Dedicated to Deposits: Deals, Data, and Discussion

15th and 16th Bank Failures of 2009

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Two banks failed today bringing the 2009 total to 16. The two failed banks were Heritage Community Bank in Illinois and Security Savings Bank in Nevada. In both cases the FDIC arranged for all regular deposits, including those above the FDIC limits, to be transferred to the assuming banks. However, brokered deposits at Security Savings Bank are going to be held by the FDIC rather than being transferred to the acquiring bank (see FAQ #5). These depositors could lose money if they had deposits over the FDIC limits.

As is typical, the acquiring banks have the right to adjust the interest rates, and for both cases, the banks haven't decided if they'll honor rates on CDs to maturity. Depositors are free to withdraw the money without a penalty, but it could be painful for depositors to lose a rate lock in this current rate environment.

Both failed bank had the lowest ratings at both BauerFinancial and Bankrate.

I posted on Security Savings Bank in July 2006 when it was offering a 5.40% savings account and a 5.65% one year CD that were available nationwide.

Here's a summary of the two failures:

15th Bank Failure of 2009 in Illinois
  • FDIC Press Release
  • Closed Bank: Heritage Community Bank
  • Location: Glenwood, IL
  • Size: 4 branches, $232.9 million assets, $218.6 million deposits
  • Possible Uninsured Deposits: ALL deposits Transferred
  • Acquiring Bank: MB Financial Bank, N.A., Chicago, IL
  • Estimated Cost to Deposit Insurance Fund: $41.6 million
  • Financial Ratings: 0 star at BauerFinancial, 1 star (lowest) at Bankrate.com

16th Bank Failure of 2009 in Nevada
  • FDIC Press Release
  • Closed Bank: Security Savings Bank
  • Location: Henderson, NV
  • Size: 2 branches, $238.3 million assets, $175.2 million deposits
  • Possible Uninsured Deposits: ALL deposits Transferred EXCEPT brokered deposits
  • Acquiring Bank: Bank of Nevada, Las Vegas, NV
  • Estimated Cost to Deposit Insurance Fund: $59.1 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com

References:
Thanks to the readers who emailed me news of these closures.


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Comments
9 Comments.
Comment #1 by Anonymous posted on
Anonymous
Does someone withdrawing a CD early from an Assuming Bank get interest at the new rate until the day of withdrawal? It probably takes a couple of weeks to get the letter that tells the new rate. It might be like most grace periods after a CD matures during which interest is earned only if one stays with the the new CD. Anyone had experience with this?

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Comment #2 by Anonymous posted on
Anonymous
BankingGuy, you can get on the FDIC mailing list and directly get the bank-closing announcements every Friday (and other interesting stuff.)

https://service.govdelivery.com/service/multi_subscribe.html?code=USFDIC

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Comment #3 by Anonymous posted on
Anonymous
It isn't just the banks. Earlier this month there was failure of one or more corporate credit unions. These corporate credit unions serve exclusively the many local credit unions in which we have a lot of our money invested.

The NCUA is propping up these corporate credit unions by levying assessments against local credit unions nation wide. Losses are in the billions of dollars. The money is coming out of thousands of local credit unions' capital funds, depleting those funds in the process, and weakening our credit unions.

Many local credit unions declared themselves untouched by the toxic investments that have decimated banks. This was, and is, not true. Local credit unions themselves invested our money carefully and wisely. But some also gave a portion of our money to the corporate credit unions to invest. And the corporate credit unions were investing in, among other things, toxic assets.

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Comment #4 by Anonymous posted on
Anonymous
These failures thus far are to be expected. As predicted in this economic tailspin, many more banks and CUs will fail. No Surprise. The only question is which specific banks and CUs and when will it all end? Unfortunately, nobody knows.

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Comment #5 by Anonymous posted on
Anonymous
According to a proprietary study, the states with the most problem banks are Georgia, Florida, Illinois and California, in that order, http://www.chicagotribune.com/business/chi-illinois-bank-delinquencies-0224,0,7839321.story (“Illinois ranks third in shaky banks, according to new study”).

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Comment #6 by Anonymous posted on
Anonymous
Anon@7:16 AM:

Thanks for the link. It's interesting that one can get pretty much the same result from Bauer Financial (a publicly available source). For example, I keep a database of all zero-star banks at Bauer, which I consider to be a decent proxy for the banks most at risk of failure. Since at least 14 of the 16 banks to fail so far this year were 0* banks, it seems reasonable.

According to Bauer, as of today and based on 9/30/08 data, these are the states and the number of zero star banks in them:
GA 23
FL 9
IL 5
CA 4
MI 4
MN 4
TX 4
MA 3
MO 3
KS 2
NJ 2
OK 2
UT 2
AZ 1
DE 1
LA 1
MD 1
NE 1
OH 1
PA 1
PR 1
SD 1
VA 1
WA 1

Also of interest - the following states have NO zero star banks (in some cases, like NV and OR, the last zero star bank was recently closed) headquartered there:
Alabama
Alaska
American Samoa
Arkansas
Colorado
Connecticut
DC
Guam
Hawaii
Idaho
Indiana
Iowa
Kentucky
Maine
Mississippi
Montana
Nevada
New Hampshire
New Mexico
New York
North Carolina
North Dakota
Oregon
Rhode Island
South Carolina
Tennessee
US Virgin Islands
Vermont
West Virginia
Wisconsin
Wyoming

Note that Bauer goes by the headquarters of the bank, so if you bank at an out-of-state bank, look under the state where it's based, not your state.

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Comment #7 by Anonymous posted on
Anonymous
Are bank failures a good or bad thing? Am I the only one who thinks we have a lot more banks than we need?

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Comment #8 by Anonymous posted on
Anonymous
From the perspective of a saver, I think having more banks is a good thing. More banks means more people competing for your deposit dollars, and more competition means higher deposit rates. For the most part, very large banks pay paltry rates (ex. Chase "interest checking" currently pays 0.05%) so if there weren't other smaller banks out there, nobody would be able to earn much interest.

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Comment #9 by Anonymous posted on
Anonymous
Read the following article. The FDIC may not survive.

http://news.yahoo.com/s/afp/20090305/pl_afp/financeeconomyusbankinggovernment_20090305182545

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