The List of Failed Banks Has Grown, But the Worst May Be Over

There is a lot of talk in mainstream media about failed banks, so we went directly to the source–the FDIC, to find out the full story. Here, you can see clearly that last year, 26 banks failed in total. As you can see from the chart there was very little activity in the first half of the year, then bank failures steadily increased from July through December.

Bank failures are qualified by the FDIC, as such: When a bank fails, the FDIC is named the “Receiver” of the assets and then finds a home for them via a transfer to an “assuming institution.” What this means is that when a bank fails, the FDIC takes all the deposits, loans, credit cards, etc. and sells them off to the highest bidder, or in the case of non-sellable assets, collects them as the final “insurer.” This ensures that the bank’s customers can continue to get their money, pay their mortgage, write checks, etc. without interruption. The FDIC as the insurer, will bear all costs within the terms of their agreement with the FDIC insured bank.

Back to the chart. For the start of 2009, you can see bank failures were in a strong upswing. We are at the end of March, but there has been only four bank failures reported so far. Nobody can be certain that bank failures have subsided, however this is a positive sign that the worst is over.

Many of the banks are in areas that have housing issues. For instance, County Bank of Merced, California is located in an area that has a significant amount of foreclosures. Currently, Merced, CA has 165 properties listed for sale as re-sale, but an enormous 1,685 properties are listed as foreclosures. The banks that issue those mortgages are only going to see a fraction of their money returned. Keep in mind that this is not related to the credit default swaps debacle that has tied up much larger banks that are seeing government bailouts. These are banks that are direct lenders to their communities.

Here is a formal list of 2009 bank failures as of March 25th.

March 2009

TeamBank, National Association, Paola, Kansas, with approximately $669.8 million in assets, was closed. Great Southern Bank, Springfield, Missouri, has agreed to assume all deposits (approximately $492.8 million). 

Colorado National Bank, Colorado Springs, Colorado, with approximately $123.5 million in assets, was closed. Herring Bank, Amarillo, Texas has agreed to assume all deposits (approximately $82.7 million). 

FirstCity Bank, Stockbridge, Georgia, with approximately $297.0 million in assets and approximately $278.0 million in deposits was approved for payout by the FDIC Board of Directors. 

Freedom Bank of Georgia, Commerce, Georgia, with approximately $173.0 million in assets and approximately $161.0 million in deposits, was closed. Northeast Georgia Bank, Lavonia, Georgia has agreed to assume all deposits.

source FDIC