Monday, May 11, 2015

Edgebrook Bank, IL, Closed by Regulators – Fifth Bank Failure of 2015

EDGEBROOK BANKAfter over a two month hiatus with no bank closings, regulators swooped in to close the Edgebrook Bank, Chicago, Illinois.  The last banking failure occurred on February 28, 2015 when regulators closed the Doral Bank, San Juan, Puerto Rico.
After the Illinois Department of Financial & Professional Regulation closed Edgebrook Bank, the FDIC was appointed as receiver to protect depositors.  The FDIC in turn sold the failed bank to Republic Bank of Chicago, Oak Brook, Illinois, under a purchase and assumption agreement under which Republic agreed to assume all deposits of Edgebrook Bank.  Prior to today’s acquisition the Republic Bank of Chicago had acquired five other failed banking institutions since 2009.
All depositors of Edgebrook Bank will automatically become depositors of Republic Bank of Chicago with continued FDIC deposit insurance up to the applicable limits.  Customers of Edgebrook Bank will have access to their money over the weekend through the use of checking accounts, ATMs, and debit cards.
Indicative of a long standing pattern of practice, regulators allowed Edgebrook Bank to remain open for an extended period of time despite the fact that it has been in poor financial condition since 2008 due to large loan losses.  Despite the financial recovery in the banking industry there are still 291 banks on the FDIC Problem Bank List as of December 31, 2014.  By comparison there were only 50 banks classified as being problem banks in 2006 prior to the financial crisis.
Edgebrook Bank had the particular misfortune of being founded in mid 2005 just prior to the financial crisis that resulted in the failure of many of the largest banks in the United States.  As the bank began operations it was essentially making real estate loans at peak market values thus almost guaranteeing failure as real estate values collapsed.
Edgebrook Bank was a tiny bank with one branch and only $90.0 million in total assets and $90.0 million in deposits as of March 31, 2015.  The Republic Bank of Chicago agreed to purchase $79.7 million of the failed bank’s assets with the FDIC retaining the balance for later disposition.
The loss to the FDIC Deposit Insurance Fund (DIF) for the failure of Edgebrook Bank will be $16.8 million.  There have been a total of five banking failures year to date as shown below.  Total losses to the FDIC DIF amounted to $864.8 million.

FIRST NATIONAL BANK OF CRESTVIEW FL  $          79.70  $       4.40
HIGHLAND COMMUNITY BANK IL  $          54.70  $       5.80
CAPITOL CITY BANK & TRUST CO GA  $        272.30  $     88.90
DORAL BANK PR  $     5,900.00  $   748.90
EDGEBROOK BANK IL  $          90.00  $     16.80
TOTALS (MILLIONS)  $    6,396.70  $  864.80

The pace of bank failures has slowed dramatically since the dark days of the financial crisis when about 150 banks failed during 2009 and 2010. Bank failures have declined every year since 2010 and only 18 banks failed during 2014. There have been 544 bank failures since 2000

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