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Bank Beat—Which comes First: Eggs or Chickens?


The 15 banks failures this year add up to $2.34 billion to the FDIC Deposit Insurance Fund; this week, $1.8 billion, $531.7 million last week. There also are loss shares, and it should be pointed out these are estimated loses, as often there are other expenses in liquidation as well as liens by local and state governments as well as federal liens that become known and by law need to be recognized.

Lessening of banking regulations or curbing the growth of larger banks is not going to get the many banks lending again as they first have to recover, guard their equity and get a hold of their losses, and be very careful of lending as the margins are not there to make any further mistakes.

Answering the question of which comes first, the eggs or the chickens:
It’s the chickens!!! Look to lending to remain tight, and the five bank failures below explain in best:

Becoming the most costly bank to the FDIC to close this year ($825.5 million the estimate to the Deposit Insurance Fund) were the eight branches of First Regional Bank, Los Angeles. Founded December 31, 1979 as Great American Bank by Jack Sweeney. The bank, which changed its name in 1987, eventually became one of the 10 largest in Los Angeles, with assets approaching $2.5 billion and 283 full time employees. They were closed by the California Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First-Citizens Bank & Trust Company, Raleigh, North Carolina, to assume all of the deposits of First Regional Bank.

Nasdaq halted trading of First Regional’s shares, which had fallen from $34 to 65 cents over the last three years.

As of September 30, 2009, First Regional Bank had approximately $2.18 billion in total assets and $1.87 billion in total deposits. Bank equity had gone from $233.4 million in September 30, 2008 to $131.2 million September 30, 2009; loss of $7.2 million to a loss of $110.5 million after a charge off of $112.6 million. Net operating income was a minus $110.5 million. Tier 1 risk-based capital ratio: 6.19%

http://www.fdic.gov/news/news/press/2010/pr10026.html
 

Community Bank and Trust, Cornelia, Georgia, was closed last Friday by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with SCBT, N.A., Orangeburg, South Carolina, to assume all of the deposits of Community Bank and Trust.

The banks 36 branches, mostly inside grocers and Wal-Marts, last year had 49 full time employees, but was down to 38 full time employees by of September 30, 2009, with $1.21 billion in total assets and $1.11 billion in total deposits.

Atlanta.bizjournals.com reported "Community Bank & Trust operated more than 20 branches inside grocers and Wal-Marts, and the banking company is the first with such a heavy dependence on retail store branches to fail in Georgia, though analysts say that is not likely a contributing cause to failure.

"Community Bank & Trust, like many failed and struggling Georgia lenders, overextended on residential development loans."

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $354.5 million.

http://www.fdic.gov/news/news/press/2010/pr10025.html

 

First National Bank of Georgia, Carrollton, Georgia, founded September 16, 1946 with 11 branches was closed with Community & Southern Bank, Carrollton, Georgia, a newly chartered institution, to assume all of the deposits. The investment group led by Patrick Frawley, former bank regulator from the Office of the Comptroller of Currency who turned around one bank, Blountsville, Ala.-based Community Bank. in 2002, but lost Integrity Bank, which ultimately failed in August 2008. The key will be to raising capital and keeping it positive. In George, this will be very difficult in 2010. Look for more bank failures here.

As of September 30, 2009, First National Bank of Georgia had approximately $832.6 million in total assets and $757.9 million in total deposits. Community & Southern Bank will pay the FDIC a premium of 1.25 percent to assume all of the deposits of First National Bank of Georgia. In addition to assuming all of the deposits of the failed bank, Community & Southern Bank agreed to purchase essentially all of the assets.

The bank had gone from 266 full-time employees in September 30, 2008 to 206 in September 30, 2009 net equity $96.6 million to $14 million; losing $2.8 million to the September 30, 2009 loss of $53.6. Tier 1 risk-based capital ratio: 1.50%.

The FDIC and Community & Southern Bank entered into a loss-share transaction on $607.4 million of First National Bank of Georgia's assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $260.4 million

http://www.fdic.gov/news/news/press/2010/pr10022.html

The 11 branches of Florida Community Bank, Cornelia, Georgia were closed and the FDIC arranged for Premier American Bank, National Association, Miami, Florida to assume all deposits.

As of September 30, 2009, Florida Community Bank had approximately $875.5 million in total assets and $795.5 million in total deposits. Premier American Bank, N.A. will pay the FDIC a premium of 0.4 percent to assume all of the deposits of Florida Community Bank. In addition to assuming all of the deposits of the failed bank, Premier American Bank, N.A. agreed to purchase approximately $499.1 million of the failed bank’s assets.

