Dedicated to Deposits: Deals, Data, and Discussion

95th Bank Failure of 2009 and Other FDIC and NCUA News

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This was another slow Friday for the FDIC with only one bank failure. Georgian Bank was the 95th U.S. Bank closure for 2009 and the 19th for Georgia. It's a sizable bank with $2 billion in assets and $2 billion in deposits. The failure is typical of this year's failures with another bank assuming all of the deposits except for some brokered deposits. First Citizens Bank and Trust Company, Inc. not only assumed all deposits, but according to the FDIC it also "agreed to purchase essentially all of the assets." This isn't the same First Citizens Bank that has acquired west coast banks at previous bank failures (Venture Bank and Temecula Valley Bank). This one that acquired Georgian Bank is First Citizens Bank and Trust Company, Inc., Columbia, SC. The other one was
First-Citizens Bank and Trust Company, Raleigh, NC.

There's no mention by the FDIC or at First Citizen Bank's website about if it'll honor existing CD rates to maturity. According to First Citizen Bank's FAQs, customers "will be fully notified in writing regarding any changes to your accounts." Hopefully, they'll handle communication better than how MB Financial communicated changes to Corus Bank customers (see post). If First Citizens Bank does change CD rates, customers will be free to make a penalty-free early withdrawal.

Georgian Bank's failure was costly with an estimated cost of $892 million to the Deposit Insurance Fund (DIF). As a comparison, Corus Bank's failure cost the DIF an estimated $1.7 billion and Guaranty Bank's failure cost the DIF an estimated $3 billion. The FDIC board is scheduled to meet next Tuesday to discuss how to replenish the DIF (see CNN article).

FDIC's Public Enforcement Actions:

The FDIC released its August public enforcement actions today. This included 25 cease and desist orders and 14 civil money penalties. One interesting recipient of a civil money penalty was Fidelity Management Trust Company which is a subsidiary of the mutual fund giant Fidelity Investments.

Update 9/26/09: This unofficial bank problem list includes all of the banks that have recently received public enforcement actions as of 9/25/09.

Credit Union Conservatorship

The NCUA placed one credit union into conservatorship this week. According to the NCUA's press release, the NCUA "assumed control of service and operations at Keys Federal Credit Union of Key West, Florida. NCUA’s goal is to continue credit union service to the members and ensure safe and sound credit union operations." As is typical with the NCUA, there's no mention about the status of uninsured deposits. In the past there has been no risk to members' uninsured deposits when credit unions were placed into conservatorship. It's only when the credit union is liquidated that uninsured deposits are at risk.

Update 9/28/09: There were two credit union liquidations that occurred during this week. Refer to this post for more details.

Below is a summary of today's bank failure:

95th Bank Failure of 2009 (19th in GA)
  • FDIC Press Release
  • Closed Bank: Georgian Bank, Atlanta, GA
  • Size: 5 offices, $2 billion in assets, $2 billion in deposits
  • Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
  • Acquiring Bank: First Citizens Bank and Trust Company, Inc., Columbia, SC
  • Rate Changes: First Citizens Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $892 million
  • Financial Ratings: 1 star (lowest) at Bankrate.com, Unknown at BauerFinancial
Bankrate's rating is based on 3/31/09 data. BauerFinancial had already changed the rating status of the bank to indicate a bank failure before I checked.

References:

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Comments
Comment #1 by Anonymous posted on
Anonymous
Banks do not fail on their own, FDIC decides if they will fail or not.
Since, FDIC is practically broke, we will not see many closures of banks, until FDIC finds the money to close them.

2