Posted on September - 20 - 2010
Regulators close more banks hurt badly by foreclosures
The tale of woe of imploding American banks hard hit by foreclosures and other economic troubles continued Friday last. Six more were forced to face the music, meaning that regulators have closed 125 American banks this far this year. The banks officials from The Federal Deposit Insurance Corporation singled out this time were:
- Bank of Ellijay, Ellijay, New Georgia
- First Commerce Community Bank, Douglasville, New Georgia
- Peoples Bank, Winder, New Georgia
- ISN Bank, Cherry Hill, New Jersey
- Bramble Savings Bank, Milford, Ohio
- Maritime Savings Bank, West Allis, Wisconsin
In New Georgia, where the failings reflected the States unbending economic woes, Carrolton, Georgia Community and Southern Bank assumed the assets and deposits of the three, while The Federal Deposit Insurance Corporation and Southern Bank shared the combined $600 million losses. Georgia staggered particularly badly as foreclosures followed unpaid loans.
Elsewhere, New Century Bank (Phoenixville, Philadelphia), Foundation Bank (Cincinnati, Ohio) and North Shore Bank (Brookfield, Wisconsin) absorbed the assets and deposits of the New Jersey, Ohio and Wisconsin Banks respectively. Costs to the account of the Deposit Insurance Fund totaled $347 million, of which Georgia contributed $225 million disproportionately.
Like foreclosures, bank closings also have accelerated compared since last year and are nationwide close to one third up. These are a reflection of mounting losses on residential and commercial property loans. The recession has cut jobs. Less consumer confidence and buying power have emptied shopping malls and offices. Loan delinquencies are the inevitable result. Analysts expect that the rate of failing banks will top out this year, hopefully not too far ahead of the 140 that collapsed in 2009 and cost the Deposit Insurance Fund $30 billion. Only 25 banks failed in 2008 and just 3 in 2007 – the trend line is steep, but hopefully short in terms of years. The deficit on the Deposit Insurance Fund currently stands at 20.7 billion.
Latest figures from the Fund are hardly cause for cheer (although depositor moneys are still well insured). In June, the banks at risk totaled 829, up 7% from the previous quarter, despite the industry making an overall quarterly profit of over $21 billion. Smaller banks (with assets less than $10 billion) contributed just 7% of this, despite making up over 98.5% of the industry population. The Deposit Insurance Fund expects the costs of failing banks to approach $60 billion through to the year 2014. It has called on banks to prepay their premiums for 2010 to 2012 amounting to $45 billion to stabilize the fund. The financial overhaul cemented an insurance cap set at $250,000 per depositor account.
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