FDIC Bank Failure Report

On 29/01/10, the Federal Deposit Insurance Corporation closed six banks: First National Bank of Georgia, Carrollton, GA; Florida Community Bank, Immokalee, FL; Marshall Bank, N.A., Hallock, MN; Community Bank & Trust, Cornelia, GA; First Regional Bank, Los Angeles, CA; and American Marine Bank, Bainbridge Island, WA. The assets of the closed banks were $5,531,200,000 and insured deposits were $4,896,600,000. The cost to the FDIC is estimated at $1,875,760,000.

According to our methodology, the recoverable value of the banks was only 54.61% of the declared asset value. This makes the recoverability of this week's closures distinctly below the cumulative recoverability since December of 2007, which stands at 57.66% (down slightly from last report's 57.69%).

Cumulative cost-to-FDIC so far in the Depression was brought to $59,643,720,000. These closures bring the total declared assets of FDIC-failed banks (since December of 2007) to $555,373,580,000, and total FDIC-insured deposits to $379,858,150,000. The recoverable value of all failed banks was only $320,214,430,000 (57.69% of the declared value).

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Once again the FDIC has pulled out a new trick: this week is was an "equity appreciation instrument," taken as "consideration for the transaction" of Florida Community Bank. We assume this means stock. If we're right, then it is simply another method by which the FDIC is extending store credit to acquiring institutions. What makes the situation seem all the more strange, is that the acquirer of Florida Community was a bank which was formed just last week: Premier American Bank, N.A., which purchased the failed Premier American Bank, with a "cash participant instrument" in the transaction.

Hmm... We have not heard back from the FDIC on our enquiry about the terms of the cash participant instrument, so we cannot conjecture about what exactly is going on. In general, however, we have to seriously question what the hell the FDIC is thinking: it is not only extending credit, but extending it to a newly-formed bank in two different forms within two weeks, potentially involving upwards of $850 million in assets. If the FDIC gave generous credit to Premier American - for example, only 10% downpayment or so - that's a lot of leverage for an institution, whose predecessor showed itself less than reliable.

We will still try to get more information from the FDIC about these instruments thrown about recently. If we do get something useful, we'll try to make better sense of the situation.

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On the basis of the ratio of bank closures to population (i.e. simply the number of failures in each State, with no weighting with 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. Oregon
8. Missouri
9. Florida
10. Washington (replacing Arizona)

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 (39.81%, up from 39.38%)
2. Colorado (42.80%)
3. Michigan (43.53%)
4. California (45.13%, up from 45.06%)
5. Nevada (49.81%)
6. Ohio (50.84%)
7. Washington (55.25%, up from 54.11%)
8. Georgia (55.33%, up from 54.64%)
9. North Carolina (56.70%)
10. Maryland (56.90%)

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The Frugal Scotsman's FDIC Cash Burn Through O'Meter gets adjusted with a subtraction of $1,875,760,000. The value now stands at $36,302,620,000.