FDIC Bank Failure Report

This week, the Federal Deposit Insurance Corporation closed five banks: United Security Bank, of Sparta, GA; Home Federal Savings Bank, of Detroit, MI; Prosperan Bank, of Oakdale, MN; Gateway Bank of St. Louis, of St. Louis, MO; and United Commercial Bank, of San Francisco, CA. The total assets of the closed banks were $11,599,100,000, and total deposits were approximately $7,866,300,000. The cost to the FDIC is estimated at $1,532,700,000.

According to our methodology, the recoverable value of the banks was $6,333,600,000, or only 54.60% of the declared asset value. This makes this week's closures distinctly below the cumulative recoverability since December of 2007, which stands at 57.73% (down from last week's 57.81%).

Cumulative cost-to-FDIC so far in the Depression was brought to $50,490,500,000. This closure brings the total declared assets of FDIC-failed banks (since December of 2007) to $511,961,580,000, and total FDIC-insured deposits to $346,067,320,000. The recoverable value of all failed banks was only $295,576,820,000 (57.73% of the declared value).

***

The situation with United Commercial Bank (UCB) is an interesting one, as it marks a degree of cooperation previously unseen in the banking world. UCB, UCB of Hong Kong, and UCB-China in Shanghai were all closed by the FDIC's actions, in cooperation with the Hong Kong government and the China Banking Regulatory Commission. Although it's a moment to wave the non-existent flag of international fellowship and all that, we would like to point out just how bad this looks to us.

The FDIC's actions show just how interconnected the financial systems of the World are, and how terribly difficult it is to find any sort of separation across national borders; this will make sorting failed banks like UCB very difficult, especially if non-US agencies are not quite as cooperative as they were this time. In addition, it's all well and good, as far as the average U.S. Citizen is concerned, that the FDIC took over banks in China; what happens if and when China starts taking over banks in the United States?

But leaving that aside, we have a loose prediction for the general trend of future, weekly FDIC closures: they will likely consist of a handful of minor community banks, and one large-ish bank. This week's format is a good example of what we're walking about, as the banks other than UCB were quite small indeed. Since we are fully convinced the FDIC is effectively out of money, this would suggest that the banks which the FDIC manages to scrape up the cash to close are the worst imaginable banks in the United States... leaving aside such cesspools as Citibank, Wells Fargo, Bank of America, JPMorgan Chase, et al.

***

On the basis of the ratio of bank closures to population (i.e. simply the number of failures in each State, with no account of assets or deposits), the ten most afflicted States are listed here. Only those States which have two or more closures are considered.

1. Georgia
2. Nevada
3. Illinois
4. Minnesota
5. Utah
6. Kansas
7. Missouri (up from #8)
8. Oregon (down from #7)
9. Arizona
10. Colorado

The recoverable value represents how much of declared assets are worth by our estimate on the open market. The following are the ten States with the lowest recoverable value; only those States which have had two or more closures are considered in this analysis.

1. Florida (32.44%)
2. California (42.37%, up from 40.11%)
3. Colorado (42.76%)
4. Michigan (43.18%, up from 43.07%)
5. Nevada (50.13%)
6. Georgia (53.79%, up from 53.74%)
7. Utah (55.39%)
8. Arizona (56.08%)
9. Washington (56.18%)
10. North Carolina (56.7%)

***

We're very pleased with how these two lists have shaped up; the movement from week to week is becoming very slight, so we're pretty confident this gives a relatively accurate idea of how badly off these various States and the banks within them are. Of course, our analysis only reflects those States which have had over two bank failures, so that leaves a good portion of the Union (and its... extensions) not reflected in our report.

Nevertheless, these five States - Georgia, Utah, Arizona, Nevada, and Colorado, in no particular order - are likely to be among the worst-off, as they are represented in both the preceeding lists. We really can't say which of those is the king of the dung heap, as it were, because we still haven't figured out how to compare apples and oranges.