Another Bank Fails And The FDIC Takes Over The Deposits

Calibre
Posted: 2008-03-12 17:31:16

Press Release

FDIC Approves the Assumption of the Insured Deposits of Hume Bank, Hume, Missouri

March 7, 2008 -

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.

At the time of closing, Hume Bank had approximately $1.1 million in 33 deposit accounts that exceeded the federal deposit insurance limit. These customers will have immediate access to their insured deposits, and they will become creditors of the receivership for the amount of their uninsured funds.

Over the weekend, customers can access their money by writing checks, or by using their debit or ATM cards. Checks drawn on the bank that did not clear before today will be honored up to the insured limit.

Customers with questions about how deposit insurance works, or who would like more information about the failure, can either call the FDIC toll-free at 1-866-806-6128 or visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/Hume.html. The toll-free number will be operational until 9:00 p.m. (Central time) this evening. Beginning tomorrow and into the following week, the number will operate daily from 9:00 a.m. to 6:00 p.m., Central time.

In addition to assuming the insured deposits of the failed bank, Security Bank will purchase approximately $2.7 million of Hume Bank's assets. The FDIC will retain the remaining assets for later disposition.

At this time, the FDIC does not have an estimate for the cost of this transaction to its Deposit Insurance Fund. Both failures of FDIC-insured banks this year have been in Missouri. The first was Douglass National Bank, Kansas City, Missouri, on January 25, 2008.

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Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 8,534 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars - insured financial institutions fund its operations.

Media Contact:

David Barr (202) 898-6992

cell: (703) 622-4790

e-mail: dbarr@fdic.gov

Another Missouri Bank Fails

The Missouri Division of Finance and the FDIC on Friday announced the closing of Hume Bank, of Hume, Mo., with the FDIC being named receiver. All of the institution's insured deposits were taken over by Security Bank of Rich Hill, Mo.

This is the second bank failure this year. The first was Douglass National Bank, of Kansas City, in late January.

TheStreet.com had downgraded Hume Bank to a D rating (weak financial strength) in December 2007. We now know that our rating was based on false information, the extent of which was only recently discovered by bank examiners.

According to D. Eric McClure, the Missouri Commissioner of Finance, there was "some widespread mismanagement" at Hume Bank, by its former management, which was replaced last summer. Problem loans were under-reported and the bank was even creating false records to indicate that payments were received when they were never collected.

Hume Bank's former president, Jeffrey W. Thompson was banned from the industry by Mr. McClure's office in August 2007.

Mr. McClure stated that the bank's new management had signed its December 31, 2007 call report in good faith, but the extent of the former management's improprieties was not discovered until recently. The losses from problem loans "exhausted the bank's capital and ultimately resulted in its failure."

The institution had $1.1 million in uninsured deposits. While depositors had immediate access to insured funds through Security Bank, they became creditors to the receivership for any uninsured balances. Any money recovered on uninsured balances after a bank failure is termed a "dividend."

In some bank failures, depositors have received immediate dividends for a portion of their uninsured deposits. However, David Barr, the FDIC's assistant director for public affairs confirmed that there would be no advance dividends for Hume Bank's uninsured depositors.

When asked about the likelihood of the depositors recovering a significant portion of uninsured balances, Mr. McClure said he was "not optimistic in this case."

TheStreet.com provides conservative, objective financial strength ratings for all U.S. banks and S&Ls. While you may feel no need to worry about your bank's health if you have deposits of less than the FDIC's standard $100,000 limit, chances are that you or someone you know is associated with a business, school district or other entity with large deposits in a local bank.

You can quickly check your institution's rating using the ratings screener.