Three banks failed today. Unlike the previous two Fridays, there weren't any large banks to fail. The largest one today was California-based Affinity Bank which had $1 billion in assets. For all three closures, the FDIC was able to find buyers who agreed to assume all deposits, including those above the FDIC limit. The only exception are some brokered deposits in which the acquiring banks will not assume. The FDIC will pay those accounts off directly.
The only thing depositors will have to worry about is having rates on their existing CDs cut by the acquiring banks. None of the three acquiring banks has decided if they'll honor rates on the existing CDs until maturity. If rates are reduced, the CD holders will have the option to make a penalty-free early withdrawal.
It has been common this year for the acquiring banks to decide not to honor existing CD rates. There was one exception last Friday with
Guaranty Bank's closure. BBVA Compass who acquired Guaranty Bank stated in a FAQ on their website that they will honor rates of Guaranty CDs to maturity.
When the FDIC can't find a buyerBesides the issue of CD rate cuts, these closures should be very easy for customers. When the FDIC can find a buyer, the customers may hardly notice a change. That's not the case when the FDIC cannot find a buyer. This is rare, but it has happened a few times this year. The last one was two weeks ago when Community Bank of Nevada
was seized. The FDIC wasn't able to find a buyer, so the FDIC is closing the bank.
When the FDIC can't find a buyer and has to close the bank, it'll mail checks for the insured amounts of the CDs. This is not always a quick process. One of this blog's readers had a CD at Community Bank of Nevada, and he has been waiting two weeks for his check. He was contacted by the FDIC today, and he learned that the FDIC had the wrong address (FDIC used an address that he had never given to the bank). According to the FDIC, a new check was issued today.
Another reader was more fortunate. The check for his Community Bank of Nevada CD arrived last Saturday, just one week after the closure. He said he deposited the check into his Chase/WaMu account, and they placed a 7-day hold on it.
Fortunately, all of today's failed banks had buyers. So CD holders won't have to worry about having their checks lost in the mail.
Below is a summary of today's bank failures:
82nd Bank Failure of 2009 (2nd in MD)- FDIC Press Release
- Closed Bank: Bradford Bank, Baltimore, MD
- Size: 9 offices, $452 million in assets, $383 million in deposits
- Possible Uninsured Deposits: All deposits transferred
- Acquiring Bank: M&T Bank, Buffalo, NY
- Rate Changes: M&T Bank will review rates
- Estimated Cost to Deposit Insurance Fund: $97 million
- Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
83rd Bank Failure of 2009 (2nd in MN)- FDIC Press Release
- Closed Bank: Mainstreet Bank, Forest Lake, MN
- Size: 8 offices, $459 million in assets, $434 million in deposits
- Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
- Acquiring Bank: Central Bank, Stillwater, MN
- Rate Changes: Central Bank will review rates
- Estimated Cost to Deposit Insurance Fund: $95 million
- Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
84th Bank Failure of 2009 (9th in CA)- FDIC Press Release
- Closed Bank: Affinity Bank, Ventura, CA
- Size: 10 branches, $1 billion in assets, $922 million in deposits
- Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
- Acquiring Bank: Pacific Western Bank, San Diego, CA
- Rate Changes: some rates may change (Pacific Western's FAQs)
- Estimated Cost to Deposit Insurance Fund: $254 million
- Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
The above financial ratings are based on 3/31/09 data.
Update 8/29/09: The Pennsylvania credit union, Free Choice Federal Credit Union, was liquidated on Friday. This was a tiny credit union with less than $1 million in assets and only 400 members. According to the
NCUA's press release, "Its members’ share accounts were purchased and assumed by Trumark Financial Credit Union of Trevose, Pennsylvania, providing Free Choice members with uninterrupted credit union service."
References:Thanks to the readers who emailed me news on these closures.
