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Six Banks Closed by Regulators in Four States

POSTED ON BY

The FDIC was busy today with six bank closures. This will probably be the last of the bank closures for 2010. The next two Fridays are holidays. The total number of bank failures for this year is now 157.

There was another bank failure in Florida which puts the number of Florida closures at 29. That's the most of any state. Second place goes to Georgia which had 3 closures today which puts the yearly total at 21.

For each of the six bank closures, the FDIC was able to find another bank to assume the deposits. There was another case of an acquiring bank not assuming some out-of-state CDs. The failed bank was Appalachian Community Bank, F.S.B. in Georgia. Here is how the FDIC described this:

If you have a CD that was not assumed by Peoples Bank of East Tennessee, such as an "out-of-state" non-IRA CD or QwickRate CD, your CD, if unencumbered, will automatically be closed, and the FDIC will mail your proceeds check, including interest earned through closing date, on Monday, December 20, 2010. You will not be assessed an early withdrawal penalty.

Most banks that failed had very weak health ratings. However, there was one exception. First Southern Bank in Arkansas had high ratings at Bankrate, BauerFinancial and in our own health score at DepositAccounts.com. Also, it didn't have any public enforcement action against it. I found the reason for the closure in an Arkansas newspaper. According to ArkansasBusiness.com:

First Southern Bank of Batesville bought $22 million worth of rural improvement district bonds that may be fraudulent. It is now looking to merge with another bank because of the potential loss.

Update 12/18/2010: I just noticed this press release from the Arkansas State Bank Department. It included the following reason for the closure:

This instance was not the result of poor quality loans, but the result of an imprudent business relationship between First Southern Bank and one individual

This is one example in which ratings can miss some important details.

Last Tuesday there was another credit union liquidation. Beehives Credit Union in Salt Lake, Utah was liquidated. The NCUA arranged for Security Service FCU to acquire Beehives. This was the 19th credit union liquidation of 2010. In addition to this liquidation, the AEA Federal Credit Union in Arizona was placed into conservatorship.

Below is a summary of this week's bank and credit union failures:

152nd Bank Failure of 2010 (29th in Florida)

  • FDIC Press Release
  • Closed Bank: The Bank of Miami, N.A., Coral Gables, FL
  • Size: 3 branches, $448.2 million in assets, $374.2 million in deposits
  • Acquiring Bank: 1st United BankBoca Raton, FL
  • Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits, have been assumed by 1st United Bank
  • Rate Changes: Current rates will be reviewed by the acquiring institution and may be lowered
  • Estimated Cost to Deposit Insurance Fund: $64.0 million
  • Enforcement Action: OCC 7/21/10 Consent Order
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star at BauerFinancial, 0 out of 5 with a Texas Ratio of 449.37% at DepositAccounts.com

153rd Bank Failure of 2010 (19th in Georgia)

  • FDIC Press Release
  • Closed Bank: Chestatee State Bank, Dawsonville, GA
  • Size: 4 branches, $244.4 million in assets, $204.5 million in deposits
  • Acquiring Bank: Bank of the Ozarks, Little, AR
  • Possible Uninsured Deposits: All deposit accounts, including brokered deposits, have been assumed by Bank of the Ozarks
  • Rate Changes: Current rates will be reviewed by the acquiring institution and may be lowered
  • Estimated Cost to Deposit Insurance Fund: $75.3 million
  • Enforcement Action: FDIC 8/21/08 C&D Order
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star at BauerFinancial, 0 out of 5 with a Texas Ratio of 1,085.44% at DepositAccounts.com

154th Bank Failure of 2010 (20th in Georgia)

  • FDIC Press Release
  • Closed Bank: Appalachian Community Bank, F.S.B., McCaysville, GA
  • Size: 3 branches, $68.2 million in assets, $76.4 million in deposits
  • Acquiring Bank: Peoples Bank of East Tennessee, Madisonville, TN
  • Possible Uninsured Deposits: All the deposits, excluding the Cede & Co. deposits and certain "Out of State" CDs have been assumed by Peoples Bank of East Tennessee
  • Rate Changes: Current rates will be reviewed by the acquiring institution and may be lowered
  • Estimated Cost to Deposit Insurance Fund: $26.0 million
  • Enforcement Action: OTS 12/30/09 C&D Order, OTS 10/14/10 PCA
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star at BauerFinancial, 0 out of 5 with a Texas Ratio of over 1000% at DepositAccounts.com

155th Bank Failure of 2010 (21st in Georgia)

  • FDIC Press Release
  • Closed Bank: United Americas Bank, N.A., Atlanta, GA
  • Size: 2 branches, $242.3 million in assets, $193.8 million in deposits
  • Acquiring Bank: State Bank and Trust Company, Macon, GA
  • Possible Uninsured Deposits: all deposit accounts, excluding the Cede & Co deposits, have been assumed by State Bank and Trust Company
  • Rate Changes: Current rates will be reviewed by the acquiring institution and may be lowered
  • Estimated Cost to Deposit Insurance Fund: $75.8 million
  • Enforcement Action: OCC 10/07/10 Consent Order
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star at BauerFinancial, 1 out of 5 with a Texas Ratio of 487.21% at DepositAccounts.com

