CHARLOTTE, N.C. (AP) - Regulators on Friday shut down Strategic Capital Bank in Illinois, marking the 35th failure this year — and second this week — of a federally insured bank.
The Federal Deposit Insurance Corp. was appointed receiver of the bank, based in Champaign, Ill. It had $537 million in assets and $471 million in deposits as of May 13.
The closure was the second this week, after the federal regulators seized struggling Florida thrift BankUnited FSB on Thursday. That closure is expected to cost the FDIC $4.9 billion, representing the second-largest hit to the FDIC's insurance fund since the financial crisis began felling banks last year.
The costliest was last year's seizure of California lender IndyMac Bank, on which the bank insurance fund is estimated to have lost $10.7 billion.
The closure of Strategic Capital Bank is expected to cost the FDIC $173 million.
The FDIC said all of the bank's deposits will be assumed by Midland States Bank, based in Effingham, Ill.
In addition to acquiring the failed bank's deposits, Midland States Bank agreed to purchase about $536 million in assets. The FDIC will retain the rest for eventual sale.
Strategic Capital Bank branches will reopen Tuesday as a branch of Midland States Bank.
Strategic Capital Bank customers can still write checks and use ATM or debit cards, and loan customers should continue to make their payments as usual. The FIDC will continue to insure deposits. Regular deposit accounts are insured up to $250,000.
The latest bank to fail in Illinois was Heritage Community Bank in Glenwood on Feb. 27.
The list of bank failures is growing as falling home prices and rising unemployment cause more individuals and businesses to default on their debt. The 35 bank failures this year in the U.S. compare with 25 in 2008 and just three in 2007.
As the economy nationwide has soured, amid rising unemployment, tumbling home prices and soaring loan defaults, bank failures have cascaded and sapped billions out of the deposit insurance fund. According to the most recent data available, the fund now stands at its lowest level in nearly a quarter-century — $18.9 billion as of Dec. 31, compared with $52.4 billion at the end of 2007.
The FDIC expects that bank failures will cost the insurance fund around $65 billion through 2013.
The FDIC has planned to impose a new emergency fee on U.S. banks to replenish the fund. Legislation passed by Congress this week boosts the FDIC's authority to borrow from the Treasury Department if needed from $30 billion to $100 billion, allowing the agency to reduce the amount of the insurance fees.
The failure of IndyMac, which had $32 billion in assets, was the second-largest last year, trailing only the September collapse of Washington Mutual Inc.
Thrifts have been the most troubled regulated institutions during the financial crisis and among the most spectacular failures. By law, they must have at least 65 percent of their lending in mortgages and other consumer loans — making them particularly vulnerable to the housing downturn. Seattle-based thrift Washington Mutual was the biggest bank to collapse in U.S. history, with around $307 billion in assets. It was later acquired by JPMorgan Chase & Co. for $1.9 billion.
Strategic Capital Bank customers with questions can call the FDIC toll-free at 866-954-9527. |