Five Failed Banks Cost the FDIC $317m, on Track for Record Year
Regulators shut down five separate banks on Friday, naming the Federal Deposit Insurance Corp. (FDIC) as receiver. In an ongoing indication of investment opportunities in failed banks, the FDIC effectively found buyers for essentially all assets and deposits of the shuttered firms. The failures, however, are expected to cost the FDIC's Deposit Insurance Fund (DIF) $317m. The five transactions bring the running total of banks shut down so far in 2010 to 78, more than twice the 36 failures seen by the same time last year. The growth in failures is on par with recent explosions in the volume of shuttered banks, according to audit firm Grant Thornton. A new white paper (download here) finds that bank failures in 2009 grew nearly 500% from 2008, and represented approximately 70% of total bank failures in the past decade: Failures in 2010 could exceed 2009, according to available data, Grant Thornton said. For example, the FDIC's "problem list" of banks grew to 702 by year-end 2009, from 252 a year earlier. Additionally, the FDIC's recently proposed budget for 2010 reflects a twofold increase in receivership funding over 2009, further indicating 2010 failures could exceed 2009. "One thing appears certain – bank failures coupled with FDIC assistance will continue to present significant opportunities with clear and unique benefits for healthy banks and other investors," Grant Thornton said. Three such banks took advantage of the opportunities posed by the five failures Friday. The Florida Office of Financial Regulation shut down three affiliated Bank of Florida institutions. EverBank will acquire essentially all assets and all deposits from Bank of Florida — Southeast, Bank of Florida — Southwest and Bank of Florida — Tampa Bay. The three failed banks were owned by the same holding company, Bank of Florida Corp., which was not part of the transaction. The Southeast bank had $595.3m of assets and $531.7m of deposits, while the Southwest bank had $640.9m of assets and $559.9m of deposits and the Tampa Bay bank had $245.2m of assets and $224m of deposits. All told, EverBank is acquiring $1.48bn of assets and $1.32bn of deposits from the three banks. EverBank and the FDIC entered loss-share transactions on $437.3m of Southeast's assets, $568.1m of Southwest's assets and $210.8m of Tampa Bay's assets. The three affiliated banks are estimated to cost the DIF a combined $203m. The failure of Southeast is estimated to cost the DIF $71.4m, while Southwest is estimated to cost $91.3m and Tampa Bay will cost $40.3m. The Nevada Financial Institutions Division shut down Sun West Bank. City National Bank will acquire essentially all $360.7m of assets from the failed bank, and will pay the FDIC a 0.67% premium to acquire all $353.9m of deposits. City National entered a loss-share transaction on $280m of the assets. The failure is expected to cost the DIF $96.7m. The Office of the Comptroller of the Currency (OCC) shut down Granite Community Bank. Tri Counties Bank will purchase essentially all $102.9m of assets and $94.2m of deposits from the failed bank. Tri Counties Bank and the FDIC entered a loss-share transaction on $89.3m of the assets. The failure is expected to cost the DIF $17.3m. "The OCC acted after finding that the bank had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices," the OCC said in a statement. "The OCC also found that the bank incurred losses that depleted its capital, the bank is significantly undercapitalized, and there is no reasonable prospect that the bank will become adequately capitalized without Federal assistance." Write to Diana Golobay.