The second bank failure of 2016 occurred last Friday. Trust Company Bank in Memphis, Tennessee was closed by state regulators, and the FDIC arranged for The Bank of Fayette County to assume all of the deposits. Trust Company Bank was small with only four branches and with only $20.3 million in deposits.
Bank failures have become rare. The last bank to fail was on March 11. Last year only eight banks failed. If the trend continues, we will probably only see around two bank closures per quarter. A few years ago, it was rare to go through a month without a bank closure. In fact, there were months in 2010 with over ten failures.
The closure of Trust Company 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 The Bank of Fayette County.
The FDIC did not mention any brokered deposits. For past closures, the FDIC mentioned in its Q&A if 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 April 29, 2016 will be paid at your same rate. Trust Company Bank's rates will be reviewed by The Bank of Fayette County 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 Bank of Fayette County.
Below is the summary of Friday’s bank failure:
2nd Bank Failure of 2016 (1st in Tennessee) (April 29)
- Closed Bank: Trust Company Bank, Memphis, TN
- FDIC Press Release
- Size: 4 branches, $20.7 million in assets and $20.3 million in deposits
- Acquiring Bank: The Bank of Fayette County, Piperton, TN
- Possible Uninsured Deposits: All deposits, regardless of dollar amount, were transferred to The Bank of Fayette County (FDIC Q&A)
- Rate Changes: rates will be reviewed by The Bank of Fayette County and may be lowered (FDIC Q&A)
- Estimated Cost to Deposit Insurance Fund: $7.2 million
- Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, F & Texas Ratio of 296% 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
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- My bank failure review posts
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- 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
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