On July 18, 2014 Eastside Commercial Bank, Conyers, Georgia, was closed. Referri
ID: 1092346 • Letter: O
Question
On July 18, 2014 Eastside Commercial Bank, Conyers, Georgia, was closed. Referring to the FDIC press releas:
(a) What happened to the deposits and depositors?
(b) As of March 31, 2014 what was the approximate value of assets and deposits?
(c) Assuming the deposits are the only liabilities, what was the value of equity as of March 31, 2014?
(d) The leverage of a financial institution is the ratio of assets to equity. What was the leverage as of March 31, 2014?
(e) As of March 31, 2014 what percent change in asset value (assuming deposit level to be constant) would have made the bank insolvent (zero value of equity)?
https://www.fdic.gov/news/news/press/2014/pr14058.html
Explanation / Answer
a.
Eastside Commercial Bank, Conyers, Georgia, was closed today by the Georgia Department of Banking & Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Community & Southern Bank, Atlanta, Georgia, to assume all of the deposits of Eastside Commercial Bank.
b.
As of March 31, 2014, Eastside Commercial Bank had approximately $169.0 million in total assets and $161.6 million in total deposits. In addition to assuming all of the deposits of Eastside Commercial Bank, Community & Southern Bank agreed to purchase approximately $104.7 million of the failed bank's assets
c.
Total liabilities and shareholders' equity
$
1,101,702
Longer term interest rate risk measured by the economic value of equity (EVE) on the other hand shows increased liability sensitivity and the promise of deterioration in profitability.
d.
The Company's tier 1 leverage ratio was 10.1% at March 31, 2014 and 9.5% at December 31, 2013. All capital ratios exceed regulatory minimums to be considered well capitalized.
Following quarter end, on April 23, 2014, the Company repaid the remaining$10,680,000 of its TARP preferred stock from the U.S. Department of the Treasury.
e.
Asset quality remained solid, and no provision for loan losses was necessary. The ratio of the allowance for loan losses to total non-covered loans remained sound at 1.75% at March 31, 2014.
Total liabilities and shareholders' equity
$
1,101,702
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