Two More Banks Bite the Dust

Two Illinois Banks, holding combined assets of $974 million, were shut down Friday by federal regulators, marking the 35th and 36th US bank failures of 2009. Strategic Capital Bank and Citizens National Bank were both placed in receivership of the Federal Deposit Insurance Corporation. On behalf of Strategic Capital, the FDIC entered into a purchase and assumption agreement with Midland States Bank to assume all of Strategic Capital’s deposits, totaling approximately $471m. Midland States also agreed to purchase $536m of the failed bank’s assets. The remaining assets will be retained by the FDIC for later disposition. The FDIC and Midland States Bank agreed upon a loss-share transaction on approximately $420m of Strategic Capital Bank’s assets. The two institutions will share in the losses on the asset pools covered under the agreement. Number 36 Macomb, IL-based Citizens National Bank reopened on Saturday as Morton Community Bank, after the FDIC entered into a purchase and assumption agreement with Morton Community Friday to assume all of the deposits of this failed bank. As of Mid-May, Citizens National Bank had total assets of about $437m and total deposits of around $400m. Morton Community agreed to purchase $240m of the assets and the FDIC will retain the remaining assets for later disposition. Morton will also buy Citizen National’s deposits, excluding $200m in brokered deposits. Brokers will be payed directly by the FDIC, according to a statement Friday. The FDIC and Morton Community entered into a loss-sharing arrangement on $200m of Citizen National’s assets, where Morton Community will share in the losses on the asset pools covered under the agreement. In the case of both banks failures, the FDIC says there is no need for customers to change their banking relationship to retain deposit insurance coverage, as those deposits will continue to be insured by the FDIC. Costs from closing banks in the second quarter have climbed to more than $8bn, from $2.2bn in the first quarter, according to FDIC data. On Thursday, BankUnited Financial Corp. in Florida, went belly up, costing $4.9bn. Write to Kelly Curran.