US Economy: Two More Bank Failures

[Broomstick]

Two more banks have gone under this week - from CNN

CARSON CITY, NEV. (AP) -- The 28 branches of 1st National Bank of Nevada and First Heritage Bank N.A., operating in Nevada, Arizona and California, were closed late Friday by federal regulators.

The banks, owned by Scottsdale, Ariz.-based First National Bank Holding Co., were scheduled to reopen on Monday as Mutual of Omaha Bank branches, the Federal Deposit Insurance Corp. said.

The FDIC said the takeover of the failed banks was the least costly resolution and all depositors -- including those with funds in excess of FDIC insurance limits -- will switch to Mutual of Omaha with "the full amount of their deposits."

The FDIC also said accountholders can access their funds during the weekend by writing checks or using ATM or debit cards. As of June 30, the closed banks had total assets of $3.6 billion. That's down from $4.1 billion six months earlier.

Most of the assets are in 1st National, while First Heritage accounts for $254 million. Calls to 1st National were referred by a receptionist to Joe Martony, an executive vice president in Scottsdale, Ariz. Martony didn't return repeated calls to his office.

In Nevada, 1st National has 10 branches and employs about 350 people. Five of its branches are in Las Vegas, three are in the Reno-Sparks area, one is in Carson City and one is in Laughlin. Notices of the closure were being posted late Friday.

Fifteen 1st National branches are in Arizona, while Newport Beach-based First Heritage has three branches in Southern California. Bill Uffelman of the Nevada Bankers Association said Friday the FDIC action "is a reflection of the times for the banks. It's a poor economy."

Uffelman cautioned against the sort of consumer concern that prompted many customers of IndyMac Bank branches to wait for hours in line to withdraw funds across Southern California last week after that bank was seized by federal regulators.

All FDIC-insured bank deposits are guaranteed by the FDIC up to $100,000, he noted. Gov. Jim Gibbons said the bank takeover will be closely monitored in Nevada "to ensure there's minimal disruption to business and that employees' jobs are protected as much as possible."

Arizona Gov. Janet Napolitano spokeswoman Shilo Mitchell said in a statement that the FDIC's takeover of 1st National is not indicative of the overall banking climate in Arizona.

"It's very important that Arizonans know that their deposits are secure," said Felecia Rotellini, superintendent of Arizona Department of Financial Institutions. "They are well-managed and the 1st National Bank of Arizona issues should not cause any panic in Arizona."

The FDIC action comes two weeks after after the agency took control of IndyMac bank, a Pasadena, Calif.-base mortgage lender with $19 billion in deposits. A total of seven banks have failed this year as the credit crunch and housing correction continue to take a toll on the economy.

For those of you not clued into history, the FDIC (Federal Deposit Insurance Corporation) was part of FDR's New Deal era Great Depression reforms. Back then, if a bank went under the depositors lost everything. The FDIC was created to insure deposits up to a given amount - at present $100,000 though when I was a child I remember it being a significantly smaller amount ($50,000? It's been awhile).

For the past, oh, 30 years I've heard the Republitards bitching about government interference and how FDR ruined the country.... but personally I think the FDIC is a good thing, particularly as it helps insulate the smaller depositors - those with fewer resources to weather a crisis - from bank failures. Without the FDIC there would be considerably more pain to go around. It's a little considered part of the social safety net, but a valuable one.

[Steve]

I find it ludicrous to believe the FDIC is some sort of government interference. If anything it bolsters the national banking system by increasing customer security and preventing a run on banks that was the usual result of a bank crash in the pre-FDIC days (the Great Depression being the most notorious of which).

[J]

I find it ludicrous to believe the FDIC is some sort of government interference.

Even the most right wing pro-business people I know believe the FDIC is a good thing, and is needed to stabilize the banking system and prevent panic & bank runs. The only people I've seen who want to abolish the FDIC are complete libertarian loonies, the ones who think all government is bad and everthing is better without government.

[Phantasee]

I think it's pretty clear the FDIC is showing it's value in the current situation. This is the sort of time it was designed for, wasn't it? Has it been used before during previous downturns?

[Fingolfin_Noldor]

I think it's pretty clear the FDIC is showing it's value in the current situation. This is the sort of time it was designed for, wasn't it? Has it been used before during previous downturns?

If you go to the FDIC website, it actually provides a long list of banks that it had to step in and support the bank accounts when the banks failed. There's typically a few banks that fail a year; those small regional ones.

[J]

Add another one to the list.

FDIC press release

SunTrust Bank Acquires the Insured Deposits of First Priority Bank, Bradenton, Florida

FOR IMMEDIATE RELEASE
August 1, 2008
Media Contacts:
Andrew Gray (Cell: 202-494-1049)
David Barr (Cell: 703-622-4790; Office: 202-898-6992)

First Priority Bank, Bradenton, Florida, was closed today by the Commissioner of the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with SunTrust Bank, Atlanta, Georgia, to assume the insured deposits of First Priority.

The six branches of First Priority will reopen on Monday as branches of SunTrust Bank. Depositors of the failed bank will automatically become depositors of SunTrust. 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. For the time being, however, customers of both banks should use their existing branches until SunTrust can fully integrate the deposit records of First Priority.

Over the weekend, customers of First Priority can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of June 30 2008, First Priority had total assets of $259 million and total deposits of $227 million. At the time of closing, there were approximately $13 million in uninsured deposits held in approximately 840 accounts that potentially exceeded the insurance limits. This amount is an estimate that is likely to change once the FDIC obtains additional information from these customers.

Customers with accounts in excess of $100,000 should contact the FDIC toll free at 1-800-837-0215 to set up an appointment to discuss their deposits. This phone number will be operational this evening until 9:00 p.m. EDT; on Saturday from 8:00 a.m. to 8:00 p.m. EDT; and on Sunday and thereafter from 8:00 a.m. to 6:00 p.m. EDT.

In addition to continued access to their insured deposits, depositors of First Priority with amounts exceeding the insurance limits will receive a payment of 50 percent of their uninsured balance from the FDIC as receiver. The FDIC will mail these payments directly to the customers early next week; the amounts will not appear in their account balances at SunTrust Bank.

Customers who would like more information on today's transaction should visit the FDIC's Web site at http://www.fdic.gov/bank/individual/fai ... ybank.html. Beginning Monday, depositors of First Priority with more than $100,000 at the bank may visit the FDIC's Web page, "Is My Account Fully Insured?" at http://www2.fdic.gov/dip/Index.asp to determine their insurance coverage

SunTrust agreed to assume the insured deposits for no premium. In addition to assuming the failed bank's insured deposits, SunTrust Bank will purchase approximately $42 million of the failed bank's assets. The assets are comprised mainly of cash, cash equivalents and securities. The FDIC, however, entered into a separate agreement with LNV Corporation, Plano, Texas, to purchase $14 million in First Priority's assets. LNV Corporation is a subsidiary of Beal Bank Nevada, Las Vegas, Nevada. The FDIC will retain the remaining assets for later disposition.

The cost to the FDIC's Deposit Insurance Fund is estimated to be $72 million. First Priority is the first bank to fail in Florida since Guaranty National Bank, Tallahassee, on March 12, 2004. This year, a total of eight FDIC-insured institutions have been closed.

A small bank this time, thankfully.