Dedicated to Deposits: Deals, Data, and Discussion

37th Bank Failure of 2009

POSTED ON BY

Republic Bank of Chicago
One small Illinois bank, Bank of Lincolnwood, was closed today by state regulators, and the FDIC arranged for the Republic Bank of Chicago to assume all deposits, even those above the FDIC limits. This is the third Illinois bank to fail in just two weeks. Illinois is now tied with Georgia for the most 2009 failed banks. Both have had six bank failures for 2009.

With all deposits being assumed by Republic Bank of Chicago, the only concern for those with CDs will be the potential of losing their rate lock. As is typical, the assuming bank hasn't decided if it will keep the rates the same. According to the FDIC's Q&A, Republic Bank of Chicago will "be reviewing rates and will notify you." Depositors are free to withdraw funds without an early withdrawal penalty. Unfortunately, the assuming bank can take a while to decide, and the FDIC doesn't report on the decision. If you're a customer of a failed bank, please leave a comment about what the assuming bank decides.

Deposit Rates Observation

I found it interesting that the assuming bank is offering higher CD rates than what the failed bank was offering. Bank of Lincolnwood's best deal was a 2.27% APY 12-month CD. The best CD deal at Republic Bank of Chicago is a 2.50% APY 16-month CD. This rate is listed at the bank's rate table as of 6/05/09. According to the FDIC, both rates are above the rate caps for less than well capitalized institutions. These rate restrictions won't apply until 2010, but the FDIC has started to publish these weekly (see post).

Here's a summary of today's failure:

37th Bank Failure of 2009
  • FDIC Press Release
  • Closed Bank: Bank of Lincolnwood
  • Location: Lincolnwood, IL (suburbs of Chicago)
  • Size: 2 offices, $214 million assets, $202 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Assuming Bank: Republic Bank of Chicago
  • Estimated Cost to Deposit Insurance Fund: $83 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
References:
Thanks to the readers who emailed me on this closure.

  Tags: Republic Bank of Chicago

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Comments
Comment #1 by Anonymous posted on
Anonymous
I visited Lincolnwood, IL, years ago. As I recall, it is a suburb of Chicago located a bit west of the city.

My take on this closing is it's a classical example of collateral damage. They were aiming for the "big mahatma" of failed banks in that region, Corus Bank of Chicago. But their aim was off and they hit, instead, poor innocent little Bank of Lincolnwood.

Perhaps next time we will witness the intended outcome. Or maybe not. I'm uncertain the FDIC has sufficient resources to close Corus. They pick off the small fry while the big fish languish.

Next Friday . . . . more drama.

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