US authorities seized nine failed banks on Friday, the most in a single day since the financial crisis began.
US seizes nine failed banks
LOS ANGELES // US authorities seized nine failed banks on Friday, the most in a single day since the financial crisis began and the latest stark sign that substantial parts of the nation's banking industry are being crippled by bad loans. The move brought the total number of failed banks in 2009 to 115 ? their highest annual level since 1992 ? with analysts expecting more to come. Among the lenders seized Friday was Los Angeles-based California National Bank, in what was the fourth-largest US bank failure this year.
The largest institution to fail in the current financial crisis was Washington Mutual, which boasted US$307 billion (Dh1.1 trillion) in assets when it was shuttered in September 2008. US Bancorp on Friday acquired the nine banks that had been held by FBOP Corp, picking up $18.4bn in assets and $15.4bn of deposits. Visibly worried employees lined up to file into Cal National's head offices in the heart of a deserted downtown Los Angeles on a chilly Friday evening, where they had their employers' fate explained to them, regulators said.
"We're getting ready to turn everything over to US Bank," said Roberta Valdez, a spokeswoman for the Federal Deposit Insurance Corp, which helped supervise the transfer of FBOP's assets. "They will continue to operate as normal in the interim," she added, referring to lenders acquired from FBOP. US Bancorp ? which has been buying up distressed assets this year ? is picking up the lenders once owned by FBOP, a private Illinois group with over $18bn in assets that owned banks in Texas, Illinois, Arizona and California.
Cal National is FBOP's largest bank by branches. Others that will now go under the U.S. Bancorp umbrella included BankUSA, Citizens National Bank, Madisonville State Bank, North Houston Bank, Pacific National Bank, Park National Bank, San Diego National Bank, and the Community Bank of Lemont. "This transaction is consistent with the growth strategy that we have outlined many times in the past, which includes enhancing our existing franchise through low-risk, in-market acquisitions," said Rick Hartnack, vice chairman of consumer banking for U.S. Bancorp.
"This transaction adds scale to our current California, Illinois and Arizona footprints." In the "near future," all nine lenders' branches will be rebranded U.S. Bank, which is the California-focused unit of U.S. Bancorp's that operates a network of more than 770 branches across Illinois, Arizona and California. U.S. Bancorp did not specify what would happen to the new employees it inherits. Cal National operates 68 branches across Southern California with more than $7bn in assets. As of June 30, the lender maintained five times as much foreclosed property on its books and twice as many non-current loans as it had a year earlier, according to the Los Angeles Times, which first reported news of its evening takeover on Friday.
Cal National lost about $500 million on heavy investments in Fannie Mae and Freddie Mac preferred shares, the newspaper added, referring to securities rendered nearly worthless by the government takeover of the mortgage firms last year. *Reuters