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Two Banks Closed by Regulators in Illinois and Florida

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Two Banks Closed by Regulators in Illinois and Florida

A small Illinois bank and a small Florida bank were closed by state regulators on Friday. They were both named Valley Bank, and both were subsidiaries of the bank holding company, River Valley Bancorp. Even though there were related through the bank holding company, they had separate FDIC certificate numbers, and they were treated as separate banks in the closures.

With these two failures, the total number of bank failures for the year is now 11. At about this time last year there had been 16 bank failures, and for all of 2013 there had been 24 bank failures. If the second half of 2014 matches the first half, the number of bank failures for 2014 should come close to the total in 2013.

The frequency of bank failures has declined since 2010 when 157 banks failed. In good economic times, bank failures have been rare. For example, no banks failed in 2005 and 2006, and only 3 banks failed in 2007.

These bank closures were typical in that the FDIC was able to find buyers. Consequently, no one lost any money. According to the FDIC FAQs:

No one lost any money on deposit as a result of the closure of this bank. All deposits, regardless of dollar amount, were transferred to [Great Southern Bank or Landmark Bank, N.A.]

CD customers of these two failed banks will have to wait to see what happens with their rates. According to the FDIC FAQs:

Interest on deposits accrued through close of business on June 20, 2014 will be paid at your same rate. Valley Bank’s rates will be reviewed by [the acquiring bank] and may be lowered; however, you will be notified in writing of any changes. You may withdraw funds from any transferred account, regardless of whether your interest rate changes, without early withdrawal penalty until you enter into a new deposit agreement with [the acquiring bank].

Below is the summary of the June 20th bank failures:

10th Bank Failure of 2014 (3rd in Illinois)

  • Closed Bank: Valley Bank, Moline, IL
  • FDIC Press Release
  • Size: 13 branches, $456.4 million in assets and $360.0 million in deposits
  • Acquiring Bank: Great Southern Bank, Reeds Spring, MO
  • Possible Uninsured Deposits: all deposit accounts, including brokered deposits, have been assumed by Great Southern Bank (FDIC Q&A)
  • Rate Changes: rates will be reviewed by Great Southern Bank and may be lowered (FDIC Q&A)
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, D & Texas Ratio of 161.04% at DepositAccounts.com (see financial rating note)

11th Bank Failure of 2014 (1st in Florida)

  • Closed Bank: Valley Bank, Fort Lauderdale, FL
  • FDIC Press Release
  • Size: 4 branches, $81.8 million in assets and $66.5 million in deposits
  • Acquiring Bank: Landmark Bank, National Association, Fort Lauderdale, FL
  • Possible Uninsured Deposits: all deposit accounts, including brokered deposits, have been assumed by Landmark Bank, National Association (FDIC Q&A)
  • Rate Changes: rates will be reviewed by Landmark Bank, National Association and may be lowered (FDIC Q&A)
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, F & Texas Ratio of 189.91% at DepositAccounts.com (see financial rating note)

Financial Ratings Notes: 0 star is lowest at BauerFinancial, 1 star is lowest at Bankrate.com and an F is lowest at DepositAccounts.com &, Texas Ratios over 100% is considered at risk. Ratings at DepositAccounts.com and BauerFinancial are based on March 31, 2013 data. Ratings at Bankrate.com are based on December 31, 2013 data.

References:

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Comments
Anonymous
Anonymous   |     |   Comment #1
Why don't the FDIC quit procrastating and start closing the under performing banks sooner rather than later?  The incompetent bank officers will be just find.  Taxpapers no longer need to subsidize their salaries.
Anonymous
Anonymous   |     |   Comment #3
The FDIC deposit insurance fund isn't funded by taxpayers. It's funded by premiums collected from insured banks. Moreover, the primary responsibilty for declaring a bank insolvent still lies with the bank's chartering authority. That's the state agency tht issued the bank's charter or, in the case of federally chartered banks, the Comptroller of the Currency or the Federal Reserve. The FDIC has the authority to close banks, but will only do so under dire circumstances when the primary regulator fails to act. I've only heard of that happening once after a state banking commissioner refused to close a bank for politically motivated reasons. Finally, understand that there's a difference between a problem bank and an insolvent .bank. The mere fact that a bank is undercapitalized doesn't mean it's insolvent.  By law, the bank must be afforded the opportunity to take prompt corrective action to remedy its financial deficiencies. Closing a bank is the last resort. In most cases, "problem" banks resolve their difficulties without being closed. That's obviously preferable to having the FDIC close the bank.
Anonymous
Anonymous   |     |   Comment #2
Small fish can no longer swim along the sharks, they have no access to free money like the big 10 do, therefore, there will be many small banks failures and many of them are almost insolvent.