Friday, January 16, 2009

Bank Failure Friday…

And so it goes… more bank failures after Paulson said no more. Albeit a relatively small one, I expect the number of bank failures to pick up this year over last as we are getting to the place in the downturn where companies that were hanging on hoping for a quick turn around will discover that there is no quick turn around in sight.
National Bank of Commerce in Illinois Seized by OCC

By Ari Levy

Jan. 16 (Bloomberg) -- National Bank of Commerce in Berkeley, Illinois, was seized by regulators, the first bank shut down in 2009, as a deepening recession and record foreclosures extend the housing slump into a third year.

National Commerce, with $430.9 million in assets and $402.1 million in deposits, was shut by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. was named receiver. Republic Bank of Chicago in Oak Brook, Illinois is assuming ownership of the failed bank’s two offices as of tomorrow, the FDIC said.

“Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their current deposit coverage,” the statement said.

Regulators closed 25 banks last year, the most since 1993, draining money from the FDIC deposit insurance fund, which had $34.6 billion as of Sept. 30. The FDIC last month approved a budget for the coming year that almost doubles spending to $2.2 billion from 2008 to hire staff for handling bank closures. As much as $1 billion was allotted to manage failed banks.

Republic Bank will assume all the deposits and buy $366.6 million in assets at a $44.9 million discount, with the FDIC holding the remaining assets for later disposition.
The FDIC today joined the Treasury Department and the Federal Reserve in announcing a $138 billion emergency lifeline to Bank of America Corp., the largest U.S. bank by assets, to support its acquisition of Merrill Lynch & Co. Citigroup Inc. today posted a fifth straight quarterly loss and announced plans to split in two.

Government’s Steps
The FDIC and OCC have taken steps to stem failures, such as allowing private-equity firms and other bidders to buy assets and deposits of lenders running out of cash. IndyMac Bank, the fourth-largest U.S. lender to fail last year, was the first institution sold to a private-equity investor, for $1.3 billion on Jan. 2. The sale was led by Steven Mnuchin of Dune Capital Management LP.

The FDIC oversees 8,384 institutions with $13.6 trillion in assets and insures as much as $250,000 per depositor per bank. The agency last month doubled premiums charged to banks for coverage to replenish its reserves amid agency forecasts that bank failures through 2013 will cost almost $40 billion.

The FDIC classified 171 banks as “problem” in the third quarter, a 46 percent jump from the second quarter, and said industry earnings fell 94 percent to $1.73 billion from the previous year. The agency doesn’t identify problem banks by name.

Washington Mutual Inc., formerly the biggest savings and loan, was seized Sept. 25 and its branch network sold to JPMorgan Chase & Co. after customers drained $16.7 billion in deposits in less than two weeks. Wachovia Corp., the sixth-biggest bank, was pushed by regulators into a sale and snapped up by Wells Fargo & Co. for $12.7 billion.

Queen – Another One Bites The Dust: