Four more banks had to bite to dust, as regulators shut them down in a recent move. These banks in Florida, Illinois, Utah and Maryland were reeling under the pressure of toxic assets that they had accumulated over the past couple of years.
The number of banks shut down this year has now gone up to 26 and it does not seem like this may be the final number for the quarter yet. With these closures, Federal Deposit Insurance Corporation (FDIC) has come under more pressure to keep a stronger hold over the situation and dispose off the piling toxic assets.
Since the economy was hit due to massive losses on the commercial and residential real estate loans, a large number of lenders have been collapsing in the aftermath. The number of affected and under risk banks was the maximum in fourth quarter since 1992.
The total number of banks that went under was 140 last year and it is being speculated that the number might actually be larger this year. The FDIC had 700+ ‘problem’ banks on its list as of December 31 and together they make for more than $400 billion in assets. With these dismal numbers, the worst might not be over for the banking industry after all.
Of the four banks that were recently closed, two could not find buyers. These were the Waterfield Bank in Maryland and Centennial Bank in Utah. The Waterfield Bank’s assets and deposits will go to a new chartered lender who will be open till April 5. Part of Centennial Bank’s operations have gone to Zions Bancorporation and they have been put in charge of the deposits related to social security and other government benefits.
The other two closed banks that found buyers are Sun American Bank of Florida that was purchased by First Citizens Bank and Trust Co., and Bank of Illinois, bought by Heartland Bank and Trust Co.
First Citizen Bank found synergies in their purchase of Sun American as South Florida is an important market for them. This is their second purchase this year through FDIC’s resolution process and fourth overall. North Carolina lender, The Raleigh has taken over $443 million in deposits of Sun American and will be sharing losses with FDIC on the troubled assets.
Heartland Bank has agreed on a premium of 3.6% on Bank of Illinois’s $198 million in deposits and will be sharing the losses with FDIC on the assets of $166 million.