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Five Banks Fail, FDIC Couldn't Find a Buyer for One

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Five banks failed today. All were relatively small with assets under $500 million. Two were in Illinois, one in Iowa, one in Missouri and one in Arizona. Four of the five were typical closures in which the FDIC was able to find buyers which assumed all deposits (except some brokered deposits), even deposits over the FDIC limit. However, one of the failed banks in Illinois, Platinum Community Bank, was an unusual closure.

The FDIC wasn't able to find a buyer for Platinum Community Bank. Consequently, the FDIC closed all accounts, and it will be mailing checks for customers' insured deposits. I found several things unusual about this closure. It appears the Office of Thrift Supervision (OTS) and the FDIC rushed this closure.

First, the FDIC didn't established a temporary bank to give customers time to find another bank. As described in the FDIC Q&A, customers are on their own in dealing with automatic payments and outstanding checks. The FDIC did arrange for direct deposits to be redirected to another bank.

The last bank that failed and wasn't acquired by another bank was Community Bank of Nevada (see post). In that case FDIC created a temporary bank for 30 days to "allow depositors access to their insured deposits and time to open accounts at other insured institutions."

Platinum Bank was closed by the OTS. In the OTS's press release it's stated that:
Platinum was unlikely to be able to pay its obligations or meet its depositors’ demands in the normal course of business. The bank, which began operations in March 1999, had total assets of $148 million, retail deposits of $110.2 million, 237 employees and one branch.

The OTS only noted one branch. However, I was able to access the bank's location webpage which lists two branches: one in Rolling Meadows, IL and the other in Ocala, Florida. I couldn't find any mention of this Florida branch at the OTS or FDIC websites. In addition to the bank's website, I found the Ocala branch mentioned in this Ocala news article:
Platinum Community Bank operates two full service banking locations and 21 retail mortgage loan production offices and delivers online banking services through Web site www.myptbank.com

From this article I learned that Platinum Bank's connection with Taylor Bean & Whitaker Mortgage Corp. which acquired the controlling interest in Platinum Bankshares Inc., Platinum Bank’s holding company in July 2008. TBW made headlines last month when its headquarters were raided by FBI agents. It later filed for Chapter 11 bankruptcy. This other Ocala news article described more of TBW problems and the OTS's cease and desist order issued to Platinum Bank.

Yet another unusual aspect of Platinum Bank was its relatively high ratings for safety and soundness. The vast majority of banks that failed this year had the lowest ratings at both BauerFinancial and Bankrate.com. This was also the case for the other four banks that failed today. However, Platinum Bank had a 3 star rating (performing) at Bankrate.com and 2 stars (problematic) at BauerFinancial. Both are based on 3/31/09 financial data. This shows that you don't want to rely too heavily on any private ratings. The FDIC keeps its problem list secret so there's no way to know for sure how close a bank may be to failure.

The Platinum Bank's closure shows why it's important to keep under the FDIC limit. Also, it shows why you don't want to be 100% dependent on one bank. The abrupt closure of Platinum Bank without any temporary bank will make it difficult for the checking account customers who don't have checking accounts at other banks.

Credit Union Liquidation:

There was also a credit union that was liquidated on Monday of this week (see NCUA press release). The NCUA placed Kaiser Lakeside Credit Union of Oakland, CA into liquidation and arranged for it to be acquired by SafeAmerica Credit Union. Kaiser was a small credit union with $24 million in assets and 3,500 members. This Oakland news article has more details on this liquidation.

Below is a summary of today's bank failures:

85th Bank Failure of 2009 (2nd in MO)
  • FDIC Press Release
  • Closed Bank: First Bank of Kansas City, Kansas City, MO
  • Size: 1 office, $16 million in assets, $15 million in deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: Great American Bank, De Soto, KS
  • Rate Changes: Great American Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $6 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
86th Bank Failure of 2009 (14th in IL)
  • FDIC Press Release
  • Closed Bank: InBank, Oak Forest, IL
  • Size: 3 offices, $212 million in assets, $199 million in deposits
  • Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
  • Acquiring Bank: MB Financial Bank, N.A., Chicago, IL
  • Rate Changes: MB Financial Bank, N.A. will review rates
  • Estimated Cost to Deposit Insurance Fund: $66 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
87th Bank Failure of 2009 (1st in IA)
  • FDIC Press Release
  • Closed Bank: Vantus Bank, Sioux City, IA
  • Size: 15 branches, $458 million in assets, $368 million in deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: Great Southern Bank, Springfield, MO
  • Rate Changes: Great Southern Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $168 million
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
88th Bank Failure of 2009 (15 in IL)
  • FDIC Press Release
  • Closed Bank: Platinum Community Bank, Rolling Meadows, IL
  • Size: 2 branches, $345.6 million in assets, $305.0 million in deposits
  • Possible Uninsured Deposits: FDIC did not provide estimate
  • Acquiring Bank: None
  • Rate Changes: All accounts closed. Checks for insured deposits being mailed.
  • Estimated Cost to Deposit Insurance Fund: $114.3 million
  • Financial Ratings: 2 star (problematic) at BauerFinancial, 3 stars (performing) at Bankrate.com
89th Bank Failure of 2009 (3rd in AZ)
  • FDIC Press Release
  • Closed Bank: First State Bank, Flagstaff, AZ
  • Size: 6 branches, $105 million in assets, $95 million in deposits
  • Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
  • Acquiring Bank: Sunwest Bank, Tustin, CA
  • Rate Changes: Sunwest Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $47 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.

References:

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Comments
2 comments.
Comment #1 by Anonymous posted on
Anonymous
Good legwork reporting on the Platinum Bank issue. Thanks, Banking Guy!

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Comment #2 by Anonymous posted on
Anonymous
Platinum was a real mess. TWB
(Taylor, Bean and Whitaker) is the holding company for Platinum Community Bank.

TBW was also involved with the whole Colonial Bank situation. Colonial now belongs to BB&T.

The Secret Service is currently investigating a former TBW employee who allegedly skimmed $1.6 million from short sales.

The branch manager at the Orlando branch of Navy Federal Credit Union reported suspicious transactions.

It's a great story:

http://www.ocala.com/article/20090828/articles/908279967

TBW laid off nearly 2000 employees on Aug 5 then filed Chapter 11.

1