Dedicated to Deposits: Deals, Data, and Discussion

Summary of Today's Seven Bank Failures

POSTED ON BY

Since Friday is a holiday at many banks, the FDIC did its closures on Thursday instead of Friday, and it was busy. A total of seven banks closed: six in Illinois and one in Texas. However, the failed Illinois banks are related. According to the FDIC:
The six failed Illinois banks are all controlled by one family and followed a similar business model that created concentrated exposure in each institution. The failure of these banks resulted primarily from losses related to the banks' investment in collateralized debt obligations and other loan losses.

It appears the family controlled several bank holding companies. Three of the failed Illinois banks were part of Peotone Bancorp, Inc. (Founders Bank, Rock River Bank and The First National Bank of Danville). There was one bank under this holding company that wasn't closed, Peotone Bank and Trust Company. The other three failed Illinois banks were part of three different bank holding companies.

For each of the seven failures, the FDIC was able to find another bank to assume all deposits of the failed bank, including deposits above the FDIC limits. This even included brokered deposits. So no depositors lost any money.

Even though depositors won't have to worry about losing any money, they may lose a rate lock on their CDs. Six of the banks that are assuming the deposits will "be reviewing rates and will notify" depositors. However, one of the banks, State Bank of Lincoln, will honor existing rates of the failed John Warner Bank. For all cases, depositors will have the right to make an early withdrawal without penalties.

In addition to CD account holders, reward checking customers may be nervous. At least two of the closed banks had been offering reward checking accounts with attractive rates and caps. The failed banks, Founders Bank and Rock River Bank, have been offering a reward checking rate of 4.19% APY on balances up to $50K. It'll be interesting to see what the new banks do with these accounts. I'm not optimistic that they'll continue them.

If you're a customer of any of these banks, please leave a comment as you learn what the new banks decide.

Below is a summary of today's bank closures:

46th Bank Failure of 2009 (7th in IL)
  • FDIC Press Release
  • Closed Bank: John Warner Bank
  • Location: Clinton, IL
  • Size: 3 offices, $70 million in assets, $64 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: State Bank of Lincoln, Lincoln, IL
  • Estimated Cost to Deposit Insurance Fund: $10 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 2 stars (below peer group) at Bankrate.com
47th Bank Failure of 2009 (8th in IL)
  • FDIC Press Release
  • Closed Bank: First State Bank of Winchester
  • Location: Winchester, IL
  • Size: 2 offices, $36 million assets, $34 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: First National Bank of Beardstown, Beardstown, IL
  • Estimated Cost to Deposit Insurance Fund: $6 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 2 stars (below peer group) at Bankrate.com
48th Bank Failure of 2009 (9th in IL)
  • FDIC Press Release
  • Closed Bank: Rock River Bank
  • Location: Oregon, IL
  • Size: 4 offices, $77 million assets, $75.8 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: The Harvard State Bank, Harvard, IL
  • Estimated Cost to Deposit Insurance Fund: $27.6 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 2 stars (below peer group) at Bankrate.com
49th Bank Failure of 2009 (10th in IL)
  • FDIC Press Release
  • Closed Bank: The Elizabeth State Bank
  • Location: Elizabeth, IL
  • Size: 2 offices, $55.5 million assets, $50.4 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: Galena State Bank and Trust, Galena, IL
  • Estimated Cost to Deposit Insurance Fund: $11.2 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
50th Bank Failure of 2009 (11th in IL)
  • FDIC Press Release
  • Closed Bank: First National Bank of Danville
  • Location: Danville, IL
  • Size: 7 offices, $166 million assets, $147 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: First Financial Bank, N.A., Terre Haute, IN
  • Estimated Cost to Deposit Insurance Fund: $24 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
51st Bank Failure of 2009 (1st in TX)
  • FDIC Press Release
  • Closed Bank: Millennium State Bank of Texas
  • Location: Dallas, TX
  • Size: 1 office, $118 million assets, $115 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: State Bank of Texas, Irving, TX
  • Estimated Cost to Deposit Insurance Fund: $47 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
52nd Bank Failure of 2009 (12th in IL)
  • FDIC Press Release
  • Closed Bank: Founders Bank
  • Location: Worth, IL
  • Size: 11 offices, $962.5 million assets, $848.9 million deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: PrivateBank and Trust Company, Chicago, IL
  • Estimated Cost to Deposit Insurance Fund: $188.5 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
Note, the ratings at BauerFinancial are based on 3/31/09 data and those at Bankrate.com are based on 12/31/08 data.

References:
Thanks to the readers who commented and emailed me news of these closures.


Related Posts

Comments
Comment #1 by Anonymous posted on
Anonymous
"Though few people have heard of it, hot money — or brokered deposits, as it is also known in the industry — is one of the primary factors in the accelerating wave of failures among small and regional banks nationwide."

http://www.nytimes.com/2009/07/04/business/04brokered.html?

1