Dedicated to Deposits: Deals, Data, and Discussion

Five Banks Close Including Mutual Bank - 69 Bank Failures So Far This Year

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This was another busy Friday for the FDIC with five bank failures. As has been common this year, the FDIC arranged for other banks to acquire the failed banks and to assume all deposits even those above the FDIC limits (with the exception of some brokered deposits).

The largest bank to fail was Mutual Bank. It was headquartered in Illinois, but it also had branches in New York, New Jersey and Texas. I've reported on Mutual Bank since 2006 when it used to be a 4-star bank. Its ratings for safety and soundness started falling in late 2006. In January of this year both Bankrate and BauerFinancial rated Mutual Bank with their lowest values.

Mutual Bank had long offered competitive CD and money market rates nationwide. Two years ago they were offering long-term CDs with rates near 6%. The new bank which is acquiring Mutual Bank, United Central Bank, has yet to decide on future rates of those CDs. It's possible that they'll reduce the rates. At least depositors will be allowed to make a penalty-free early withdrawal, but for those who have long-term CDs at 5%+ at Mutual Bank, it's going to be painful to lose those high rates in this low interest rate environment. If you have Mutual Bank CDs, please let us know what United Central Bank decides.

Update 8/10/09: A reader reported receiving a letter from United Central Bank regarding Mutual Bank CDs. Below is the comment from the reader:
I received a letter today dated August 3,2009 from the CEO and President of United Central Bank Keith Ward. One of the things the letter says is that if you have a CD or IRA you may withdraw all or part of the balance in your CD without penalty at any time prior to the maturity date. Also effective Tuesday, September 1,2009 the interest rate on your CD or IRA will change according to the following rate schedule:

60 mo @ 2.90 APY
48 mo @ 2.90 APY
36 mo @ 2.55 APY
24 mo @ 2.35 APY
18 mo @ 2.25 APY
12 mo @ 2.25 APY
6 mo @ 2.00 APY
3 mo @ 1.75 APY

This issue of depositors having their CD rates downsized has been common this year. This Press-Enterprise article described the CD rate cuts occurring at the two California banks, Vineyard National and Temecula Valley, that failed earlier this month:
For instance, just before its seizure, Vineyard was paying 1.9 percent interest on a one-year CD, 2.3 percent for two years and 2.52 percent for three years. As of Tuesday the bank's new owner, California Bank & Trust, adjusted those downward to 1.25 percent, 1.48 percent and 1.88 percent, respectively.

Not all Vineyard CD customers will be affected. The new bank is rewarding those who had Vineyard checking or savings accounts:
He said the CD change was not imposed on Vineyard customers who have other relationships with the bank, such as checking and savings accounts.

I guess the new bank doesn't care if they lose customers who just had CDs. This may be a good reason to open a checking or savings account at a weak bank that's offering a hot CD deal.

Similar rate cuts happened at the bank that acquired Temecula Valley Bank:
For example, a 12-month CD that Temecula Valley advertised at 2.2 percent interest converts to 1.5 percent as of today.

The article described why banks are allowed to lower the CD rates in a take-over of a failed bank:
But the intent was to prevent potential acquiring banks from being scared off by the responsibility of paying prohibitively high interest rates enacted by failed institutions in their waning days.

If the FDIC isn't able to find a buyer, the FDIC is then forced to close all accounts and mail checks of only the insured deposits. From that point-of-view, making it easier for potential buyers is helpful for depositors.

Cease and Desist Orders:

Before the closures today the FDIC made public its June Enforcement Actions. There were 27 cease and desist orders. Two of the better known banks to receive these orders include Colonial Bank and Advanta Bank Corp.

Below is a summary of today's bank closures:

