Florida’s Partners Bank. It was the seventh failure in Florida, a state hard hit by a speculative real estate bubble and now stagnant growth. In 2009, Florida experienced its first drop in population since the end of World War II.
On September 8, the OTS had issued a Prompt Corrective Action Directive telling Naples-based Partners Bank to prepare for sale or merger since it had failed to raise sufficient capital to cover bad loans (see ProPublica’s failed bank list). Partners didn’t get to wallow in its newfound infamy as number 100 for very long. By the time the emails had stopped flying Friday evening, seven banks had failed, including two more in Florida. The total for the year now stands at 106. That’s the highest number of bank closings since 1992, when 181 banks failed.
Lest there be panic in the streets, Sheila Bair, chairman of the FDIC taped a statement and had it put on the front page of FDIC.gov. Her last line of the almost four minute statement contained the takeaway line: “Our resources are strong and your insured deposits are absolutely safe.”
Yet even as she stressed that for depositors, bank failures should be viewed as “a nonevent,” Bair also acknowledged reality. “Until the [economic] healing process is complete, there will be more bank failures,” she said. Some analysts estimate as many as 1,000 over the next few years. The FDIC’s problem bank list only contains 416 institutions, none of which are named by the agency.
Bair explained that the FDIC had sufficient resources, citing new efforts to raise money from member banks and the backstop of the federal government. The estimated costs to the agency’s deposit fund from the seven failures is $356.6 million, according to the FDIC.
Bair said that at the end of the second quarter, the agency had $42 billion in its reserve fund. Armed with a novel strategy of having the banks prepay three years of fees into the fund, she expected to raise another $45 billion by the end of the year. “Our current projections indicate that this will be more than ample to cover the costs of expected failures,” she said.
In addition to Partners, the two other Florida banks to fail were Hillcrest Bank Florida, also of Naples, and Bradenton-based Flagship National Bank. Partners was picked up by Stonegate Bank of Fort Lauderdale, which also took the assets and deposits of Hillcrest. Flagship’s deposits went to Lake City-based First Federal Bank of Florida.
Joining the Florida trio were Georgia-based American United Bank, Illinois-based First DuPage Bank, Minnesota-based Riverview Community Bank, and Racine, Wisconsin-based Bank of Elmwood. The FDIC entered into purchase and assumption agreements with Ameris Bank of Moultrie, Georgia, First Midwest Bank of Itasca, Illinois, Central Bank of Stillwater, Minnesota and Tri City National Bank of Oak Creek, Wisconsin respectively to take all the deposits of the failed banks.