Georgia leads in bank failures
By Jake Bernstein, ProPublica
Anyhope that the pace of bank failures might be slowing was dashed onFriday when the FDIC announced five new names to add to the growinglist of the defunct. The total number of failed banks this year nowstands at 45. The day's activities cost the FDIC's deposit fund $264.2million.
Once again Georgia led the way. Since August 2008, 14 banks have failed in Georgia. The first to go on Friday was Community Bank of West Georgia,based in Villa Rica. It was founded in 2003 to take advantage of thered hot real estate market in Atlanta's suburbs. As of the firstquarter of 2009, about one-third of the bank's $129 million in totalloans were in some stage of delinquency, default or had becomebank-owned foreclosures, according to the Atlanta Business Chronicle.
Usuallywhen a bank fails, the FDIC finds a neighboring institution to helpdefray the cost of the failure in exchange for assets and deposits inwhat's called a "purchase and assumption agreement." Customers of thefailed bank continue with the new bank as if nothing had happened. TheFDIC could find no takers for Community Bank of West Georgia. It willinstead mail checks to insured depositors for their funds.
Next to fail was Neighborhood Community Bank of Newnan, Ga. In this case, the FDIC struck a purchase and assumption agreement with CharterBank of West Point, Ga.
Sincethe FDIC likes to close banks after business hours, it announcesfailures from east to west, usually beginning around 5 p.m. EasternStandard Time. Almost two hours after the agency revealed the firstGeorgia failure, it moved west to Minnesota where Horizon Bank of Pine City officially failed. The bank's assets and deposits were picked up by Stearn's Bank of St. Cloud.
As in Georgia, bad real estate lending seems to be the culprit.
The Star Tribune had the quote of the day:
The Los Angeles Times reportsthat the FDIC has hired about 400 people to staff an office in Irvineto supervise bank closures in the region. As of late May, the FDIC'slist of problem banks nationwide numbered 305. It's shaping up to be abusy summer and fall in the bank closure business.
Anyhope that the pace of bank failures might be slowing was dashed onFriday when the FDIC announced five new names to add to the growinglist of the defunct. The total number of failed banks this year nowstands at 45. The day's activities cost the FDIC's deposit fund $264.2million.
Once again Georgia led the way. Since August 2008, 14 banks have failed in Georgia. The first to go on Friday was Community Bank of West Georgia,based in Villa Rica. It was founded in 2003 to take advantage of thered hot real estate market in Atlanta's suburbs. As of the firstquarter of 2009, about one-third of the bank's $129 million in totalloans were in some stage of delinquency, default or had becomebank-owned foreclosures, according to the Atlanta Business Chronicle.
Usuallywhen a bank fails, the FDIC finds a neighboring institution to helpdefray the cost of the failure in exchange for assets and deposits inwhat's called a "purchase and assumption agreement." Customers of thefailed bank continue with the new bank as if nothing had happened. TheFDIC could find no takers for Community Bank of West Georgia. It willinstead mail checks to insured depositors for their funds.
Next to fail was Neighborhood Community Bank of Newnan, Ga. In this case, the FDIC struck a purchase and assumption agreement with CharterBank of West Point, Ga.
Sincethe FDIC likes to close banks after business hours, it announcesfailures from east to west, usually beginning around 5 p.m. EasternStandard Time. Almost two hours after the agency revealed the firstGeorgia failure, it moved west to Minnesota where Horizon Bank of Pine City officially failed. The bank's assets and deposits were picked up by Stearn's Bank of St. Cloud.
As in Georgia, bad real estate lending seems to be the culprit.
The Star Tribune had the quote of the day:
"There'sa lot of toxic assets," said Norm Skalicky, CEO and major owner ofStearns Bank, who was in Pine City on Friday. "Everybody was on kind ofa spending spree. That has to get flushed out, I guess."FromMinnesota, the financial grim reaper swung over to California, wherereckless real estate lending has led to multiple bank failures in thepast two years. The FDIC announcedthe failure of Irvine-based MetroPacific Bank. Sunwest Bank of Tustin,Calif., picked up its non-brokered deposits. To cap the day off,shortly before 10 p.m. EST, the FDIC issued a press release on theclosing of Mirae Bank, located in Los Angeles' Koreatown district. The press release offered Korean and Chinese translations. Wilshire State Bank of Los Angeles assumed all the non-brokered deposits.
The Los Angeles Times reportsthat the FDIC has hired about 400 people to staff an office in Irvineto supervise bank closures in the region. As of late May, the FDIC'slist of problem banks nationwide numbered 305. It's shaping up to be abusy summer and fall in the bank closure business.
