Friday, February 13, 2009

Bank Failure Friday – A Quadruple, Making 13 Total on Friday the 13th!

It was a four fer Friday…
Bank failures: 13 in 2009

Closures in Nebraska, Florida, Illinois and Oregon bring the number of bank failures to 13 this year as the financial crisis continues to roll.

By Kenneth Musante, staff writer

NEW YORK ( -- Four banks folded Friday, bringing the total number of banks to fail this year to 13.

Deposits at Sherman County Bank, based in Loup City, Neb., the first bank in the state to fail since 1990, will be taken over by Heritage Bank, based in Wood River, Neb., according to the Federal Deposit Insurance Corporation.

Meanwhile, accounts held by Riverside Bank of the Gulf Coast based in Cape Coral, Fla., will be assumed by TIB Bank based in Naples, Fla., the FDIC said. It is the second bank to fail in Florida this year and the fourth to go under in that state since the economic crisis unfurled.

Corn Belt Bank and Trust Company, based in Pittsfield, Ill., the third bank to fail in the state since January 2008, was also shuttered by state regulators, and its deposits were turned over to The Carlinville National Bank out of Carlinville, Ill.

Pinnacle Bank, Beaverton, Oregon, was closed by the Oregon Division of Finance and Corporate Securities. The FDIC entered into an agreement with Washington Trust Bank, Spokane, Washington, to assume all of the deposits of Pinnacle Bank.

Customers who banked with Sherman County Bank, Riverside, Corn Belt Bank, or Pinnacle Bank will automatically become customers of the new owners, and will retain their account protection under the FDIC, which insures single accounts up to $250,000, and joint accounts up to $500,000, the government agency said.

Due to the Presidents Day holiday on Monday, Sherman County Bank's four branches, Riverside's nine branches, and Corn Belt Bank's two, will reopen on Tuesday as branches of the new deposit holders, the agency said.

Over the three-day weekend, those customers will be able to use checks, ATMs and debit cards as normal. Customers who have taken out loans from a failed bank should continue to make regular payments, the FDIC said.

Sherman County Bank held assets worth about $129.8 million, and held deposits worth about $85.1 million, as of Feb. 12, the FDIC said. Heritage Bank has agreed to purchase about $21.8 million of Sherman County Bank's assets.

Riverside Bank held assets worth about $539 million, and held deposits worth about $424 million, as of December last year, the FDIC said. TIB Bank will not assume $142.6 million worth of brokered deposits held by Riverside Bank, but agreed to buy $125 million of Riverside's assets.

Corn Belt Bank carried assets worth about $271.8 million, with deposits of $234.4 million, according to the agency. Carlinville National will not take on $92 million of Corn Belt's brokered deposits, but would buy $60.7 million of Corn Belt's assets, the FDIC said.

Pinnacle Bank had total assets of approximately $73 million and total deposits of $64 million. In addition to assuming all of the deposits of the failed bank, including those from brokers, Washington Trust Bank agreed to purchase approximately $72 million in assets at a discount of $7.6 million, the FDIC announced late Friday.

Altogether, the bank failures announced Friday will cost the FDIC about $341.6 million.

The unfolding financial crisis continues to take a toll on banks. If banks continue to fail at a rate of at least one per week, on average, then 2009 could see twice as many failures as in 2008. Last year, 25 banks were closed nationwide, which was the highest annual total since 1993, when 42 banks went under.

Economists expect the number of failed banks to continue rising this year, as the financial crisis plays out and the economic outlook remains dark.
Now the FDIC has a snowball that’s growing larger and larger on their hands. Anybody else see where this is heading?
Disposing of Assets of Failed Banks Tests F.D.I.C.


Published: February 13, 2009

WASHINGTON — When regulators took over the First National Bank of Nevada last year, they faced a showdown with the Terrible Herbst, the mustachioed cowboy who boasts of being the “best bad man in the West.”

This was no real gunslinger, but the name and logo of a chain of gas stations and convenience stores in Nevada that feature slot machines next to candy and beer.

The family-owned Herbst chain, auditors at the Federal Deposit Insurance Corporation concluded, did not generate enough sales at its Reno-area gas stations to support the repayment of a loan, leaving auditors with three bad choices: Move to take over those stations and put the government in the gambling business. Cut off any flow of additional loan money. Or sell the loan at a steep loss.

The F.D.I.C. faces tough choices like this every day as it struggles to manage $15 billion worth of loans and property left from failed banks. If still-to-be-sold assets from IndyMac Bancorp of California, whose demise last year was the fourth-largest bank failure, are included, the number jumps to $40 billion.

The F.D.I.C. inherited the collection of loans and property after the failure of 25 banks in 2008, compared to just three in 2007. Thirteen more have failed this year, including four on Friday night, and no one doubts that more are on the way.

The F.D.I.C., which insures bank deposits and ultimately has responsibility for liquidating failed banks, is selling hundreds of millions of dollars worth of loans through eBay-like auction sites.

DebtX of Boston and First Financial Network of Oklahoma City, for instance, sell loans at auction to investors who typically pay 5 cents to 85 cents for each dollar of outstanding principal, according to Bliss A, Morris, First Financial’s president. It is unloading hundreds of houses across the country at bargain basement prices.

In November, Lula Smith, 86, of Kansas City, Mo., bought a two-bedroom house across the street from her home for $4,000, one-tenth of its value two years ago.

“I am real satisfied with that price, yes sir,” she said, adding that after about $1,000 in additional costs to repair the house, and some new carpet, her son and daughter-in-law will move in. “It was a nice little deal, indeed.”

And — in the most closely watched tactic — the F.D.I.C. is negotiating a series of billion-dollar deals with private equity partners who will take over huge batches of loans in exchange for a chunk of the sale proceeds.

Even as the solutions to the financial crisis are debated in Congress and among economists, the F.D.I.C., one of the agencies that deals most closely with the nation’s banks, has already been transformed.

The rising tide of foreclosed real estate is so overwhelming that the agency, which had shrunk to a relatively tiny 4,800 employees from as many as 15,000 in the last period of bank meltdowns in the 1990s, is in the midst of a military-scale buildup as it undertakes one of the greatest fire sales of all time.

The agency is frantically calling in retirees and holding job fairs, looking to hire as many as 1,500 people. It has rented a high-rise office building in Irvine, Calif., the new headquarters for a West Coast branch of 450 employees who are wrestling with a real estate crisis in one of the hardest-hit regions. It is also budgeted to pay hundreds of millions of dollars for a small army of contractors to augment its staff. “We are trying to be ready for the inevitable,” said Mitchell L. Glassman, director of the F.D.I.C.’s division of resolutions and receiverships.
Perhaps a moment of silence is fitting for the fallen? Or should we just place “naked” bets on the number of bank failures there will be this year?

Well, we got tired of “Another one Bites the Dust” and last week we had “Dust in the Wind,” perhaps it’s time for these banks and their fiat money to “Ride Across the River to the Other Side?”

Dire Straits – Ride Across the River: