Featured Savings Rates

Popular Posts

Featured Accounts

5th Bank Failure of 2017: Guaranty Bank with 119 Branches in 5 States

POSTED ON BY

5th Bank Failure of 2017: Guaranty Bank with 119 Branches in 5 States

Another bank with over $1 billion in assets failed. Last Friday, Guaranty Bank of Milwaukee, Wisconsin was closed by the OCC. This failure occurred only one week after the April 28th failure of First NBC Bank, a bank that had almost $5 billion in assets. The failure of Guaranty Bank is the fifth bank to fail in 2017. That number matches the total number of banks that failed in all of 2016. Every year since 2010 we’ve had fewer bank failures. That won’t be the case in 2017. In 2010, 157 banks failed which was the highest number of bank failures in a year since the 2008 financial crisis.

According to the FDIC, Guaranty Bank (which did business as BestBank in Georgia and Michigan) had “119 branches in five states, 107 of which were in retail outlets, such as grocery and general merchandise stores.” Guaranty Bank had $1.01 billion in total assets and $951 million in total deposits. It’s atypical for a bank with over 100 branches to have only $1 billion in assets. For example, First NBC Bank, that failed on April 28th, had almost $5 billion in assets with only 29 branches. The fact that 107 of Guaranty Bank branches were in retail outlets may be one reason why it had so few assets.

Another thing to note regarding the Guaranty Bank branches is that the in-store branches will not be reopened under a new bank. Guaranty Bank had more than 900 employees. It seems likely that a large majority of them won’t be employed by the acquiring bank. For deposit customers of Guaranty Bank, the FDIC listed ways they can access their money at these in-store branches:

Depositors with accounts at the 107 branches located in retail outlets, such as grocery stores and general merchandise stores, which are not reopening, have several options to access their money. If possible, they can go to one of the 12 brick-and-mortar branches located in Illinois, Minnesota or Wisconsin, or they can use electronic means for conducting their banking business, including online and mobile banking. ATM machines on-site at the branches in retail outlets will not be operational.

It appears these in-store branches did not have safe deposit boxes. According to the FDIC’s FAQs, “Customers may continue to access their safe deposit box during normal business hours. Any changes will be communicated by First-Citizens Bank & Trust Company.”

Other than the issue of these in-store branches, the closure of Guaranty Bank was typical in that the FDIC arranged for another bank to assume all deposits of the failed bank. The FDIC entered into a purchase and assumption agreement with First-Citizens Bank & Trust Company, of Raleigh, North Carolina. According to the FDIC’s 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 First-Citizens Bank & Trust Company.

Deposits that were transferred also included brokered deposits.

CD customers of Guaranty Bank may have their CD rates lowered. Here’s what the FDIC FAQs state on this issue:

Interest on deposits accrued through close of business on Friday, May 5, 2017 will be paid at your same rate. Guaranty Bank's (d/b/a BestBank) rates will be reviewed by First-Citizens Bank & Trust Company and may be adjusted; 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.

No other bank or credit union has failed since my bank failure post from last week. Below is the summary of the failed Guaranty Bank:

5th Bank Failure of 2017 (1st in Wisconsin) (May 5)

  • Closed Bank: Guaranty Bank, Milwaukee, WI (did business as BestBank in GA and MI)
  • FDIC Press Release
  • Size: 119 branches, $1.01 billion in assets and $951.0 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: Guaranty Bank's (d/b/a BestBank) rates will be reviewed by First-Citizens Bank & Trust Company and may be adjusted (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $146.4 million

References:

