Illinois Bank Fails, No. 23 For the Year

Valley Community Bank, St. Charles, Illinois, has become the 23^rd bank to fail so far this year. The bank was closed Friday by the Illinois Department of Financial and Professional Regulation – Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.

In 2010 157 banks failed following 140 failures in 2009.

FDIC Chairman Sheila Bair has said she expects the number of failures to drop in 2011. In the FDIC's most recent quarterly report, released on Feb. 23, the agency said the number of banks on the "problem list" grew to 884 from 860 but that most were expected to survive.

Valley Community's failure continues the trend towards smaller banks failing. Larger banks have mostly recovered from the financial crisis, thanks in part to federal bail-out funds. Local banks are also being hard-hit by the slumping real estate market and a sluggish business climate.

To protect the depositors, the FDIC entered into a purchase and assumption agreement with First State Bank, Mendota, Illinois, to assume all of the deposits of Valley Community Bank.

Depositors of Valley Community Bank will automatically become depositors of First State Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits.

Customers of Valley Community Bank should continue to use their existing branches until they receive notice from First State Bank that it has completed systems changes to allow other First State Bank branches to process their accounts as well.

Depositors of Valley Community Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of December 31, 2010, Valley Community Bank had approximately $123.8 million in total assets and $124.2 million in total deposits. In addition to assuming all of the deposits of the failed bank, First State Bank agreed to purchase essentially all of the assets.

Customers who have questions about today's transaction can call the FDIC toll-free at 1-800-357-7599. Interested parties also can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/valleycomm.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $22.8 million. Compared to other alternatives, First State Bank's acquisition was the least costly resolution for the FDIC's DIF.

Valley Community Bank is the 23rd FDIC-insured institution to fail in the nation this year, and the second in Illinois. The last FDIC-insured institution closed in the state was Community First Bank-Chicago, Chicago, Illinois, on February 4, 2011.