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Regulators Close 3 Banks in Florida & Colorado

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Regulators Close 3 Banks in Florida & Colorado

Three banks were closed by regulators this Friday. There was also a credit union that was placed into conservatorship. The three failed banks bring the total number of 2011 bank failures to 58. Two of the failed banks were in Florida which brings Florida's 2011 number of bank failures to 9. For the year, Florida is still far behind Georgia's 16 failures. The other bank closure was in Colorado which brings the 2011 Colorado bank closures to 5.

Both of the failed Florida banks were small. The largest one only had assets of $275 million in assets. However, the failed bank in Colorado, Bank of Choice, was quite a bit larger. With $1.07 billion in assets, it was one of the few failed banks this year with over $1 billion in assets. This Denver Business Journal has a good review of Bank of Choice and its problems. According to the article:

Like many other troubled Colorado banks, Bank of Choice was hurt by the recession and subsequent downturn in the commercial real estate market.

The FDIC arranged for other banks to assume all deposits of the three failed banks. The only exception was Cede & Co. deposits at Bank of Choice.

For all three closures, the FDIC provided its typical line regarding future interest rates:

Interest on deposits accrued through close of business the day the bank was closed will be paid at your same rate. Current rates will be reviewed by the new bank and may be lowered; however, you may withdraw funds from any transferred account without early withdrawal penalty until you enter into a new deposit agreement.

Sometimes the banks provide more details about their plans for existing CDs of the failed banks they acquired. That's not the case for today's banks, at least as of Friday night.

Credit Union Conservatorship

The NCUA also had some action today in Colorado. The small Colorado credit union, Saguache County Credit Union, was placed into NCUA conservatorship. This is the 9th NCUA conservatorship for the year. Unlike the FDIC, the NCUA often places troubled credit unions into conservatorship. While in conservatorship, there's no loss in uninsured deposits. It's only in credit union liquidation that members risk losing their uninsured deposits. Of course, insured deposits are not at risk. During the conservatorship, if the NCUA can't resolve issues affecting the credit union's safety and soundness, they will often liquidate the credit union. So a conservatorship is a big red flag that members need to quickly get their deposits under the insured limits.

Below is a summary of this week's bank failures and credit union conservatorship:

56th Bank Failure of 2011 (8th in Florida)

  • FDIC Press Release
  • Closed Bank: Southshore Community Bank, Apollo Beach, FL
  • Size: 2 branches, $46.3 million in assets, $45.3 million in deposits
  • Acquiring Bank: American Momentum Bank, Tampa, FL
  • Possible Uninsured Deposits: all deposit accounts, including brokered deposits, have been assumed by American Momentum Bank
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $8.3 million
  • Enforcement Action: FDIC 3/4/10 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 332.73% at DepositAccounts.com (see financial rating note)
57th Bank Failure of 2011 (9th in Florida)

  • FDIC Press Release
  • Closed Bank: LandMark Bank of Florida, Sarasota, FL
  • Size: 6 branches, $275.0 million in assets, $246.7 million in deposits
  • Acquiring Bank: American Momentum Bank, Tampa, FL
  • Possible Uninsured Deposits: all deposit accounts, including brokered deposits, have been assumed by American Momentum Bank
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $34.4 million
  • Enforcement Action: Federal Reserve 11/5/09 Written Agreement, Federal Reserve 9/17/10 PCA
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 382.76% at DepositAccounts.com (see financial rating note)

58th Bank Failure of 2011 (5th in Colorado)

  • FDIC Press Release
  • Closed Bank: Bank of Choice, Greeley, CO
  • Size: 17 branches, $1.07 billion in assets, $924.9 million in deposits
  • Acquiring Bank: Bank Midwest, N.A., Kansas City, MO
  • Possible Uninsured Deposits: all deposit accounts, including brokered deposits, excluding the Cede & Co. deposits, have been assumed by Bank Midwest, N.A.
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $213.6 million
  • Enforcement Action: FDIC 5/6/10 Consent Order, FDIC 3/14/11 PCA
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 245.14% at DepositAccounts.com (see financial rating note)
9th Credit Union Conservatorship of 2011 (July 22)
  • NCUA Press Release
  • CU placed into conservatorship: Saguache County Credit Union, Moffat, CO
  • Size: $17.7 million in assets and served 3,165 members
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 stars & Texas Ratio of 189.97% at DepositAccounts.com (see note)

Financial Ratings Notes: 0 star is lowest at BauerFinancial, 1 star is lowest at Bankrate.com & DepositAccounts.com, Texas Ratios over 100% is considered at risk. Ratings are based on March 2011 data.

References:



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Comments
5 Comments.
Comment #1 by Anonymous posted on
Anonymous
When a bank acquires another bank, they acquire also some toxic asset held by the previous bank and in no time the good bank’s assets become toxic and after few years down the road they will be up either for sale or closure and the down cycle repeats itself .

7
Comment #2 by Anonymous posted on
Anonymous
To #1 - um, no. Most bank closures today are handled under a loss-share system where the FDIC absorbs a large portion of the losses from bad assets. The FDIC generally won't let an acquiring bank close an acquisition unless they have financial strength to be able to absorb their share of expected losses under the loss-share agreements.

1
Comment #3 by Anonymous posted on
Anonymous
To #2,

You wrote: “The FDIC generally won't let an acquiring bank close an acquisition unless they have financial strength to be able to absorb their share of expected losses under the loss-share agreements.”
You contradict yourself by attaching #1, but you answer your own doubt that #1 is correct by stating that the new bank will absorb the present or future losses acquired from the closed bank.
When a bank acquires a failed bank with bad debt, they will certainly be affected by it. Most of the bad debt is not shown immediately and is hidden into future bad assets that will pop up when the collation or re-financing fails,

5
Comment #4 by Anonymous posted on
Anonymous
to #3 - I was taking issue with #1's assertion that "after few years down the road they will be up either for sale or closure and the down cycle repeats itself". This is not necessarily true. As I said, the FDIC won't let just anyone buy a failing bank - it's got to be a bank that is strong enough to absorb the expected losses without putting itself in jeopardy of failing again. Assuming the FDIC does its job properly, #1 is wrong. The issue may arise only if the expected losses turn out to be a lot higher than projected.

3
Comment #5 by Anonymous posted on
Anonymous
To #4,
What agency in USA does its job properly........none as far as I know,.....therefore, #1 is closer to the truth then you are.
FDIC just want to take it of the books and push it on someone else’s back.
Chase just discovered billions of new bad debt inherited from WAMU, Wells Fargo discovered $8 billions hidden debt from Wachovia never shown on the books and so on.....

5