Bank Failures Cost the FDIC Deposit Insurance Fund $894 Million in 2015

posted in: Banking News | 0
Bank Failures Cost the FDIC Deposit Insurance Fund $894 Million in 2015

The financial crisis of 2007-2008 resulted in hundreds of bank failures. In the year after the crisis, bank closures cost the FDIC‘s Deposit Insurance Fund more than $38 billion. As the U.S. economy slowly recovered, fewer banks have been closed and sold by regulators. In 2014, 18 banks failed. In 2015, eight bank failures cost the Deposit Insurance Fund just $894 million.

First National Bank of Crestview

First National Bank of Crestview, FL, was the first bank closure of 2015. All deposit accounts totaling more than $78 million, along with $62 million in performing loan assets were transferred to First NBC Bank in New Orleans. First National Bank was established in 1956 and had been in trouble for the past five years. Failure in January 2015 followed an unsuccessful attempt by the bank’s board of directors to gain regulatory approval to sell First National to First Commerce Credit Union based in Tallahassee.

Highland Community Bank

Highland Community Bank operated on the south side of Chicago as a small lender for more than 43 years, owned by former University of Illinois football player George Brokemond. The bank had been in decline for a number of years, and attempts to recapitalize were unsuccessful. Following the bank closure in early 2015, United Fidelity Bank of Indiana assumed deposits and purchased assets of Highland’s two branches. Cost of the failure to the Deposit Insurance Fund was estimated at less than $6 million.

Capitol City Bank & Trust Company

Capitol City Bank & Trust began in 1994 in Atlanta, GA, and was closed by regulators in 2015 after five years of troubled asset ratios exceeding 100%. Troubled loans ultimately closed the bank even after receiving millions from institutions like Wells Fargo and SunTrust banks. Cost of the failure to the FDIC totaled about a third of the bank’s assets at closure, or almost $90 million.

Doral Bank En Espanol

The Doral Bank headquartered in San Juan, Puerto Rico was closed by regulators in February. All deposit accounts were acquired by Banco Popular de Puerto Rico, which subsequently distributed deposit accounts and assets to 17 other banks in Puerto Rico, five branches of Centennial Bank out of Florida, and three branches of Banco Popular North America based in New York. Loss to the FDIC of failure of all 26 Doral Bank branches was estimated at $748 million in the largest bank failure since 2010. Closure came after almost a decade of consecutive annual losses.

Edgebrook Bank

In May, regulators closed Chicago-based Edgebrook Bank and it’s one branch was sold to Republic Bank of Chicago making this their sixth failed bank acquisition over the previous six years. Edgebrook Bank’s closing came after a pattern of continuing large loan losses since 2008, and a cease and desist order in March after discovery of almost 35% of the bank’s loans “seriously delinquent” and questionable loan practices. Loss from the bank failure to the FDIC totaled more than $16 million.

Premier Bank

In July, the Colorado Division of Banking officially closed Denver based Premier Bank and named the FDIC as receiver who subsequently sold it to United Fidelity Bank of Indiana in order to protect depositors. Premier Bank started in 1996, and was in trouble as early as 2007 when regulators issued a cease and desist order after discovering that more than 90% of its loan portfolio was made up of SBA loans. In the year prior to closing, Premier Bank had been issued a warning by the Federal Reserve following almost a decade of loan losses, and the bank continued its pattern of a high proportion of troubled assets even as it attempted corrective measures.

The Bank of Georgia

In October 2015 regulators sold the troubled Bank of Georgia at a loss of $23 million to Fidelity Bank in Atlanta, who took over all seven of the failed bank’s branches. The Bank of Georgia had been in business since 2000 and experienced early and rapid growth. However, with a strong real estate loan focus and consistent losses of more than $9 million since 2011, the FDIC decided that the most cost-effective strategy was to sell the failed bank to a healthy bank able to manage all assets.

Hometown National Bank

In a quiet and unannounced move by the FDIC in October, Hometown National Bank in Longview, WA became the eighth and final bank failure of the year and the first in Washington State since 2013. Depositors likely barely noticed a change, however, as Twin City Bank of Longview assumed all banking functions. Over the previous year, Hometown National Bank’s single branch had struggled with a troubled asset ratio of approximately 50%, compared to the national median of under 15%, and remained critically undercapitalized.