Related Pages: bank health ratings
Comments
savant detector
savant detector   |     |   Comment #1
WHAT WAS THEIR 5 4 3 2 1 STAR RATING OR HEALTH RATING, SAFE SOUND RATING BY THE USUAL SUSPECTS BEFORE THE CLOSING?,,,,,,,any out of synch depositor rates? inquiring minds want to know.
canary
canary   |     |   Comment #2
Enforcement actions by the FDIC are often an early indicator as to which banks are having problems. I didn't find any for "Guaranty Bank", but in this case they were closed by the "Office of the Comptroller of the Currency" and I'm not sure they have an analogous resource available. The OCC's press release mentioned "the bank had experienced substantial dissipation of assets or earnings due to unsafe or unsound practices" and "the bank was significantly undercapitalized and failed to submit a capital restoration plan acceptable to the OCC". I can't help but wonder how many other gov't entities have the power to close a bank.
canary
canary   |     |   Comment #3
Found the OCC URL for enforcement actions:
http://apps.occ.gov/EASearch
whereby the latest EA was at the end of Feb 2017:
https://www.occ.gov/static/enforcement-actions/ea2017-020.pdf
savant detector
savant detector   |     |   Comment #4
google and be informed ,,,,HOW MANY OTHER BANKS LIKE IT?? milwaukee is a gorgeous but unfortunately slipping blue collar city in a financialized economy.
HEAD HUNTER
HEAD HUNTER   |     |   Comment #5
THE BANK EMPLOYEES THAT LOST THEIR JOBS SHOULD CONSIDER BANKS WEST OF THE MISS,,,,THE CORN PIG BELT BANKS COULD REALLY USE THE PROFESSIONALISM OF THE BIG CITY BANK FRONT OFFICE CUSTOMER SERVICE PEOPLE.,,,,,but it ain't gonna be like MILWAUKEE,,,,AS A WORD OF ADVICE.
A guy online
A guy online   |     |   Comment #7
Their health rating was D.
houseofcards
houseofcards   |     |   Comment #11
which suspect reported that,,,,,thanks.
Ken Tumin
Ken Tumin   |     |   Comment #18
Yes, DA had them rated with a D grade. This rating placed them in the lowest 40 or so banks in the country in terms of health ratings and does indicate a very high risk for failure.
HOUSE OF CARDS
HOUSE OF CARDS   |     |   Comment #19
GOOD TO KNOW....I HAVE BEEN UNABLE TO DETERMINE THE OTHER RATINGS SITES RATINGS,,,I WONDER WHAT THEY WERE?....a mid grade gives me pause and caution.
IT'SCLOSINGTIME
IT'SCLOSINGTIME   |     |   Comment #24
why not LIST THOSE 40 OR SO BANKS AS A PUBLIC SERVICE, thanks.
Anonymous
Anonymous   |     |   Comment #33
They are all easily accessible on this website! Go to the "banks" tab at the top and select "bank health ratings" - then scroll down to the bottom and select "worst" banks and CU's in any state with any asset level. You will get the list right there in front of you!
HEAD HUNTER
HEAD HUNTER   |     |   Comment #15
YO,,,SD,,,,,you have found a lake where the fish are really biting,,,,,jumpin right into da boat.,,,p.s. I have never found a ratings blog that rated A FIRM lower than a mid grade,,,it might cause a bank run,,also the fdic keeps hush hush. the occ might be helpful, but they are known to be THEE POSTER CHILD OF REGULATORY CAPTURE.
Anony
Anony   |     |   Comment #6
It is quite possible with modern technology to determine the point at which closing an institution would result in precisely ZERO dollars to FDIC. The estimate of a $146 billion FDIC bill on a $1B institution is laughable and a sign of weak oversight and enforcement by the FDIC. Any decent auditor would have seen this coming a long time ago.
bob2560
bob2560   |     |   Comment #8
That' s 146.4 Million not billion!
deplorable 1
deplorable 1   |     |   Comment #9
This is why I always stay within the $250,000 limit and $100,000 limit prior to that. Also if you have CD's remember to add up the interest for the term and subtract that from your deposit as well. Can you imagine having a 7 or 10 year CD at a bank that goes belly up near the end of the term and getting shafted out of all that interest?
Bozo
Bozo   |     |   Comment #13
Deplorable, it is my understanding that accrued interest is covered, so long as the total (principal plus accrued interest) does not exceed the insurance limit. With after-tax CDs, it's fairly simple to increase limits with joint accounts, PODs, and such. With IRA CDs, it gets a bit trickier. One limit, $250,000 per institution. The truly paranoid will back out the maximum potential accrued interest using Moneychimp. Another strategy is to harvest interest, so your principal never goes above $250,000.

Since I'm now in RMD territory, the latter strategy works for me.
Bozo
Bozo   |     |   Comment #14
As I've noted in other threads, I don't get all nervous and jerky these days over FDIC/NCUA insurance limits. As a general rule, I stay within limits. But slavish, I am not. My IRA CD with Patelco is a good example. Is it over the NCUA limit? Sure. Do I lose sleep over that fact? No.
Nothing
Nothing   |     |   Comment #16
Would you advise (any) client (previously when practicing) of that action? If not, why?
Bozo
Bozo   |     |   Comment #28
To Poster "Nothing": The answer is "sure". It's all about risk/reward. The odds of a financial institution going belly-up, with no savior, are quite slim. The odds of a financial institution which has been around longer than I (pushing 70) doing "toes up", even less. Would I alert the client to the risk? Of course.

