Failed Banks: Better to Close than Receive?
First of all, were these the last major closings of the year? If you think about it, bank closings generally happen on Friday nights, allowing the weekend for transition. But this next Friday is Christmas, and the one after that is 2010. Are we going to close banks on Christmas and New Year's? I'm thinking not.
Second, there were some sizable institutions closed. Of the seven, four were of $1 billion or more in assets under management, including First Federal Bank of California, a $6.1 billion bank that's now part of OneWest Bank.
In this season of giving, are there fewer institutions prepared to receive the assets of failed banks?
But if you take a deeper look at that list, there's another stat that stands out even more: Two of the seven banks were not acquired by other institutions.
In the case of RockBridge Community Bank of Atlanta, the FDIC was unable to find a buyer, so the entire $294 million institution was shuttered. Checks will be mailed to the bank's customers.
Then, in the case of Citizens State Bank of New Baltimore, MI., regulators formed a deposit insurance national bank (DINB), giving customers 45 days to move their accounts elsewhere.
Begs the question: In this season of giving, are there fewer institutions prepared to receive the assets of failed banks?
It's an interesting questions. Without naming names, the FDIC does a good job keeping us all apprised of how many "problem banks" we have in the U.S. (currently 552). Of those, of course, only a small percentage truly fail.
But what we don't have is an accurate assessment of "solution banks" (for lack of a better term) - banks strong enough to take on a failed institution's assets. Could it be that, after seeing 170 banks and credit unions fail this year, we're starting to exhaust our supply of healthy institutions that can afford to acquire failures?
Like I say, a question to ponder as we close out 2009 and think about how the banking landscape might change in 2010.