U.S. authorities seized nine failed banks on Friday, the most in a single day since the financial crisis began and the latest stark sign that substantial parts of the nation’s banking industry are being crippled by bad loans.
The move brought the total number of failed banks in 2009 to 115 — their highest annual level since 1992 — with analysts expecting more to come. Among the lenders seized Friday was Los Angeles-based California National Bank, in what was the fourth-largest U.S. bank failure this year.
The largest institution to fail in the current financial crisis was Washington Mutual, which boasted $307 billion in assets when it was shuttered in September 2008.
U.S. Bancorp on Friday acquired the nine banks that had been held by FBOP Corp, picking up $18.4 billion in assets and $15.4 billion of deposits.
Visibly worried employees lined up to file into Cal National’s head offices in the heart of a deserted downtown Los Angeles on a chilly Friday evening, where they had their employers’ fate explained to them, regulators said.
“We’re getting ready to turn everything over to U.S. Bank,” said Roberta Valdez, a spokeswoman for the Federal Deposit Insurance Corp, which helped supervise the transfer of FBOP’s assets. “They will continue to operate as normal in the interim,” she added, referring to lenders acquired from FBOP.
U.S. Bancorp — which has been buying up distressed assets this year — is picking up the lenders once owned by FBOP, a private Illinois group with over $18 billion in assets that owned banks in Texas, Illinois, Arizona and California.
Cal National is FBOP’s largest bank by branches. Others that will now go under the U.S. Bancorp umbrella included BankUSA, Citizens National Bank, Madisonville State Bank, North Houston Bank, Pacific National Bank, Park National Bank, San Diego National Bank, and the Community Bank of Lemont.
“This transaction is consistent with the growth strategy that we have outlined many times in the past, which includes enhancing our existing franchise through low-risk, in-market acquisitions,” said Rick Hartnack, vice chairman of consumer banking for U.S. Bancorp.
“This transaction adds scale to our current California, Illinois and Arizona footprints.”
NEXT BIG HEADACHE
In the “near future,” all nine lenders’ branches will be re-branded U.S. Bank, which is the California-focused unit of U.S. Bancorp’s that operates a network of more than 770 branches across Illinois, Arizona and California.
U.S. Bancorp did not specify what would happen to the new employees it inherits.
Cal National operates 68 branches across Southern California with more than $7 billion in assets. As of June 30, the lender maintained five times as much foreclosed property on its books and twice as many non-current loans as it had a year earlier, according to the Los Angeles Times, which first reported news of its evening takeover on Friday.
Cal National lost about $500 million on heavy investments in Fannie Mae and Freddie Mac preferred shares, the newspaper added, referring to securities rendered nearly worthless by the government takeover of the mortgage firms last year.
According to FDIC data, Cal National was the fourth biggest bank failure this year in terms of assets, just edging out Corus Bank, seized Sept 11 with a flat $7 billion of assets.
A bank official who answered the main number at Cal National’s headquarters said they could not talk at the time.
Banks are still cleaning up their balance sheets from the recent credit boom that fueled banks’ appetite to extend loans, many with poor underwriting and triggers that caused borrowers’ payments to spike to unaffordable levels.
More lenders are expected to go under this year as the industry tries to get a handle on commercial real estate loans that will continue to worsen, as more strip malls go vacant and residential developments stall.
Banks held about $1.7 trillion in commercial real estate loans at the end of September, according to Federal Reserve data, or about 15 percent of their total assets. But to the extent these loans weaken, small banks are likely to be hit the hardest because larger banks were better diversified.
Banks that analysts say could risk big losses include Salt Lake City’s Zions Bancorp, Columbus, Georgia’s Synovus Financial Corp and Dallas-based Comerica Inc.
Before FBOP, U.S. Bancorp bought Downey Savings of Newport Beach and PFF Bank & Trust of Pomona when those thrifts failed last November, the newspaper said. Just this month, U.S. Bancorp bought 20 Nevada branches from BB&T Corp, which had acquired them as part of its deal to buy Colonial BancGroup Inc, it added.
Fox News launches desperate clean up effort after Mulvaney acknowledges Ukraine quid pro quo
Several Fox News hosts embarked on a large cleanup effort Thursday night in the hours after acting White House chief of staff Mick Mulvaney acknowledged that President Donald Trump withheld millions in military aid to Ukraine in an attempt to pressure the country to launch an investigation that could benefit him politically.
Pompeo now regrets not defending Ukraine ambassador as scandal ensnares the State Department: report
Sources are saying Secretary of State Mike Pompeo has become frustrated by the loss of some top officials and regrets his failure to defend the former ambassador to the Ukraine from a smear campaign.
One source said Pompeo failed to get involved because he was afraid of upending U.S.-Ukraine policy and be pushed out of the administration like former national security adviser John Bolton, reported CNN.
Trump’s selfish betrayal of the Kurds is not just outrageous — it’s criminal
Donald Trump’s decision to withdraw American forces from Syria may well be remembered as one of the most egregious and inhuman disasters that he has ever taken since he came to power. For a President of the United States to make such a critical decision with so many implications, simply based on a conversation with Turkish President Erdogan, not only shows his shortsightedness and total lack of strategic approach, but his inability to appreciate how that will adversely affect our friends and please our foes. We are already witnessing the unfolding disaster, and there are no words to explain how and by what logic the President of the United States in particular can take such critical steps, knowing how disastrous the repercussions of his actions would be.