Regulators Shut 9 Banks In 3rd Quarter At Cost Of $6 Billion

Regulators shut down an average of one bank about every 10 calendar days in the third quarter of this year, adding up to nine failed institutions in a 92 day span from July through September.

The nine failed institutions had assets of $347 billion and deposits of $214 billion at the time of closing. The Federal Deposit Insurance Corp, which protects individual deposits up to $100,000 per account, estimates the third quarter bank failures will cost between $6 billion and $10 billion.

Washington Mutual, a $310 billion in assets institution based in Henderson, Nev., was the last bank to fail in the third quarter, being shut by regulators on Sept. 25.

In a preemptive move prior to the seizure, the FDIC negotiated a deal for Washington Mutual Bank’s assets to be sold to JPMorgan Chase Bank, a $1.4 trillion in assets institution based in Ohio, to ensure consumer confidence and avoid mass deposit withdrawals.

Wachovia Bank, a $782 billion in assets institution based in North Carolina, avoided being the 10th institution shuttered in the third quarter only when the North Carolina-based organization was able to reach a deal to be acquired by Citigroup, which operates the $1.3 trillion in assets Citibank institution.

For the year, regulators have shut down 13 institutions. California, Nevada, and Missouri lead the nation in failed institutions with two banks each. Florida, Arkansas, Minnesota, Kansas, Georgia, West Virginia, and of course Washington state have each had one institution shuttered this year.

Before Washington Mutual Bank’s failure, federal regulators were busy on Sept. 19 shutting down Ameribank Inc., a 102-year-old community bank based in West Virginia with links to Florida.

Prior to the Ameribank’s closure, Silver State Bank in the Las Vegas suburb of Henderson was the last institution to be shut, that occurring on Sept. 5.

Silver State Bank was the second Nevada institution to fail this year. In July, banking regulators shut down the First National Bank of Nevada in Reno, which along with the First Heritage Bank in Newport Beach, Calif., was owned by First National Bank Holding Co. in Scottsdale, Ariz.

A host of other banks are being closely monitored by industry watchers who anticipate further failures this year, especially in Sun Belt states where the housing crisis has hit hardest.

Before regulators shuttered Ameribank and Silver State Bank, the focus of examiners was on Greater Atlanta-based Integrity Bank, a $1.1 billion in assets institution that was shut on Aug. 29.

Working down the list of failed lenders, regulators seized Columbian Bank and Trust Co., a $752 million in assets institution based in Topeka, Kansas, on Aug. 22.

Three weeks earlier on Aug. 1, regulators shut First Priority Bank of Bradenton, a six branch institution with $261 million in assets located on the state’s west coast.

First Priority’s closing marked the first Florida institution to be closed by regulators in more than four years.

On July 11, federal regulators shut down IndyMac Bank, a $32 billion institution based in Pasadena, Calif. The estimate cost of that seizure is between $4 billion and $8 billion, according to the FDIC.

Before IndyMac, regulators seized Minnesota-based First Integrity Bank with $54.7 million in total assets and $50.3 million in total deposits on May 30; Arkansas-based ANB Financial with $2.1 billion in total assets and $1.8 billion in total deposits on May 9; Missouri-based Hume Bank with total assets of $18.7 million and total deposits of $13.6 million on March 7; and Missouri-based Douglas National Bank with $58.5 million in total assets and $53.8 million in total deposits on January 25, according to the FDIC.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

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