MAY 15, 2010
By ROBIN SIDEL, Wall Street Journal
State regulators shuttered small banks in Illinois, Missouri, Georgia and Michigan, including a 23-branch community bank that failed despite having received an infusion from the government's Troubled Asset Relief Program.
So far this year, 72 banks have collapsed and the spate of failures is expected to continue throughout 2010. Although there are signs that the worst of the financial crisis may be over for the banking industry, financial institutions are still being battered by severe losses on mortgages and commercial real-estate loans.
In the largest of Friday's closures, Illinois regulators closed Midwest Bank & Trust Co. of Elmwood Park. FirstMerit Corp., based in Akron, Ohio, agreed to take over Midwest's 23 branches, $2.42 billion in deposits and essentially all of its $3.17 billion in assets.
Midwest had been warning for months that it was in dire financial straits. On Thursday, the bank said in a securities filing that it would likely be placed into receivership because it had been unable to raise fresh capital after a previous plan had been rejected by the Federal Reserve.
Its failure is a financial blow to the government, which had previously swapped the preferred shares that it held in Midwest for common shares. The government had received the preferred shares when it injected Midwest with $84.8 million of TARP funds. Common shareholders typically are wiped out when a bank fails.
FirstMerit, which has been a bidder on other failed banks, agreed to pay the Federal Deposit Insurance Corp. a premium of 0.4% for Midwest's deposits. FirstMerit also entered into a loss-sharing transaction on $2.27 billion of Midwest's assets.
As part of the deal, the FDIC will receive a so-called value appreciation instrument, which will provide the agency with additional money if FirstMerit's share price rises over a certain amount of time.
Midwest was the 11th bank to fail in Illinois so far this year.
Elsewhere, regulators in Georgia, Illinois and Michigan closed three one-branch banks.
In Georgia, state regulators seized Satilla Community Bank, of Saint Marys, Ga. Ameris Bank, based in Moultrie, Ga., agreed to assume all of the deposits and most of its assets. Satilla had $135.7 million in assets and $134 million in deposits at March 31.
Ameris, which is paying a premium of 0.19% to assume Satilla's deposits, also entered into a loss-sharing agreement with the FDIC. It was the eighth bank failure of the year in Georgia.
Michigan regulators closed Plymouth-based New Liberty Bank, which had roughly $109.1 million in assets and $101.8 million in deposits. Bank of Ann Arbor, based in Ann Arbor, assumed all of the deposits and agreed to buy nearly all of the assets. It didn't pay a premium for the deposits.
In Missouri, regulators closed Southwest Community Bank, based in Springfield. Its $96.6 million in assets and $102.5 million in deposits are being assumed by Simmons First National Bank, of Pine Bluff, Ark.
The FDIC estimated the four failures would cost $301.7 million to its deposit insurance fund.
Write to Robin Sidel at robin.sidel @wsj.com