Changes to the FDIC Bank Failure Report

In our last FDIC Bank Failure Report, we took a look at Corus Bank's assets and the consequent FDIC losses, and smelled a rat. Corus' $7 billion in assets had cost the FDIC $1.7 billion... but the FDIC sold off $3 billion of those assets to an unwitting sucker in the form of MB Financial Bank. So, the $1.7 billion cost-to-DIF was actually on the $4 billion in ex-Corus assets which the FDIC kept, giving Corus Bank a losses-to-assets ratio of 42.50%. Bad, quite bad, and made worse so in our eyes, as Corus' raw losses-to-assets originally came up at a paltry 24.29%.

But then, we started thinking. How could it be that Corus' $7 billion in assets didn't cover the $7 billion in FDIC-insured deposits? Why was it that the FDIC had to spend $1.7 billion on a bank which should have been able to be liquidated and be able to pay out?

The answer is obvious, of course: Corus' reported assets were overvalued. But just how overvalued were they? It's around this point when we realised we had been looking at the answer for months, now, without it having sunk into our thick skull: the assets were overvalued by the amount of money the FDIC admitted it had to spend on the failed bank!

So... forget everything about losses-to-assets, we've got something new to look at: recoverable value. Simply put, what percentage of declared value the bank's assets are really worth when they're put up on the FDIC's auction block.

As an example, we'll take Corus. The $7 billion in declared assets were supposed to cover the $7 billion in FDIC- insured deposits. They didn't, to the tune of $1.7 billion (i.e. cost-to-Deposit Insurance Fund). This means that the assets on Corus' books were reported overvalued by $1.7 billion. Doing the math, Corus' assets were only worth $5.3 billion or so.

And lo, the recoverable value appears: the declared value of Corus' assets was only 75.71% recoverable.

This is horrible, with a capital H, O, R, R, I, B, L, and E! To see a major bank have assets whose market value is only 75.71% of their declared value is unbelievably bad. Why Corus wasn't shut down months ago, we have a few dark suspicions – a topic for a later post. Suffice it to say, Corus Bank was insolvent, out of cash, massively overvalued, and otherwise scum-of-the-earth as far as a bank goes.

Did we forget to mention it gets much, much worse? Let's hop onto a time machine, and look at some bank failures from the past. First stop, Washington Mutual, the FDIC's whack-job for our friends over at JPMorgan Chase. The two 'divisions' of WaMu had combined assets of $307 billion, and combined deposits of $188 billion. The FDIC, at the time of WaMu's assassination – or closure, if you prefer – made a great fanfare about how the failure was not going to cost the DIF a single cent.

That all might be true, but we read in the FDIC's press release that JPMorgan Chase gave the FDIC $1.9 billion. For what, we wonder? Perhaps to cover costs to the DIF, so that the FDIC could have a media coup? Hmmm... we suspect that it is indeed just that: the true cost of the failure, conveniently hidden by JPMorgan Chase's willing assistance; so, we count that $1.9 billion as the actual cost-to-DIF.

Using our new methodology – subtract cost-to-DIF from total FDIC-insured deposits – we find that WaMu's assets were only worth about $186.1 billion; recoverable value was only 60.62%. Yes, dear Reader, that is worse than Corus, and much bigger too! However, a happy moment can be found in WaMu: the FDIC didn't just gift several hundred billion dollars to JPMorgan Chase, it actually gave it a bag of bad assets and rotting derivatives. You know, the usual fare at JPMorgan.

Anyway, one more failure to visit, this one even deeper in the past: IndyMac F.S.B. It had assets at a declared value of $32.01 billion, and total deposits of $18.06 billion. From the day that the FDIC closed the bank, until the FDIC sold off the successor zombie-bank, the total cost-to-DIF was a lovely $10.7 billion – making IndyMac the most costly bank failure in raw dollars this far in the Depression, as an aside.

But now, the scary part... Using our new methodology – subtract cost-to-DIF from total FDIC-insured deposits – we find that IndyMac's assets were only worth about $7.36 billion.

Pause a moment, dear Reader, and ponder that number. That's a bad number. Compare to the dlecared asset value of $32.01 billion. IndyMac's recoverable value, after all was said and done, was a chillingly slender 22.99% of declared asset value. This makes IndyMac the biggest loser so far in the Depression; a bottomless pit into which the FDIC shoveled money.

