Two banks in Illinois and Nevada were closed by regulators today which brings the total number of bank failures for this year to 28. At this time last year there had been 42 bank failures. Both banks were small with assets under $200 million. That has been common this year. Out of this year's 28 bank failures, only 13 had assets over $200 million, and only two had assets over $1 billion.
The two bank closures were typical. The FDIC arranged for other banks to assume all deposits. The failed Illinois bank had all of its deposits including brokered deposits assumed. The failed Nevada bank had all of its deposits excluding Cede & Co. brokered deposits assumed. For depositors who had CDs at these failed banks, they will have to wait to see if their CD rates will be reduced. The only information I could find on this is what the FDIC has in its Q&As. It's the same for both banks:
Rates on all accounts will be reviewed by the new bank and may be changed effective the day after the bank was closed.
I don't like how they can make the lower rates effective the day after the closure. It can take the banks one or more weeks before they inform the CD holders of the new rates. The CD holders can choose to close the CD without a penalty, but they might have a few weeks in which the CD is earning a low and unknown rate.
Credit Union Liquidation
In addition to the two bank failures, there was a credit union closure today. The NCUA liquidated a tiny credit union in California. That brings the total number of credit union liquidations this year to 6. The NCUA arranged for Self-Help Federal Credit Union to take over the liquidated credit union. Self-Help has long offered competitive CD rates and the credit union provides an easy way for anyone to join. One downside with Self-Help is that it's not in the best financial health. Its Texas Ratio is 96.37%. Any institution with a Texas Ratio near or greater than 100% is considered at risk. Perhaps that's not a concern for the NCUA.
FDIC and NCUA in a Government Shutdown
For those wondering what will happen to the FDIC and NCUA if the federal government goes into a shutdown, there won't be any effect. Both agencies are self-funded from premiums paid by the institutions they insure. The NCUA described this in a press release on the potential shutdown. This might be a moot issue since, as of 10:00pm CDT, a deal appears to have been reached by Congress.
Below is a summary of today's bank and credit union closures:
27th Bank Failure of 2011 (4th in Illinois)
- FDIC Press Release
- Closed Bank: Western Springs National Bank and Trust, Western Springs, IL
- Size: 2 branches, $186.8 million in assets, $181.9 million in deposits
- Acquiring Bank: Heartland Bank and Trust Company, Bloomington, IL
- Possible Uninsured Deposits: all deposit accounts, including brokered deposits, have been assumed by Heartland Bank and Trust Company
- Rate Changes: Rates on all accounts will be reviewed by the new bank and may be changed effective the day after the bank was closed
- Estimated Cost to Deposit Insurance Fund: $31.0 million
- Enforcement Action: OCC 11/19/09 Consent Order, OCC 11/18/10 PCA
- Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 359.68% (poor) at DepositAccounts.com
28th Bank Failure of 2011 (1st in Nevada)
- FDIC Press Release
- Closed Bank: Nevada Commerce Bank, Las Vegas, NV
- Size: 2 branches, $144.9 million in assets, $136.4 million in deposits
- Acquiring Bank: City National Bank, Los Angeles, CA
- Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits have been assumed by City National Bank
- Rate Changes: Current rates will be reviewed by the new bank and may be lowered
- Estimated Cost to Deposit Insurance Fund: $31.9 million
- Enforcement Action: FDIC 11/20/09 Consent Order, FDIC 9/14/10 PCA
- Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 430.31% (poor) at DepositAccounts.com
6th Credit Union Liquidation of 2011 (April 8)
- NCUA Press Release
- Liquidated CU: Mission San Francisco FCU of San Francisco, CA
- Size: $6 million in assets and served 2,500 members
- Acquiring CU: Self-Help Federal Credit Union
- Financial Ratings: 1 stars at Bankrate.com, 0 star at BauerFinancial
The above financial ratings are based on December 2010 data.