Controls: Bank Failure Friday: FDIC Seizes 2 Banks (Charts) *2011 Totals: Failures 25, Cost $1.81 Billion*

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2010 bank failures were 157, 2009 bank failures were 140

Bank Failure Friday: FDIC Seizes 2 Banks

The FDIC closed 2 banks, in Oklahoma and Wisconsin, on Friday, March 11, 2011 to increase the 2011 total bank failures to 25. 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, California 3, Colorado 2, Florida 2, Georgia 6, Illinois 2, Michigan 1, New Mexico 1, North Carolina 1, Oklahoma 2, South Carolina 1, Wisconsin 3.

Total assets of the 2 closed banks were $280.6 million, based on the December 31, 2010 call reports (regulatory financial statements). Overall, the 2 banks were small community banks with total assets less than $500 million. Both the closed banks were merged via a purchase and assumption agreements. The FDIC retained some of the assets of both banks for later disposition. The estimated cost to the FDIC Deposit Insurance Fund for the 2011 bank closures year-to-date is $1.81 billion. (See chart below).

#24 The First National Bank of Davis, Davis, OK
* The Pauls Valley National Bank, Pauls Valley, Oklahoma, to assume all of the deposits
* As of December 31, 2010, The First National Bank of Davis had approximately $90.2 million
* Pauls Valley National Bank agreed to purchase approximately $28.5 million of the assets
* FDIC will retain the remaining assets for later disposition
* FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $26.5 million

#25 Legacy Bank, Milwaukee, WI
* Seaway Bank and Trust Company, Chicago, Illinois, to assume all of the deposits
* As of December 31, 2010, Legacy Bank had approximately $190.4 million in total assets
* Seaway Bank and Trust Company agreed to purchase approximately $165.9 million of the assets
* FDIC will retain the remaining assets for later disposition
* FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $43.5 million

The next FDIC bank closings, if any, will most likely be announced on Friday, March 18.

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. 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

2004: 4

2005: 0

2006: 0

2007: 3

2008: 25

2009: 140

2010: 157

2011: 25 actual, 130 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 Year

The FDIC problem bank list continues to rise, actually skyrocket, although the total assets of these banks has leveled off. Now at 12/31/2010 the total is an astronomical 884. The total assets of the problem banks from the year-ends 2004 through 2009 were $28B, $7B, $8B, $22B, $159B, and $403B, respectively. The total assets of the current (12/31/2010) 884 problem banks is $390B, indicating most of these are small to medium community banks.

Date, Total Problem Banks

12/31/2004: 80

12/31/2005: 52

12/31/2006: 50

12/31/2007: 76

12/31/2008: 252

12/31/2009: 702

12/31/2010: 884