Dedicated to Deposits: Deals, Data, and Discussion

Two Friday Bank Closures

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With a long weekend there had been speculations that there would be a high number of bank closures on Friday. It turned out the number wasn't high, but two small banks were closed. One was in Michigan and the other was in Illinois. In both closures all depositors, even those with over the FDIC limits, did not lose any money. All deposits were transferred over to the new banks. Some may wonder why the uninsured deposits would be covered. As I described in this post, it's likely due to the acquiring banks agreeing to assume these deposits.

Main Street Bank in Michigan was closed yesterday by the Michigan regulators, and the FDIC was named receiver. Here's the FDIC's press release link, and here's a summary of the closure:
  • Closed Bank: Main Street Bank
  • Location: Northville, MI
  • Size: 2 branches, $98 million assets, $86 million deposits
  • Possible Uninsured Deposits: ALL deposits transferred to acquiring bank
  • Acquiring Bank: Monroe Bank & Trust
  • Cost to Deposit Insurance Fund: between $33 million & $39 million
  • 2008 closures: 14th bank to be closed this year
  • Financial Ratings: 0 stars at BauerFinancial, 1 star at Bankrate.com
Meridian Bank in Illinois was closed yesterday by the Illinois regulators and the FDIC was named receiver. Here's the FDIC's press release link, and here's a summary of the closure:
  • Closed Bank: Meridian Bank
  • Location: Eldred, IL
  • Size: 4 branches, $39.18 million assets, $36.88 million deposits
  • Possible Uninsured Deposits: ALL deposits transferred to acquiring bank
  • Acquiring Bank: National Bank
  • Cost to Deposit Insurance Fund: between $13 million & $14.5 million
  • 2008 closures: 15th bank to be closed this year
  • Financial Ratings: 0 stars at BauerFinancial, 1 star at Bankrate.com
Here's the FDIC list of all the recent bank failures. For more info on FDIC coverage, please refer to my Facts about FDIC and NCUA post and my recent post on FDIC News, Resources and History. For the recent changes to FDIC coverage, please refer to this post

Thanks to the readers who sent me news of these closures.

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Comments
11 comments.
Comment #1 by Anonymous posted on
Anonymous
Someone is not telling the truth.
If the Bank A was assumed by Bank B, including all accounts and liabilities,
why there is a Cost to Deposit Insurance Fund between $33 million & $39 million on $86 million in deposits, that is over 30% in costs associated with the take over. If FDIC did not have to pay to any of the customer any money, where did the $33 million & $39 millions went?

1
Comment #2 by Anonymous posted on
Anonymous
Who said that the FDIC didn't cover any of the customer's money? If the FDIC covers insured deposits and the acquiring bank covers uninsured deposits, no depositors lose money, yet both institutions paid money.

1
Comment #3 by Anonymous posted on
Anonymous
Something is fishy here.

Main Street Bank had $98 millions in assets and $86 millions in deposits.
Why FDIC paid between $33 million & $39 million to the acquiring Bank. Assets were greater than the deposits.

Who pocketed the money and why?

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Comment #4 by Anonymous posted on
Anonymous
IS ANYONE OVERSEEING FDIC AND THEIR ACTIONS?

1
Comment #5 by Anonymous posted on
Anonymous
If someone gave me $100 millions in assets and $39 millions in cash just to assume $80 millions in insured liabilities I will take it any time.
FDIC made a mistake here.

1
Comment #6 by Anonymous posted on
Anonymous
When FDIC is named receiver in a take over, all of unsecured debt is wiped out.
Acquiring Bank gets free and clear title to the assets, yet FDIC paid enormous amount of money for a simple transaction.
FDIC is not doing it right.

1
Comment #7 by Jim (anonymous) posted on
Jim
Look in the press releases.


Main Street Bank had total assets of $98 million in total assets and $86 million in total deposits as of October 7, 2008.

Monroe Bank & Trust has agreed to pay a total premium of 1 percent for the failed bank's deposits. In addition, Monroe Bank & Trust will purchase approximately $16.9 million of Main Street's assets, and have a 90-day option to purchase approximately $1.1 million in premises and fixed assets. The FDIC will retain the remaining assets for later disposition.


and


Meridian Bank had total assets of $ 39.18 million in total assets and $ 36.88 million in total deposits as of September 25, 2008. National Bank will purchase approximately $7.55 million of Meridian's assets, and did not pay the FDIC a premium for the right to assume all of the failed bank's deposits. The FDIC will retain the remaining assets for later disposition.


It looks to me like the FDIC is getting suck with a lot of assets that the acquiring bank doesn't want (building, chairs, computers, etc.) and will try to sell later at an assumed loss. At least that's my guess.

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Comment #8 by Anonymous posted on
Anonymous
Sole purpose of FDIC is to insure and protect the consumers with deposits at the Banks. The Banks in this case did not failed but were taken over, which means FDIC acted as purchaser of the assets of the failed Banks.

Stupid idea, since the Banks still had working model and within the frame work of the banking regulations for assets and deposit safety ratio.

I think FDIC made a mistake and acted as preemption to possible failure, which made FDIC use insurance money for not failed deposits.

I think FDIC acted in bad faith or under pressure from other superiors to assert its influence, nothing more, nothing else.

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Comment #9 by Patrick McFarland (Diablo-D3) (anonymous) posted on
Patrick McFarland (Diablo-D3)
So, its official, FDIC finally declares Main Street bankrupt.

Best unfortunately named bank ever.

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Comment #10 by Anonymous posted on
Anonymous
I think both banks would have pulled trough if FDIC did not interfere in their business model.
To bad for the banks employees and families.
Nobody lost any money but us, the taxpayers. I think there should be overseeing body over FDIC brutal force approach to solving a non existent problem.

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Comment #11 by Anonymous posted on
Anonymous
All of this shows that there is bigger addenda in Government involvement in the banking system.
I feel that small banks are under pressure from Paulson to start using the FED windows for interbank loans or else. Hank and Ben are trying to assert themselves on the banking system and nationalize it. Those $700 billions will be used for that purpose, to purchase controlling shares of the banks.
The banks that resit such actions will be closed by FDIC period.

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