Banks 15 and 16 Fail on Friday

The FDIC announced on Friday, February 27, the failure of two more U. S. Banks. As with previous closings, the FDIC made the announcement as the weekend began thereby giving the local market an opportunity to absorb the news before the start of a new week.

Heritage Community Bank of Glenwood, Illinois was closed by the Illinois Department of Financial Regulation, Banking Division and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. As has become standard practice, all arrangements were in place at the time of the announcement by the Illinois State regulators for the FDIC to immediately turn the failed bank over to another financial institution, in this case the MB Financial Bank, N.A., Chicago, IL.

The other bank to fail this week was the Security Savings Bank of Henderson, Nevada. The same procedure was followed by the FDIC in that it had the Bank of Nevada waiting in the wings when the Nevada Financial Institutions Division announced the closing.

Both banks will reopen under the names of the acquiring institutions on Monday. In the meantime, the FDIC assured depositors that their ATM transactions, debit cards and checks would continue to be honored and all of their deposits are fully insured.

In a separate press release on Friday, the FDIC also announced another transaction involving a failed Nevada bank: First National Bank of Nevada. The agency successfully concluded the sale of $1.45 billion of performing and non-performing loans it had acquired from the failed bank.

While the FDIC will, initially, retain an 80% interest in the assets, the successful bidders for the assets, Stearns Bank, NA and Diversified Business Strategies, will, once certain performance criteria are met, take on an additional 20% of the assets. In total, there were 18 separate bidders making 30 unique bids for the assets.

More than $3.2 billion in assets have now been sold by the FDIC using the private/public partnership model.

Tim Holland – February 28, 2009