Just like you never want to hear a doctor say "oops" in the operating room, you never want to see a going-concern statement in a financial report about a company you own. Accountants throw these in when they've been over the books, talked to customers, and checked the horoscopes and have concluded there is "substantial doubt" about a company's ability to remain in business. In short, don't blame the accountants if the company files for bankruptcy protection.

You¿d reckon that a going-concern statement would be enough to send investors running to the exits, but it's not. True, many large institutions automatically bail when an existing company gets slapped with one of these, but many individuals (often wrongly) take a chance they know more than the bean counters.

During the tech boom of the late 1990s, many companies actually went public even though they had been hit with going-concern statements. Many of those companies subsequently disappeared. Enough said.

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Friday, October 10, 2008

FDIC Seizes Two More Banks

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Joanna Ossinger

FOXBusiness

Two banks -- one in Illinois and one in Michigan -- failed on Friday night, the Federal Deposit Insurance Corp. said, underscoring just how much the credit crunch is hurting financial institutions.

The FDIC said that depositors in both would continue to have uninterrupted access to their money, and they would still be insure. It estimates that the two failures will cost its insurance fund between $46 million and $53.5 million.

Meridian Bank in Eldred, Ill., which had $39.18 million in total assets and $36.88 million in total deposits, was closed by Illinois state officials, and the FDIC was named receiver of the assets. National Bank in Hillsboro, Ill., will assume all of Meridian’s deposits.

Meridian’s four offices, located in the Illinois cities of Altamont, Alton, Carlyle and Eldred, will reopen as National Bank branches on their next day open for business.

The FDIC said it estimates that the cost to its Deposit Insurance Fund for Meridian’s failure will be between $13 million and $14.5 million.

In addition, Main Street Bank of Northville, Mich., was closed by Michigan state officials, and the FDIC was named receiver. Monroe Bank & Trust of Monroe, Mich., will assume all of Main Street Bank’s deposits.

Main Street Bank had $98 million in total assets as of Oct. 7, and $86 million in total deposits. Monroe has agreed to pay a premium of 1% for the failed bank’s total deposits. Main Street Bank’s two offices will reopen Saturday morning as Monroe branches.

The FDIC said it estimates that the cost to its Deposit Insurance Fund will be between $33 million and $39 million.

Customers of either bank can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/banklist.html, or call the FDIC toll-free at 1-877-894-4713, today until 9 p.m.; Saturday from 9 a.m. to 5 p.m.; Sunday from 12 p.m. to 5 p.m.; and thereafter from 8 a.m. to 8 p.m. All times are Central Time.

These banks mark the 14th and 15th FDIC-backed institutions to have failed so far this year.