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Doral Bank Fails - Largest Bank Failure Since 2010

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Doral Bank Fails - Largest Bank Failure Since 2010

After many years of financial difficulty, Doral Bank of San Juan, Puerto Rico is finally closed by regulators on Friday. News of the closure was leaked early, and even the FDIC released news of the closure prematurely. According to the Wall Street Journal, "[t]he FDIC announced the closure earlier than intended, with an official sending a statement at 3:03 p.m. EST, then asking reporters to disregard it minutes later."

Doral Bank is the largest bank failure since 2010, and unlike recent bank failures, this one has some complications. The FDIC arranged for Banco Popular de Puerto Rico to acquire the banking operations, including all the deposits, of Doral Bank. However, Banco Popular will be operating only 8 of the Doral Bank’s 26 former branches. Banco Popular entered into separate agreements with three banks to acquire 18 of the remaining locations. FirstBank Puerto Rico will operate and assume the deposits of Doral Bank's 10 other branches in Puerto Rico; Banco Popular's affiliated bank, Banco Popular North America, will operate all three locations in New York City; and Centennial Bank in Arkansas will operate and assume the deposits of Doral Bank's five branches in the panhandle area of Florida.

The FDIC set up three separate Q&A pages for the regions of Puerto Rico, New York and Florida. The most important thing for all former Doral Bank customers to know is that no depositor lost money. According to all three of the FDIC’s Q&As:

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 the branch owner.

Doral Bank also operated the internet bank Doral Direct. I can’t find anything specific mentioned about Doral Direct in the FDIC documentation. However, I did find this transition page that Banco Popular set up (The link to the transition page was located on Banco Popular’s home page at www.popularcommunitybank.com.) The transition page has links with information for Doral branches in the three regions mentioned above and also for Doral Direct. The Doral Direct transition page welcomes customers to Popular, provides phone numbers to call for questions, and lists a link to allow Doral Direct customers to log into their online banking. Banco Popular already has an internet bank called E-LOAN. Its savings account and CDs used to be competitive, but its rates have been disappointing for the last several years. It’ll be interesting to see how Banco Popular handles the former Doral Direct customers. I doubt they’ll see any new competitive rates that will make them want to stay.

CD customers of Doral Bank and Doral Direct will have to wait and see what happens with their rates. According to all three of the FDIC’s Q&As:

Interest on deposits accrued through close of business on Friday, February 27, 2015, will be paid at your same rate. Doral Bank's rates will be reviewed by the branch owner 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 branch owner.

Doral Bank and Doral Direct had some competitive rates. Customers of these CDs may soon want to look for new places for their money if the acquiring banks decide to lower the rates.

Below is the summary of the Friday bank failure:

4th Bank Failure of 2015 (1st in Puerto Rico) (February 27)

  • Closed Bank: Doral Bank, San Juan, Puerto Rico
  • FDIC Press Release
  • Size: 26 branches, $5.9 billion in assets and $4.1 billion in deposits
  • Acquiring Bank: Banco Popular de Puerto Rico (Banco Popular sold some branches and their deposits to FirstBank Puerto Rico and Centennial Bank of Conway, Arkansas)
  • Possible Uninsured Deposits: All deposits, regardless of dollar amount, were transferred to the branch owner. (FDIC Q&As)
  • Rate Changes: rates will be reviewed by the branch owner and may be lowered (FDIC Q&As)
  • Estimated Cost to Deposit Insurance Fund: $748.9 million
  • Financial Ratings: 1 star at Bankrate.com, 0 stars at BauerFinancial, F & Texas Ratio of 107% 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 Bankrate.com and BauerFinancial are based on September 30, 2014 data. Ratings at DepositAccounts.com are based on December 31, 2014 data.

References:

