Dedicated to Deposits: Deals, Data, and Discussion
DETAILSINSTITUTIONAPYMINMAXPRODUCT
First Bank (FL)0.76%-$25kKasasa Cash
First Bank (FL)0.05%--Kasasa Cash
Accounts mentioned in this post. Rates as of April 19, 2014

FDIC Forces Another Bank To Slash Its Reward Checking Rate

POSTED ON BY

Another community bank is being forced by the FDIC to slash its reward checking rate. First Bank of Clewiston, FL notified its customers of the rate cut and the reason behind it. The bank also posted the letter on its website. Below is a copy of the letter:

As part of their response to the economic downturn, the FDIC has placed interest rate restrictions on many banks preventing them from paying interest on deposit accounts that are significantly higher than the markets they serve. Until recently, this has not been an issue for First Bank, with the exception of our Kasasa Cash deposit account. We have been in continued discussion with the FDIC maintaining that Kasasa Cash is a different type of deposit account and it should only be compared to similar accounts, not to regular interest bearing checking accounts. Unfortunately, our substantial efforts and appeals have been unable to convince the FDIC and we must adjust the rate paid on Kasasa Cash to be in line with other interest bearing checking accounts in the Southwest Florida market. As of March 1st, the rate on Kasasa Cash will be .76%, which is the maximum allowable in our market where some checking accounts are paying as low as .01%. The rate on our Kasasa Saver will remain at .90% and will remain an attractive option for many of our customers.

Although we strongly disagree with the FDIC's directive, we ultimately have no choice but to comply. Please know we, and other community banks in the nation, continue to fight this decision.

We do hope that you will continue to find value in your relationship with First Bank. As always, we will continue to provide you with excellent service and innovative products, all with the personal touch only First Bank can offer!

Currently, First Bank's reward checking account, Kasasa Cash, has a 1.51% APY on balances up to $25,000 if certain monthly requirements are met. The rate had been 2.51% APY before November 2011.

In May 2009 the FDIC issued a final rule "to prevent banks that are less than well capitalized from soliciting deposits at interest rates that significantly exceed prevailing rates." The FDIC has been publishing weekly national deposit rate averages and rate caps that are used to enforce this rule.

The FDIC does not disclose which banks it considers as "less than well capitalized". However, we can make guesses based on public enforcement actions. This FDIC consent order was issued on June 2011 against First Bank. The order does include capital requirements.

Unfortunately, the FDIC has been unfairly forcing banks to cut their reward checking rates since 2009. I first received confirmation of the FDIC rate restrictions affecting a reward checking account in November 2009 when Libertad Bank slashed its reward checking rate. BancVue, the company behind most of the reward checking accounts, has tried to convince the FDIC that reward checking needs to be treated differently than interest checking. You can read their arguments in this April 2009 letter to the FDIC. It's clear that the FDIC has refused to listen to BancVue and the community banks.

Hat tip to reader George who mentioned this First Bank notice in the comments.

  Tags: First Bank (FL), checking account

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Comments
28 comments.
Comment #1 by Anonymous posted on
Anonymous
If you really want to mess things up, let the government get involved.

9
Comment #2 by Anonymous posted on
Anonymous
I think the FDIC has every right to limit the ability of a bank that is "less than well capitalized" from offering higher than normal market interest rates. Some banks would do this as an enticement to bring in monies for deposit.

Do we know for a fact that this bank was less than well capitalized?

In the end, if the bank goes under, the FDIC can be left holding the bag.

 

9
Comment #3 by lou posted on
lou
Ken, I noticed that you gave First Bank 4 stars for capitaliztion, so it doesn't seem like it has a problem in this area. I wonder why the FDIC thinks this bank is less than well capitalized? It would be interesting to know what percentage of banks are considered less than well capitalized by the FDIC.

