Dedicated to Deposits: Deals, Data, and Discussion

Another Bank Failure - a Small Ohio Bank

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A two-branch Ohio bank, Miami Valley Bank, was closed yesterday by Ohio's Superintendent of Financial Institutions, and the FDIC was named the receiver. According to this FDIC press release, the insured deposits will be assumed by The Citizens Banking Company. The branches will open today under this bank.

Out of the $76 million in total deposits, about $14 million in 269 accounts exceeded the FDIC limits. According to the FDIC:
While these customers will have access to their insured deposits, they will become creditors of the receivership for the amount of their uninsured funds. The FDIC will retain all of Miami Valley's assets for later disposition.

Perhaps many people just let their accounts build up over the years and forget about checking on it. Even if these depositors didn't want to move their money to other banks, they could have at least structured the accounts as joint accounts or revocable trust accounts to increase FDIC coverage. However, I wonder if this $14 million that the FDIC estimated has been checked for revocable trust accounts. According to this FDIC Q&A, accounts with over $100K may require review by an FDIC Claim Agent.

According to the FDIC the bank "was found to be in an unsafe condition." The Ohio Department of Commerce has additional details. The bank did have the lowest Safe & Sound star rating (1 out of 5) atBankrate.com.

Last Friday, NetBank was closed (see post). This is the third bank to fail this year. The first one was in Pennsylvania and was a lot like this Ohio bank (see post).

This FDIC page has the full details about the closure.

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Comments
5 comments.
Comment #1 by Anonymous posted on
Anonymous
Does anyone truly have the answer re FDIC insurance on joint accounts. I have been told by an employee answering the phone at FDIC that if it is a joint account with right of survivorship then the account actually has $200,000 of FDIC insurance, $100000 for each of the two depositor whose names are on the account.

However, employees at the bank sometimes say yes and sometimes say no that it is only a total of $100,000. So which is it and can anyone explain why opposite answers are given by bank employees?

It is important to know because obviously if one only has $100000 of insurance and has over $100000 but less than $200000 in the bank they could wind up losing anything over the $100000.

A detailed explanation from an expert would be great.

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Comment #2 by Anonymous posted on
Anonymous
Go to http://www2.fdic.gov/edie which is the Deposit Insurance Estimator(EDIE),on the FDIC web site. Go to the bottom of the page and click on "Walk me through" Then follow the instructions. When you are finished, you will see that a Joint Account is insured for $200,000

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Comment #3 by Anonymous posted on
Anonymous
To Anonymous 8:36A
FDIC insurance is $100k per depositor on joint account. Visit FDIC website for more info on fdic insurance for other types of accounts such as POD,trusts, etc.

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Comment #4 by Anonymous posted on
Anonymous
I strongly recommend that you go to the Edie calculator like the others have recommended and put in all of your accounts and see how much insurance you have. If you accurately enter ALL of your accounts, you will get the definitive answer.

Be very careful about statements like "if I have a type X account it is insured up to $y." Accounts are not insured. Depositors are insured. Statements like the above can yield different answers depending on how many other accounts you have.

For example, let's say John and Mary have a joint account for $200,000. Unknown to John, Mary still has a joint account with her father Fred that they opened when she was a little girl and that she has long forgotten about that also has $200,000 in it.

What happens if the bank goes bust?

John gets a check for $100,000.
Mary gets a check for $100,000.
Fred gets a check for $100,000.
The other $100,000 goes uninsured.

So which account had the uninsured $100,000? Which account had less than $200,000 insurance?

It's dangerous to say "an account is insured for $200,000" unless you know the complete picture of all the accounts that everybody owns. That can be part of the reason why you get what seem to be contradictory answers.

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Comment #5 by Anonymous posted on
Anonymous
Here is an even more perverse example to think about:

John and Mary have a joint account with $200,000.

Mary and Fred have a joint account with $100,000 at the same bank.

At first look, you say to yourself, there are three people and $300,000 on deposit, it must all be covered, right?
Wrong.

If the bank goes bust,
John gets $100,000,
Mary gets $100,000,
Fred gets $50,000.

The reason: Half of the money in Mary and Fred's account is deemed to belong to Mary and she's already used up her $100,000 coverage. Fred is only insured for his half of the account.

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