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Comments
Anonymous
Anonymous   |     |   Comment #1
There has to be a beginning of an unfortunate theme...Toby, Doral, etc. who's next with FDIC insurance but the recipient of bad news internally (Toby 3 % gig) and externally (closure of Doral).  Bank of Mattress never folded
Anonymous
Anonymous   |     |   Comment #2
I seriously doubt Toby will ever become a problem, or a consideration of any nature, for the FDIC.
Anonymous
Anonymous   |     |   Comment #3
TobyFCU, now known as Valor Credit Union, is federally insured by the NCUA anyway.
Anonymous
Anonymous   |     |   Comment #4
LMAO!  That was my point!!  Maybe I needed to spell it out.
Anonymous
Anonymous   |     |   Comment #5
Gee whiz! I got your comment #2. My comment was meant for #1.
Anonymous
Anonymous   |     |   Comment #6
Cost to FDIC of 3/4 of a billion dollars. I think someone needs to up their audit game. 
Anonymous
Anonymous   |     |   Comment #7
Who? A government with 17 trillion in debt
Anonymous
Anonymous   |     |   Comment #10
An incompetent government which the FDIC is part of does indeed have an affect. If they would have known "well in advance" as you say why is this costing the FDIC almost 3/4 of a billion dollars?This bank has been under FBI investigation for a while too.
FDIC guy
FDIC guy (anonymous)   |     |   Comment #13
Thanks for contributing something pertinent to this sorry comment thread. I'm of the impression that some of the others still don't understand that the FDIC deposit insurance fund isn't funded by the U.S. Treasury.
Anonymous
Anonymous   |     |   Comment #14
If/when the FDIC or any gov't agency "runs a little short," guess who is the "banker" of last resort?  Or, if the money in the example was not spent now it could be available later.  And, we all know who pays the premiums for the insurance, ie. the industry.  FDIC has the full backing of the US Treasury...if not, who would believe in the "insurance?"
FDIC guy
FDIC guy (anonymous)   |     |   Comment #15
"if the money in the example was not spent now it could be available later...." They'll recover the Doral expenditures from the liquidation of the bank's remaining assets and, if necessary, by adjusting the deposit insurance premiums all banks pay. If Congress has to bail out the  FDIC again, it won't be because of any number of Doral sized banks failed. The reason will likely be because Congress watered down the protections in Dodd-Frank requiring banks to transfer move their asset securitization functions to another entity. That GOP sponsored gift to big banks now places the entire risk arising from those transaction on the FDIC deposit insurance fund.
Anonymous
Anonymous   |     |   Comment #16
Adjusting the premium banks pay. We really pay that premium and would most likely reduce interest rates. No one knows at this point what will be recovered. I had money in Doral for years and they pay high rates because they were having financial problems but I had no incentive to pick a safer bank as the FDIC is the insurer. Really an insurer of last resort. You sound like a typical liberal beaureucrat blaming someone else. Nice to know the FDIC. Is there after the fact.
Anonymous
Anonymous   |     |   Comment #9
#7

Your inability to keep up can and should be forgiven.  Who among us is able!

For the record, though, here is the current national debt, not that it matters to our exulted leader in DC:


Anonymous
Anonymous   |     |   Comment #11
OK, so we have established Ken's website, when it comes to posting stuff, is NOT WYSIWYG.  And without a preview function, there is no way to know in advance what you are seeing actually will not post.  So here is that number again.  I hope it comes through this time:

$18,156,010,160,371.89

Bottom line we are over $18T and well on our way to $19T.  Before Obama is gone, COUNT on our national debt being in excess of $20T . . not that he gives a ****.
Anonymous
Anonymous   |     |   Comment #12
What does that have to do with the price of beans?
Anonymous
Anonymous   |     |   Comment #17
If Congress is the same configuration two years from now and the President is a Republican...what makes "you" think that the Republican House faction will do anything different then except continued gridlock!
uncle
uncle   |     |   Comment #18
Obama.  The most polarizing president I can remember and I'm a pretty old guy.
NYCDoug
NYCDoug   |     |   Comment #19
Checking my account balance online this evening, I just discovered that some time in the past two weeks (I last checked my balance on March 19th) the former 1.5% APY rate on my 2-year CD has been lowered to 1.144%. This is without any notification from the bank [now Banco Popular]. Any suggestions?
Anonymous
Anonymous   |     |   Comment #20
Move the money w/o penalty
NYCDoug
NYCDoug   |     |   Comment #21
I'm thinking to wait until the next interest posts (every 3 months), in mid-May. But wondering (1) if I close out the account sooner, will I be credited a pro-rated amount? And (2) if I wait until May 15th, will I still be able to withdraw w/o penalty?
Anonymous
Anonymous   |     |   Comment #22
You should be given an opportunity to move the money w/o penalty or take the new rate...your time to move the money limited!
Anonymous
Anonymous   |     |   Comment #23
PS

Recall an earlier post by someone that said s/he talked to the new people at a bank that had been "taken over" from the financial meltdown and was able to convince them to continue the old rate b/c of being a long time customer, amount on deposit, etc.