So ends today's time-travelling. We hope it was enlightening for you, as it was quite eye-opening for us. A final bit of bad news: using our new methodology on the total declared assets of all banks closed since December 2007, the recoverable value of all 119 of these banks was 57.46%. Although the comparison is not exact, one can suggest that it is possible that the entire United States' banking system will only be about 57% recoverable, or so. We must be honest here: we fully expect that this will get worse in the future. Much worse.

FDIC Bank Failure Report

Last week, the Federal Deposit Insurance Corporation closed three banks: Corus Bank (Chicago, Illinois); Brickwell Community Bank (Woodbury, Minnesota); and Venture Bank (Lacy, Washington). Total assets of the closed banks were $8,042,000,000. The cost to the FDIC is estimated at $2,020,000,000. The percentage of FDIC loss out of total assets is 25.12%.

This closure brings the total assets of FDIC-failed banks (since December of 2007) to $471,296,780,000, with cost-to-FDIC brought to $38,783,800,000 - this includes the assets of Washington Mutual, whose closing offered no cost to the FDIC. The percentage of FDIC losses to total assets presently stands at 8.23%, up from 7.87% as of last report.

Upon elimination of WaMu's assets from the analysis, total assets are $164,296,780,000, and total cost is $38,783,800,000. The percentage of FDIC losses to total assets now stands at 23.61% up from 23.53% as of last report.

The situation with Corus Bank requires additional examination. The acquiring institution, MB Financial Bank, agreed to take ownership of $3 billion (out of $7 billion) of ex-Corus assets, leaving $4 billion in the capable hands of the FDIC. The raw losses-to-assets ration is 24.29%; however, taking MB Financial's actions into account, and the extimated cost-to-DIF of $1.7 billion, the actual losses-to-assets stands at an whopping 42.50%. Because of the severity of this different, we're going to be looking closer at past closures, as it is entirely possible that closures have been altogether worse than we previously thought.

On the basis of the ratio of bank closures to population, and the ten most afflicted states are:

1. Nevada
2. Georgia
3. Illinois
4. Utah
5. Kansas
6. Minnesota
7. Oregon
8. Missouri
9. Washington
10. Florida

On the basis of the total losses-to-assets ratio in each state, the worst are as follows:

1. Pennsylvania - 50.75%
2. Utah - 40.32%
3. Idaho - 39.11%
4. Michigan - 39.03%
5. Wyoming - 38.57%
6. Florida - 37.62%
7. Iowa - 36.68%
8. West Virginia - 36.52%
9. Nevada - 35.56%
10. Arizona - 34.45%

FDIC Bank Failure Report - Extra-Late Edition

Last week, the Federal Deposit Insurance Corporation closed four banks: ebank (Atlanta, Georgia); First Coweta (Newnan, Georgia); CapitalSouth Bank (Birmingham, Alabama); and Guaranty Bank (Austin, Texas). Total assets of the closed banks were $13,927,000,000. The cost to the FDIC is estimated at $3,262,000,000. The percentage of FDIC loss out of total assets is 23.42%.

This closure brings the total assets of FDIC-failed banks (since December of 2007) to $460,207,180,000, with cost-to-FDIC brought to $35,916,500,000 - this includes the assets of Washington Mutual, whose closing offered no cost to the FDIC. The percentage of FDIC losses to total assets presently stands at 7.80%, up from 7.32% as of last report.

Upon elimination of WaMu's assets from the analysis, total assets are $153,207,180,000, and total cost is $35,916,500,000. The percentage of FDIC losses to total assets now stands at 23.44% down from 23.45% as of last report.

On the basis of the ratio of bank closures to population, and the ten most afflicted states are:

1. Nevada
2. Georgia
3. Utah
4. Illinois
5. Kansas
6. Oregon
7. Minnesota
8. Missouri
9. Florida
10. Colorado

On the basis of the total losses-to-assets ratio in each state, the worst are as follows:

1. Pennsylvania - 50.75%
2. Utah - 40.32%
3. Idaho - 39.11%
4. Michigan - 39.03%
5. Wyoming - 38.57%
6. Florida - 37.62%
7. West Virginia - 36.52%
8. Nevada - 35.56%
9. Maryland - 35.00%
10. South Dakota - 33.90%

FDIC Bank Closure Report, Quite Late

Last week, the Federal Deposit Insurance Corporation closed three banks: First State Bank (Sarasota, Florida); Community National Bank of Sarasota County (Venice, Florida); Community First Bank (Prineville, Oregon). Total assets of the closed banks were $769,000,000. The cost to the FDIC is estimated at $185,000,000. The percentage of FDIC loss out of total assets is 24.06%.

