The Federal Deposit Insurance Corp. on Friday night seized SCB Bank, a Shelbyville institution with $183 million in assets. First Merchants Bank, headquartered in Muncie, is taking over all four SCB branches.
SCB is the third bank to fail in Indiana since the banking crisis developed three years ago, following Columbus-based Irwin Union and Evansville-based Integra. IBJ reported in November that SCB was at risk of being taken over because of a high proportion of problem loans, especially in its real estate and commercial-and-industrial portfolios. One of the customers who defaulted was Tim Durham, the Indianapolis financier now facing felony charges of orchestrating a Ponzi scheme.
SCB Bank's failure is expected to cost the government $33.9 million.
First Merchants said it is buying $117 million in SCB loans and assuming $136 million of its deposits. The deal with the FDIC excludes all development loans, land lands and all non-performing loans. The remaining assets were purchased for a $29 million discount and the deposits were assumed at no premium.
Under the deal, First Merchants also is buying SCB's main office building in Shelbyville for $1.4 million.
“As an Indiana-based community bank, we have a great deal of experience operating banks in county seat markets throughout the state," First Merchants CEO Michael Rechin said in a statement. "Shelby County’s demographic profile is consistent with many of our current Indiana markets and we understand how to service those markets very well."
Including SCB and a small Illinois bank also closed Friday by regulators, the total number of U.S. bank failures this year rose to nine, a slower pace than in 2011, when there were 92 bank closures. The Illinois bank was Charter National Bank and Trust, based in Hoffman Estates, with $93.9 million in assets and $89.5 million in deposits
The number of closures already had dropped sharply in 2011 from the two previous years, when banks were working their way through the bad debt accumulated in the recession. But by this time last year, regulators had shuttered twice as many banks—18.
In all of 2010, regulators seized 157 banks, the most in any year since the savings and loan crisis two decades ago. Those failures cost around $23 billion. The FDIC has said 2010 likely was the high-water mark for bank failures from the Great Recession.
In 2009, there were 140 bank failures that cost the insurance fund about $36 billion, more than in 2010 because the banks involved were bigger on average. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three were closed in 2007.
From 2008 through 2010, bank failures cost the fund $76.8 billion. The FDIC expects failures from 2011 through 2015 to cost $19 billion.
The deposit insurance fund fell into the red in 2009. With failures slowing, the FDIC's fund balance turned positive in the second quarter of last year.
By Sept. 30, the end of the federal government's most recent fiscal year, it stood at $7.8 billion.