65th Bank Failure of 2009 (1st in OK)
  • FDIC Press Release
  • Closed Bank: First State Bank of Altus, Altus, OK
  • Size: 2 offices, $103.4 million in assets, $98.2 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: Herring Bank, Amarillo, TX
  • Rate Changes: Herring Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $25.2 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
66th Bank Failure of 2009 (4th in FL)
  • FDIC Press Release
  • Closed Bank: Integrity Bank, Jupiter, FL
  • Size: 1 office, $119 million assets, $102 million deposits
  • Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
  • Acquiring Bank: Stonegate Bank, Fort Lauderdale, FL
  • Rate Changes: Stonegate Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $46 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
67th Bank Failure of 2009 (1st in OH)
  • FDIC Press Release
  • Closed Bank: Peoples Community Bank, West Chester, OH
  • Size: 19 offices, $705.8 million in assets, $598.2 million deposits
  • Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
  • Acquiring Bank: First Financial Bank, N.A., Hamilton, OH
  • Rate Changes: First Financial Bank, N.A. will review rates
  • Estimated Cost to Deposit Insurance Fund: $129.5 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
68th Bank Failure of 2009 (2nd in NJ)
  • FDIC Press Release
  • Closed Bank: First BankAmericano, Elizabeth, NJ
  • Size: 6 offices, $166 million assets, $157 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: Crown Bank, Brick, NJ
  • Rate Changes: Crown Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $15 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
69th Bank Failure of 2009 (13th in IL)
  • FDIC Press Release
  • Closed Bank: Mutual Bank, Harvey, IL
  • Size: 12 offices, $1.6 billion assets, $1.6 billion deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: United Central Bank, Garland, TX
  • Rate Changes: United Central Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $696 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
References:
Thanks to the readers who emailed me and commented on these closures and the June Enforcement Actions.

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Comments
17 comments.
Comment #1 by Anonymous posted on
Anonymous
The Mutual Bank take down caught me by surprise. I had money in that bank at one time, within the last eighteen months. I believe nearby Corus Bank will be turning turtle and falling very, very soon. And when it does there's going to be a loud "boom". Even as recently as yesterday additional negative reports about Corus emerged. The end must be near.

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Comment #2 by Anonymous posted on
Anonymous
Banking Guy, I have one more year left on a multi-year, high rate CD with Mutual Bank.

As of today, I haven't received any communication from them or the acquiring bank about this.

Until they notify me and the other customers in some way, does that mean the bank will continue paying the monthly interest credits???

And then...what happens later.... The new bank will offer me a new CD with a new term and rate, or offer me a new (presumably lower) rate for the remainder of the existing term???

I've never personally been thru a bank failure before... Lucky me... Not sure how the logistics of it work, in the interim time like now.

Fortunately, of course, I was well below the FDIC limit. And another larger CD I had with them them just matured earlier this year...

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Comment #3 by Anonymous posted on
Anonymous
I deal (have cd's) with thirty different banks to keep below FDIC limits. Been through 3 bank failures this year. Mutual Bank cd holders will probably get a letter within 2 weeks about the failure and the new CD rate. If the rate stinks, you may have to wait to get through to cash out CD unless you live near a branch. I have one with them that is at 5.5 % for 6o months, but already through 43 of the months. Hopefully they won't mess with it. Good luck

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Comment #4 by Anonymous posted on
Anonymous
Looks like several of us have been caught holding CDs at Mutual Bank.

I have about 18 months to go on my 5 year 5.50% CD with them. I have been pulling my interest monthly through the the ACH system. The most recent interest payment was cleared on July 29th, right on schedule. Now I will be anxious to see what transpires. Bummer, but at least I will not be loosing any of my principle.

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Comment #5 by Anonymous posted on
Anonymous
It's true there will be no loss of principal. But to minimize losing interest you MUST remain vigilant, active, and aware. For goodness sake call the bank. And you will probably need to telephone them quite a bit to remain on top of developments. Think, and ask a LOT of questions. Sure, they will send you information by mail. But you could lose interest if you wait for information to arrive by mail. You have to remain on top of events. Use the telephone or use e-mail if that's possible. Telephone the FDIC. It can't hurt. Better to try and fail than to wait for the US Mail. Anything is better than doing things by mail.

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Comment #6 by Anonymous posted on
Anonymous
Thought it would be interesting to see what rates United Central Bank has posted on their website. I've seen worse ...

Interest Rates are current as of August 1, 2009

Certificates of Deposits

Term Minimum Deposit*** Annual Percentage Yield
60 Month $1,000.00 2.90%
48 Month $1,000.00 2.90%
36 Month $1,000.00 2.55%
24 Month $1,000.00 2.35%
18 Month $1,000.00 2.25%
12 Month $1,000.00 2.25%
6 Month $1,000.00 2.00%
3 Month $1,000.00 1.75%

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Comment #7 by Anonymous posted on
Anonymous
Yes, I immediately looked into their CD rates when I learned of Mutual's failure and UCB's takeover. With 18 months remaining on my 5 year CD, if they lower the rates to match their existing rates, it would be like actually receiving 2.90% for an 18 month CD if I leave it with them until maturity. Although it's not near the 5.50% APY I was receiving, it's not too shabby for an 18 month CD in today's rate climate.

