bank run blog

The FDIC has announced the failure of America West Bank, of Layton, Utah. The federal agency has arranged a sale of the failed bank’s assets to Cache Valley Bank of Logan.

America West Bank is the 32nd bank to fail in the nation this year, and the second in Utah. The FDIC closed MagnetBank, Salt Lake City, on January 30. There were a total of twenty-five bank failures in the United States in 2008. From the official press release :

“America West Bank, Layton, Utah, was closed today by the Utah Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Cache Valley Bank, Logan, Utah, to assume all of the deposits of America West.

The failed bank’s three offices will reopen on Monday as branches of Cache Valley Bank. Depositors of America West Bank will automatically become depositors of the assuming bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches.”

see resources–

FDIC Failed Bank Information Page : Cache Valley Bank, Logan, Utah, Assumes All of the Deposits of America West Bank, Layton, Utah

Salt Lake Tribune : America West Bank shuttered

The FDIC has announced the failure of Citizens Community Bank, of Ridgewood, New Jersey. The federal agency has arranged a sale of the failed bank’s assets to North Jersey Community Bank, of Englewood Cliffs.

Citizens Community Bank is the 31st bank to fail in the nation this year, and the first in New Jersey. The last FDIC-insured institution to fail in the state was Dollar Savings Bank, Newark, on February 14, 2004. There were a total of twenty-five bank failures in the United States in 2008. From the official press release :

“Citizens Community Bank, Ridgewood, New Jersey, was closed today by the New Jersey Department of Banking and Insurance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with North Jersey Community Bank, Englewood Cliffs, New Jersey, to assume all of the deposits of Citizens Community Bank.

The failed bank’s sole office will reopen on Monday as a branch of North Jersey Community Bank. Depositors of Citizens Community Bank will automatically become depositors of the assuming bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until North Jersey Community Bank can fully integrate the deposit records of Citizens Community Bank.”

see resources–

FDIC Failed Bank Information Page : North Jersey Community Bank, Englewood Cliffs, New Jersey, Assumes All of the Deposits of Citizens Community Bank, Ridgewood, New Jersey

Los Angeles Times : Banks fail in New Jersey and Georgia

The FDIC has announced the failure of Silverton Bank, National Association, of Atlanta, Georgia. The federal agency has created a bridge bank to take over the operations of the failed institution.

Silverton Bank is the 30th bank to fail in the nation this year, and the sixth in Georgia. The FDIC closed American Southern Bank, Kennesaw, on April 24. There were a total of twenty-five bank failures in the United States in 2008. From the official press release :

“Silverton Bank did not take deposits directly from the general public nor did it make loans to consumers. It was a commercial bank that provided correspondent banking services to its client banks.

Silverton Bank had approximately 1,400 client banks in 44 states, and operated six regional offices. It provided a variety of services for its clients, including credit card operations, clearing accounts, investments, consulting, purchasing loans, and selling loan participations. Since the FDIC created a new bank to take over the operations of Silverton Bank, there is not expected to be any meaningful impact on the bank’s clients.

The creation of the bridge bank allows the client banks to maintain their correspondent banking relationship with the least amount of disruption. The FDIC will operate Silverton Bridge Bank, N.A., to allow preexisting marketing efforts for the bank to continue.

At the time of its closing, Silverton Bank had approximately $4.1 billion in assets and $3.3 billion in deposits, all of which are expected to be within the FDIC’s insurance limits.”

see resources–

FDIC Failed Bank Information Page : FDIC Creates Bridge Bank to Take Over Operations of Silverton Bank, National Association, Atlanta, Georgia

Reuters : U.S. regulators seize Silverton commercial bank

Continuing its policy of “gently” releasing the results of the stress tests performed on 19 of the largest banks in the country, the Treasury has leaked reports that it had warned Bank of America and CitiGroup that their capital reserves were insufficient to meet expected loan losses.

The banks have denied that they need to raise new capital, but the rumors pounded their shares in early trading. According to the Independent :

“Banks on both sides of the Atlantic are being warned by regulators that they must hoard additional capital to weather the recession and future economic storms, in another series of steps designed to limit the risk-taking that pumped up the industry’s earnings during the credit boom.

Shares in Citigroup and Bank of America, two of the biggest banking giants in the US, fell sharply amid reports the Treasury has asked them to raise additional money after concluding ‘stress tests’ of their operations.

And the UK’s chief regulator, the Financial Services Authority’s chairman Lord Turner, earmarked higher capital requirements as ‘a possible way forward’ out of the financial crisis.

The US Treasury handed the country’s 19 biggest banks the preliminary results of the stress tests last week, requiring at least BofA and Citigroup to raise additional capital to fill holes in their balance sheet which could open up if the recession lasts longer and is deeper than expected.”

In a related story, Bloomberg is reporting that private investment analyst Paul Miller of Freidman, Billings, and Ramsey has estimated that BofA alone will need another $70 billion, after the firm conducted its own stress tests :

“Bank of America Corp. needs $60 billion to $70 billion of capital, according to Freidman, Billings, Ramsey Group Inc. analyst Paul Miller, who cited stress tests performed by his firm.

Bank of America should consider converting its preferred shares to common stock, including $27 billion in private hands ‘as soon as possible,’ Miller wrote in a note to clients today. Miller said his firm’s versions of the stress tests were ‘somewhat tougher’ than those performed by U.S. regulators.

