Three more United States banks shut their doors Friday, according to the Federal Deposit Insurance Corporation, bringing the total number of failures up to 32 in 2009. The first failure was a wholesale banking operator in Georgia that served 1,400 other lenders across the US, became the fifth biggest bank failure in terms of assets.
FIDC said in a statement that it created a bridge bank to take over the operations of Silverton Bank, National Bank, headquartered in Atlanta. Unlike the other 30 banks that have failed so far in 2009, Silverton Bank did not take deposits directly from the general public or make loans to consumers. Instead, it was a bankers' bank, offering a wide variety of services, such as foreign wire transfers, as well as clearing and cash management, to other banks.
Silverton was cooperatively owned by community banks throughout the US Southeast and was heavily invested in loans to real estate developments in Florida, Georgia, and other parts of the Southeast. When real estate values sank in the current downturn, the assets backing those properties also lost their value. The Southeast has seen numerous regional banks topple as the housing bubble burst.
At the time of its closing, Silverton Bank had approximately 4.1 billion US dollars in assets and 3.3 billion USD in deposits.
The FDIC estimates that the cost to the Deposit Insurance Fund will be 1.3 billion, making it the fourth costliest bank failure since the start of the recession. Silverton served banks in 44 states and operated six regional offices.
The FDIC created a bridge bank to take over the assets of the institution and has contracted The Independent Bankers Bank, out of Irving, Texas, to assist. The FDIC does not expect to see any significant impact to the bank's clients, at least in the near term.
Meanwhile in New Jersey State regulators shut down Citizens Community Bank Friday night, and named the FDIC as the receiver. The Ridgewood, New Jersey based bank had total assets of approximately 45.1 million USD and total deposits of 43.7 million as of Dec. 31.
North Jersey Community Bank, of Englewood Cliffs, N.J., has agreed to assume all of the deposits of the failed bank. The failed bank's single office will reopen Monday as the North Jersey Community Bank.
On Friday also FDIC became the receiver of America West Bank, after the Utah regulators closed the institution. The Layton, Utah-based bank had total assets of approximately 299.4 million USD and total deposits of 284.1 million USD as of December 31.
United States local banks have been shutting down in droves as the recession has made it harder for customers and businesses to pay their loans. Nearly every Friday so far this year, at least one bank has failed. Last week, four regional banks were shuttered.
Even as the Obama administration has committed unprecedented amounts of money to increase liquidity and jumpstart the economy, the pace of bank failures has accelerated. In all of 2008, 25 banks failed, compared with 2009's 31 banks.
But it is not only smaller, regional banks that have felt the pressure of the recession. US largest banks have also been hit by rising default rates and a decline in business spending. Among the big banks that have received government aid, Citigroup and Bank of America have each received 45 billion USD in funds from the government's Troubled Asset Relief Program, TARP.