Friday, July 23, 2010

This Week in Bank Failures

Once deposit insurance limits were raised to $250,000 per depositor on an emergency basis, it was going to be hard to walk them back to the prior limits of $100,000. The reduced insurance would have led jittery depositors to shift their deposits around, likely leading to dozens of additional bank failures, and possibly sparking runs on some banks. That is not a scenario bank regulators have to plan for now, as the new Wall Street reform law makes the new higher deposit insurance limits permanent.

The number of bank failures passed 100 for the year tonight, keeping a pace similar to last year. The financial condition of the failed banks is getting worse as the cycle goes on, with an increasing number having minimal or negative net worth by the time they fail. Bank failures occurred across the country tonight, with no more than one bank failure in any state.

A tropical storm moving off to the west didn’t stop Florida officials from closing Sterling Bank and its 6 locations along the southeast Florida coast. The bank had $372 million in deposits as of March. Iberiabank is taking over the deposits and purchasing the assets.

In Georgia, it was Crescent Bank and Trust Company, with 11 locations spread across the northern end of the state and reaching into the northern suburbs of Atlanta. The failed bank had nearly $1 billion in deposits. It had reported losses of more than $75 million since 2008. Mississippi-based Renasant Bank paid a 1 percent premium for the deposits and is also purchasing the assets.

Regulators in Oregon closed Home Valley Bank, which had five offices in Grants Pass and Cave Junction in the southwestern corner of the state. The bank had $230 million in deposits. Nearby competitor South Valley Bank & Trust is paying a 1 percent premium for the deposits and is also purchasing the assets.

Home Valley Bank, like so many other banks, took losses on loans after real estate development projects failed and real estate values fell. It had been operating since 1980.

Four smaller banks, with deposits totaling $450 million, failed tonight:

  • SouthwestUSA Bank, with one location in Las Vegas, Nevada. California-based Plaza Bank is taking over the deposits and purchasing 64 percent of the assets.
  • Williamsburg First National Bank, with five offices in eastern South Carolina. Columbia, South Carolina-based First Citizens Bank and Trust Company is paying a 0.5 percent premium for the deposits and is also purchasing the assets.
  • Community Security Bank, with one office in New Prague, Minnesota, on the edge of the Minneapolis-St. Paul metro area. Roundbank is paying a 0.89 percent premium for the deposits and is purchasing the assets.
  • Thunder Bank, a rural bank with offices in Sylvan Grove and Hunter, Kansas. It had been in business since the 1800s. The Bennington State Bank is taking over the deposits and purchasing the assets.

With tonight’s failures, there have now been 103 bank failures so far this year.