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One Chicago Bank Closed by Regulators, FDIC Unable to Find Buyer

POSTED ON BY

New City Bank in Chicago was closed by regulators this Friday. This was the only bank failure of the day, and it raises the total number of 2012 failures to 13. Last year at this time there had been 25 bank failures.

This was another 2012 bank closure in which the FDIC wasn't able to find a buyer. It was only two weeks ago when Home Savings of America failed without a buyer. Unfortunately, these types of closures are becoming more common. For all of last year only two banks failed without buyers.

When the FDIC can't find a buyer, those with deposits over the FDIC limit may lose their uninsured deposits. According to the FDIC:

The amount of uninsured deposits will be determined once the FDIC obtains additional information from those customers.

For insured deposits, the FDIC will be mailing checks to the depositors. Those checks should include both the principal and accrued interest up to the day of closure.

Below is the summary of the bank failure.

13th Bank Failure of 2012 (2nd in Illinois)

  • Closed Bank: New City Bank, Chicago, IL
  • FDIC Press Release
  • Size: 1 branch, $71.2 million in assets and $72.4 million in deposits
  • Acquiring Bank: None
  • Possible Uninsured Deposits: The amount of uninsured deposits will be determined once the FDIC obtains additional information from those customers
  • Rate Changes: The FDIC will mail checks directly to depositors of New City Bank for the amount of their insured money
  • Estimated Cost to Deposit Insurance Fund: $17.4 million
  • Enforcement Action: FDIC 5/16/11 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 390.48% at DepositAccounts.com (see financial rating 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 at DepositAccounts.com and BauerFinancial are based on December 2011 data. Bankrate's ratings are based on September 2011 data.

References:


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Comments
5 comments.
Comment #1 by jujubee posted on
jujubee
I would bet that we start to see more of these types of closures. The FDIC has been working for years to find buyers for troubled banks, if they still haven't found a buyer by now, they are probably going to begin concluding there is no buyer and just close the banks that need to be closed.

2
Comment #2 by jujubee posted on
jujubee
Sorry, that wasn't the best wording. What I mean is, the troubled banks that any other bank wants have mostly already been bought. What's left now are the banks nobody wants, and if they need to be shut down they will be closed without a buyer.

3
Comment #3 by Ryan (anonymous) posted on
Ryan
I notice that in the info. above it states that the cost to the FDIC was 17.4 million dollars. 

I am wondering how the FDIC is funded.  Do banks, who obviously must participate, pay the bulk of the cost of the FDIC through premiums/fees charged to them?  Or does the US simply fund the FDIC through tax dollars?  Or some combination.   It would be interesting to know this info.  Perhaps I should start googling.

1
Comment #4 by OC Steve (anonymous) posted on
OC Steve
Many times I think acquiring banks look at the deposit branch locations, their real estate costs (owned or leased), staffing costs per branch, ability to retain low cost deposits over an extended period of time, branch overlap to their own existing branching system, expansion opportunities into new geographic territory, etc.

If the bank assets are generally high levels of troubled loans & REO's, an estimate needs to be made of the projected loss factors, compared to FDIC loss sharing agreement parameters, etc.  Many times- especially small institutions are just not worth the time or trouble of an acquisition.  Don't forghet there would be alot of legal costs involved and outside professional fees (auditors, collection lawsuites, etc.).  Only positive projected rate of return projects would go forward.

Just my two cents of observations over the years.


 

5
Comment #5 by Apache posted on
Apache
Ryan:  From what I have been told, the banks each have to pay for the FDIC insurance for their depositors.  That is why they refuse to pay us higher interest rates unless they can back them up with loans with higher rates.   The FDIC insurance is supposedly free to us but not to the banks.

5