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Depositors Suffer from the Bank Failures of Corus and Irwin Union Bank


Even though the banks that took over Corus Bank and Irwin Union Bank agreed to assume all deposits, the depositors of these two failed banks still had to contend with several issues. In previous years both Corus Bank and Irwin Union Bank had offered very competitive CD rates. These attracted many customers around the nation who had opened CDs with terms of up to five years. The customers agreed to lock their money in these CDs in exchange for a guaranteed interest rate for the entire term. When interest rates fall, as they have in the last two years, this rate lock is especially nice. However, this rate guarantee ends after a bank fails.

When a bank fails, depositors are only guaranteed to receive the insured principal and accrued interest up to the day of the closure. After a closure, the new bank that assumes the deposits of the failed bank is free to reduce interest rates and close accounts. If the new bank makes any changes to the existing CDs, the bank has to allow penalty-free early withdrawals.

Corus Bank and MB Financial Bank

Corus Bank failed on September 11th, and the FDIC arranged for MB Financial Bank to assume all deposits. MB decided to keep its focus on the Chicagoland market. For the former Corus customers who live outside of Illinois, MB decided to close those accounts, and MB didn't waste any time. MB reported to have mailed checks on September 22nd. Letters informing customers of this were reported to have been mailed on September 18th. Some problems that readers reported included:
  • CD rates were reset the day after Corus Bank's closure to 0.05%
  • No options for withdrawals were given except receiving the checks by mail
  • Checks were received before the letters. No explanation was included with the checks.
  • Some readers were still waiting for their checks as of 9/26/09.
When Corus failed, MB issued a FAQ for Corus Bank customers, and in this FAQ, it stated the following:
Will my CD continue to earn the same interest rate?

We are reviewing bank products and interest plans, and we will let you know if anything will change on any deposit account you had with Corus Bank.

It's understandable why many had the reasonable assumption that their accounts would continue without change until they were contacted. However, it appears CD rates were cut and accounts closed too early without giving enough time to ensure affected customers had been notified.

Irwin Union Bank and First Financial Bank

Irwin Union Bank was closed on September 18th, and the FDIC arranged for all deposits to be assumed by First Financial Bank. First Financial issued a letter dated September 24th to Irwin Union Bank depositors which described how existing Irwin Union CDs would change:
If your certificates of deposit currently has a rate greater than 1.50%, it will be reduced, effective September 24, 2009, to 1.50%/1.51% annual percentage yield until its maturity

As required, they also described how one could make a penalty-free withdrawal:
You may withdraw your funds from any CD without an early withdrawal penalty until you enter into a new CD agreement with First Financial Bank. Entering into a new agreement can be done by either 1) renewing your CD or 2) making a withdrawal from your CD.

One reader mentioned to me that he had a 5.30% 40-month CD at Irwin Union. So for many Irwin Union CD holders this will be a major rate cut. They can withdraw their money, and they should be able to do better than 1.50%. However, they shouldn't expect to find anything close to 5.30%.


One reader left a comment with a good idea. If you believe you have been mistreated by a bank that took over your failed bank, you should contact the FDIC. The more complaints logged against them the less likely they will be considered for future takeovers. Here's the link to the FDIC contact information. You may also want to contact the bank's primary regulator (OCC for the case of MB Financial). Here's the link to the OCC complaint form.


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Anonymous   |     |   Comment #1
I find it interesting that I happen to call Irwin on the 25th to inquire about my CD and was told no decisions had been made yet. However, on the 28th, I receive a letter in the mail saying effective the 24th my interest rate is now 1.5%. Is a bank not required to give you FUTURE notice? I find it kind of ridiculous I find out after the change. Not that I am going to complain to the bank or the FDIC about a few days but it seems like there should be some sort of protection for the customer in this case.
Anonymous   |     |   Comment #2
The suffering has just begun!!! Just wait until all the big banks which are essentially bankrupt go belly up. The FDIC has negative funds. So let's not cheer lead people into believing their deposits are safe when they are not.
Anonymous   |     |   Comment #3
I hope you're not trying to suggest that we've been mistreated just because the new bank has lowered our CD rates. We all know this can happen. And with the financial ratings that Irwin had, it should not be a shock that they failed. If anything, FDIC insuranced allowed me to take advantage of Irwin's offer. 2.2% interest was more than I'm getting for savings and I got a free TV on top of it. I'd almost argue that there is something wrong with a system like this that allows me to disregard whether a bank is healthy or not.
Anonymous   |     |   Comment #4
It seems that Corus Bank a/k/a MB Financial has a rather interesting creative accounting method for computing interest. Not only did they reduce the interest to .05% without advanced or even contemporaneous notice on certificates of deposits, but they only paid interest to the date the check was cut. I know at least three depositors whose envelopes were not meter mailed for several days later. Check and keep your envelopes.

