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Four Banks Fail Including Vineyard Bank and Temucula Valley Bank in California

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It was another busy Friday for the FDIC with four bank closures: one in Georgia, one in South Dakota and two banks in California. The Georgia and South Dakota banks were little-known, small banks. However, the two failed banks in California, Vineyard Bank and Temecula Valley Bank, were sizable with each having over $1 billion in assets. I've posted on these banks several times in previous years for their competitive CD rates. My last post on Vineyard Bank was in August 2008 when I reported on the consent order issued by the Office of the Comptroller of the Currency. My last post on Temecula Valley Bank was in December 2008. I reported on a San Diego news article on the bank which described how the bank was seeing its nonperforming loans soar throughout 2008 as home builders failed with their new projects.

In my last post on Valley Bank, I was concerned that Vineyard Bank had about a third of its deposits over the FDIC insured limits. Fortunately, this isn't going to be an issue since the acquiring bank will take over all regular deposits even those above the FDIC limits. Only some brokered deposits won't be transferred. Those will be paid by the FDIC. The All-Deposit Transfers also took place at the other three banks.

For all four bank failures, the acquiring banks will be reviewing rates, and they may decide to offer lower rates on existing CDs. Depositors will be allowed to make penalty-free withdrawals. If you stay under the FDIC limits, this is the main risk when a bank fails. You won't lose your money, but you may lose your CD rate which is a significant issue in interest rate environments like we have today. If you have CDs at any of these banks, please let us know what the acquiring banks decide.

Below is a summary of today's bank closures:

54th Bank Failure of 2009 (10th in GA)
  • FDIC Press Release
  • Closed Bank: First Piedmont Bank
  • Location: Winder, GA
  • Size: 2 offices, $115 million in assets, $109 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: First American Bank and Trust Company, Athens, GA
  • Estimated Cost to Deposit Insurance Fund: $29 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
55th Bank Failure of 2009 (1st in SD)
  • FDIC Press Release
  • Closed Bank: BankFirst
  • Location: Sioux Falls, SD
  • Size: 2 offices, $275 million assets, $254 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: Alerus Financial, N.A., Grand Forks, ND
  • Estimated Cost to Deposit Insurance Fund: $91 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
56th Bank Failure of 2009 (7th in CA)
  • FDIC Press Release
  • Closed Bank: Vineyard Bank, N.A.
  • Location: Rancho Cucamonga, CA
  • Size: 16 offices, $1.9 billion assets, $1.6 billion deposits
  • Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
  • Acquiring Bank: California Bank & Trust, San Diego, CA
  • Estimated Cost to Deposit Insurance Fund: $579 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
57th Bank Failure of 2009 (8th in CA)
  • FDIC Press Release
  • Closed Bank: Temecula Valley Bank
  • Location: Temecula, CA
  • Size: 11 offices, $1.5 billion assets, $1.3 billion deposits
  • Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
  • Acquiring Bank: First-Citizens Bank and Trust Company, Raleigh, NC
  • Estimated Cost to Deposit Insurance Fund: $391 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
References:
Note, the financial ratings are based on 3/31/09 financial data. Thanks to the readers who emailed me news of these closures.

Update 8/10/09: News articles have reported on the CD rate cuts that were imposed by the banks that took over Temecula and Vineyard. From the San Diego Union Tribune regarding Temecula Bank's CD rates:
First Citizens Bank was allowed to lower CD rates July 31, less than two weeks after it took control of the failed institution
....
First Citizens has set rates on 12-to-17-month CDs at 1.5 percent. Rates on six-to-11-month CDs are now 1.25 percent. A five-year CD carries a rate of 2.95 percent.

From the Press Enterprise regarding Vineyard National Bank's CD rates:
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.


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