Bank of America is among 19 lenders evaluating results of the formal U.S. stress tests. The Charlotte, North Carolina-based lender sold $45 billion of preferred stock to the Treasury’s bank rescue fund. Chief Executive Officer Kenneth Lewis and directors face opposition from shareholders to their reelection at tomorrow’s annual meeting after a 78 percent drop in the share price in 12 months.”

Influential finance blogger Barry Ritholz has said that a dozen or more of the 19 banks evaluated will be required to raise new capital. Because they are unlikely to be able to raise money from private sources, it is increasingly probable that the banks will need another round of bailout funds.

But with Congress unlikely to appropriate new dollars, some sort of “emergency” federal intervention may be the preferred plan for the summer months. This might be the subtext to FDIC chief Sheila Bair’s remarks yesterday at the Economic Club of New York. The Associated Press reports :

“Bair also expanded on her calls for a new system of regulation that prevents institutions from taking on excessive risk and becoming so big their failure would endanger the financial system. She said the FDIC would be the ideal agency to become the ‘resolution authority’ empowered to take over and resolve the risky institutions.

‘The FDIC is up to the task, and whether alone or in conjunction with other agencies, the FDIC is central to the solution,’ Bair said in her remarks to the Economic Club of New York. ‘Given our many years of experience resolving banks and closing them, we’re well suited to run a new resolution program.’

As the Obama administration and Congress work to fashion a new financial rule book to replace the ‘too big to fail’ model used by the government in the financial crisis, various regulators have been staking claims.”

Independent : Banks told to bolster their capital reserves

Bloomberg : Bank of America May Need $70 Billion, FBR Says

Associated Press : Bair: bailout fund can handle stress test results

With all the attention on the large banks, their astonishing earnings, and their preordained success in the federal stress tests, it was a good week to take a look at the rest of the US banking industry, particularly the so-called “superregionals”, that have billions in deposits but fewer friends in Washington than the big four (C, BAC, JPM, WFC). According to CNN :

“Even in this chilly economic climate, megabanks like Wells Fargo and Citigroup have somehow managed to make money.

A bit lower on the banking food chain however, there have been few signs of relief for big regional banks.

KeyCorp and Fifth Third Bancorp, two major banks headquartered in Ohio, both reported losses this week, hurt, in part, by their exposure to commercial real estate.

Further to the south, First Horizon National, one of Tennessee’s largest lenders, recorded its fourth-straight loss last week. Atlanta-based SunTrust reported an $875.4 million loss on Thursday.

And in other states that have been hit hard during the recession, such as Oregon, regional banks have found themselves unable to catch a break. Portland-based Umpqua Holdings reported a nearly $14 million loss last week.

Many of these regional banks have been stung by rising loan losses as more and more Americans find themselves out of work or simply unable to make ends meet.”

A Wall Street Journal report from Wednesday also focused on the superregional banks, emphasizing that their financial positions offer a truer barometer of the health of the economy than the dodgy balance sheets of the covertly subsidized big four :

“From Minnesota to Alabama, battered regional banks are warning a turnaround from the economic malaise is nowhere in sight.

A series of large regional banks reported Tuesday that rising losses from bad loans plagued first-quarter results. And, that’s forced names like U.S. Bancorp, Regions Financial Corp., and others to put more money aside to fortify against another wave of defaults.

It demonstrates not just massive U.S. institutions like Bank of America Corp. are reeling as the industry pays for extending credit to shaky borrowers. Smaller players scattered across the country are also feeling the pain, telling investors a protracted recession means things will get worse before they get better.

‘No significant turnaround will occur this year,’ Huntington Bancshares Inc. Chief Executive Stephen Steinour said after the Columbus, Ohio-based bank posted a $2.43 billion quarterly loss. He announced a nearly $300 million credit loss provision as the bank faces a stream of potential losses from commercial loans.

Huntington is just one example of a bank struggling as a troubled economy and tight credit environment make it more difficult for consumer and business borrowers to pay their debt. Falling stock markets and rising unemployment also illustrate the breadth and depth of the economic stress, regional bank CEOs said.

Investors have been paying particular attention to regional banks after BofA and Citigroup Inc. reported better-than-expected results through largely one-time gains and accounting changes. Regionals, which typically focus on bread-and-butter operations like lending and deposits, offer a purer snapshot of the industry.

‘We’re now dealing with an extreme recession, and the continued resolution of the over-indebted consumer,’ said Nancy Bush, an independent bank analyst. ‘This is not a 2009 phenomenon, but something we’ll possibly deal with into 2011 to 2012.’”

Bloomberg reports that the entire sector has become unattractive to investors, who believe that writedowns will continue to mount for the superregionals :

“’Across the board, regional banks just continue to fall short of expectations,’ said Terry McEvoy, an analyst with Oppenheimer & Co. ‘Net charge-offs are coming in higher than expected, and really as we move our way through the credit cycle, commercial lending is really driving those losses.’”

CNN Money : Regional banks can’t catch a break

Wall Street Journal : Regional Banks Show No Turnaround In Sight

Bloomberg : PNC, SunTrust, Fifth Third Boost Bad Debt Provisions