This closure brings the total assets of FDIC-failed banks (since December of 2007) to $419,464,280,000, with cost-to-FDIC brought to $28,979,700,000 - this includes the assets of Washington Mutual, whose closing offered no cost to the FDIC. The percentage of FDIC losses to total assets presently stands at 6.91%, up from 6.88% as of last report.

Upon elimination of WaMu's assets from the analysis, total assets are $112,464,280,000, and total cost is $28,979,700,000. The percentage of FDIC losses to total assets now stands at 25.77% down from 25.78% as of last report.

On the basis of the ratio of bank closures to population, and the ten most afflicted states are:

1. Georgia
2. Nevada
3. Utah
4. Illinois
5. Kansas
6. Oregon
7. Minnesota
8. Missouri
9. Florida
10. Colorado

On the basis of the total losses-to-assets ratio in each state, the worst are as follows:

1. Utah - 40.32%
2. Idaho - 39.11%
3. Michigan - 39.03%
4. Wyoming - 38.57%
5. Florida - 37.62%
6. West Virginia - 36.52%
7. Maryland - 35.00%
8. South Dakota - 33.90%
9. Minnesota - 33.01%
10. Washington - 32.39%

FDIC Bank Failure Report - Extra-Late Edition

This week, the Federal Deposit Insurance Corporation closed five banks: First State Bank of Altus (Altus, Oklahoma); Integrity Bank (Jupiter, FL); Peoples Community Bank (West Chester, OH); First Bankamericano (Elizabeth, NJ); and Mutual Bank (Harvey, IL). Total assets of the closed banks were $2,694,200,000. The cost to the FDIC is estimated at $911,700,000. The percentage of FDIC loss out of total assets is 33.84%.

This closure brings the total assets of FDIC-failed banks (since December of 2007) to $418,695,280,000, with cost-to-FDIC brought to $28,794,700,000 - this includes the assets of Washington Mutual, whose closing offered no cost to the FDIC. The percentage of FDIC losses to total assets presently stands at 6.88%, up from 6.70% as of last report.

Upon elimination of WaMu's assets from the analysis, total assets are $111,695,280,000, and total cost is $28,794,700,000. The percentage of FDIC losses to total assets now stands at 25.78% up from 25.58% as of last report.

The first closure of an Ohio bank in the Depression is a good sign for the accuracy of our Economic Stress Report. In the last edition, Ohio ranked as the second-most stressed State, according to our analysis. Indeed, three of the five States with this week's failures are on our watch list. We expect that our Stress Report will more accurately predict coming bank failures (an indicator of economic stress) in future months.

On the basis of the ratio of bank closures to population, and the ten most afflicted states are:

1. Georgia
2. Nevada
3. Utah
4. Illinois
5. Kansas
6. Minnesota
7. Oregon
8. Missouri
9. Colorado
10. California

On the basis of the total losses-to-assets ratio in each state, the worst are as follows:

1. Utah - 40.32%
2. Idaho - 39.11%
3. Michigan - 39.03%
4. Wyoming - 38.57%
5. Florida - 38.12%
6. West Virginia - 36.52%
7. Maryland - 35.00%
8. South Dakota - 33.90%
9. Minnesota - 33.01%
10. Washington - 32.39%

FDIC Bank Failure Report - Extra-Late Edition

This week, the Federal Deposit Insurance Corporation closed seven banks: Waterford Village Bank (Clarence, NY); Security Bank of Bibb County (Macon, GA); Security Bank of Houston County (Perry, GA); Security Bank of Jones County (Gray, GA); Security Bank of Gwinnett County (Suwanee, GA); Security Bank of North Metro (Woodstock, GA); and Security Bank of Fulton (Alpharetta, GA). Total assets of the closed banks were $2,852,400,000. The cost to the FDIC is estimated at $812,600,000. The percentage of FDIC loss out of total assets is 28.49%.