7
Comment #4 by Anonymous posted on
Anonymous
http://problembanklist.com/

1
Comment #5 by Apache (anonymous) posted on
Apache
Well Capitalized



  • Core capital to adjusted tangible assets as least 5%
  • Core capital to risk-weighted assets at least 6%
  • Risk-adjusted capital ratio1at least 10%
For anyone who is interested in what makes a bank considered "well capitalized", the above information can come in handy.  I use it to check out any banks I want to use no matter what their "star" rating appears to be.  I have found star ratings can be misleading unless one double checks it by the above criteria if you are really looking for the most solvent banks.  If you use Bankrate for your financial research, you will find that they give the above information on their Financial page for each bank they rate.  

6
Comment #7 by Anonymous posted on
Anonymous
Amazing that we're talking about the FDIC being upset about 1.51%!!!!!! What has happepenned to this once great country?????  1.51%.......And the government says it's too high??????? Wow.

5
Comment #8 by Hank-2 (anonymous) posted on
Hank-2
Did you hear Bernanke speech today, he said the savers should stop whinnying since most of us are already invested in the stock market, corporate bonds and are collecting healthy dividend.
Case closed, the FEDs and FDIC are teamed up to totally destroy the savers and stop any interest paid to bank accounts.

15
Comment #9 by mschoenf posted on
mschoenf
Oh how I long for the days of 5% desperation CD-rates from the likes of Wamu in a last ditch attempt to survive.  Alas, the FDIC, rightly, has cracked down on this practice of essentially gov't backed junk bonds. This case was not as extreme with this bank, but same principle.  

7
Comment #10 by Anonymous posted on
Anonymous
Appreciate the informaiton regarding Fed Cap which I was unaware of. Keep up the good work.

1
Comment #11 by Anonymous posted on
Anonymous
They are doing everything they can to force everyone to put their money in the stock markets.

5
Comment #12 by Apache (anonymous) posted on
Apache
We all put our money into the stock market, another Great Depression hits and we can all jump out of the nearest skyscraper window singing "We DIDN'T overcome!"  It is so obvious what Bernanke and his cohoots are up to that I need an Alker Selzer just to read the crap!  I am SO eager to go vote this election that I think I will just take a loaf of bread and a case of colas and go park myself outside the voting place I need to go to!

11
Comment #14 by Inforay posted on
Inforay
What have we come to, that a bank does not even have the right to pay a paltry 1.51% to its depositors?  This is not capitalism. This is an all-out assault on savers by the Federal Reserve, FDIC and all branches of the Fed.  I am wringing my hands in disbelief and shock.  The Feds are so in our business that they don't like it that we get 1.51% on our hard earned money!! What's next??  Although this blog does not generally discuss policy, I have noticed that it is read by a lot of people who share similar views. We are a strong voting bloc.  Let us all unite and make sure that we vote in a manner that ensures that Ben Bernanke is not reappointed as chief of the Federal Reserve when his term is up in 2014. He should not be messing with savers so that the stock market shows gains.  Look at the prices of gasoline and food.  The easy monetary policies are going to cause inflation, the likes of which we have not seen. And on top of that we cannot earn 1.51% on our money, all because of the Fed's plan to put everyone in the stock market just to deceive people into thinking that Ben Bernanke has been very successful at his job because the stock market is doing well!

11
Comment #16 by Inforay posted on
Inforay
Anonymous #15:  I think the banks have to pay premiums to get FDIC coverage.  It is like an insurance policy only with the federal government.  And, at the end of the day, all of us depositors would contribute towards this premium because it is not coming out of the bank's pocket.  Some credit unions actually have private insurance coverage rather than NCUA.  I don't think that paying depositors 1.51% is going to bankrupt an otherwise solid financial institution.  If it can lend at 2.5% or 3.0% it wil still come out ahead. I think this government has an agenda and that is to force everyone to put their money in the stock market so it looks like it is doing well.  In a capitalist economy, supply and demand would set interest rates, not some arbitrary government action.

