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.
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