Dedicated to Deposits: Deals, Data, and Discussion

38th, 39th and 40th Bank Closures for 2009

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June had been a quiet month for bank closures. Before today there had been just one closure in Illinois. It picked up today with three more failures. All three were small banks. For depositors, the failures should cause no problems. For each closure, another bank assumed all regular deposits, even those above the FDIC limits. The only exception is that in one of the closures, not all brokered deposits were transferred.

For those wondering why all deposits including those over the FDIC limits are being transferred, the FDIC states the following:
The FDIC is required by law to employ the least-cost resolution measure for each failed financial institution. The most frequent result is for the FDIC to transfer only the insured deposits in a merger transaction. The FDIC has been able to transfer all deposits in about 25% of the failures over the past 15 years.

This year the percentage of all-deposit transfers is much higher than 25%. I've calculated that out of the 40 closures this year, 32 were all-deposit transfers. That's 80%. If you include brokered deposits, the number of all-deposit transfers would go down to 22. That's still over 50%.

The only worry for depositors will be those with CDs. They may lose their rate lock which could be a big disappointment with the very low-interest rate environment that we have now. For all three cases, the FDIC states that the acquiring banks will be reviewing rates. CD holders will be free to withdraw their deposits without a penalty for early withdrawal.

There was also some action at the NCUA this week. It wasn't a closure, but the NCUA was able to get a purchase agreement for High Desert Federal Credit Union which the NCUA had placed into conservatorship last October (see NCUA press release). Except for tiny credit unions, it has been common for the NCUA to place unsound credit unions into conservatorship. When this has happened, no members have lost money, even those with over the insurance limits. Members with over the insured limits have then been able to reduce their deposits to below the limits during conservatorship.

Even though it has been rare for depositors with over the insurance limits to lose money, it's still best to keep under the limits.

Here's a summary of today's three bank failures:

38th Bank Failure of 2009
  • FDIC Press Release
  • Closed Bank: Southern Community Bank
  • Location: Fayetteville, GA
  • Size: 5 regional offices, $377 million in assets, $307 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: United Community Bank, Blairsville, GA
  • Estimated Cost to Deposit Insurance Fund: $114 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
39th Bank Failure of 2009
  • FDIC Press Release
  • Closed Bank: Cooperative Bank
  • Location: Wilmington, NC
  • Size: 24 offices, $970 million assets, $774 million deposits
  • Possible Uninsured Deposits: All deposits transferred, except those from brokers
  • Acquiring Bank: First Bank, Troy, NC
  • Estimated Cost to Deposit Insurance Fund: $217 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
40th Bank Failure of 2009
  • FDIC Press Release
  • Closed Bank: First National Bank of Anthony
  • Location: Anthony, KS
  • Size: 6 offices, $156.9 million assets, $142.5 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: Bank of Kansas, South Hutchinson, KS
  • Estimated Cost to Deposit Insurance Fund: $32.2 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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