More Community Banks Closed by FDIC
November 9th, 2009 Categories: Default News, Mortgage and Loans, Real Estate News, Real Estate Trends
FDIC has taken over 120 banks so far this year…
Came across this article in DSNews this morning and thought I’d re-post it…
Bank failures continue to mount, even as the U.S. economy is beginning to show signs of improvement. Regulators on Friday shut down five more institutions – in California, Georgia, Michigan, Minnesota, and Missouri.
These latest closures bring the total number of FDIC-insured failures to 120 for the year so far – the most in a single year since the savings & loan crisis of the last decade. By comparison, 25 U.S. banks were seized by officials in 2008, and only three went under in 2007.
On Friday evening, the FDIC stepped in to help shut down San Francisco-based United Commercial Bank (UCB), the largest institution to be closed last week, whose failure is expected to cost the agency and estimated $1.4 billion. Last year, the Treasury gave $299 million in Troubled Asset Relief Program (TARP) funds to UCB’s holding company. Based on the Department’s most recent TARP transaction report, UCBH Holdings, Inc. has not yet repaid any of the capital injection and it is unclear how the investment of taxpayer dollars will be affected by the collapse.
The FDIC facilitated a deal with East West Bancorp, Inc., the parent company of East West Bank in Pasadena, California, to acquire all the banking operations of UCB. Under the terms of the transaction, East West will receive $10.4 billion in assets, including $7.7 billion in loans, and assume $9.2 billion in liabilities, including $6.5 billion in deposits of UCB. The FDIC and East West have entered into a loss sharing agreement covering substantially all acquired loans.
East West’s presence is concentrated in California, but it also operates several banking offices in Greater China. The Shanghai, China, subsidiary of United Commercial (UCB-China), and a Hong Kong branch of UCB were also part of Friday’s transaction. According to East West, its acquisition of UCB creates the second largest independent bank headquartered in California and the largest bank in the United States focused on serving the Asian American community.
The San Francisco Business Times reported that UCB fell under the weight of its construction loan portfolio. Thomas Wu, UCB’s former chairman, president, and CEO who stepped down just two months ago, told the paper earlier this year, “We’ve been doing construction lending for 20 years, but we’ve never experienced anything like what we have in the last 12 months. It’s unprecedented.”
United Security Bank headquartered in Sparta, Georgia, was also closed Friday. Ameris Bank of Moultrie, Georgia agreed take over United Security’s $150 million in deposits, $157 million in assets, and its two branch offices, including the branch in Woodstock, Georgia that operated as the Bank of Woodstock. The failure is expected to cost the FDIC $58 million. With United Security, 21 Georgia banks have failed this year, more than in any other state.
Home Federal Savings Bank in Detroit, Michigan, was shut down by the Office of Thrift Supervision. The FDIC brokered a deal with Liberty Bank and Trust Company of New Orleans, Louisiana to acquire all of the $12.8 million in deposits of Home Federal Savings Bank, its $14.9 million in assets, and its two branches. The closure will cost the FDIC an estimated $5.4 million.
Prosperan Bank in Oakdale, Minnesota was also seized by regulators. In a deal facilitated by the FDIC, Alerus Financial, N.A. of Grand Forks, North Dakota agreed to take over operations of Prosperan’s three branches, as well as assume $175.6 million in deposits and purchase $173.9 million of the failed bank’s assets. The FDIC expects Prosperan’s collapse to cost its deposit insurance fund $60.1 million.
Gateway Bank of St. Louis in Missouri was taken over by Central Bank of Kansas City. Gateway Bank had only one branch office, total assets of $27.7 million, and total deposits of approximately $27.9 million. Gateway Bank’s failure is expected to cost the FDIC’s insurance fund $9.2 million.
Federal lawmakers last week chastised the nation’s banking regulators for coming down too hard on smaller community banks, such as those shut down last week.
As DSNews.com reported Thursday, House Financial Services Committee Chairman Barney Frank (D-Massachusetts) accused regulatory agencies of punishing the wrong institutions for the financial crisis. He called their stringent oversight of small community banks – which he says are trying to respond to the government’s call to resume lending – an “overreaction” that could easily exacerbate the credit crisis.
