Dedicated to Deposits: Deals, Data, and Discussion

20th Bank Failure of 2008 - The Community Bank, Georgia

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The Community Bank was closed today by Georgia 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: The Community Bank
  • Location: Loganville, GA
  • Size: 4 branches, $681 assets, $611 million deposits
  • Possible Uninsured Deposits: ALL deposits transferred to acquiring bank
  • Acquiring Bank: Bank of Essex
  • Cost to Deposit Insurance Fund: $200 to $240 million (estimated)
  • 2008 closures: 20th bank to be closed this year
  • Financial Ratings: 0 star at BauerFinancial, 1 star at Bankrate.com
There weren't any failures last Friday, so I didn't think we would get two Fridays in a row without a bank failure. This is the third straight failure in which all deposits, including uninsured deposits, were transfered to the new bank. So no depositors should lose any money.

The main risk for CD customers when a bank fails is that the new bank is allowed to change the rate, and it appears Bank of Essex has decided to do this. As described in this Q&A:
be advised that from and after the date of closing, the Bank of Essex will accrue and pay interest on deposit liabilities at a rate it shall determine; accordingly, the Bank of Essex shall permit depositors, including brokered depositors, impacted by reduced rates to withdraw their deposits without penalty for early withdrawal.

So even though the CD customer won't lose any principal or interest, he may lose out on future returns from a high yield. Also, there is a risk that there could be some delay before the new bank allows you to close the CD. A reader of a previous bank failure had his CD changed to a much lower rate at the date of the bank closure, and the new bank didn't provide for a quick way to close the CD by mail.

I couldn't find this bank in my archives so it appears I never posted on any of their deposit specials.

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 this closure.


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Comments
2 Comments.
Comment #1 by Anonymous posted on
Anonymous
Looks like Downey (Newport Beach, CA) made it through another week!

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Comment #2 by O-Qua Tangin Wann (anonymous) posted on
O-Qua Tangin Wann
Wrong!

U.S. Bank, National Association, Minneapolis, MN, acquired the banking operations, including all the deposits, of Downey Savings and Loan Association, F.A., Newport Beach, CA, and PFF Bank & Trust, Pomona, CA, in a transaction facilitated by the Federal Deposit Insurance Corporation.

The combined 213 branches of the two organizations will reopen as branches of U.S. Bank under their normal business hours, including those with Saturday hours. Depositors will automatically become depositors of U.S. Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.

Customers of both banks should continue to use their existing branches until U.S. Bank can fully integrate the deposit records of the organizations. Over the weekend, depositors can access their money by writing checks or using ATM or debit cards.

As of September 30, 2008, Downey Savings had total assets of $12.8 billion and total deposits of $9.7 billion. PFF Bank had total assets of $3.7 billion and total deposits of $2.4 billion. Besides assuming all the deposits from the two California banks, U.S. Bank will purchase virtually all their assets. The FDIC will retain any remaining assets for later disposition.

The FDIC and U.S. Bank entered into a loss share transaction. U.S. Bank will assume the first $1.6 billion of losses on the asset pools covered under the loss share agreement, equal to the net asset position at close. The FDIC will then share in any further losses. Under the agreement, U.S. Bank will implement a loan modification program similar to the one the FDIC announced in August stemming from the failure of IndyMac Bank, F.S.B., Pasadena, CA.

~O-Qua Tangin Wann

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