As many as 1,000 U.S. banks may fail

Discussion in 'Economics' started by ByLoSellHi, Feb 15, 2009.


    Regulators Shut 4 Banks, Toll Reaches 13; Deposit Fund Shrinks
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    By Margaret Chadbourn

    Feb. 15 (Bloomberg) --
    Banks in four U.S. states with more than $1 billion in assets were closed in a single day, boosting the toll of seized lenders to 13 this year and further draining a deposit insurance fund amid record home foreclosures.

    Florida, Nebraska, Illinois and Oregon regulators took over the banks Feb. 13 and, with the Federal Deposit Insurance Corp., sold $807.5 million in deposits and arranged to open the branches under new names on Feb. 17. The FDIC said the shutdowns, the most on one day since 1992, will cost the agency $341.6 million.

    Florida’s Riverside Bank of the Gulf Coast in Cape Coral, Nebraska’s Sherman County Bank in Loup City, Illinois’ Corn Belt Bank and Trust Co. of Pittsfield and Oregon’s Pinnacle Bank of Beaverton were shut. TIB Bank of Naples bought Riverside’s $424 million of deposits, the FDIC said. Heritage Bank of Wood River got Sherman County’s $85.1 million of deposits, Carlinville National Bank gained Corn Belt’s $234.4 million deposits and Washington Trust Bank of Spokane got Pinnacle’s $64 million.

    Regulators have now seized 13 banks, and seven so far in February are the most for a month since 1993. State and federal agencies shuttered 25 banks last year, matching the total for 2001-2007, as home foreclosures soared and bank profits tumbled. The FDIC has doubled premiums it charges banks to replenish its reserves, which had $34.6 billion as of the third quarter.

    The Obama administration is seeking to jolt the economy with a bank rescue using $350 billion from the Troubled Asset Relief Program, a $787 billion stimulus package and a plan to stem foreclosures. The housing plan involves the U.S. subsidizing as much as $50 billion for interest-rate cuts to help borrowers avoid losing their homes, said a person briefed on the proposal.

    Troubled Banks

    Nebraska Banking Commissioner John Munn said Sherman County Bank, which had four offices in central Nebraska, became the first state lender shut in two decades because of losses stemming from commodity trading by about 30 of its farm customers.

    “This closing is not indicative of the general condition of our Nebraska banks,” Munn said, according to the Omaha World Herald. “I do not believe this is the tip of an iceberg.”

    Heritage Bank is paying a 6.5 percent premium for Sherman County’s deposits, the FDIC said.

    Riverside Gulf Coast Banking Co., parent of the Florida bank, in late October agreed with regulators to strengthen management and lending practices within 60 days. The Federal Reserve said Riverside would hire a consultant to write a management plan with qualified personnel and raise additional capital for the bank, with nine offices on Florida’s Gulf coast.

    TIB agreed to pay the FDIC a premium of 1.3 percent for the deposits, without taking $142.6 million in brokered deposits. The FDIC said it will pay brokers directly.

    Illinois, Oregon

    Corn Belt Bank in December accepted an FDIC order that required the two-branch bank to improve management, raise capital and end hazardous lending and lax collection practices, the agency said. Carlinville National will pay a 1.75 percent premium for Corn Belt’s deposits, and left $92 million in brokered deposits with the FDIC to resolve with the brokers.

    Pinnacle in May was required to notify the government before adding to its board or hiring senior executives. Oregon officials Feb. 13 said the bank relied on brokered deposits that led to “significant liquidity problems,” while a “high level” of commercial real-estate loans on which collections had stopped resulted in 2007 and 2008 losses, the regulator said.

    Pinnacle’s single office will reopen Feb. 17 as a branch of Washington Trust, which is taking deposits, including brokered accounts, and assuming $72 million of the assets, the FDIC said.

    “This acquisition gives Washington Trust full branching powers in the state of Oregon to enhance our services to our existing customers in the market and to consider expansion into key communities in and around the Portland area,” said Washington Trust Chief Executive Officer Peter Stanton.

