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45th Bank Failure and 9th Credit Union Liquidation of the Year

POSTED ON BY

Just like last week, only one bank failed this Friday. The small South Carolina bank, Atlantic Bank and Trust, became the 45th bank failure of the year. It was the second bank to fail this year in South Carolina.

The FDIC arranged for First Citizens Bank and Trust Company of Columbia, SC to acquire Atlantic Bank. All deposits of Atlantic Bank were assumed by First Citizens including brokered deposits. So no one lost any money regardless of the size of the deposit.

First Citizen's FAQ currently suggests that existing Atlantic CD rates could be reduced. However, it does state that customers will be noticed before the change:

If in the future we find it necessary to make any changes to your fees or rates, you will receive this information in advance of the change.

It's nice to see First Citizens isn't reducing the CD rates immediately after Atlantic Bank's closure. The FDIC does allow acquiring banks to lower rates starting the day after the closure. If that occurs, depositors may lose interest if the CD rate is slashed to an uncompetitive level and the bank doesn't hurry to notify the customers.

As is always the case, the CD account holders from the failed bank are allowed to make penalty-free early withdrawals.

Credit Union Liquidation

In addition to a bank failure, there was also a credit union failure this week. It was Valued Members Federal Credit Union in Jackson, MS., a small credit union with only $9 million in assets and 2,000 members. All deposits are being assumed by Magnolia Federal Credit Union.

Valued Members FCU had been placed into conservatorship on May 4th. The financial condition of the credit union must have been so poor, the NCUA quickly decided to shut it down without a buyer.

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

45th Bank Failure of 2011 (2nd in South Carolina)

  • FDIC Press Release
  • Closed Bank: Atlantic Bank and Trust, Charleston, SC
  • Size: 3 branches, $208.2 million in assets, $191.6 million in deposits
  • Acquiring Bank: First Citizens Bank and Trust Company, Inc., Columbia, SC
  • Possible Uninsured Deposits: All deposit accounts, including brokered deposits, have been assumed by First Citizens Bank and Trust Company, Inc.
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC FAQs)
  • Estimated Cost to Deposit Insurance Fund: $36.4 million
  • Enforcement Action: OTS 1/25/11 C&D Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 752.44% at DepositAccounts.com (see financial rating note)

9th Credit Union Liquidation of 2011 (May 31st)

  • NCUA Press Release
  • Liquidated CU: Valued Members Federal Credit Union of Jackson, MS
  • Size: $9 million in assets and served 2,000 members
  • Acquiring CU: Magnolia Federal Credit Union
  • Financial Ratings: 2 stars at Bankrate.com, ? stars at BauerFinancial, 2 stars with a Texas Ratio of 36.08% at DepositAccounts.com (see financial ratings note)

Financial Ratings Notes: 0 star is lowest at BauerFinancial, 1 star is lowest at Bankrate.com & DepositAccounts.com, Texas Ratios over 100% is considered at risk. Ratings are based on December 2010 data except at DepositAccounts.com which now includes data from March 2011 data.

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