Regulators Shut 2 More Banks As Financial Crisis Deepens

As the U.S. financial crisis deepens, regulators have seized two more financial institutions with combined assets of $6.2 billion and deposits of $4.2 billion, pushing the total number of bank failures this year to 19.

Franklin Bank, a Houston-based institution established in 1987 with assets of $5.6 billion, and Security Pacific Bank, a Los Angeles-based institution created in 1981 with assets of $588 million, were seized by regulators on Nov. 7. The Federal Deposit Insurance Corp, which insures deposits up to $250,000, was named receiver of both failed institutions.

The two most recent failures are estimated to cost the FDIC’s insurance fund between $1.6 billion and $1.8 billion. The 19 bank failures to date are expected to cost the insurance fund between $7.9 billion and $12.3 billion, according to the FDIC.

In anticipation of the two planned seizures, the FDIC negotiated “purchase and assumption” agreements beforehand for the assets of both failed financial institutions to be absorbed immediately by existing banks in hopes that customers would not be hindered.

Prosperity Bank, an El Campos, Texas-based institution created in 1949 with assets of $6.8 billion, assumed all of the deposits, $850 million of assets, and the 46 branches of the failed Franklin Bank.

Concurrently, Pacific Western Bank, a San Diego-based institution established in 1982 with assets of $4.3 billion, assumed all of the deposits, $51.8 million in assets, and the four branches of the failed Security Pacific Bank.

The remaining assets of the two most recent failed banks are to be sold off in the future, according to the FDIC.

The failure of Franklin Bank and Security Pacific Bank means that six financial institutions have been shuttered by regulators in the fourth quarter, which began Oct. 1.

Nine institutions were shuttered in the third quarter at an estimated cost of between $5.7 billion and $10 billion, according to the FDIC.

Regulators shut two institutions in the second quarter at an estimated cost of $216 million and two more institutions in the first quarter at an expense of nearly $6 million, according to the FDIC.

The bank failures have been scattered throughout the United States. California leads the nation with three bank failures. Nevada, Georgia, Missouri, and Florida are all tied for second with two bank failures each. Arkansas, Minnesota, Kansas, West Virginia, Washington state, Michigan, Illinois, and Texas each have had one institution shuttered this year.

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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