Clearly there has been unjust enrichment to the bank as they floated themselves a free loan with probably millions of dollars over those few days. My suggestion is to file a complaint with the U.S. Attorney of Chicago as likely tens of thousands of people throughout the United States have been impacted. A class action suit may be in order. At the very least, MB Financial's tactics should be investigated!
sad saver
sad saver   |     |   Comment #5
I just got the letter from Irwin (I opened a 20k CD for the TV I heard about on this blog a few months ago - thanks).

I called the number at the "front" of Irwin's website and got a message that "First Bank" (or whoever acquired Irwin) was closed.

At the top of Irwin's online banking prompt was another toll-free number: 866-879-5901 and that line still has humans at the other end (as of 4:30 PM Pacific Coast Time) - the woman I spoke with took my request for CD redemption to be processed tomorrow.

Since I opened my account online, the representative said she would send my funds back to the institution I funded the account with (in my case, Alliant). She said it would be submitted tomorrow (thursday) morning so I should expect to see the money in my funding account on Monday.
Anonymous   |     |   Comment #6
A few comments about Corus:

1. Crain's Chicago Business had been given a heads up and posted an article to their website over an hour prior to the takeover. Likely by MB Financial since it nearly congratulated the CEO of MB for taking 3 banks, with Corus being the third.

2. My Corus CD (4.65% with 2 weeks left to maturity) had interest posted immediately after the seizure.

3. The MB CFO stated on their conference call that all out of market accounts would be closed.

4. I requested a check and Corus was very prompt in mailing it. They have always been a class act. The MB Financial letters arrived a week after I cashed the check.

5. 66% of my Corus check was held for 10 business days. The balance for 2 business days by my bank PNC/Nat City.

It is very likely that rates on "in market" accounts were treated differently than out of market. Even though I am in Illinois, I was considered out of market.
jafjr-Sometimes wrong but never in doubt
jafjr-Sometimes wrong but never in doubt   |     |   Comment #7
Thanks for the information on Irwin. I dropped by my branch here in Las Vegas on Monday and was told that they just got the news that morning that CD rates would remain intact until maturity - Mine is currently at 4.47%. I guess I better call them back. Thanks again.
scott   |     |   Comment #8
Still no change on my Corus 4.65% CD and still getting 1.31% in my UMA and I'm in MA. I have less than two weeks to now till maturity, Corus would have mailed me the notice about options at maturity by now but nothing so far. So wonder if they are keeping open and it will then renew at some very low rate that I'm stuck with if I don't close in time? So just a warning to anybody who did not get CD closed by MB
jafjr-Sometimes wrong but never in doubt
jafjr-Sometimes wrong but never in doubt   |     |   Comment #9
Called Irwin this morning here in Las Vegas and was told that the FSB side of Irwin DID drop there rates but the other side of Irwin DID NOT. I know they have Irwin Bank and a Irwin Bank & Trust?
ctgottapee   |     |   Comment #10
while i get the upset, i don't understand how anyone can feel they were wronged with CD rate adjustments; you should just be relieved FDIC insurance covered you. the FDIC only guarantees your money until take over, so you should only expect to get the money held and accured until the legal date of takeover. after that it is just luck if you keep a good interest rate or get a check quickly; many of us get neither with non-failed banks.

i'm guessing if you read the full text of the FDIC insurance, it probably allows the takeover bank many months if not all sorts of other leniency in crediting depositors.

i still admire at how well the FDIC manages the whole takeover process. your money is safe and whisked overnight. anyone with any sort of sense know this is a business nightmare. it can take longer fun a functional bank to start up a new account properly.

as far as the bank dropping rates to .05%, it shows you the FDIC is having a hard time finding willing and capable banks to take over the dead ones. with a rate like that, it insures millions in CD deposits will be sucked out almost instantly, so the takeover bank isn't getting the liquidity, just the debt and the expense of taking over. this is not a good sign.

fyi: i just waited 17 days to get a check from a matured CD from one of the larger banks in the world.
Anonymous   |     |   Comment #11
I had one year CD with Irwin Bank maturing in June 2010 @ 2.01% APY.

I contacted First Financial and was told that my CD eate will not change until maturity.