This closure brings the total assets of FDIC-failed banks (since December of 2007) to $416,001,080,000, with cost-to-FDIC brought to $27,883,000,000 - this includes the assets of Washington Mutual, whose closing offered no cost to the FDIC. The percentage of FDIC losses to total assets presently stands at 6.70%, up from 6.55% as of last report.

Upon elimination of WaMu's assets from the analysis, total assets are $109,001,080,000, and total cost is $27,883,000,000. The percentage of FDIC losses to total assets now stands at 25.58% up from 25.50% as of last report.

On the basis of the ratio of bank closures to population, and the ten most afflicted states are:

1. Georgia
2. Nevada
3. Utah
4. Kansas
5. Illinois
6. Minnesota
7. Oregon
8. Missouri
9. Colorado
10. California

On the basis of the total losses-to-assets ratio in each state, the worst are as follows:

1. Utah - 40.32%
2. New Jersey - 40.13%
3. Idaho - 39.11%
4. Michigan - 39.03%
5. Wyoming - 38.57%
6. Florida - 38.11%
7. West Virginia - 36.52%
8. Maryland - 35.00%
9. South Dakota - 33.90%
10. Minnesota - 33.01%

FDIC Bank Failure Report

This week, the Federal Deposit Insurance Corporation closed three banks: First Piedmont Bank (Winder, GA); BankFirst (Sioux Falls, SD); and Temecula Valley Bank (Temecula, CA). Total assets of the closed banks were $1,890,000,000. The cost to the FDIC is estimated at $511,000,000. The percentage of FDIC loss out of total assets is 27.04%.

This closure brings the total assets of FDIC-failed banks (since December of 2007) to $413,148,680,000, with cost-to-FDIC brought to $27,070,400,000 - this includes the assets of Washington Mutual, whose closing offered no cost to the FDIC. The percentage of FDIC losses to total assets presently stands at 6.55%, up from 6.46% as of last report.

Upon elimination of WaMu's assets from the analysis, total assets are $106,148,680,000, and total cost is $26,679,400,000. The percentage of FDIC losses to total assets now stands at 25.50% up from 25.47% as of last report.

On the basis of the ratio of bank closures to population, and the ten most afflicted states are:

1. Nevada
2. Georgia
3. Utah
4. Kansas
5. Illinois
6. Minnesota
7. Oregon
8. Missouri
9. Colorado
10. California

On the basis of the total losses-to-assets ratio in each state, the worst are as follows:

1. Utah - 40.32%
2. New Jersey - 40.13%
3. Idaho - 39.11%
4. Michigan - 39.03%
5. Wyoming - 38.57%
6. Florida - 38.11%
7. West Virginia - 36.52%
8. Maryland - 35.00%
9. South Dakota - 33.90%
10. Minnesota - 33.01%

FDIC Bank Failure Report

This week, the Federal Deposit Insurance Corporation closed one, small bank: Bank of Wyoming (Thermopolis, WY). Total assets of the closed bank was $70,000,000. The cost to the FDIC is estimated at $27,000,000. The percentage of FDIC loss out of total assets is 38.57%.

This closure brings the total assets of FDIC-failed banks (since December of 2007) to $411,258,680,000, with cost-to-FDIC brought to $26,559,400,000 - this includes the assets of Washington Mutual, whose closing offered no cost to the FDIC. The percentage of FDIC losses to total assets presently stands at 6.46%, up from 6.45% as of last report.

Upon elimination of WaMu's assets from the analysis, total assets are $104,258,680,000, and total cost is $26,559,400,000. The percentage of FDIC losses to total assets now stands at 25.47%, unchanged from last report.

