More Banks Fail as Foreclosures Succeed in Holding Sway

Three more banks failed as foreclosures succeed in holding sway defeating all preventive measures. On Friday 30th January 2009 the federal regulators shut down three banks in Florida, Maryland and Utah.

The FDIC (Federal Deposit Insurance Corp.) was made the receiver of the banks – Ocala National Bank of Ocala, Magnet Bank of Salt Lake City and Suburban Federal Savings Bank in Crofton.

In 2008 as many as 25 banks had failed – the figure being more than the combined total of the past five years. The three failures till now of 2009 adds up to the total of 2007.

It is apprehended that the toll will increase throughout this year under the pressure of falling real estate, rising foreclosures and the credit crunch. Some banks may be compelled to merge with other financial bodies.

The FDIC has failed so far to find another bank to take over the responsibilities of Magnet Bank. Its assets were worth $292.9 million and deposits of $282.8 million till 2nd December 2008. This will result in the agency sending cheques by mail on 2nd February 2009 to all retail depositors for their insured funds. Regular deposit accounts have been insured up to $250,000.

The deposit responsibilities of Ocala National Bank having assets and deposits worth $223.5 million and $205.2 million respectively till 31st December 2008 will be taken over by Center State Bank of Florida. The latter will also purchase the soured assets of the bank worth $23.5 million. The FDIC will keep the balance of the final sale. The four branches of Ocala will reopen on 2nd February as Center State Bank.

The deposits of Suburban Federal are being taken over by the Bank of Essex, Tappahannock. The latter will share the losses with FDIC. Thrift Supervision officials found that the Suburban Federal was “critically” under-capitalized and in a dangerous condition. The regulators placed the blame on the directors and managers of the bank for failing to supervise a forceful mortgage schedule of lending that started off from 2005. In the last week of January Thrift Supervision gave time till 30th January for the Suburban Federal to negotiate with a purchaser or else allow takeover by the government. The Suburban Federal had assets and deposits worth $360 million and $302 million respectively. Apart from the deposits the Bank of Essex will also purchase assets worth $348 million. The rest is being retained by FDIC. Seven branches of the Suburban Federal will reopen as those of Bank of Essex.