Friday, May 1, 2009

Three Banks Seized by Regulators, Pushing Year’s Total to 32

Regulators seized banks in Georgia, New Jersey and Utah yesterday, boosting the tally of failed lenders in the U.S. this year to 32 and tapping more than $1.4 billion from the federal government’s deposit-insurance fund.

Silverton Bank of Atlanta, a commercial bank, was shut by the Office of the Comptroller of the Currency. Citizens Community Bank of Ridgewood, New Jersey, and America West Bank of Layton, Utah, were seized by state regulators. The Federal Deposit Insurance Corp. was named receiver for all three. Silverton was the largest failure since Downey Financial Corp. was shut in November, costing the FDIC about $1.37 billion.

The FDIC’s deposit-insurance fund, supported by fees on insured banks, fell 45 percent to $18.9 billion in the fourth quarter after 25 banks closed in 2008 amid the worst financial crisis since the Great Depression. The U.S. economy contracted at a 6.1 percent annual rate from January through March, the weakest performance since 1957-1958.

Silverton Bank, which didn’t take consumer deposits, provided services to about 1,400 banks in 44 states, the FDIC said yesterday in a statement. The Washington-based regulator set up a bridge bank to take over the operations of Silverton, which had about $4.1 billion in assets and $3.3 billion in deposits. Taking over the bank will cost the insurance fund about $1.3 billion, the FDIC said.

“Silverton had significant loan losses which had eroded its capital position,” Pamela Farwig, an associate director in the FDIC’s division of resolution and receivership, said on a conference call yesterday. “They had a large volume of problem assets centered in acquisition development and construction loans.”

Citizens Community

Citizens Community Bank had assets of $45.1 million and deposits of $43.7 million, the FDIC said in a statement. North Jersey Community Bank paid a premium of 0.67 percent to acquire all of the deposits. North Jersey will take over Citizens Community’s single banking office and plans to open it May 4.

America West’s three branches were assumed by Cache Valley Bank of Logan, Utah, which also bought the failed bank’s $284.1 million in deposits at a discount of $352,000. Of America West’s $299.4 million in assets, Cache Bank purchased about $10.9 million, with a 30-day option to buy loans at book value, the FDIC said.

The FDIC is forcing the banking industry to pay a one-time, emergency fee to prop up the insurance fund. FDIC Chairman Sheila Bair said she may trim the assessment if Congress increases the agency’s authority to borrow from the U.S. Treasury.

FDIC’s Borrowing

Senate Banking Chairman Christopher Dodd, a Connecticut Democrat, introduced a bill this week that would raise the borrowing authority to $100 billion and temporarily increase it to $500 billion through 2010. The House of Representatives already passed a measure that would more than triple the FDIC’s credit line from $30 billion and permanently raise the deposit- insurance limit to $250,000 per depositor per bank, from $100,000.

FDIC-insured banks lost $32.1 billion from October through December, the first aggregate quarterly loss since 1990. The agency insures deposits at 8,305 institutions with $13.9 trillion in assets.