US banking failures top 120 for the year
United Commercial Bank, a big San Francisco bank with branches in China, was closed by state regulators this weekend and its operations were acquired by East West Bancorp, also active in both nations.
East West said the transaction made it the second-largest independent bank in California. Based in Pasadena, East West has 137 US branches, including offices in New York, Atlanta, Boston and Seattle, and four in China.
United Commercial Bank, with assets of $11.2bn, was the 120th US bank to fail this year. Regulators closed four other banks on Friday, in Georgia, Michigan, Missouri and Minnesota. Failures already were the highest since 1992.
Banks are struggling to clean up their balance sheets as loans made during the credit boom continue to deteriorate. The FDIC has said the pace of failures will remain elevated through next year. Last year 25 institutions were closed by regulators, compared to three in all of 2007.
Dominic Ng, chief executive of East West Bank, said the transaction was “a transformational event” that strengthened his bank’s position. East West’s assets increased to $19bn, from $12.5bn.
United Commercial Bank had 63 US branches, a branch in Hong Kong and a subsidiary, UCB-China, in Shanghai. They will reopen as part of East West Bank.
China’s Banking Regulatory Commission said UCB-China had ample liquidity and capital. It said the bank had total assets of 2.667bn yuan. With liabilities of 1.754bn, its net assets were £913m yuan, the regulator said in a statement posted on its website. The CBRC said it would work closely with the Federal Deposit Insurance (FDIC) to maintain the stability of UCB-China.
It said it had conducted a preliminary examination of East West Bank’s fitness to take over UCB-China and was now deliberating on the matter in accordance with Chinese laws.
The California Department of Financial Institutions cited inadequate capital and other weaknesses in closing United Commercial Bank. The agency said the bank had been unable to increase its capital reserves sufficiently.
US BANK FAILURES
FINANCIAL
MELTDOWN CLAIMS DOZENS OF SCALPS
The collapse of United Commercial Bank marked the 120th US bank failure this year. The latest to go include:
United Security Bank, of Sparta, Georgia, with assets of $157m. Ameris Bank, of Moultrie, Georgia, agreed to assume all the deposits. FDIC and Ameris Bank entered a share-loss transaction on approximately $123m of United Security Bank’s assets.
Home Federal Savings Bank, of Detroit, with $14.9m in assets and $12.8m in deposits. Liberty Bank and Trust, of New Orleans, agreed to assume all the deposits and essentially all of the assets.
Gateway Bank of St Louis, of St Louis, Missouri, with $27.7 m in assets. The bank’s sole office was due to reopen on Saturday as a branch of Central Bank of Kansas City, Missouri, which assumed Gateway’s assets.
Prosperan Bank, of Oakdale, Minnesota, which had assets of $199.5m and deposits of $175.6m. FDIC entered an agreement with Alerus Financial, National Association, of Grand Forks, North Dakota, to assume all of Prosperan’s deposits. It purchased approximately $173.9m of Prosperan’s assets in a share-loss agreement with FDIC.
The FDIC insurance fund’s balance went negative as of the end of the third quarter, but the FDIC is careful to emphasise that it has plenty of access to cash to operate and protect bank deposits. The agency has estimated the total cost of failures will reach $100bn from 2009 through 2013.
The FDIC board will meet next week to finalise its proposal to have banks prepay three years of industry assessments, which would give the government cash to handle the rising tide of bank failures.
During the current financial crisis, Seattle-based lender Washington Mutual became the biggest bank to fail in US history. It had $307bn in assets when it was closed in September 2008 while suffering from losses from soured mortgages and liquidity problems.