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Three Banks Closed, FDIC Levies New Fee

Three more community banks - two in Illinois and one in Washington - have succumbed to the nation's economic crisis, bringing the total number of ""failed institutions"":http://www.fdic.gov/bank/individual/failed/banklist.html for the year to 36. Not even midway through the year, and already the number of failed institutions in 2009 has outpaced the 25 banks that were shut down in all of 2008.
Both ""Citizens National Bank"":http://www.fdic.gov/bank/individual/failed/citizensnational.html in Macomb, Illinois, and ""Strategic Capital Bank"":http://www.fdic.gov/bank/individual/failed/strategiccapital.html in Champaign, Illinois, were closed Friday by federal and state regulators.
Citizens was acquired by Morton Community Bank of Morton, Illinois. Morton Community agreed to assume all of the failed institution's $200 million non-brokered deposits and $240 million of Citizen's $437 million in assets. The FDIC agreed to share in any losses incurred on a pool of approximately $200 million of the assets purchased.
Strategic Capital was acquired by Midland States Bank of Effingham, Illinois. Midland States agreed to assume all of Strategic Capital's $471 million deposits and purchase its $536 million in assets. The FDIC will share in the losses on approximately $420 million of the failed bank's assets.
""Westsound Bank"":http://www.fdic.gov/bank/individual/failed/westsound.html in Bremerton, Washington, was also closed recently by the Washington Department of Financial Institutions. Kitsap Bank of Port Orchard, Washington, agreed to take over the failed Westsound Bank's operations. Kitsap assumed the insolvent institution's $295 million in non-brokered deposits, as well as $49.3 million of assets comprised of cash, cash equivalents, marketable securities, and loans secured by deposits.
The FDIC has estimated that the failure of these three institutions, together, will cost it $387 million. The FDIC's Deposit Insurance Fund has taken a beating from the growing number of banks that have buckled under the pressures of a national recession. Last Thursday, the agency announced the ""closing of Florida's BankUnited"":http://dsnews.comindex.php/home/news_story/3003 - a failure which cost the FDIC $4.9 billion, its most expensive seizure since IndyMac nearly a year ago.
Congress tacked on an amendment to the Helping Families Save Their Home Act signed into law by President Barack Obama last week, which more than triples the FDIC's line of credit with the Treasury to $100 billion - a measure that was intended to help rebuild the agency's depleted insurance fund while keeping lenders' fees at a minimum.
But despite the new law, the FDIC announced on Friday that it will begin imposing a ""special levy on banks"":http://www.fdic.gov/news/news/press/2009/pr09074.html to counter the mounting losses the agency has incurred because of the significant rise in bank failures since the financial crisis began. The fee will be calculated based on an institution's assets minus its Tier 1 capital, and will be collected September 30.
FDIC Chairman Sheila Bair said, ""We have tried to strike the right balance between keeping the assessment low enough so that it does not unduly burden lending capacity with our longstanding commitment to cover all projected costs through industry assessments, not taxpayer borrowing."" But Bair also said that it is ""probable"" that it will be necessary to charge banks yet another special assessment in the fourth quarter of this year.
Donald E. Goetz, the president of DeMotte State Bank, an 11-branch community operation in the northwest part of Indiana, recently told the _""New York Times"":http://www.fdic.gov/news/news/press/2009/pr09074.html_ that he is bracing for a steep increase in his institution's overhead cost for the FDIC's insurance coverage. The _Times _reported that last year, DeMotte paid $42,000 into the agency's insurance fund. This year, because of failures in other parts of the country and particularly among national banks, DeMotte expects that amount to rise to $500,000 or more.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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