March 19, the FDIC closed seven more banks bringing the total number of closures in 2010 to 37.  At this time last year, the FDIC had brought the curtains down on just 20 banks.  Many small community banks remain in trouble and the pace of bank closures is not likely to slow in the near future.

Included in the most recent group of bank deaths was State Bank of Aurora, First Lowndes Bank, Bank of Hiawassee, Appalachian Community Bank, Advanta Bank Corp, Center Security Bank and American National Bank.  In the case of Advanta Bank, the banks assets were apparently so ghastly that the FDIC was unable to find another bank willing to acquire the institution.  In these cases, which are quite uncommon, the FDIC executes its obligation to the insured depositors of the bank and mails checks for their insured amounts.  UFB Direct or Waterfield Bank suffered the same fate two weeks earlier and the depositors had their funds returned when an acquiring institution could not be bribed into taking over the bank by the FDIC.

Of the other six banks closed on Friday, all of these banks had their accounts transferred to other banks.  State Bank of Aurora had all deposit accounts transferred to Northern State Bank, Ashland, WI.  First Lowndes Bank had all deposit accounts transferred to First Citizens Bank, Luverne, AL.  Bank of Hiawassee had all deposit accounts, excluding certain brokered deposits, transferred to Citizens South Bank, Gastonia, NC.  Appalachian Community Bank had the deposit accounts transferred to Community & Southern Bank, Carrollton, GA.  Century Security Bank had the deposit accounts, excluding certain brokered deposits, transferred to Bank of Upson, Thomaston, GA.  And American National Bank deposit accounts, excluding certain brokered deposits, have been transferred to The National Bank and Trust Company, Wilmington, OH.

An interesting note which follows up on last weeks commentary regarding how bank closures or conversely how weak banks can impact bank CD rates when the FDIC closes these banks that have created imbalances in the market by offering CD rates that are higher than average rates, is the number of Georgia banks going out of business.  This past wave of closures included three banks based in Georgia, that’s 3 out of 7 banks closed last week in the seventh largest state by population. 

Georgia is one state that has had a number of banks offer certificate of deposit rates well above the national average.  This week, the highest six month CD rate available nationally is at 1.31%, the top five CD rates in Georgia with a six month terms exceed the highest national rate by 44 basis points or 44/100 of a percent.  The highest six month CD rate in Georgia comes in 1.80%, almost 1/2 a percent higher than the best national bank rate.  Continued bank closures in that state are sure to bring the numbers closer to the average.

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