Archive for Saturday, August 23, 2008

Regulators shut down Columbian Bank in Kansas

August 23, 2008


— Federal regulators on Friday shut down Kansas bank Columbian Bank and Trust Company.

The Federal Deposit Insurance Corp. was appointed receiver of Columbian Bank of Topeka, which had $752 million in assets and $622 million in deposits as of June 30.

The FDIC said the bank's deposits will be assumed by Citizens Bank and Trust of Chillicothe, Mo. Its nine offices will reopen Monday as branches of Citizens Bank. Depositors of Columbian Bank will continue to have full access to their deposits, the agency said.

It was the ninth failure this year of an FDIC-insured bank.

That compares with three failures in all of 2007. More banks are in danger of failing this year, agency officials have said.

The FDIC estimated the resolution of Columbian Bank will cost the deposit insurance fund around $60 million.

Regular deposit accounts are insured up to $100,000.

There were about $46 million in uninsured deposits held in 610 accounts at Columbian Bank that potentially exceeded the insurance limit, the FDIC said.

Concern has been growing over the solvency of some banks amid the housing slump and the steep slide in the mortgage market.

The pressures of tighter credit, tumbling home prices and rising foreclosures have been battering many banks, large and small, across the nation.

The FDIC has been beefing up its staff of examiners to handle the anticipated spike in bank failures this year. agency.

The largest bank failure by far this year has been that of savings and loan IndyMac Bank, which was seized by regulators on July 11 with about $32 billion in assets and deposits of $19 billion.

The seizure of Pasadena, Calif.-based IndyMac, which was the largest regulated thrift to fail in the United States, prompted hundreds of angry customers to line up for hours in Southern California to demand their money. IndyMac also was the second-largest financial institution to close in U.S. history, after Continental Illinois National Bank in 1984.

The FDIC has been operating the bank, now called IndyMac Federal Bank, under a conservatorship.

FDIC officials have said the agency expects to raise insurance premiums paid by banks and thrifts to replenish its reserve fund after paying out billions of dollars to depositors at IndyMac. The fund, at $53 billion, is expected to take a hit from IndyMac of $4 billion to $8 billion.

FDIC Chairman Sheila Bair said recently she expects turbulence in the banking industry to continue well into next year, and more banks to appear on the agency's internal list of troubled institutions.

Of the 8,500 or so banks in the country, 90 were considered to be in trouble in the first quarter. The FDIC doesn't disclose the banks' names.

Only 13 percent of banks that make the list fail, on average, and most are nursed back to health or acquired by stronger institutions, according to Bair.

Federally insured banks and thrifts set aside a record $37.1 billion to cover losses from soured mortgages and other loans in the first quarter, when profits were nearly halved.


Godot 9 years, 9 months ago

This is a huge story for Kansas. Columbian Bank & Trust has been in Topeka since 1920, and its business relationships are deep and strong. There could be many ripples from this."....As of June 30, Columbian Bank & Trust had $752 million in assets and total deposits of $622 million, of which there were approximately $46 million in uninsured deposits held in approximately 610 accounts that potentially exceeded the $100,000 insurance limit, the FDIC said. This amount is an estimate that is likely to change once the FDIC obtains additional information, the FDIC said.Columbian Bank & Trust also had approximately $268 million in brokered deposits that aren't part of Friday's transaction. The FDIC will pay the brokers directly for the amount of their insured funds.Customers with accounts in excess of $100,000 should contact the FDIC at (800) 523-8209 to set up an appointment to discuss their deposits. The phone number will be operational today from 9 a.m. to 6 p.m., Sunday from 11 a.m. to 5 p.m. and thereafter from 8 a.m. to 8 p.m.Citizens Bank and Trust agreed to assume the insured deposits for a 1.125 percent premium. It also will purchase $85.5 million of the failed bank's assets. The assets are comprised mainly of cash, cash equivalents and securities. The FDIC will retain the remaining assets for later disposition.The cost to the FDIC's Deposit Insurance Fund is estimated to be $60 million."

Steve Bradt 9 years, 9 months ago

It would have been interesting to have a little more information as to precisely why the bank failed and and what criteria the FDIC uses to "fail" the bank following their examination

Godot 9 years, 8 months ago

The repercussions of this bank failure are just beginning to be felt:" Sep.109:07 AM ET 2 hours agoWarren Buffett Appears to Be Worried About Future Bank FailuresPosted By:Alex CrippenTopics:Credit | Warren BuffettSectors:Insurance | BanksCompanies:Berkshire Hathaway Inc.A Berkshire Hathaway subsidiary's move to stop insuring bank deposits above federal limits apparently reflects Warren Buffett's worries about future bank failures.Several reports say that Kansas Bankers Surety in Topeka is getting out of the business of backing deposits above the $100,000 limit guaranteed by the Federal Deposit Insurance Corp. for many bank accounts.And the Wall Street Journal says this morning that the decision came from Buffett himself. "Two people briefed on the matter said the order was made Monday by Mr. Buffett."While a KBS executive confirmed to the Journal that the company isn't writing any new policies and will work with banks to eliminate existing policies, he wouldn't "confirm or deny Mr. Buffett's involvement, calling it 'strictly rumor.'"In its story on the KBS move, the Kansas City Star quotes the president of the Missouri Bankers Association as saying the decision appears to have been made "somewhere up the chain."And the Oklahoman suggests that when it comes to the glass half-full vs half-empty debate over the credit crisis, Buffett may believe the "glass is cracked."That newspaper quotes Roger Beverage, president and CEO of the Oklahoma Bankers Association, as saying, "Apparently Mr. Buffett thinks there is a possibility of more bank failures not covered by FDIC. That's a huge blow for any community bank that had those coverages." He calls the KBS decision "stunning."The Oklahoman notes that many smaller community banks use supplemental insurance for their larger deposits to "assure customers that their deposits are as safe as those in much larger institutions." [snip]"[snip]...KBS insured some of the deposits at the Columbian Bank and Trust in Topeka and lost money when that bank failed in late August with $46 million in deposits that potentially exceeded government insurance limits. "

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