Money Matters, Simplified.
4 more banks collapse; 2010 failure tally 26
by Jaspreet Virk - March 6, 2010 - comments
Though the economy is on the road to recovery, uncertainties still remain. In fact, the banks are increasingly becoming insolvent due to the losses incurred on residential and commercial property loans.
There seems to be no end to bank failures in the nation. Reeling under the effects of recession, four more banks have been shut down by federal regulators Friday, bringing the tally to 26 for this year.
Disposing piles of toxic assets, the Federal Deposit Insurance Corporation (FDIC) closed banks in Maryland, Illinois, Florida, and Utah.
Sun American bought by First-Citizens Bank
One of the largest banks to be seized was Sun American Bank in Boca Raton, Florida.
The bank, which is the 23rd FDIC-insured institution to collapse this year, has been acquired by First-Citizens Bank & Trust Company.
The Raleigh, North Carolina-based bank bought Sun American’s total deposits of $443.5 million and agreed to purchase all the assets worth $535.7 million.
Further, it will share losses with FDIC on $433 million worth of bank’s assets.
All the 12 branches of Sun American Bank will reopen Monday as branches of First-Citizens and all the depositors of the Florida-based bank will automatically become depositors of First-Citizens Bank.
Bank of Illinois acquired
Other banks to fail included Bank of Illinois in Normal, Illinois, Waterfield Bank in Germantown, Maryland, and Centennial Bank in Ogden, Utah.
The Illinois based bank’s operations have been acquired by Heartland Bank and Trust Company, in Bloomington, Illinois.
Heartland Bank will pay a premium of 3.61 percent to acquire the troubled bank’s $198.5 million in deposits.
The Bloomington-based bank has also entered a loss-sharing agreement with FDIC to share losses on $166.6 million of Bank of Illinois’ assets.
No buyers for other failed banks
The federal regulators were unable to find buyers for Waterfield Bank and Centennial Bank.
In order to protect the insured depositors of the Maryland based bank, FDIC has created a new depository institution to acquire the operations of the bank. This institution will remain opened till April 5 to allow the depositors of the bank to access their funds and transfer their accounts to other institutions, which are insured.
In case of Utah-based bank, the federal regulators have entered into agreement with Zions First National Bank in Salt Lake City, Utah that will takeover the failed bank’s direct deposits, but FDIC has not been able to find an institution to acquire the banking operations of the troubled bank.
More bank failures expected
The federal regulators have winded up 140 banks in 2009, far higher than 25 in 2008 and 3 in 2007.
Though the economy is on the road to recovery, uncertainties still remain. The banks are increasingly becoming insolvent due to the losses incurred on residential and commercial property loans.
Considering the fragile nature of the financial sector, FDIC is anticipating bank failures to remain high in 2010. The 2010 tally could exceed 140 of 2009.