It was a costly week for bank failures, with total related losses expect to come in around $0.5 billion for the second week in a row. Three of the four banks that were closed down had survived the Great Depression. In this week’s round, the Federal Deposit Insurance Corp. stopped disclosing terms of the deals it made with the acquiring banks.
Friday’s first bank seizure was The First State Bank, an institution founded in 1911. The FDIC took over the institution from the Oklahoma State Banking Department, sold it to Bank 7 and projected related losses of around $20 million.
After that, Wisconsin’s Department of Financial Institutions shut down Evergreen State Bank. The bank was established in 1899 and had a few more than 50 employees. Deposit Insurance Fund losses as a result of Evergreen’s failure are projected at $23 million.
An FDIC prompt corrective action was issued against Evergreen last month, while an FDIC cease-and-desist order was issued against a year ago.
The next failure was in Louisville, Colo.
FirstTier Bank was closed by the Colorado Division of Banking and handed over to the FDIC as receiver.
But no buyers were found for the bank, which had $782 million in assets and $723 million in deposits. Part of the reason was that FirsTier’s balance sheet was loaded with $292 million in construction-and-development loans.
The FDIC created the Deposit Insurance National Bank of Louisville to handle an orderly liquidation of the seven-year-old bank. Insured deposits that haven’t been transferred to another bank by Feb. 28 — the last day that the temporary institution will remain open — will be mailed back to the depositors.
After all is said and done, the FDIC — which hit FirstTier with a cease-and-desist order in January 2010 — projects related losses of $243 million.
Friday’s final failure — First Community Bank in Taos, N.M. — was also the most costly for the Deposit Insurance Fund. The company had faced a prompt corrective action in August 2010 by the Federal Reserve Board.
U.S. Bank, N.A., stepped up to take over the $2.31 billion in assets and $1.94 billion in deposits from the FDIC.
First Community’s demise is projected to generate $260 million in associated losses.
First Community, founded in 1922, was the 11th FDIC-insured bank failure this year.
While the FDIC had previously reported the premiums paid for deposits and the amount of loss-share agreements, neither was provided for any of this week’s bank failures.
The more than $0.5 billion in total losses this week follow last week’s nearly $0.5 billion in projected losses.
In a Federal Register filing, the FDIC solicited comments on its interim final rule to resolve too-big-to-fail institutions. The rule was authorized under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“The FDIC’s purpose in issuing this rule is to provide greater clarity and certainty about how key components of this authority will be implemented and to ensure that the liquidation process under Title II reflects the Dodd-Frank Act’s mandate of transparency in the liquidation of failing systemic financial companies,” the Federal Register stated.
