[Peace-discuss] Local banks bust

[C. G. Estabrook]

	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 at bloomberg.net; Ari Levy in San Francisco at alevy5 at bloomberg.net.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a42Xg57jVTzM