Two Illinois Banks Seized, Bringing U.S. Tally This Year to 36 By Margaret Chadbourn and Ari Levy
May 22 (Bloomberg) -- Two Illinois banks with combined assets of almost $1 billion were closed by regulators, pushing the toll of failed U.S. lenders to 36 this year amid the longest recession since the 1930s.
Strategic Capital Bank in Champaign and Citizens National Bank in Macomb were closed and the Federal Deposit Insurance Corp. was named receiver of both, the FDIC said. Strategic Capital’s deposits were assumed by Midland States Bank of Effingham, Illinois, and deposits at Citizens National were purchased by Morton Community Bank.
“Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage,” the FDIC said.
Regulators are closing banks at the fastest pace in 15 years, including BankUnited Financial Corp. in Florida yesterday, and pumped $200 billion into the biggest banks in a Treasury rescue program. Costs from closing banks in the second quarter climbed to more than $8 billion, including $4.9 billion for BankUnited, from $2.28 billion in the first, FDIC data show.
Midland States will buy $536 million of Strategic Capital’s $537 million in assets, with the FDIC sharing losses on about $420 million of them, the regulator said. Midland States will assume all of the failed bank’s $471 million in deposits. Strategic Capital’s lone office will open on May 26 as a branch of Midland States.
Morton Community Bank
Morton Community will buy $240 million of Citizens National’s $437 million in assets and signed a loss-sharing agreement with the FDIC on $200 million. Half of Citizens National’s $400 million in deposits will go to Morton Community, with the other $200 million in brokered deposits being paid directly to the brokers, the FDIC said.
Citizens National has offices in four Illinois cities, according to its Web site. The FDIC said they will open tomorrow as branches of Morton Community.
The failures are the fourth and fifth in Illinois this year. The FDIC estimates the seizures will cost the federal government’s deposit insurance fund a combined $279 million.
U.S. regulators are signaling that economic conditions are improving. FDIC Chairman Sheila Bair said May 12 that banks have “moved beyond the liquidity crisis” of last year.
“We are now in the cleanup phase,” Bair said in a speech in Washington. “But to be honest, there’s still more pain to go.”
Recession
The Commerce Department on April 30 said personal incomes fell in March for the fifth time in the past six months. The S&P/Case-Shiller Index of home prices in 20 major U.S. cities dropped in February, extending a decline that began in January 2007. The Labor Department May 8 reported employers shed 539,000 jobs in April, extending the decline to 5.7 million jobs since December 2007
The FDIC insurance fund is down 64 percent from its peak at the start of the second quarter last year, reflecting the shutdown of 22 lenders from April through December. The agency voted 4-1 today to impose a fee of 5 cents per $100 of assets, excluding Tier 1 capital, backing away from a proposal of 20 cents per $100 of insured deposits. The FDIC estimates the fee will raise $5.6 billion, lifting the fund from its lowest level since 1994.
U.S. regulators conducted unprecedented stress tests on 19 of the biggest banks, concluding on May 7 that losses could reach $599.2 billion in the next two years under economic conditions that are worse than economists forecast. The FDIC will report first-quarter bank earnings May 27.
FDIC-insured banks lost $32.1 billion from October through December, the first aggregate quarterly loss since 1990. The agency insures deposits at 8,305 institutions with $13.9 trillion in assets.
To contact the reporters on this story: Margaret Chadbourn in Washington at mchadbourn@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net.
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