Dedicated to Deposits: Deals, Data, and Discussion

Nine Banks of FBOP Corporation Closed - All Deposits Assumed by U.S. Bank

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It appeared this was going to be a quiet Friday. The FDIC website listed no bank failures as of 8:30pm CDT. It then issued a press release announcing the closures of nine banks with combined assets of $19.4 billion and deposits of $15.4 billion. All of these banks were subsidiaries of FBOP Corporation. The FDIC arranged for U.S. Bank to assume all of the deposits and essentially all of the assets of the nine failed banks.

A couple of the nine closed banks had just mildly weak ratings at BauerFinancial and Bankrate. Their affiliation to the other banks through FBOP Corporation resulted in their closure. Here's an excerpt from the FDIC press release:
The FDIC's Board of Directors issued notices of assessment of cross guaranty liability against Park National Bank and Citizens National Bank. Under statutory authority, the FDIC may assess affiliated banks for losses incurred by the Deposit Insurance Fund (DIF) from the failure of other banks, such as those owned by FBOP Corporation. Congress granted the FDIC authority in 1989 to reduce the cost to the DIF for the resolution of affiliated institutions owned by the same company. The two banks were unable to pay the amounts assessed and were closed by their chartering authorities.

So this shows that the financial health of sister banks within a bank holding company can be more important than the financial health of the bank itself.

Depositors should be happy to learn that U.S. Bank has agreed to honor existing rates. For most of this year's bank closures, the assuming banks have decided to reduce rates on existing CDs. Here's an excerpt from the FDIC Q&As from 8 of the 9 banks:
6. Interest Rates, Early Withdrawal Penalty: Will I continue to earn interest at the same rate? Will I be charged an early withdrawal penalty?

U.S. Bank will continue to honor existing rates. You may withdraw funds from any transferred account without an early withdrawal penalty until you enter into a new deposit agreement with your new bank.

However, according to the Q&A for Madisonville State Bank:
U.S. Bank will review rates and notify you if interest rates will change. Your interest rate may be reduced.

I'm not sure why U.S. Bank had a different policy for Madisonville State Bank. It seems like it may be a mistake by the FDIC, or perhaps Madisonville State Bank had been offering some very high CD rates.

September Enforcement Actions

The FDIC released a list of orders of administrative enforcement actions taken against banks and individuals in September. Some banks that I've reported on that have been issued cease-and-desist orders include:
  • United Commercial Bank, San Francisco, CA
  • Hillcrest Bank Florida, Naples, FL
  • Atlantic Southern Bank, Macon, GA
  • Rainier Pacific Bank, Tacoma, WA
Credit Union Failure

There was also a credit union failure this week. It was a tiny credit union in Los Angeles with only 340 members. According to the NCUA press release:
Prosperity Federal Credit Union (Prosperity) of Rancho Domingue, California, formerly Shell Southwest Federal Credit Union, purchased and assumed Second Baptist loans and shares, which enables its 340 members to continue to receive uninterrupted credit union service. Established in 1955 to serve Second Baptist employees and members, the credit union was closed because it is insolvent. This is the 12th federally insured credit union liquidated in 2009.

Summary of today's bank closures:

107th to 115th Bank Failures of 2009
  • FDIC Press Release
  • Closed Bank: 9 bank subsidiaries of FBOP Corporation, Oak Park, IL
  • Size: 153 offices, $19.4 billion in assets, $15.4 billion in deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: US Bank N.A., of Minneapolis, MN
  • Rate Changes: U.S. Bank will continue to honor existing rates (see note 1)
  • Estimated Cost to Deposit Insurance Fund: $2.5 billion
  • Financial Ratings: 0 star (lowest) to 2 stars (problematic) at BauerFinancial, 1 star (lowest) and 2 star (below peer group) at Bankrate.com (see note 2)
Note 1: FDIC Q&A for Madisonville State Bank states that U.S. Bank will review rates and notify you if interest rates will change. The Q&As for the other 8 banks state that U.S. Bank will continue to honor existing rates.
Note 2: The ratings are based on 6/30/09 financial data.

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