Dedicated to Deposits: Deals, Data, and Discussion

24th & 25th Bank Failure of 2009 - In MO & NV

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Two banks failed today bringing the 2009 total to 25 which equals the total that failed for all of 2008. The two failed banks were American Sterling Bank in Missouri and Great Basin Bank of Nevada. In both cases the FDIC arranged for all deposits, including those above the FDIC limits, to be transferred to the assuming banks. So no depositor lost any money. The only thing depositors will have to worry about is if they have high-yield CDs at these failed banks. Both of the assuming banks have not yet decided if they'll honor the original rates. Here's how the FDIC described this in the FAQ for the Great Basin Bank of Nevada failure:
Be advised, however, that from and after the date of closing, Nevada State Bank will accrue and pay interest on deposit liabilities at a rate it shall determine; accordingly, Nevada State Bank shall permit depositors, including brokered depositors, impacted by reduced rates to withdraw their deposits without penalty for early withdrawal.

Unfortunately, the new bank that assumes the deposits of the failed bank is free to make big cuts on the rates. This is what happened with Silver Falls Bank which failed in February. According to this OregonLive article, the new bank, Citizens Bank of Corvallis, cut rates rates from as much as 4% to 1% or less.

Except for the failures last week, both BauerFinancial and Bankrate have been on target with their ratings this year. They're back on track this week. Both failed banks had the lowest ratings at both BauerFinancial and Bankrate.

Here's a summary of the two failures:

24th Bank Failure of 2009 in Missouri
  • FDIC Press Release
  • Closed Bank: American Sterling Bank
  • Location: Sugar Creek, MO (branches also in CA & AZ)
  • Size: 5 branches, $181 million assets, $171.9 million deposits
  • Possible Uninsured Deposits: ALL deposits Transferred
  • Acquiring Bank: Metcalf Bank, Lee's Summit, MO
  • Estimated Cost to Deposit Insurance Fund: $42 million
  • Financial Ratings: 0 star at BauerFinancial, 1 star (lowest) at Bankrate.com
25th Bank Failure of 2009 in Nevada
  • FDIC Press Release
  • Closed Bank: Great Basin Bank of Nevada
  • Location: Elko, NV
  • Size: 5 branches, $270.9 million assets, $221.4 million deposits
  • Possible Uninsured Deposits: ALL deposits Transferred
  • Acquiring Bank: Nevada State Bank, Las Vegas, NV
  • Estimated Cost to Deposit Insurance Fund: $42 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
It's interesting to see that American Sterling Bank in MO had branches in AZ and CA. I wonder how many bad loans came from those branches. The bank's primary regulator, Office of Thrift Supervision described why it closed the bank.

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

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