Dedicated to Deposits: Deals, Data, and Discussion

14th Bank Failure of 2009: Silver Falls Bank in Oregon

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Only one bank was closed yesterday. This was a slowdown compared to last Friday when 4 banks were closed. The failed bank was closed by Oregon 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: Silver Falls Bank
  • Location: Silverton, OR
  • Size: 3 branches, $131.4 million assets, $116.3 million deposits
  • Possible Uninsured Deposits: ALL deposits Transferred
  • Acquiring Bank: Citizens Bank, Oregon
  • Cost to Deposit Insurance Fund: $50 million (estimated)
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
Oregon regulators described the reason for the closure in their press release:
Silver Falls Bank had been experiencing critically low levels of capital, and ultimately, became insolvent. The bank's problems resulted primarily from a heavy dependence on commercial construction loans, many of which were of poorer quality and were not performing or being repaid when the economy deteriorated.

This closure involved another All-Deposit Transfer transaction in which all deposits, even those above the FDIC limits, were transferred to the assuming bank. So no depositor should have lost any money. This includes brokered deposits.

Another thing common with this closure is that the assuming bank hasn't decided if it will honor existing CD rates to maturity. Here's what Q&A #5 states:
Be advised, however, that from and after the date of closing, the Citizens Bank will accrue and pay interest on deposit liabilities at a rate it shall determine; accordingly, the Citizens Bank shall permit depositors, including brokered depositors, to withdraw their deposits without penalty for early withdrawal.

As this shows, one risk of having your money in a failed bank is the loss of the rate lock. If you had a high-rate long-term CD, it's going to be difficult to find something comparable in today's low-rate environment.

References:
Thanks to the readers who emailed me news of this closure.

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Comments
4 comments.
Comment #1 by Anonymous posted on
Anonymous
Whew!! Thanks, Banking Guy. I dodged another bullet yesterday. I was afraid Corus Bank might take the fall. When Corus Bank goes down, I go down with it! I have to hold by breath each Friday for another seven months. Not sure I'll make it. And I don't expect Corus Bank to make it, either. :-(

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Comment #2 by Anonymous posted on
Anonymous
Since Corus bank hasn't closed its doors, you should be able to move some of your money to other banks. But if your money is in CDs, then you would have to pay the early withdrawal penalties for pulling your money out. As long as you are not over the FDIC limit, you should be ok even if it is shut down. But if you are, then you will have to see how the FDIC works through the accounts.

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Comment #3 by Anonymous posted on
Anonymous
Hey there, 12:41, relax and chill. You are behind the curve! Only last Wednesday Corus Bank entered into a critical agreement with the big boyz. I'll try to copy the URL here, not sure how it will come out:

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=PR&date=20090218&id=9623456

Find a way to put that into your browser, read the article, then kick back and have a good day!!!!! :-)

And BTW, no need to thank me. I'm always happy to be of service!!!! Ha Ha!

Grizzley Bear

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Comment #4 by Anonymous posted on
Anonymous
Fla. condo lender Corus Bank warns of receivership

Major South Florida condo lender Corus Bankshares warned that it could be the next to fail.

http://southflorida.bizjournals.com/southflorida/stories/2009/04/27/daily73.html?ana=yfcpc

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