Failed Puerto Rico Banks Posed Unique Task for FDIC

Federal Deposit Insurance Corp.The Federal Deposit Insurance Corporation seized seven more banks this week, with three in Puerto Rico representing nearly 30 percent of that island’s deposits, possibly the largest share of a single market affected since the savings and loan crisis 20 years ago.
The seven failures bring this year’s total bank closures to 64, a faster pace than in 2009 when 140 were seized.
In Puerto Rico’s market, the three failed banks held a total of $20.42 billion in assets and $14.84 billion in deposits. Finding buyers was a challenge because no bidders emerged from the U.S. mainland.
But in a press conference yesterday at the governor’s mansion on the island, FDIC Chairman Sheila Bair said she was impressed with the interest displayed by other institutions in Puerto Rico.
The island’s three failed banks were acquired by banks with a presence in the community – an important factor for the Office of the Commissioner of Financial Institutions of Puerto Rico, which initiated the closings.
“The bidding interest was stronger than anticipated, the ability of local institutions interested in bidding to raise capital that was not contingent capital was pretty phenomenal,” Bair said.
The FDIC chairman added that there are now “signs of repair” in the overall U.S. banking system that are encouraging, despite the accelerated pace of failures so far this year.
The island of Puerto Rico is not immune to the crisis in failing mortgages and bad commercial construction loans which fueled the failures.
Banco Popular de Puerto Rico, the island’s biggest bank, bought W Holding Co.’s Westernbank Puerto Rico, the biggest of the three failures. Oriental Financial Group, the island’s second-smallest bank, bought EuroBancshares’ EuroBank. And Canada’s Bank of Nova Scotia acquired R&G Financial Corp.’s R-G Premier Bank.
The FDIC and Banco Popular de Puerto Rico entered into a loss-share transaction on $8.77 billion of Westernbank Puerto Rico’s assets.
Typically in loss-share agreements, the FDIC will reimburse 80 percent of losses incurred by the acquiring bank on covered assets up to a stated threshold amount, which is generally FDIC’s estimate of the total projected losses on the loss-share assets. The acquiring bank normally picks up the remaining 20 percent in losses.
Here’s the FDIC’s recap of closures for this week:
Frontier Bank, Everett, WA with $3.50 billion in assets and $3.13 billion in deposits was closed. Union Bank, National Association, San Francisco, CA has agreed to assume all deposits, excluding certain brokered deposits.
BC National Banks, Butler, MO with $67.2 million in assets and $54.9 million in deposits was closed. Community First Bank, Butler, MO has agreed to assume all deposits.
 
Champion Bank, Creve Coeur, MO with $187.3 million in assets and $153.8 million in deposits was closed. BankLiberty, Liberty, PR has agreed to assume all deposits, excluding certain brokered deposits. 
CF Bancorp, Port Huron, MI with $1.65 billion in assets and $1.43 billion in deposits was closed. First Michigan Bank, Troy, MI has agreed to assume all deposits, excluding certain brokered deposits.
Westernbank Puerto Rico, Mayaguez, PR with $11.94 billion in assets and $8.62 billion in deposits was closed. Banco Popular de Puerto Rico, San Juan, PR has agreed to assume all deposits, excluding certain brokered deposits.
R-G Premier Bank of Puerto Rico, Hato Rey, PR with $5.92 billion in assets and $4.25 billion in deposits was closed. Scotiabank de Puerto Rico, San Juan, PR has agreed to assume all deposits, excluding certain brokered deposits.
Eurobank, San Juan, PR with $2.56 billion in assets and $1.97 billion in deposits was closed. Oriental Bank and Trust, San Juan, PR has agreed to assume all deposits, excluding certain brokered deposits.
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