FDIC stops efforts to sell failed Silverton Bank
WASHINGTON — Federal regulators have abandoned efforts to sell failed Silverton Bank in Georgia to investors and are shutting the temporary “bridge bank” they set up to replace it last month.
Atlanta-based Silverton, which operated as a sort of wholesale bank, fell victim to large losses on real estate construction and development loans, and was closed by regulators on May 1.
The Federal Deposit Insurance Corp., the bank’s receiver that has been running it as a bridge bank, said Friday it will begin “an orderly wind-down” of Silverton and will offer for sale its component pieces, such as individual loans and assets.
“We will ensure that sufficient time is given to smoothly transition correspondent banking services to other providers,” FDIC spokesman Andrew Gray said in a statement.
Silverton provided services such as credit-card operations, investments and loan purchases to around 1,400 client banks. Silverton had been one of about 20 so-called “bankers’ banks” nationwide. About 400 institutions, mostly community banks, owned stock in Silverton’s holding company, Silverton Financial Services Inc. They were expected to take investment losses as a result of its failure.
Talks with a private equity group about a sale of the bank apparently failed to bring an agreement. The Wall Street Journal reported that a consortium led by private-equity fund Carlyle Group had been in discussions with the regulators about a possible sale. The Journal cited an unnamed person familiar with the situation.
Christopher Ullman, a spokesman for Washington-based Carlyle, declined to comment Friday.
The cost to the deposit insurance fund from Silverton’s failure will be $1.3 billion, according to the FDIC.
Gray said that before closing Silverton and being named receiver, the FDIC’s marketing efforts did not yield any interest in acquiring the bank. However, Silverton had undertaken a marketing effort before the closure “which was allowed to continue” until a sale of the whole bank was no longer feasible, he said.
The regulators have been shuttering failed banks and arranging the sale of their deposits and assets to other financial institutions. But in the case of Silverton, a buyer couldn’t immediately be found and the FDIC took the rarer step of creating the bridge bank.
An investor group including Carlyle and several other prominent firms — Blackstone Group, Centerbridge Partners and WL Ross & Co., the private-equity firm run by billionaire investor Wilbur Ross — agreed to buy failed Florida thrift BankUnited FSB for $900 million in a sale brokered by the FDIC that was announced May 21. Coral Gables-based BankUnited had about $13 billion in assets, and its resolution is expected to cost the federal insurance fund $4.9 billion.
Under terms of the sale, the FDIC and the new bank agreed to share losses on about $10.7 billion in assets.
Regulators this year already have closed 36 banks and thrifts, extending a wave of collapses that began in 2008. This year’s tally compares with 25 last ear and three in 2007.
The failures sliced the amount in the deposit insurance fund to $13 billion in the first quarter, the lowest level since 1993. That compares with $17.3 billion in the fourth quarter and $52.4 billion at the end of 2007. The FDIC expects U.S. bank failures to cost the insurance fund around $70 billion through 2013.
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