6
Comment #17 by JP (anonymous) posted on
JP
What is really driving low rates is there is little high quaility loans to make so the banks dont need the deposits so why pay for them.  The fed has reduced fee income from debit and overdrafts for them but at the same time is speaking out of both side of their mouth regarding lending.  "make loans but if you make a bad one were going to get you"..  As loan demand increases rate will as well.

3
Comment #18 by Anonymous posted on
Anonymous
What is next, the CDs are too high, make them all bellow 1%.
Dictatorship in action.

6
Comment #19 by #15 (anonymous) posted on
#15
So we are "whinners" because we want to protect our money???  That makes as much sense as the junk Bernanke spits out!  Those banks are making us pay for that protection whether they admit it or not so why not take advantage of it.  I have a feeling you have more CDs than I do and so I guess that makes you a whinner too!  Have a great day, fellow whinner!

5
Comment #21 by Apache (anonymous) posted on
Apache
To Whinner #20 from Whinner #15/19:  Why don't you pick up a nice fake name to use so all these numbers won't make me crazy?   Will you get off of the "Marxist" crap?  If you really thought this country has gone Marxist don't you have the sense to realize YOU are one too if you live here?  What people like myself are trying to do is "keep" our country from going in that direction instead of just babbling about it!

As for your privately insured credit unions:  What makes you think they will exist much longer if our country is going down the toilet.  Haven't you flushed a toilet lately?  When you pull that handle, EVERYTHING in the bowl goes down!  So bye bye to you Mr. UnMarxist person! 

3
Comment #22 by ChrisCD posted on
ChrisCD
Wasn't good 'ole Ben put in place by Bush?  Believe me I am no fan of Obama and have never voted Democrat in my life, but you can't pin that one on him.

I'm not seeing that any other conservative is going to be much better.  I don't seem them coming out with policy statements about giving relief to Main St.

I'm not sure how a 1.51% at an insured institution would be padding anyone's account either.  Banks pay the FDIC insurance premiums and I'm sure they gladly pass it on to us through fees, low savings rates, and higher loan rates.  It is an expense to them.  That being said, I don't think it is wrong to stop a failing bank from offering rates that are way out of line with other's in the market.  However, it seems questionable that First Bank falls in that category.  The Gov't and other banks also put pressure on Ally Bank.  For the most part, the Gov't just needs to get out the way. 

What good have the actually produced with their meddling?!?

The savers need to be given a break and someone that wants to be elected should start proving it.

cd :O)

8
Comment #23 by Anonymous posted on
Anonymous
Okay Ben, you win.  I'll take all of my money out of FDIC insured savings and invest them in Greek bonds.

7
Comment #24 by Anonymous posted on
Anonymous
Just as a point of clarification. A bank can exceed all the required capital ratios to be considered 'well capitalized' but if the FDIC gives them a consent order that includes a 'capital maintenance' provision, the bank is then classified as 'less than well capitalized'. for example, you could have a bank with a 20% tier 1 capital ratio (which is an exceptionally strong/high capital ratio) be less than well capitalized (and therefore subject to interest rate restrictions) just because the FDIC says so, not because of the bank's actual capital ratios.

3
Comment #25 by Anonymous posted on
Anonymous
The FDIC's action makes perfect sense. Being a customer of this bank, I knw that this isn't the first time that the FDIC has come down hard on First Bank of Clewiston and it will not be the last.

The bank is under watch because of poor management practices and its inability to hire employees with actual banking experience. They were warned to clean up their act. I'm not surprised that they haven't yet.

 

1
Comment #28 by Anonymous posted on
Anonymous
Banks are not required to be FDIC insured. If you have a problem with the FDIC's decision, put your money in a non-FDIC insured bank. I had money in a bank that was closed by the FDIC and got my money plus interest from the FDIC in less than a week. 

Or put your money in the stock market. It's not insured but its real, real safe. I had money in a safe stock and only lost 87%.

 

2