On the basis of the ratio of bank closures to population, and the ten most afflicted states are:

1. Nevada
2. Georgia
3. Utah
4. Kansas
5. Illinois
6. Minnesota
7. Oregon
8. Missouri
9. Colorado
10. Washington

On the basis of the total losses-to-assets ratio in each state, the worst are as follows:

1. Utah - 40.32%
2. New Jersey - 40.13%
3. Idaho - 39.11%
4. Michigan - 39.03%
5. Wyoming - 38.57%
6. Florida - 38.11%
7. West Virginia - 36.52%
8. Maryland - 35.00%
9. Minnesota - 33.01%
10. Georgia - 32.42%

FDIC Bank Fallure Report, Holiday Edition

This week the Federal Deposit Insurance Corporation closed seven banks: Millennium State Bank of Texas (Dallas, TX); Founders Bank (Worth, IL); First National Bank of Danville (Danville, IL); Elizabeth State Bank (Elizabeth, IL); Rock River Bank (Oregon, IL); First State Bank of Winchester (Winchester, IL); and John Warner Bank (Clinton, IL). Total assets of the seven closed banks were $1,485,000,000. The cost to the FDIC is estimated at $314,300,000. The percentage of FDIC loss out of total assets for the seven is 21.16%.

These closures bring the total assets of FDIC-failed banks (since December of 2007) to $411,188,680,000, with cost-to-FDIC brought to $26,532,400,000 - this includes the assets of Washington Mutual, whose closing offered no cost to the FDIC. The percentage of FDIC losses to total assets presently stands at 6.45%, up from 6.40% as of last report.

Upon elimination of WaMu's assets from the analysis, total assets are $104,188,680,000, and total cost is $26,532,400,000. The percentage of FDIC losses to total assets now stands at 25.47%, down from 25.53% as of last report.

According to the FDIC, "The six failed Illinois banks are all controlled by one family and followed a similar business model that created concentrated exposure in each institution. The failure of these banks resulted primarily from losses related to the banks' investment in collateralized debt obligations and other loan losses." This post-mortem commentary from the FDIC on the nature of the banks' investments is unusual. We suspect it may be a veiled warning to State and Federal banking regulators to watch for similar situations.

On the basis of the ratio of bank closures to population, and the ten most afflicted states are:

1. Nevada
2. Georgia
3. Utah
4. Kansas
5. Illinois
6. Minnesota
7. Oregon
8. Missouri
9. Colorado
10. Washington

On the basis of the total losses-to-assets ratio in each state, the worst are as follows:

1. Utah - 40.32%
2. New Jersey - 40.13%
3. Idaho - 39.11%
4. Michigan - 39.03%
5. Florida - 38.11%
6. West Virginia - 36.52%
7. Maryland - 35.00%
8. Minnesota - 33.01%
9. Georgia - 32.42%
10. Washington - 32.39%

FDIC Bank Closure Report (Revised)

Blogger seems to be having trouble with scheduled posting. Apologies on the lateness of today's, and yesterday's, post. If you missed yesterday's, please scroll down.

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This week the Federal Deposit Insurance Corporation closed five banks: Mirae Bank (Los Angeles, CA); MetroPacific Bank (Irivine, CA); Horizon Bank (Pine City, MN); Neighborhood Community Bank (Newnan, GA); and Community Bank of West Georgia (Villa Rica, GA). Total assets of the five closed banks were $1,044,600,000. The cost to the FDIC is estimated at $264,200,000. The percentage of FDIC loss out of total assets for the five is 25.29%.

These closures bring the total assets of FDIC-failed banks (since December of 2007) to $409,703,680,000, with cost-to-FDIC brought to $26,218,100,000 - this includes the assets of Washington Mutual, whose closing offered no cost to the FDIC. The percentage of FDIC losses to total assets presently stands at 6.40%, up from 6.35% as of last report.

Upon elimination of WaMu's assets from the analysis, total assets are $102,703,680,000, and total cost is $26,218,100,000. The percentage of FDIC losses to total assets now stands at 25.53%, even with 25.53% as of last report.

We have determined the ratio of bank closures to population, and the ten most afflicted states are:

1. Nevada
2. Georgia
3. Utah
4. Kansas
5. Minnesota
6. Illinois
7. Oregon
8. Missouri
9. Colorado
10. Washington

A perhaps more telling indicator of stress in each state is the total losses-to-assets ratio in each state. The worst are as follows:

1. Utah - 40.32%
2. New Jersey - 40.13%
3. Idaho - 39.11%
4. Michigan - 39.03%
5. Florida - 38.11%
6. West Virginia - 36.52%
7. Maryland - 35.00%
8. Minnesota - 33.01%
9. Georgia - 32.42%
10. Washington - 32.39%