Another One Bites The Dust: More to Come?

by Florida's #1 Mortgage Planner on August 2, 2008

First Priority Bank of Bradenton was closed by Florida state regulators yesterday, the eighth bank to collapse this year, and we have another bank turned over to the FDIC.  Interestingly enough, it was also closed on Friday, so we seem to be closing a bank almost every week, on average, since IndyMac Bancorp.

First Priority Bank’s assets were sold to Suntrust, and Monday will see six of their branches open as Suntrust branches.  First Priority Bank was the first Florida based bank to fail since March 2004 when Guaranty National Bank, based in Tallahassee, Florida had gone under.

More bank failures to come?  At least one analysts thinks so:

“The only thing sure other than death and taxes is that deposit insurance premiums will be going up as more banks fail,” said Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine. He expects 300 U.S. banks to fail in the next several years, mainly because of mounting losses from real estate-related loans.  (Source:  Washington Post)

The number of lenders on the FDIC endangered list is growing, now at 90, as of the end of the first quarter, and up 14 from the prior quarter.  FDIC Chairman Sheila Bair says to expect 13 percent of these banks to outright fail, while the rest will likely be sold to other institutions.

Five more banks are on the FDIC “most warned” list.  These are the likely next candidates for an FDIC takeover due to liquidity concerns.  The banks receiving cease-and-desist orders in June were MetroPacific Bank in Irvine, California; Bank Haven in Haven, Kansas; Clarkston State Bank in Clarkston, Michigan; Columbus Bank and Trust in Columbus, Georgia: and Hastings State Bank in Hastings, Nebraska.

Chances are we will continue to see banks being taken over by the FDIC.  With the signing of the housing bill, we see more government “takeovers” via FHA loans and other means, so the bigger picture has the government taking on all of the risk of others’ mistakes.  The end result almost certainly means that every taxpayer will have to foot the bill.

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