Dedicated to Deposits: Deals, Data, and Discussion

Just One Small Bank Failure Today in Minnesota

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After the last two Fridays, I was expecting at least a half a dozen bank closures today. It turned out to be a quiet Friday with only one small bank being shut down. The failed bank was 1st American State Bank of Minnesota, and the FDIC arranged for Community Development Bank, FSB to assume all of the deposits even those over the FDIC limit. There probably weren't a lot of deposits over the FDIC limit. The bank's total deposits were just $16.3 million. The only concern for those handful of depositors will be if Community Development Bank decides to reduce existing CD rates. Based on Community Development Bank's competitive CD and money market rates, they may not be in a rush to cut rates.

Today's bank failure was the 16th for 2010. If we see the same frequency of bank failures for the rest of the year, we should have around 180 bank failures. That's in the range that a bank analyst gave in this MarketWatch article. The article reviews the health of three large banks that are having problems: Flagstar, Amcore and Sterling. All have high Texas Ratios indicative of banks in trouble.

The FDIC has said there are 552 problem institutions as of 9/30/2009. They keep this list secret to avoid causing bank runs. The MarketWatch article mentioned that there were 388 banks in the US with Texas Ratios over 100% as of 9/30/2009.

Another sign of potential trouble is when a bank receives an enforcement action from its regulator. The best list of banks operating under public enforcement actions is at Calculated Risk Blog. The latest unofficial problem bank list as of 2/05/10 has 605 banks. For each bank closure, I'm checking this list to see if the bank had been operating under a Cease and Desist Order or similar enforcement action. Today's failure was on this list, and most all of this year's failures have been on the list.

Below is a summary of today's bank failure:

16th Bank Failure of 2010 (3rd in MN)

  • FDIC Press Release
  • Closed Bank: 1st American State Bank of Minnesota, Hancock, MN
  • Size: 2 branches, $18.2 million in assets, $16.3 million in deposits
  • Possible Uninsured Deposits: All deposits transferred
  • Acquiring Bank: Community Development Bank, FSB, Ogema, MN
  • Rate Changes: Community Development Bank will review rates
  • Estimated Cost to Deposit Insurance Fund: $3.1 million
  • Enforcement Action: FDIC 2/25/08 C&D Order
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star (lowest) at BauerFinancial

The above BauerFinancial and Bankrate ratings are based on 9/30/09 data.

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