Bank Closings

Another four banks were closed this week by the FDIC.  This brings the total to 30 thus far this year. Seems we are on the same pace as last year which totaled 140. This equates to about 11.6 per month. Do you remember hearing about these bank closures? Probably not, as most of the closures by the FDIC are done Friday afternoon. The FDIC sneaks in like a Special Ops team, using stealth and shutters the doors. Being done Friday afternoon, the MSM usually does not cover the story or report about it on the Friday night news at 11pm. How many people watch the local Friday night news at 11pm? I would say not many, as many people are usually out on the town, watching a movie or in bed trying to recover from the work week.

From the FDIC website shows the ones that closed this week include:

1. Statewide Bank, Covington, Louisiana. As of December 31, 2009, Statewide Bank had approximately $243.2 million in total assets and $208.8 million in total deposits. Home Bank did not pay the FDIC a premium to assume all of the deposits of Statewide Bank. In addition to assuming all of the deposits, Home Bank agreed to purchase essentially all of the failed bank's assets. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $38.1 million.

2. Old Southern Bank, Orlando, Florida. As of December 31, 2009, Old Southern Bank had approximately $315.6 million in total assets and $319.7 million in total deposits. Centennial Bank will pay the FDIC a premium of 1.00 percent to assume all of the deposits of Old Southern Bank. In addition to assuming all of the deposits, Centennial Bank agreed to purchase essentially all of the failed bank's assets. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $94.6 million.

3. The Park Avenue Bank, New York, New York. As of December 31, 2009, The Park Avenue Bank had approximately $520.1 million in total assets and $494.5 million in total deposits. Valley National Bank will pay the FDIC a premium of 0.15 percent to assume all of the deposits of The Park Avenue Bank. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $50.7 million.

4. LibertyPointe Bank, New York, New York. As of December 31, 2009, LibertyPointe Bank had approximately $209.7 million in total assets and $209.5 million in total deposits. Valley National Bank will pay the FDIC a premium of 0.15 percent to assume all of the deposits of LibertyPointe Bank. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $24.8 million.

This equals $208.2 million from the FDIC reserves.

Number of Troubled Banks Rise to 702

"The FDIC reported that its Deposit Insurance Fund dropped further into negative territory, reporting a $20.9 billion loss in the fourth quarter, worse than its $8.2 billion loss in the third quarter".

Wow, $30.1 billion loss just in the last two quarters from last year!

"The agency hopes to make up that loss through advance payments by banks of $45 billion in fees".

There is a word I don't like seeing used by the FDIC. When I researched the $45 billion in fees I found out that the FDIC had the remaining banks pre-pay three years worth of premiums. I guess the FDIC anticipates that this will hold them over for the next three years.

From the FDIC website:
"The Deposit Insurance Fund (DIF) balance – the net worth of the fund – decreased by $12.7 billion during the fourth quarter. The fund balance of negative $20.9 billion (unaudited) as of December 31 reflects a $44 billion contingent loss reserve that has been set aside to cover estimated losses. Just as banks reserve for loan losses, the FDIC has to set aside reserves for anticipated losses to the DIF from insured institution failures. Combining the fund balance with this contingent loss reserve shows total DIF reserves of $23.1 billion".

Oh wait, we have $23.1 billion in DIF reserves, but yet we had a loss of $30.1 billion just over the last 2 quarters of last year.  Umm, as Bugs Bunny would say, "what's up Doc"?  This must be new math, as it just doesn't add up to me.  We still haven't taken into effect what CRE (commercial real estate) bubble is going to do to banks.

I will leave it here for now and maybe put some thoughts together on CRE soon as we are already seeing CRE owners walking away from properties like we have been seeing homeowners walk away from their mortgages.

Keep your eyes open....