    U.S. Response

    Treasury Secretary Timothy Geithner outlined the bank rescue Feb. 10 and pledged to remove illiquid assets from banks’ balance sheets and spur lending. Private investors have expressed an interest in joining the government in the fund, Lawrence Summers, director of the National Economic Council, said Feb. 13 on Bloomberg Television’s “Political Capital with Al Hunt.”

    The FDIC, bank regulators and Congress are taking steps to help banks avoid losses. Legislation that would boost deposit insurance coverage is being considered by Congress. The House Financial Services Committee approved a measure Feb. 4 to raise coverage to $250,000 per depositor per bank, from $100,000. The Washington-based agency oversees 8,384 institutions with $13.6 trillion in assets.

    Congress also may extend the FDIC’s line of credit with the Treasury to $100 billion from $30 billion to replenish the deposit fund, which banks support with fees on their accounts. The FDIC said bank failures through 2013 may cost $40 billion.

    Problem Banks

    The FDIC classified 171 banks as “problem” in the third quarter, a 46 percent jump from the second, and said industry earnings fell 94 percent to $1.73 billion from the previous year. A new report may be released this month.

    As many as 1,000 U.S. banks may fail in the next three to five years from mounting losses on commercial real-estate loans, RBC Capital Markets analysts said, almost double the one-year tally at the height of the saving-and-loan collapse. Most of the failures may occur at banks with less than $2 billion in assets.

    More than 250,000 foreclosures were filed in January, the 10th straight month of a quarter-million filings, RealtyTrac Inc., the Irvine, California-based provider of real estate data, said in a statement this week.

    To contact the reporter on this story: Margaret Chadbourn in Washington at
    Last Updated: February 15, 2009 00:01 EST
  2. MattF


    S&L redeux...
  3. bylosellhi:

    I can tell what threads are yours without ever looking at the author. You post so much sensationally bearish crap that I get tired of reading it.

    Don't you ever have a positive moment, or a light at the end of the tunnel moment?

    I've actually looked back to your posts in '06, and even then you were posting all these sorts of negative links.

    Sometimes I even get the feeling that the forum administrator is using your username just trying to rile people up with inflamatory nonsense, a-la-fox news or rush limbaugh.

    If you've been massively short since August '06 (which you should have been, given your ceaseless stream of negative links), you should be off spending some quality time on your yacht with a half dozen hookers, not posting here...

    I know that the ignore list function works very well, but I keep hesitating with you, since some of your articles are interesting on the surface...

    How about posting some bullish data? There must be some out there...
  4. the1


    LOL. The dude is posting nothing more than the God-awful truth.

  5. It may be, but they want me want to slide into depression.

    what irks me is that they lack context. I wsh he'd post what he's physically doing to profit from it. Maybe that'd make me feel like he's really convinced in all the stuff he posts.
  6. I'm not going to apologize to you or anyone else for being a realist.

    I'm not a pessimist. I'm a realist.

    You want bullish data?

    Sorry, I don't have any sourced.

    Am I biased? I don't know...maybe.

    Do you have bullish data?

    I'm all ears, if you do. I am looking at things in as factually an accurate way as I know how. If I'm missing data, misinterpreting things, or not getting another side of the coin (or missing the light at the end of the tunnel), tell me how - I really want to know.

    I love to tell people that I'm not a pessimist, but a realist, and that I can't make it rain, but I will observe the weather.

  7. No.

    "They" want you to wake up from your fucking slumber.

    Better yet, take the blue pill and go back to sleep.
  8. Redneck



    The things I have lurking in the back of my head

    More variable rate mortgages coming due this year..., and possible commercial real estate loan defaults - with all the businesses going belly up

    Bleak outlook at best

  9. Last time during S&L crisis; more than 1000 banks had been taken over by government bad/good bank program, there aren't any exceptions this time either.

    At least this time, there are significant tax cuts.
  10. I still call bullshit.

    The artice is about 4 (FOUR) banks being shut down, bringing the total this year to 13 (OMFG, the sky is falling!!!!), but you choose to title the thread based on a blind guess that some stupid RBC analyst pulled out of his ass in the last paragraph or two of the whole article.

    That's not "realism." It's a cheap way to draw attention to your threads.

    Anyway, I'm going to just drop it and move on.
    #10     Feb 16, 2009