Regulators Return to Action

This Friday, 17th ranked Western Springs National Bank and Trust of Western Springs, IL became the first bank to be shut down by regulators in two week. Western had approximately $186.8 million in total assets and $181.9 million in total deposits it was closed. Heartland Bank and Trust Company, (2746th) of Bloomington, IL assumed nearly all the assets and assumed all the deposits. The FDIC estimates the cost at the closing to be $31.0 million primarily due to a loss-share transaction on $100.8 million of Western Springs National Bank and Trust's commercial loans.

93rd ranked Nevada Commerce Bank of Las Vegas, Nevada was also closed today. City National Bank (1644th) of Los Angeles, California, to assume all of the deposits of Nevada Commerce Bank. This is the fourth acquisition of a failed bank by City National Bank since the start of the financial crisis and the second in Las Vegas. Nevada Commerce Bank had assets of approximately $144.9 million and deposits of $136.4 million and its closing is expected to cost the insurance fund $31.9 million.

All is Quiet on the Failure Front

For the third week in the last five, regulators have elected not to close any commercial banks. The trend suggests that fewer banks would be at risk. While bank profitability is higher and asset values have recovered, there are still a number of banks at risk. At the Bank Blog we will be looking closely to see if the skies are clearing or this is the calm before another storm.

Number Three Worst Bank is Number One Failure

3rd ranked, The Bank of Commerce of Wood Dale, IL finally succumbed to regulators this week. The roughly $163.1 million bank by total assets had nearly identical deposits of $161.4 million, a clear sign of trouble. Advantage National Bank Group (3941st) of Elk Grove Village, IL has agreed to assume all deposits. They also entered into a loss-share transaction with the FDIC on $145.7 million of The Bank of Commerce's assets. Advantage National Bank Group will share in the losses on the asset pools covered under the loss-share agreement. The expected costs of the closure are $41.9 million.

Today, the FDIC also issued it's new list of Prompt Corrective Actions from February. This list indicates some of the most at risk banks. Included on that list are ranked banks:

4. Bank of Las Vegas
9. Michigan Commerce Bank
15. Sunrise Bank of Arizona

Silence is Golden

For the second time this month, there have been no closings. Has tide turned? Only time will tell for sure, but the statistics suggest almost as many banks still have problems as in earlier quarters.

Second Worst Bank Fails and a Surprise

Second ranked Legacy Bank of Milwaukee, WI was closed by regulators today. It had approximately $190.4 million in total assets and $183.3 million in total deposits. Seaway Bank and Trust Company of Chicago, IL has agreed to assume all deposits. Seaway is second time acquiring bank having previously bought First Suburban National Bank of Maywood, IL. Although not among those banks deemed most risky by The Bank Blog, it should be pointed out that Seaway itself is not without its risks. It most recently received a rank of 434th putting it in the highest decile in terms of risk and struggles with a lower equity ratio than its peers.

The First National Bank of Davis of Davis, OK also closed today. On paper this was a very sound, profitable bank with a ranking of 3381. But just two days ago, the bank's president (and later CEO) since 1993, W.A. "Dub" Moore, was removed by OCC. With an expected cost to the Deposit Insurance Fund (DIF) of $26.5 million one can only surmise that the reported numbers were probably inaccurate. With its acquisition by the Pauls Valley National Bank (5681st) of Pauls Valley, OK chances are we will never know the bank's true state prior to failure. This is the second bank with an apparent fraud to fail since The Bank Blog began reporting.

Crickets...

There were no new failures this week. If there is anything else our readers would like to ask or see reported, we welcome you to comment.

Why the Delay in Closing Banks?

A few weeks ago someone commented about whether or not there would be more closing that day. For some reason, there have been some problems replying to comments. But it did suggest an interesting article topic: Why are the closings so spread out during the day and weeks?

The FDIC has an interesting video about the resolution process. While banks typically report new information to their regulators within a few weeks after the quarter closes, it takes some time for the latter to recognize and act on troubled bank. Once they do, the banks are usually given time to take "prompt corrective action" (PCA). This can take up to another banking quarter. Not all PCAs necessarily result in closings if the banks comply and a number of closings come at the direction of state or other primary regulators. So there may not be a PCA at all. Also, there is generally a lag between the announcement and when it is made public. This last from a few days or weeks for the Federal Reserve Bank and OCC to end of the month after the enforcement for the FDIC.

So we end up with a number of banks failing well after the predictions are made or, in some cases, not at all. This seems to be most pronounced right now for those several banks held by the same holding company Capital Bancorp Limited (CBC).

Regulators also try to close banks when the disruption can be minimized. This is why banks are closed on Friday evenings, usually after 5 pm. With the varying time zones and delays in reporting, the list may change for several hours or, in one case, on Saturday.