Another Bank Failure Costs FDIC $36 Million
Regulators on Friday shut down Commerce, Ga.-based Freedom Bank of Georgia. The Georgia Department of Banking and Finance, which closed the bank, named as receiver the Federal Deposit Insurance Corp., which entered a purchase an assumption agreement with Lavonia, Ga.-based Northeast Georgia Bank to assume all $161 million in deposits. The four branches of Freedom Bank reopened Monday as branches of Northeast Georgia Bank, which agreed to purchase $167 million of the bank's assets at a $13.65 million discount. The FDIC said it retained the remainder of the bank's $173 million in assets for later disposition. Northeast Georgia Bank also entered a loss-sharing agreement with the FDIC, through which the bank would share in losses on approximately $96.5 million in assets. The FDIC said the estimated cost to the deposit insurance fund would be $36.2 million. Ten bank closings in February were estimated to be a drain of some $944.3 million on the FDIC's deposit insurance fund, while another six closings in January cost the fund at least $789.1, according to FDIC estimates. All told, the fund is out some $1.77 billion so far this year. As of March 7, 2008, only two Missouri-based banks had failed all year -- Douglass National Bank and Hume Bank -- at an estimated cost to the fund of at least $5.6 million. Friday's closure brings the running total for 2009 to 17. The U.S. government has warned in recent weeks of a severely troubled deposit insurance fund that risks tanking this year amid rapidly mounting bank failures. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative,” wrote FDIC chairman Sheila Bair in a letter to chief executives last week. Critics have said for months that the FDIC’s deposit insurance fund just wasn’t large enough to manage all the expected bank failures expected over the coming months and years — and it seems they were right on the money. Senate Banking Committee Chairman Christopher Dodd, as of Friday, is moving to allow the FDIC to temporarily borrow up to $500 billion from the Treasury Department, after key officials, including Bair, made subtle cries for help. The FDIC’s current line of credit with the Treasury is $30 billion. Write to Diana Golobay at firstname.lastname@example.org.