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Review of the First Bank Failure of 2010 - Horizon Bank in Washington State


The first bank failure of 2010 happened today. Horizon Bank, Bellingham, WA was closed by state regulators, and the FDIC arranged for Washington Federal Savings and Loan Association to assume all deposits.

The FDIC is starting early this year. The first bank to fail in 2009 was on January 16th. Horizon Bank was the only closure today. If we see as many or more closures than last year, future Fridays will be much more busy for the FDIC.

The aspects of this closure are similar to most of last year's closures. The FDIC was able to find a buyer which agreed to assume all deposits, even those above the FDIC limit. Second, as of today the acquiring bank hasn't agreed to honor existing CD rates from the failed bank. For a summary of the 2009 bank failures, refer to my 2009 bank failure review.

One interesting thing I noticed at Horizon's website is that they were offering up to 2.15% on a 13-month CD. That's way above the current FDIC rate cap for a 12-month CD. Those looking for CDs who live near a Horizon branch may want to see if they're going to continue offering these. Failed banks that are taken over often continue their special CDs for a while after the closures. The benefit of this is that the CD will be under the new bank that's financially healthy.

One thing I'm adding to my bank failure summary is the last enforcement action that was issued against the bank. For the case of Horizon, they had been operating under a FDIC Cease and Desist order since March 2009. In addition to low financial ratings, an enforcement action is another indication of potential problems. By including the most recent ratings and enforcement actions at the time of failure, we should see how useful these are in predicting if a bank is getting close to failure. To review all banks that are operating under public enforcement actions, refer to the top right sidebar of the Calculated Risk Blog.

Update: There was also a credit union failure today. The NCUA issued this press release. Kern Central Credit Union in Bakersfield, California was closed, and Self-Help Federal Credit Union assumed its assets and liabilities. Kern Central had approximately $34.9 million in assets and served approximately 8,400 members.

Below is a summary of today's bank failure:

1st Bank Failure of 2010 (1st in WA)
  • FDIC Press Release
  • Closed Bank: Horizon Bank, Bellingham, WA
  • Size: 18 branches, $1.3 billion in assets, $1.1 billion in deposits
  • Possible Uninsured Deposits: All deposits transferred except some brokered deposits
  • Acquiring Bank: Washington Federal Savings and Loan Association, Seattle, WA
  • Rate Changes: Washington Federal Savings and Loan Association will review rates
  • Estimated Cost to Deposit Insurance Fund: $539.1 million
  • Enforcement Action: Operated under a FDIC C&D Order since 3/3/09
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star (lowest) at BauerFinancial
The above BauerFinancial rating is based on 9/30/09 data and the rating from Bankrate is based on 6/30/09 data.


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