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Two Florida Banks and One California Bank Closed by Regulators

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Three banks failed today. Two were in southwest Florida, and one was in California. The largest of the three failed banks was Orion Bank in Naples, Florida. It had $2.7 billion in assets, and it cost the FDIC's Deposit Insurance Fund an estimated $615 million. The other failed Florida bank was Century, FSB in Sarasota. It had $631 million. The smallest failed bank was Pacific Coast National Bank in California with $134.4 million.

Today's failures were typical. The FDIC arranged for other banks to assume all deposits of the failed banks, even deposits above the FDIC limit. Unfortunately, the acquiring banks haven't agreed to honor existing CD rates. At the very least, interest on all deposits accrued through today will be paid at the original rates. After today, the acquiring banks are free to modify the rates. If rates are lowered, depositors will be free to withdraw the money without a penalty.

For hints of future bank failures, Calculated Risk blog noted some banks that are in particularly bad shape. One is Imperial Capital Bank in California which has received a Prompt Corrective Action from the FDIC. Another one is Advanta Bank. Its parent, Advanta Corp, filed for bankruptcy last Monday. Advanta Bank isn't part of the bankruptcy, but in the filing it was noted that Advanta Bank's capital is below regulatory requirements and that the bank could turned over to a FDIC.

Calculated Risk Blog updated its unofficial problem bank list based on new enforcement actions. New South Federal Savings Bank received a Prompt Corrective Action. This is the bank that runs UmbrellaBank.

On a related note, yesterday the FDIC approved the final rule on prepaid assessments to rebuild the cash reserves of the Deposit Insurance Fund. The rule will require banks to prepay slightly over three years of estimated insurance assessments (see press release). This will be another cost for banks, and another thing to put downward pressure on deposit rates.

Below is a summary of today's bank failures:

121st Bank Failure of 2009 (10th in FL)
  • FDIC Press Release
  • Closed Bank: Century Bank, Federal Savings Bank, Sarasota, FL
  • Size: 11 branches, $728 million in assets, $631 million in deposits
  • Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
  • Acquiring Bank: IBERIABANK, Lafayette, LA
  • Rate Changes: IBERIABANK will review rates
  • Estimated Cost to Deposit Insurance Fund: $344 million
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star (lowest) at BauerFinancial
122nd Bank Failure of 2009 (11th in FL)
  • FDIC Press Release
  • Closed Bank: Orion Bank, Naples, FL
  • Size: 23 branches, $2.7 billion in assets, $2.1 billion in deposits
  • Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
  • Acquiring Bank: IBERIABANK, Lafayette, LA
  • Rate Changes: IBERIABANK will review rates
  • Estimated Cost to Deposit Insurance Fund: $615 million
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star (lowest) at BauerFinancial
123rd Bank Failure of 2009 (15th in CA)
  • FDIC Press Release
  • Closed Bank: Pacific Coast National Bank, San Clemente, CA
  • Size: 2 branches, $134.4 million in assets, $130.9 million in deposits
  • Possible Uninsured Deposits: All deposits transferred, excluding some brokered deposits
  • Acquiring Bank: Sunwest Bank, Tustin, CA
  • Rate Changes: Sunwest Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $27.4 million
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star (lowest) at BauerFinancial
Bankrate's and BauerFinancial's ratings are based on 6/30/09 data.

References:

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Comments
6 comments.
Comment #1 by stephen (anonymous) posted on
stephen
I guess the recession is not yet over.

1
Comment #2 by Andy (anonymous) posted on
Andy
I have a brokered deposit from Orion through Vanguard - 100K. I'll let you know how the process, which will be a first for me, goes.

1
Comment #3 by Banking Guy (anonymous) posted on
Banking Guy
Thanks. Please keep us posted. I would be interested to know more about Cede & Co. brokered deposits. Seems like these are always excluded in the transfers. Here's what the FDIC's Q&A states about these:

As an All-Deposit Transfer transaction, the total of all deposit accounts, excluding the Cede & Co. brokered deposits, have been assumed by IBERIABANK. The FDIC retained the Cede & Co. brokered deposits and will pay off those accounts directly.

1
Comment #4 by Anonymous posted on
Anonymous
It's a front for a securities depository. Securities in their name actually belong to somebody else.

http://financial-dictionary.thefreedictionary.com/Cede+&+Co.
http://financial-dictionary.thefreedictionary.com/Depository+Trust+Company

1
Comment #5 by Andy (anonymous) posted on
Andy
Re: my post from one week ago about Orion Bank and how long it would take to get a payout on a brokered CD thru Vanguard. The answer is one week. The funds plus interest up until the day they went under were deposited today.

1
Comment #6 by Banking Guy (anonymous) posted on
Banking Guy
Andy, Thanks for the update. Glad to see it only took one week.

1