California Loans News

The country’s regulators had closed down San Joaquin Bank of Bakersfield, California. This is the 99th bank insured by the federal government to have failed. The count this year is very massive compared with only 25 federally insured bank failures in 2008. And it was much lesser in 2007 with only 3 banks.

Federal Deposit Insurance Corporation’s (FDIC) list of failing banks increased from 305 in first quarter to 416. Since 1994, this has been the highest number of banks affected by the savings and loan crisis. The FDIC still expects more failures for banks over the next half decade. This is projected to cost more or less $70 billion. Moreover, according to the FDIC, most banks nationwide have lost $3.7 billion only during to the second quarter despite the gains of $7.6 billion in the previous quarter.

San Joaquin Bank is a subsidiary of San Joaquin Bancorp. As of September 29, the bank had estimated $775 million in assets, $631 n deposits and 5 branches. The bank may have seem to be thriving as it was not then included in a previous list of undercapitalized 89 financial institutions as of March 31. However, the bank’s first quarter report filing was amended, reflecting additional loan charge-offs. It also included a higher net loss.

San Joaquin Bank’s Tier 1 leverage ratio was 4.12 percent as of June 30, while its total risk-based capital ratio was 6.70 percent. Despite its leverage ratio surpassing the minimum level of 4 percent, its risk-based capital ratio was much lower than the 8 percent required. This failure also represented collapse for the FDIC, as it was the bank’s appointed receiver. The failure is projected to amount to estimated $103 million.

Another bank based in California Citizens Business Bank would assume all the deposit accounts made with San Joaquin Bank. Citizens Business Bank is a subsidiary of CVB Financial.

Meanwhile, the FDIC insures deposit accounts at more than 8,000 financial institutions, and a rough approximation of $13.5 trillion in assets. When one bank fails, the FDIC through the institution reimburses the customers’ deposits. It could be up to $250,000 per account. And since there is a current toll of failed banks, the regulator’s deposit insurance fund has been stretched too far. Again last June 30, the fund corpus was at its lowest since 1993, amounting to $10.4 billion. From the previous quarter, it was $13 billion.

Concurrently, the FDIC board proposed a plan to augment replenishing of its funds. It is targeted that U.S. banks would pay fees in advance for three years. Another measure is that the regulators are “considering requesting the healthy banks to bail out the government as soon as it is necessary to replenish the deposit insurance fund.” The deposit insurance fund has declined to 0.22% of insured deposits. It was way lower than the mandated minimum of 1.15%.

The Zacks Equity Research said, “Though current signals indicate that the economy may stabilize, we expect loan losses on commercial real estate portfolio to remain high for banks that hold large amounts of high-risk loans.”

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