The third bank failure of 2016 occurred on Friday. First CornerStone Bank in Pennsylvania was closed by state regulators, and the FDIC arranged for First-Citizens Bank & Trust Company to assume all of the deposits. First CornerStone Bank was the largest of the three banks that have failed this year, but it was still relatively small with six branches and $101 million in deposits.
The last bank failure was on April 29th.This is the first time banks have failed on two consecutive Fridays since January 2015. Bank failures have become rare. Last year only eight banks failed. Before this last bank failure, it appeared we may have fewer bank failures in 2016 than 2015. If we see just one more closure before the end of June, we would be on track to match 2015. Back in 2009 and 2010, one or more banks failed on almost every Friday.
The closure of First CornerStone Bank was typical in that the FDIC arranged for another bank to assume all of the deposits. According to the FDIC:
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 First-Citizens Bank & Trust Company.
All deposits were transferred to First-Citizens Bank & Trust Company including brokered deposits. For many past closures, the FDIC mentioned in its Q&A that certain brokered deposits were excluded in the assumption agreement. If brokered deposits are excluded, customers with brokered deposits that exceed deposit insurance limits will be at risk of losing their uninsured deposits.
CD customers of this failed bank will have to wait to see what happens with their rates. According to the FDIC’s Q&A:
Interest on deposits accrued through close of business on May 6, 2016 will be paid at your same rate. First CornerStone Bank’s rates will be reviewed by First-Citizens Bank & Trust Company 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 First-Citizens Bank & Trust Company.
Growth of First Citizens Bank
In the last few years you may have noticed a First Citizens Bank pop up in your area. The bank has grown large over the last few years in mergers and acquisitions. First CornerStone Bank is the second failed bank that First Citizen has acquired this year. The last one was in March when it acquired the two branches of North Milwaukee State Bank. First Citizens Bank now has over 540 branches with assets of over $31 billion. Based on the number of branches, it’s now the 21st largest bank in the nation.
Below is the summary of Friday’s bank failure:
3rd Bank Failure of 2016 (1st in Pennsylvania) (May 6)
- Closed Bank: First CornerStone Bank, King of Prussia, PA
- FDIC Press Release
- Size: 6 branches, $103.3 million in assets and $101.0 million in deposits
- Acquiring Bank: First-Citizens Bank & Trust Company, Raleigh, NC
- Possible Uninsured Deposits: all deposit accounts, including brokered deposits, has been assumed by First-Citizens Bank & Trust Company (FDIC Q&A)
- Rate Changes: rates will be reviewed by First-Citizens Bank & Trust Company and may be lowered (FDIC Q&A)
- Estimated Cost to Deposit Insurance Fund: $10.8 million
- Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, F & Texas Ratio of 223% 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 December 31, 2015 data. Ratings at Bankrate.com are based on September 30, 2015 data.
- FDIC list of failed banks
- NCUA list of failed credit unions
- Evaluate the Financial Health of Your Bank or Credit Union
- Latest FDIC info on deposit insurance
- My bank failure review posts
- Review of the 2015 bank and credit union failures
- Review of the 2014 bank and credit union failures
- Review of the 2013 bank and credit union failures
- Review of the 2012 bank and credit union failures
- Review of the 2011 bank and credit union failures
- Review of the 2010 bank and credit union failures
- 10 Lessons from the 2008 bank failures