Three more U.S. banks failed; tally reaches 84 this year
Bank failures continue unabated as U.S. regulators on Friday closed down three more banks in California, Maryland and Minnesota. This takes the total number of failed federally insured banks this year to 84, compared to 25 in 2008 and 3 in 2007.
The failed banks were Ventura, California-based Affinity Bank, with about $1 billion in assets and $922 million in deposits; Baltimore-based Bradford Bank, with $452 million in assets and $383 million in deposits; and Forest Lake, Minnesota-based Mainstreet Bank, with $459 million in assets and $434 million in deposits.
Failure of these banks represents another sizable impact on the Federal Deposit Insurance Corporation’s (FDIC) fund for protecting customer accounts, as it has been appointed receiver for these banks. The failure of Affinity Bank is expected to cost the deposit insurance fund an estimated $254 million; that of Bradford Bank about $97 million and that of Mainstreet Bank about $95 million.
The FDIC insures deposits at 8,195 institutions with roughly $13.5 trillion in assets and when a bank fails, it reimburses customers for deposits of up to $250,000 per account. The outbreak of failing financial institutions has significantly stretched the regulator’s deposit insurance fund. At June 30, 2009, the fund corpus fell to $10.4 billion, the lowest since 1993, from $13.0 billion in the prior quarter.
San Diego-based Pacific Western Bank has agreed to acquire the deposits and assets of Affinity Bank. The FDIC and Pacific Western agreed to share losses on about $934 million of Affinity's loans and other assets.
Buffalo, New York-based Manufacturers and Traders Trust Company (M&T) has agreed to assume the deposits and assets of Bradford Bank. The FDIC will share losses on about $338 million of Bradford Bank's loans and other assets with M&T.
Stillwater, Minnesota-based Central Bank will acquire the deposits and assets of Mainstreet Bank. The FDIC will share losses on about $268 million of Mainstreet Bank's loans and other assets with Central Bank.
In the second quarter of 2009, the number of banks on the FDIC's list of problem institutions grew to 416 from 305 in the first quarter. This is the highest number since the savings and loan crisis in 1994. The FDIC anticipates U.S. bank failures to cost $70 billion through 2013.
According to the FDIC Chairman, the agency has no immediate plans to borrow money from the government to replenish the deposit insurance fund. However, the FDIC may impose an additional fee on U.S. banks this year to bolster the fund. The agency has already raised $5.6 billion through an added assessment.
In large, the failures are concentrated among newer companies.