Point being: As I noted previously, FDIC/NCUA insurance is wonderful. We should be thankful for it. Folks know their savings are safe. Bank runs are now a distant memory. But would I stress out over having a few thousand over the limit in my IRA CD? No. Would I counsel a client to jump through hoops to keep his or her IRA CD (including accrued interest) below $250,000? Probably not.
history lesson
history lesson   |     |   Comment #29
It's good to keep in mind that people did banking before the FDIC existed. There has been a run on banks, though these days it's by ACH and is what contributed to the failure of Washington Mutual Bank.
deplorable 1
deplorable 1   |     |   Comment #34
Well call me paranoid because I had to use the FDIC twice for 2 CD's back when the limit was only $100,000. I never lost a dime because I subtracted the interest before making the deposit. So to max out a $250,000 CD I would subtract all the compound interest and then deposit that amount. So for a 1 yr CD @ 5% that would be $237,500 max. This way you can just shoot for the highest APY and take your chances. Who cares if the bank fails then you just get all your money back early with no early withdrawal penalty.
jennifer
jennifer   |     |   Comment #10
This is simply shocking. The bank's name made it sound so sturdy and safe. How could something like this happen when the name sounded so secure?
Bozo
Bozo   |     |   Comment #12
Jennifer, the irony is striking, but not surprising. Were one to start up a bank, would one advertise: "We Don't Have a Clue, But Have FDIC Coverage"? Clueless Bank and Trust. FDIC insured (thank goodness). All deposits insured to legal limits. We suggest you stay below them.
jennifer
jennifer   |     |   Comment #17
I do like the name Clueless for a bank. I can see myself saying "I have my checking and savings both at Clueless".
Bozo
Bozo   |     |   Comment #20
Jennifer, it gets better. You could have your checking and savings with Clueless, while your retirement accounts (401K and IRA) were in the Bernie Madoff (Trust Me) Fund. To rub salt in the wounds, every month, like clock-work, each would charge you $1 for a paper statement.

The funniest (or saddest) show on TV is "American Greed" on MSNBC.
psych game
psych game   |     |   Comment #21
This isn't the first "Guaranty Bank" to fail (at least the 2nd, if not the 3rd). I suppose it's cheaper to have a secure-sounding name than do the old-school approach of using lots of marble, stone, and/or concrete to make a fortress-like bank branch that tries to convey a feeling of security.
Bogey
Bogey   |     |   Comment #22
In the "real road", the name of corporation, association, school, or individual, etc., is no indication of honesty or integrity or safety. Proof of this is in the news almost daily.
Nothing
Nothing   |     |   Comment #23
Famous law firm...Dewey, Cheatem & Howe
QUEENSWHOKNIT
QUEENSWHOKNIT   |     |   Comment #25
AT LEAST GIVE TOM AND RAY AKA FRICK AND FRACK THE TAPPET BROS a footnote.
topkapi56
topkapi56   |     |   Comment #27
Oops, sorry Queen, I was in midtype while you were posting!
topkapi56
topkapi56   |     |   Comment #26
Famous fictional law firm mentioned a lot by those hilarious Car Talk brothers from Boston. Who would ever have guessed a radio call-in show about car repair could be so funny?

The Three Stooges referred to "Dewey, Burnham, and Howe" more than once.

"Sue, Grabbitt, and Runne" was coined by a British magazine.
SHALOM
SHALOM   |     |   Comment #30
click and clack,,,and one has left us.
Bozo
Bozo   |     |   Comment #32
I think it was "Dewey, Sue, and How". Actually, I knew Clark Burnham.

Do We?

Sue them?

And How.

Clark Burnham was never part of the joke. He was actually a pretty nice guy.
CASHEW
CASHEW   |     |   Comment #31
BE A MENSCH,,, BE A SAINT AND ENDOW OR DONATE TO An ANIMAL SHELTER,,,,,your rolex, rolls and castle will never love you back, a pet just loves you be you a prince or pauper. shalom et pax vobiscum.