156th Bank Failure of 2010 (1st in Arkansas)

  • FDIC Press Release
  • Closed Bank: First Southern Bank, Batesville, AR
  • Size: 2 branches, $191.8 million in assets, $155.8 million in deposits
  • Acquiring Bank: Southern Bank, Poplar Bluff, MO
  • Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits, have been assumed by Southern Bank
  • Rate Changes: Current rates will be reviewed by the acquiring institution and may be lowered
  • Estimated Cost to Deposit Insurance Fund: $22.8 million
  • Enforcement Action: None (FDIC consent order issued on 12/7/2010 became public on 1/28/2011)
  • Financial Ratings: 4 stars at Bankrate.com, 3.5 stars at BauerFinancial, 4 out of 5 with a Texas Ratio of 8.03% at DepositAccounts.com

157th Bank Failure of 2010 (8th in Minnesota)

  • FDIC Press Release
  • Closed Bank: Community National Bank, Lino Lakes, MN
  • Size: 2 branches, $31.6 million in assets, $28.8 million in deposits
  • Acquiring Bank: Farmers & Merchants Savings Bank, Manchester, IA
  • Possible Uninsured Deposits: The Farmers & Merchants Savings Bank has assumed all of the deposit accounts, including brokered deposits
  • Rate Changes: Current rates will be reviewed by the acquiring institution and may be lowered
  • Estimated Cost to Deposit Insurance Fund: $3.7 million
  • Enforcement Action: None
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star at BauerFinancial, 1 out of 5 with a Texas Ratio of 130.88% at DepositAccounts.com

19th Credit Union Liquidation of 2010 (closed on Dec 14, 2010)

  • NCUA Press Release
  • Liquidated CU: Beehive Credit Union, Salt Lake City, UT
  • Size: $145 million in assets and served 18,000 members
  • Acquiring CU: Security Service Federal Credit Union
  • Financial Ratings: 0 out of 5 with a Texas Ratio of 376.47% at DepositAccounts.com, 1 star at Bankrate.com, 0 star at BauerFinancial

The above ratings are based on September 2010 data.

References:



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Comments
7 Comments.
Comment #1 by pearlbrown posted on
pearlbrown
Ken, thank you for continuing to research until you found the answer to how a highly rated institution could be closed so abruptly.    As you indicate, the failure of First Southern serves as a reminder that ratings do not tell the whole story.   A financial institution can be doing things right (as reflected in ratings, as measured by the Texas Ratio, etc) and appear to be in good shape but nonetheless end up failing. 

It will be interesting to track future developments to see how widespread the problem is, how the fraud could go undetected for almost two years, and how First Southern realized it might have a problem. 

5
Comment #2 by OC Steve (anonymous) posted on
OC Steve
You ask what is a Quickrate CD?  It is an on-line CD rate listing service that other Banks, S&L's and CU's subscribe to (for a monthly/annual fee) that lists CD rates from  Banks, S&L's and CU's that are willing to accept "non-brokered, out of area funds".  Due to technical definition differences, Quickrate CD's are not considered "brokered CD's", because no placement fees are paid.

Just a personal note, having worked at a few Banks that used Quickrate, they can be very useful in raising funds quickly without affecting local market area rates with existing customers.  By definition, these would normally be "non-personal" deposits which a Bank will pay lower rates on that retail "personal" customer rates.

OC Steve

2
Comment #3 by Anonymous posted on
Anonymous
" The next two Fridays are holidays "

FDIC can close a bank on any day, it has happened before and will happen again.

5
Comment #4 by Anonymous posted on
Anonymous
Highly, highly unlikely, Anonymous #3.

4
Comment #5 by Anonymous posted on
Anonymous
Agree with #4 comment.  If a holiday is on Friday and a Bank needs to be closed, then the FDIC does it on Thursday.  However, during the last few weeks in December, due to difficulty in getting outside contractor closing staff to work hard over the regular holiday period, they normally don't do very many if any during that last couple of week period in December, per my memory.

2
Comment #6 by Anonymous posted on
Anonymous
But possible, #4.

3
Comment #7 by Anonymous posted on
Anonymous
Regarding the closing of the First Southern Bank of Batesville - the article that Ken linked to, dated 12/6/10, also states the following - "Other Arkansas banks also may have bought fake bonds, leaving a total debt of between $30 million and $40 million in a story that is still developing."  There are at least 2 other Arkansas banks that have long had Rewards Checking programs, and as a long-time reader my guess is that a number of Ken's readers have cash in those...  Hope those banks did not get hoodwinked as well.  The balance limits on Rewards Checking programs generally serve as an "extra incentive" for depositors to keep their balances well below the FDIC minimums, so maybe most will be safe anyway.

1