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Comment #8 by Anonymous posted on
Anonymous
For people with blinders on read this: http://market-ticker.org/archives/1283-Is-The-FDIC-Broke-And-Covering-It-Up.html

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Comment #9 by Anonymous posted on
Anonymous
No need to worry. The Feds will just print more money.

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Comment #10 by Mary (anonymous) posted on
Mary
The acquiring bank for Mutual Bank is United Central Bank. They have branches in several states and might enable certificate holders to physically visit a branch. The issue is, can you use a UCB branch if you are a Mutual Bank customer?

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Comment #11 by Anonymous posted on
Anonymous
I wrote above as 8:11 am Aug. 1. I've had a good relationship the past couple years with one of Mutual's branch managers, who's been very helpful with me in opening and closing out various CDs... So I wrote that person an email the other day asking what would happen for our existing CDs.... Here is the reply I received:

"Good Morning Mr. XXXXX,

Mutual Bank was closed and now we have been taken over by United Central Bank.

Things happen and maybe for the better. You can certainly close your CD if you wish without a penalty or if you decide to leave it till maturity, you will still have the rate that you have now (5.65% APY).

Nothing has changed your account will be the same and your rate will still be the same. The only thing that changed like I said was the name and for your concern we are FDIC insured. I guarantee
you that.

You can go on the internet and log on to www.ucbtx.com or log into Mutual Bank of Chicago and read about it.

It is always a pleasure doing business with customers like you. Please feel free to call me or email if you have any concerns.

I would not gear you in the wrong direction with your money. Thanks."

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Comment #12 by Anonymous posted on
Anonymous
This is 8:11 am again.... On the UCB web site, there is now a press release on the Mutual takeover. It indicates things will basically stay the same (for now) for Mutual customers. But it doesn't specifically mention anything about their intentions for honoring or not honoring their existing CD deposits. So, I do hope the Mutual branch manager's comments to me were correct.

The news release is located at:
http://www.ucbtx.com/news.cfm?dynpage=CE5140DF15D046A66883807D18D0264B

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Comment #13 by Mary (anonymous) posted on
Mary
Thank you Anonymous August 4, 2009 on comments concerning Mutual Bank. I keep checking this site for information, because it usually gives the best directions and specific information I can find. You and Banking Guy have given me more facts than anyone associated with the banks or the FDIC. We all hope they honor the current CD rates and would like a quick and accurate answer

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Comment #14 by Anonymous posted on
Anonymous
Thanks for the "thank you" Mary... This is Anonymous Aug. 4 checking in...

Since that earlier post, I've heard nothing more from Mutual or United Central Bank... no email.... see nothing on either bank's web site.

I logged onto to Mutual's online banking today, and it worked just fine, giving me access to my CD account. But again, no news or information.

I have a regular CD interest payment due from them later this week. I'm expecting them to deposit the interest as usual. I'll report back here...either way.

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Comment #15 by Anonymous posted on
Anonymous
Bad news on the CD rates. I just got a letter from United Central Bank stating that effective Sept 1 the CD rates are dropping. The 3 yr goes to 2.55 apy and the 4 and 5 yr go to 2.90 apy. Shorter maturities have lower terms ranging from 1.75 for a 3-month to 2.35 for a 2 yr. That's quite a come-down for my 3 yr which was yielding 5.50.

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Comment #16 by Anonymous posted on
Anonymous
That's an interesting post above.... I assume he's referring to EXISTING CD rates (those held by former Mutual customers) at UCB dropping. It's also directly contrary to what one of Mutual's branch managers promised me by email, as reported above.

I obviously have a multi-year Mutual CD with about a year left in its term, and I've yet to receive any correspondence from Mutual or UCB.

For whatever it's worth, my Mutual CD (now UCB) did make its regular monthly interest payment/dividend yesterday at the normal, 5+% rate...

I'll be watching my mailbox...hoping I don't get that same kind of UCB letter.

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Comment #17 by Anonymous posted on
Anonymous
My wife received a second letter from the United Central Bank. Letter stated that she should ignore the first letter and that her CDs interest rate will be honored( Mutual Bank rates). I dont know if anybody else got this type of second notice

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