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3rd Bank Failure of 2009: 1st Centennial Bank in California


1st Centennial Bank was closed on Friday by California regulators, and the FDIC was named receiver. Here's the FDIC's press release link, and here's a summary of the closure:
  • Closed Bank: 1st Centennial Bank
  • Location: Redlands, CA
  • Size: 6 branches, $803.3 million assets, $676.9 million deposits
  • Possible Uninsured Deposits: $12.8 million
  • Acquiring Bank: First California Bank
  • Cost to Deposit Insurance Fund: $227 million
  • Financial Ratings: 0 stars at BauerFinancial, 1 star at Bankrate.com
California Department of Financial Institutions released this press release that included the following explanation for the closure:
The DFI has been closely monitoring the bank and had ordered it to increase its capital reserves to a safe and sound level. But efforts by the bank to do so were unsuccessful.

This is the second bank failure in a row in which depositors may lose uninsured deposits. Fortunately, the estimated uninsured deposits of $12.8 million is much less than past closures. Last Friday the FDIC estimated the possible uninsured deposits at the failed Bank of Clark County was $39.3 million, and it had only $366.5 million in deposits. It should be noted that the FDIC will likely find more of the deposits insured once it examines the accounts. Some of the depositors may be over the $250K limit, but all of their deposits may still be covered based on POD or Joint Accounts. For the case of the closure of Bank of Clark County, Seattle Times reported that the FDIC overstated the uninsured deposits mainly due to initially missing funds that were withdrawn during the previous week.

For depositors with CDs at 1st Centennial Bank, you can close the CD without an early withdrawal penalty which is typical (see FDIC Q&A). Unfortunately, the new bank may not honor the CD rates to maturity:
All interest on insured deposits accrued through Friday, January 23, 2009, will be paid at your same rate. First California Bank will be reviewing rates and will provide further information soon.

If you deposited funds through a broker, the interest will accrue and be paid through Friday, January 23.

The rating services were on target with their ratings for soundness. Both BauerFinancial and Bankrate.com had given the bank their lowest score.

I had one post on this bank in July 2008 when it was offering some competitive CD rates. For those who purchased one of those special CDs, please leave a comment about what the new bank decides regarding honoring rates to maturity.

Thanks to the readers who emailed me news of these closures

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Anonymous   |     |   Comment #1
Be careful and don't confuse this closed bank with Centennial Bank in Fountain Valley, CA. (Orange County).

OC Steve