BOARD: Sheila Bair, chairman of the Federal Deposit Insurance Corp., speaks at a board meeting in Washington. Regulators have closed banks at the fastest pace in 17 years and more are likely as losses mount from soured real-estate debt. Bloomberg photo.
Regulators closed banks in California, Maryland and Minnesota Friday, pushing U.S. bank failures to 84 this year amid continuing fallout from the worst economic crisis since the Great Depression.
The Federal Deposit Insurance Corp. was named receiver for Affinity Bank of Ventura, California, Bradford Bank of Baltimore and Mainstreet Bank of Lake Forest, Minnesota, after Friday’s closings, the FDIC said. Assets of $1.9 billion and deposits of $1.7 billion from the three banks were turned over to new lenders at a total cost of about $446 million to the FDIC’s deposit insurance fund, according to agency statements.
Regulators have closed banks at the fastest pace in 17 years and more are likely as losses mount from soured real-estate debt. A total of 416 banks with combined assets of $299.8 billion failed the FDIC’s grading system for asset quality, liquidity and earnings in the second quarter, the most since June 1994, the regulator said in a report Aug. 27.
Pacific Western Bank of San Diego will assume the deposits of Affinity Bank, the FDIC said. Affinity, with $1 billion in assets and $922 million in deposits, had 10 branches. Two, based in San Mateo and San Francisco, has opened Saturday as Pacific Western branches; the rest will open today under new ownership, according to the FDIC. The regulator agreed to share losses on $934 million of the assets.
Central Bank of Stillwater, Minnesota, assumed $434 million in deposits at Mainstreet Bank, the FDIC said. Central Bank will pay a premium to purchase Mainstreet’s $459 million in assets, with the FDIC sharing losses on about $268 million. Mainstreet’s eight branches will open today as Central offices.
Buffett stake
Manufacturers & Traders Trust Co. of Buffalo, New York, took over the deposits of Bradford Bank, the FDIC said. M&T, whose parent counts billionaire investor Warren Buffett among its biggest shareholders, is buying Bradford’s $383 million of deposits and $452 million in assets. The FDIC is sharing losses on $338 million of assets in the deal, the regulator said.
Bradford is the second Maryland-based bank acquired this year by M&T, which bought Baltimore-based Provident Bankshares Corp. in May. M&T picked up $5.1 billion in deposits and $6.3 billion assets in the Provident deal, according to a company filing.
The FDIC insures deposits at 8,195 institutions with roughly $13.5 trillion in assets and reimburses customers for deposits of up to $250,000 per account when a bank fails. The surge in failures has depleted the Washington-based regulator’s deposit insurance fund, which fell to $10.4 billion at the end of June from $13 billion in the previous quarter, the agency said. The total was the lowest since 1993.
Added Assessment
FDIC Chairman Sheila Bair said in an Aug. 5 Bloomberg Television interview that the agency will likely levy another fee this year to replenish the deposit insurance fund. The agency has already raised $5.6 billion through an added assessment and has the authority to levy two more before the end of the year.
The collapses of Bradford and Mainstreet brought down lenders with roots reaching back more than a century, according to their Web sites, a departure in a banking crisis that has
seen failures concentrated among newer companies. The FDIC yesterday moved to address that trend, extending to seven years from three years the time new banks must maintain higher capital levels and face more frequent examinations.
The agency has brokered the 6th and 11th largest bank failures in U.S. history this year in Birmingham, Alabama-based Colonial BancGroup Inc. and Austin, Texas-based Guaranty Financial Group Inc.