By John
Poirier
WASHINGTON (Reuters) - U.S. regulators seized
Silverton Bank of Atlanta on Friday, a bank that
provided services to other banks and the biggest
bank failure so far this year, but officials said
the impact would be minimal.
Silverton had about 1,400 client banks in 44
states and provided services that included credit
card operations, clearing accounts and trading of
loans, including the real estate loans that were its
undoing.
The Federal Deposit Insurance Corp said it had
created a bridge bank to take over Silverton, saying
this would allow its client banks to maintain their
relationship with the least amount of disruption.
"This is not going to change the financial
make-up of any of the institutions doing
business" with Silverton, said Mitchell
Glassman, who heads the FDIC's resolutions and
receiverships division.
Silverton, with about $4.1 billion in assets and
$3.3 billion deposits, was the largest failure since
Downey Savings and Loan was seized in November with
about $12.8 billion in assets.
The FDIC said the failure is expected to cost its
deposit insurance fund about $1.3 billion.
Silverton's seizure was the 30th U.S. bank
failure so far in 2009 and was followed by news that
the FDIC had closed two other institution: Citizens
Community Bank of Ridgewood, New Jersey with assets
of about $45.1 million and America West Bank of
Layton, Utah with assets of about $299.4 million.
An FDIC official blamed Silverton's collapse on
about $1 billion in soured commercial real estate
loans.
"Those loans experienced significant losses
due to credit quality deteriorating," Pamela
Farwig, associate director of the FDIC's
receivership unit, told a conference call with
reporters.
As a so-called correspondent bank, Silverton did
not take deposits directly from the general public
nor did it make loans to consumers. It was owned by
about 400 shareholder banks, described by the FDIC
as mostly small, community banks.
The FDIC said it will hold a conference call with
Silverton's client banks on Saturday.
Silverton is one of about 20 U.S. banks that
provide services to other banks. Although it is the
first such bank to fail, its woes echo those of two
wholesale credit unions seized by U.S. officials in
March.
Silverton changed its primary regulator from the
Federal Reserve to the U.S. Office of the
Comptroller of the Currency (OCC) in August 2007
allowing it expand its activities.
During the U.S. housing boom, Silverton began
selling pieces of larger loans to smaller bank
customers. It created a large loan portfolio that
was concentrated in residential construction and
development lending, regulators said.
In February, the OCC ordered Silverton to adopt a
sweeping restructuring plan. It also demanded the
bank lower its loan risk and better manage its
earnings, performance and capital. Continued...
