Friday, October 24, 2008

Georgia's Alpha Bank & Trust Fails; Toll Rises to 16

Oct. 24 -- Alpha Bank & Trust of Alpharetta, Georgia, was closed by regulators today, the 16th U.S. bank seized this year amid a collapse in the housing markets that led to a $700 billion rescue plan to unfreeze financial markets.

Alpha, with $354 million in assets and $346 million in deposits, was shut by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corp. was named receiver. Stearns Bank, N.A., of St. Cloud, Minnesota, will assume deposits. Alpha's two offices north of Atlanta will open on Oct. 27 as branches of Stearns Bank, the FDIC said.

Regulators have closed the most banks in 15 years, and the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. were among the biggest in history. The housing slump and tight credit led to enactment of the bank-rescue plan, and triggered a bankruptcy by Lehman Brothers Holdings Inc. and nationalization of Fannie Mae and Freddie Mac.

Stearns is assuming Alpha's insured deposits and will acquire about $38.9 million, or 11 percent, of the failed bank's assets, the FDIC said. The agency will retain the remaining assets. Stearns didn't pay a premium, the FDIC said.

The cost to the FDIC's deposit insurance fund will be $158 million, the agency said.

The FDIC oversees 8,451 institutions with $13.3 trillion in assets, and insures deposits of as much as $250,000 per depositor per bank and the same amount for some retirement accounts. The agency has proposed doubling premiums charged to banks for coverage to replenish its reserves amid forecasts bank failures through 2013 will cost almost $40 billion.

WaMu, National City

Washington Mutual, the biggest savings and loan, sold its assets to JPMorgan Chase & Co. Sept. 25 after customers drained $16.7 billion in deposits in less than two weeks. Wachovia Corp., the sixth-biggest bank, agreed to be acquired by Wells Fargo & Co. for $11.7 billion, a deal that trumped an FDIC-brokered sale of banking operations to Citigroup Inc.

PNC Financial Services Group Inc., the biggest bank in Pennsylvania, today bought National City Corp. of Cleveland for about $5.2 billion, with $7.7 billion from the Treasury bailout fund. National City dropped 83 percent in trading before today.

The Treasury is buying preferred shares in nine banks: Citigroup, Wells Fargo, JPMorgan, Bank of America Corp., Merrill Lynch & Co. Morgan Stanley, Goldman Sachs Group Inc., Bank of New York Mellon Corp. and State Street Corp.

The FDIC is running a successor to California lender IndyMac, closed in July, and through this week had eased mortgage terms for more than 3,500 borrowers. The failure drained more than 10 percent from the U.S. insurance fund that had $45.2 billion at the end of the second quarter.

`Problem' Banks

The agency in August said 117 banks were classified as ``problem'' in the second quarter, a 30 percent jump from the first quarter. The agency doesn't name the ``problem'' lenders.

``Banks overall are very well capitalized,'' FDIC Chairman Sheila Bair told the Senate Banking Committee yesterday. ``We have some banks with some challenges, but the vast majority are well capitalized.''

The U.S. closed 27 banks from October 2000 through the end of last year, according to a list at fdic.gov.

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