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Feds Close Two Banks

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Bank closures appear to be picking up. The Feds closed two banks yesterday:
  • First National Bank of Nevada, Reno, NV - Assets of $3.4 billion - Deposits of $3 billion (FDIC info)
  • First Heritage Bank, N.A., Newport Beach, CA - Assets of $254 million - Deposits of $233 million (FDIC info)

I last checked the FDIC website at 7:30pm EDT yesterday, and it looked like it was going to be a quiet Friday. The FDIC was working late yesterday.

As you can see from the FDIC list of failed banks, two closures on the same day are rare.

The FDIC press release does have some good news regarding these closures. All insured and uninsured deposits from both banks have been transferred to the acquiring bank:
All depositors, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Mutual of Omaha Bank for the full amount of their deposits.

So it appears no one will lose any of their deposits. The FDIC says this is only the second time in the last 10 closures in which a bank acquired all of the failing banks' insured and uninsured deposits.

Also part of this closure is First National Bank of Arizona which had recently merged into First National Bank of Nevada. These banks had been offering some attractive CD specials over the last few months. My lasts post was on June 13th. BauerFinancial had given it a rating of 2 stars (problematic) based on 3/31/08 data. Bankrate gave the bank its lowest rating of 1 star which was also based on 3/31/08 data. So Bankrate proved to be more accurate for this case.


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Comments
6 Comments.
Comment #1 by Bob (anonymous) posted on
Bob
It's nice that no depositors have to worry about losing money on this one.

1
Comment #2 by Anonymous posted on
Anonymous
Yes, that is nice. BUT it would be bad if that fact, true for 2 small bank closures, led to complacency among depositors. Many other closed banks have depositors who were uninsured and who did NOT get all their uninsured funds back. Depositors should learn the many very simple ways to increase FDIC insurance above $100K per account.

1
Comment #3 by Anonymous posted on
Anonymous
The two banks that were closed on the same day were part of the same bank holding company, even though they were in different states. Maybe that helps explain why they were closed together?

1
Comment #4 by Banking Guy (anonymous) posted on
Banking Guy
Yes, that's probably why they were closed on the same day and their deposits were acquired by the same bank.

1
Comment #5 by Anonymous posted on
Anonymous
For those of you who believe in DIF (Private insurance over 100K), read this:

DIF has never paid any money yet to anyone do to following facts:

a) In the agreement between the Bank and DIF are numerous exclusions for DIF to walk out of the obligations of paying to depositors.

b) DIF can disallow any payments if there is a slight allegation of fraud committed by the Bank, employees or management.

c) DIF can disallow any payments if there is a lawsuit of any kind directed at DIF or the Bank.

d) DIF can disallow any payments if there is a civil or criminal investigation of misconduct that adversely affects DIF.

e) DIF can disallow any payments if PODs or Trust accounts are not set properly or disallowed by State or Federal laws.

f) There are numerous other exclusions not to pay depositors and DIF is for profit oriented Corporations and are allowed to file for Bankruptcy if they can not pay the claims.

I would not count on DIF for protection over 100K at any Bank. DIF is just a smoke screen to lure naive depositors.

DIF are not directly controlled by FDIC or SEC and they work in the shadow of the banking laws.

1
Comment #6 by Anonymous posted on
Anonymous
I agree with the post at 9AM, July 27th.

I will add this:
The DIF has over $300 million in assets, plus an additional $100 million of reinsurance. During the recession of the early 1990s, the worst financial period in the history of the Massachusetts savings bank industry, the DIF paid out more than $50 million to protect over 6,500 depositors in 19 failed member banks but failed to pay on 11 other Banks the DIF insurance due to fraud at those 11 Banks and people lost lots of money.

It is a chicken feed in today's environment the $300 Mill in reserve that DIF has.
They will go Bankrupt even a small to medium size Bank goes under. There over $10 Billions over the FDIC insurance funds in personal deposits that depend on DIF coverage. Where the money will come from?

I would not count on DIF either. Send the money in different Banks with under $100K. That is the best insurance you can have.

1