Founded July 7, 1923 with full time employees dropped from 185 September 30, 2008 to 158 September 30, 2009; net equity $94 million to $21.1 million; a loss of $24.1 million to a loss of $29.6 million with a Tier 1 risk-based capital ratio: 3.28%

In an article that appears in the February, 2010 edition of US Banker, "Community Bank of Florida bad debts double:"

"The availability of cheap money in the early- and mid-2000s fueled an explosion in building activity, real estate prices ballooned, and speculators descended. 'Suddenly you had the New York X-ray technician who wanted to buy five condos like his buddy did and flip them for a profit,' says Alex Sanchez, CEO of the Florida Bankers Association. 'When the music stopped, he got caught without a chair.'

"Locals caught the fever, too. Bill Valenti, CEO of the $340 million-asset Florida Gulf Bancorp in Fort Myers, recalls an otherwise sane customer visiting his office in 2006 seeking a $1 million credit line to buy lots in a high-end subdivision. 'He was going to pay $72,000 for each lot and flip them to out-of-state investors,' says Valenti, who passed on the credit line. 'Today, those lots are selling for less than $10,000'."

http://www.bizjournals.com/southflorida/stories/2009/08/03/daily2.html

The FDIC and Premier American Bank, N.A. entered into a loss-share transaction on $305.4 million of Florida Community Bank's assets. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $352.6 million

http://www.fdic.gov/news/news/press/2010/pr10023.html

 

American Marine Bank, Bainbridge Island, Washington was closed Friday with Columbia State Bank, Tacoma, Washington, to assume all of the deposits. Founded September 17, 1948, the bank had 11 branches with 120 full time employees. As of September 30, 2009, American Marine Bank had approximately $373.2 million in total assets and $308.5 million in total deposits. Columbia State Bank will pay the FDIC a premium of 1.0 percent to assume all of the deposits of American Marine Bank. The FDIC and Columbia State Bank entered into a loss-share transaction on $255.1 million of American Marine Bank's assets.

Net equity had dropped from $33 million September 30, 2008 to $14.37 million September 30, 2009. Previous year time period showed a profit of $1.3 million but September 30, 2009 a $19 million loss after a $16.1 million charge off. Net operating income was a minus $20.3 million; Tier 1 risk-based capital ratio: 5.13%

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $58.9 million.

Here is the Full story:
http://www.kitsapsun.com/news/2010/jan/29/regulators-shut-down-bainbridge-islands-american-m/
 

http://www.fdic.gov/news/news/press/2010/pr10027.html


 

Marshall Bank, National Association, Hallock, Minnesota, 14 full time employees founded October 4, 1943 with three branches closed Friday with United Valley Bank, Cavalier, North Dakota, to assume all of the deposits. Bank equity had gone from $11.4 million September 30, 2008 to $4.3 million September 30, 2009; a loss of $1.8 million September 30, 2008 to a loss of $3.79 million September 30, 2009 after a charge off of $4.8 million. Tier 1 risk-based capital ratio: 4.27%.

In 2003 Northwestern State Bank, Hallock, Minnesota, became a national bank with the title of "Marshall Bank, National Association" and proposed a branch office in Minneapolis, Minnesota. It was active in “Agricultural Specialization,” according to the FDIC filing, with offices in Hallock, Kennedy and Lancaster. They had on their September 30, 2009 balance sheet $1.73 million in real estate construction and land development loans, with zero secured by farmland. In addition, they had gone done from $1.89 million September 30, 2008 to $487,000 in real estate secured by nonresidential properties.

As of September 30, 2009, Marshall Bank, N.A. had approximately $59.9 million in total assets and $54.7 million in total deposits. United Valley Bank will pay the FDIC a premium of 7.35 percent to assume all of the deposits of Marshall Bank, N.A.

The FDIC and United Valley Bank entered into a loss-share transaction on $23.9 million of Marshall Bank, N.A.'s assets. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $4.1 million.

http://www.fdic.gov/news/news/press/2010/pr10024.html
 

List of Bank Failures
http://www.fdic.gov/bank/individual/failed/banklist.html
 

Previous Bank Beat columns:
http://www.leasingnews.org/Conscious-Top%20Stories/Bank_Beat.htm

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