FDIC

A new look at the banking sector shows huge losses in the first quarter of 2008. The Federal Deposit Insurance Corp., which insures bank deposits up to $100,000, reported that U.S. financial institutions earned $19.3 billion in the quarter, down 46 percent from $35.6 billion in the first quarter of 2007.

Earlier this year, the FDIC began trying to lure roughly 25 retirees like Holloway back to prepare for an increase in bank failures. It’s also hiring about 75 new staff.

In this slow economy, even banks are feeling the pinch. The FDIC shut down one northwest Arkansas bank system. Arkansas National Bank, that had nine branches in the Bentonville area was shut down Friday.

he number of banks in financial trouble nationwide is expected to grow this year, but any failures should be manageable, one of the country’s top banking regulators said Tuesday. New data on the Federal Deposit Insurance Corp.’s so-called troubled-bank list will show an increase over the current 76 banks on the list, Sheila Bair, chairman of the FDIC, said. But, she cautioned “that is not a big number” and that increase will not necessarily lead to a wave of bank failures.

Local law firm Venable LLP has pointed out two little-noticed signs that the government is taking aggressive measures to buttress a clearly overstressed financial system.

Federal banking regulators will hire 140 new employees in an effort to reassure the public they are well-positioned to deal with a possible increase in bank failures over the next year, the Federal Deposit Insurance Corp. said Tuesday. The agency will increase its staff by 60%, most of whom would be temporary and based in Dallas.

Federal regulators have ordered WSB Financial Group Inc. and its Westsound Bank subsidiary to make changes regarding its past lending practices.

Hume Bank, Hume, Missouri, was closed today by the Commissioner of Missouri's Division of Finance, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect depositors, the FDIC Board of Directors approved the assumption of Hume Bank's insured deposits by Security Bank, Rich Hill, Missouri. The failed bank's sole office will reopen Monday as a branch of Security Bank. Depositors of Hume Bank will automatically become depositors of the assuming bank. As of December 31, 2007, Hume Bank had total assets of $18.7 million and total deposits of $13.6 million. Security Bank has agreed to assume $12.5 million of the failed bank's insured deposits for a premium of 4.26 percent.

As if the economy wasn't already fighting enough strong headwinds, the risk of capital shortfalls and outright failure of the nation's banks is rising. The Federal Deposit Insurance Corp., the federal agency that backs bank deposits, last week reported the biggest jump in "problem institutions" it has seen since the savings and loan crisis of the late 1980s. While the extent of the problem is still low by historic standards, it identified 76 banks as in trouble - a 52% increase from a year ago.

Summary: The FDIC is proposing the attached two-part rulemaking relating to the potential failure of an FDIC-insured depository institution: The first part of the proposal would govern how and at what point deposit account balances would be determined in the event of a failure, and applies to all FDIC- insured depository institutions. The second part proposes requirements to facilitate the process for determining the insurance status of depositors of large insured depository institutions in the event of failure. Comments on the Notice of Proposed Rulemaking are due by April 14, 2008.