Today, seven banks were put to sleep by the FDIC including SIX bank failures in Illinois alone (bringing that state's total to 12 in 2009 out of a total of 52 for the nation). This puts last weekend's total of five to shame and sets a 15+ year record for most bank failures in a single day. Interestingly, all six of the Illinois bank failures were controlled by one family, per the FDIC's press release:
The six failed Illinois banks are all controlled by one family and followed a similar business model that created concentrated exposure in each institution. The failure of these banks resulted primarily from losses related to the banks' investment in collateralized debt obligations and other loan losses.Our suspicion is either CLOs or, more likely CDOs of TruPS, which was a giant ratings agency blessed orgiastic daisy chain of banks funding other banks that were funding other banks compounded by structured finance technology (i.e., leverage). Apparently a few banks caught the hiv and, well, you can imagine how well these have done...
According to this Bloomberg article, the six Illinois banks are all affiliated with Peotone Bank & Trust Co. in Illinois. We are not sure where Bloomberg got that information, but if you're a large depositor at Peotone Bank, and this weekend you read the headlines that six of its affiliates were euthanized on Thursday, we have to imagine you get just a wee bit antsy.
As frequent TILB readers know, we are tracking the severity of the crisis by monitoring how much the FDIC expects to lose at failed banks as a percentage of the reported assets. In mid-2008, losses were averaging 20% of assets. More recently its been in the 30%+ range, which is an enormous number.
Let's look at how this week went:
Assets: $962mm, FDIC Losses: $188.5mm, Losses as a Percentage of Assets: 19.6%
Millennium State Bank of Texas
Assets: $118mm, FDIC Losses: $47mm, Losses as a Percentage of Assets: 39.8%
First National Bank of Danville
Assets: $166mm, FDIC Losses: $24mm, Losses as a Percentage of Assets: 14.5%
Elizabeth State Bank
Assets: $55.5mm, FDIC Losses: $11.2mm, Losses as a Percentage of Assets: 20.2%
Rock River Bank
Assets: $77mm, FDIC Losses: $27.6mm, Losses as a Percentage of Assets: 35.8%
First State Bank of Winchester
Assets: $36mm, FDIC Losses: $6mm, Losses as a Percentage of Assets: 16.7%
John Warner Bank
Assets: $70mm, FDIC Losses: $10mm, Losses as a Percentage of Assets: 14.3%
Straight Average Losses as a Percentage of Assets: 23.0%
Weighted Average Losses as a Percentage of Assets: 23.5%
We suppose this is "good" news as 23% average losses seems like a bit of an improvement (though still epically horrible). However, this week is a bit of a strange bird given that six of the banks are related to each other and all six were in pretty bad shape even if all six were not in the 30%+ camp. One of the six Illinois cousins was 30%+, one was 20%+, the largest bank was just under 20% and the other three were mid-teens. I suspect the reality is the FDIC knew if it closed one it would have to close all six. I am curious as to how Peotone survived and how much better its balance sheet is.
The Texas bank, on the other hand, is just a total shit show at almost 40% losses to assets. It almost seems impossible to lose that much money in banking.