Bad year for banks: Failures surpass '08
Four regional banks fail Friday, setting the FDIC back nearly $700 million and bringing the annual total up to 29.
NEW YORK (CNNMoney.com) -- First Bank of Idaho became the fourth U.S. bank to fail Friday, raising the 2009 total to 29 -- four more than the 25 that failed all of last year, the government said.
The failure of the Ketchum, Idaho-based bank, along with banks based in Georgia, Michigan and California, will cost the Federal Deposit Insurance Corp.'s deposit insurance fund $698.4 million.
Idaho: First Bank of Idaho became the first bank based in the state to fail in more than 20 years Friday, when the FDIC was appointed receiver by the Office of Thrift Supervision. The bank had $374 million in deposits and $488.9 million in assets.
Most of the bank's deposits were acquired by U.S. Bank of Minneapolis, which will reopen First Bank's seven branches in Idaho and Wyoming under its name on Monday. Two branches operating under the First Bank of the Tetons name in Jackson, Wyo., and Driggs, Idaho, will have their usual Saturday drive-up window hours.
U.S. Bank paid a 0.55% premium for the deposits, the FDIC said.
The FDIC said U.S. Bank will not assume $112.8 million in brokered deposits; instead, the agency will pay brokers directly for the amount of their funds, with customers needing to contract the brokers to determine the status of their deposits.
U.S. Bank acquired about $17.8 million in First Bank's assets. The FDIC said the remaining assets will be retained for later disposition.
The FDIC said the deal will cost its deposit insurance fund $191.2 million.
Customers with questions can call the bank at 1-800-591-2845 or visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/firstbankidaho.html.
Georgia: American Southern Bank shut its doors for the last time on Friday. The Kennesaw, Ga.-based bank was shuttered by the Georgia Department of Banking and Finance and the FDIC was named the receiver.
With 10 bank failures, Georgia has the most bank closures of any state since the crisis intensified at the start of last year.
As of March 30, American Southern had total assets of $112.3 million and total deposits of $104.3 million.
Alpharetta, Ga.-based Bank of North Georgia has agreed to take over all of the deposits, except brokered accounts, at a premium of 0.003%.
The bank failure will cost the Deposit Insurance Fund approximately $41.9 million, according to the FDIC.
The single office of the failed bank will reopen on Monday as a branch of Bank of North Georgia.
Through the weekend, customers of the failed banks can access their money by writing checks or using ATM or debit cards. Checks drawn on the banks will continue to be processed and loan customers should continue to make their payments as usual.
The FDIC will continue to fully insure individual accounts up to $250,000 through the end of 2009.
For the $48.7 million in brokered deposits held by the failed bank that Bank of North Georgia did not agree to take over, the FDIC will pay the brokers directly for the amount of their funds. Customers are advised to contact them directly for more information about the status of their deposits.
Michigan: Michigan Heritage Bank, based in Farmington Hills, Mich., was shuttered Friday by state regulators and the FDIC was named the receiver.
As of Dec. 31, the failed bank had total assets of approximately $184.6 million and total deposits of $151.7 million.
Level One Bank, also based in Farmington Hills, Mich., agreed to assume all of the deposits of Michigan Heritage Bank, except those from brokers. For the deposits that it would take, Level One Bank paid a premium of 1.16%.
The Michigan bank failure will cost the Deposit Insurance Fund approximately $71.3 million, according to the FDIC.
The three offices of the failed bank will reopen on Monday as branches of Level One and depositors of will automatically be transferred over.
As with the failed bank in Georgia, customers can continue to access their funds. And the $50 million in brokered accounts at the failed Michigan bank will also be handled in a parallel manner as well.
In addition to the $101.7 million in deposits that Level One agreed to take, it agreed to purchase $46.1 million in assets, leaving the rest for the FDIC to negotiate.
California: First Bank of Beverly Hills, Calabasas, Calif., shut its doors for the last time Friday. State regulators shuttered the bank and named the FDIC the receiver.
But the FDIC was not able to find a buyer for the local bank. "We marketed the institution but there were no bids as it had little franchise value, most of the deposits were brokered and only 3% were CA depositors," said Andrew Gray, spokesperson for the FDIC, in an email. "It had a very small local presence. It isn't unusual for a payout to occur in these circumstances."
The cost of the failure to the Deposit Insurance Fund was estimated to be approximately $394 million, according to the release from the FDIC.
At the end of the year, the failed bank had total assets of $1.5 billion and total deposits of $1 billion.
For insured deposits placed directly with the bank and not through a broker, the government will mail customers checks for their insured funds on Monday. The FDIC estimates that the bank has $179,000 of uninsured deposits.
Customers of the failed bank who have questions can call the FDIC toll free at 1-800-523-8089 or go to a Web site the FDIC has set up at http://www.fdic.gov/bank/individual/failed/beverlyhills.html.
Banks in a bind: The recession has left regional banks reeling, with cash-crunched consumers struggling to pay off their loans.
As banks remained skittish about lending, the federal government stepped in with a series of financial rescue efforts aimed at restoring confidence and jumpstart lending.
This week, Bank of America (BAC, Fortune 500) surprised Wall Street by reporting a much better-than-expected first-quarter profit of $4.2 billion, but Chief Executive Ken Lewis warned of "deteriorating credit quality."
Investors remain concerned over just how prepared the banks are to absorb any further losses. The Obama administration has been conducting "stress-tests" on 19 of the nation's banks with more than $100 billion in assets at the end of 2008 to determine how well prepared they are to survive further economic turmoil.
On Friday, banking regulators offered up a 21-page report about the stress tests but it was sparse on details. It acknowledged that most U.S. lenders were currently well capitalized, but that losses associated with the recession and turmoil in the financial markets had eroded the capital levels of some financial institutions. The full assessment will be released May 4.