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$400,000 of Deposits at a Failed Bank, First-Hand Experience at ANB Financial

(Note: as of October 2008, the FDIC insurance limit was increased to $250K. This would affect the amounts mentioned throughout this post.)

One of this blog's readers was a depositor at the failed bank ANB Financial, and he has emailed me his experience to share. I reported on this bank failure Friday after the FDIC sent out its press release. He and his wife had opened a $400,000 CD last summer at this bank. He thought he was covered since he was careful to open the CD in the proper ownership category. However, when he read about the bank failure on Sunday, it did ruin his weekened. What if there was some esoteric mistake in the bank's documentation that put the money at risk?

The good news is that his diligence when he opened the CD paid off. The $400,000 was insured, and they were able to receive the funds on Monday after several nerve-racking hours at the bank. Here is how he described this time:
We spent 3 hours there inside the bank calling various phone numbers and being mostly told, "the information you have received is erroneous." No one took any responsibility for getting the money to us. Finally, one of the FDIC team members inside the bank decided to personally intervene on our behalf. Within about 45 minutes, we had correctly navigated the maze and wire transfer form had been fax'd to the correct location and authority to effect the transfer.

The bad news is that the interest earned was not covered. The CD had earned almost $15,000 in interest, and this put the total amount above $400,000. The FDIC claims agent told them that they'll receive a "receiver's certificate" within 30 days and that they may someday receive something back.

Why have over $100,000 in one bank? Sometimes this happens when people just forget, and the money keeps growing until it exceeds $100,000. However, in this case the reader was taking advantage of a 5.82% APY CD special. I had reported on this special last September.

If you're going to take advantage of similar deals with deposits over $100,000, you should be interested in what he has learned. I describe these lessons below along with some other potential issues that I've learned over the last few years from other readers.

Be Very Careful When You Go Above $100,000

It's not common knowledge, but you can have over $100,000 FDIC insurance for a non-retirement account at one bank. The FDIC defines many different ownership categories. An account that falls into one of these ownership categories can have more than $100,000 of coverage if the account meets the applicable requirements. You should be very careful to ensure these requirements are met, and you shouldn't assume that your bank is taking care of this.

The ownership category that the reader and his wife used was a revocable trust account. This FDIC page provides the formal definition of a revocable trust account. A subset of this account is a payable-on-death (POD) account. The owner of a POD account is insured up to $100,000 for each beneficiary if 3 specific requirements are met. This FDIC page describes these requirements.

Account Title Requirement

The first of these 3 requirements can be problematic. The requirement states that the account title must include a commonly accepted term such as "payable-on-death," "in trust for," "as trustee for" or similar language to indicate the existence of a trust relationship. The term may be abbreviated (for example "POD," "ITF" or "ATF").

The problem is that banks often do not include the POD or similar term in the account title. This almost happened to the reader. Here's what the reader reported:
Because of your FDIC insurance warnings and advice we were VERY hardnosed about correctly titling the accounts. In fact, the bank almost refused to correctly title the two POD's but we told them we would "walk" if they didn't. They finally relented and titled them exactly the way they were supposed to be titled.

This seems to be a common problem among banks. Last year another reader reported having problems with Countrywide Bank. He had applied for Countrywide's Savingslink account, and in the application, he listed two beneficiaries. The problem was that these beneficiaries were not officially added to the account titled as POD's. So if you are depending on POD's to extend your FDIC coverage over $100,000, make sure you verify the proper account title.

What Happens if a Beneficiary Dies

In addition to the account title, there are also other issues that could reduce your FDIC coverage. If the POD beneficiary dies, the coverage is reduced immediately. Example #18 of this FDIC page describes this.

Joint Accounts and Signature Cards

Thanks to an investigation by another reader, I just learned of another potential issue that could reduce your FDIC coverage. This one involves joint accounts. As described at this FDIC page, a joint account for a husband and wife can qualify for $200,000 in FDIC coverage. Note the three conditions listed at that FDIC page which must be met. One of the conditions that apply to savings accounts states that each co-owner must personally sign the account signature card. This concerned the reader when he had applied for an Indymac money market account since it can take several weeks before you receive the signature card from Indymac. The reader recommended that you stay under $100,000 during this period. Below is what he received from the FDIC:
If the joint account is opended as a Market Market Deposit Account (MMDA), then it is important to have all owners of the deposit sign the signature card, otherwise if the bank were to fail the FDIC could make the determination the account is insured under the single ownership category in your name only for up to a total of $100,000.

He was also concerned about online banks that do not require a paper signature card. According to the FDIC representative, "the attachment or use of an electronic signature does satisfy the FDIC requirements for deposits including joint accounts." So you should be safe with online joint money market accounts that only have electronic signatures.

Make Sure You Consider the Accumulated Interest

Unfortunately, the reader with the ANB Financial CD may lose the interest he earned. He had let the interest be added back into the principal of the CD, and the total balance exceeded the $400,000 insured limit.

If you specify that interest payments are to be added to the principal, make sure the total amount will always remain under the insurance limit during the entire CD term. Most banks also allow you to withdraw interest without penalties. Another option is to specify that interest be paid to you by check or be transfered to another bank.

Monitor Your Banks

One more lesson the reader mentioned was to carefully monitor your bank's condition. This is a good idea, but I wouldn't recommend this as an alternative to maintaining deposits under the FDIC limits. The bank's financial data that is publicly available is often at least 3 months old. The safety ratings issued by Bankrate and BauerFinacial are even older than this. You may be able to pick up on other clues that show the bank is in trouble, but these signs can be easy to miss.


In summary, the reader provided the following lessons learned which sums up many of the above details:
  • Be a bulldog on FDIC requirements for account titling. Do NOT take the word of any CSR such as "Don't worry, it's OK." Make certain the accounts are titled exactly as required.
  • Monitor your bank's evolving condition.
  • Withdraw interest at every available opportunity and put it somewhere else. Whatever little pittance you might gain through compounding pales in comparison to the total loss of your interest!

For more information and links on FDIC coverage and on NCUA coverage for credit unions, please refer to my post from last year. I have a short list of important FDIC and NCUA links in this post.

Thanks to this reader who emailed me his experience with ANB Financial. Also, thanks to the reader who informed me about the Joint Account issue, and other readers who shared their experience on FDIC insurance issues.

Update 5/16/08: Details of the Account Title

I followed up with the reader regarding how exactly the account title of his CD was specified. Did it only have POD? Or did it also include the names of the beneficiaries. He replied that he took a strict interpretation of the FDIC rules and made sure the beneficiary names were in the account title. When he was at the bank on Monday after the bank failure, he was very glad he did this. Below is some of his reply in which he does a very good job at explaining the issue.
It is our understanding that the name of the qualified beneficiary has to appear after the term "POD" in the account title itself. This is the same account title that shows up in the mailing envelope when the statement is mailed to the account holder. Some of the surface level FDIC material seems to indicate that everything is OK if the POD beneficiary appears on the bank's signature card. However, we took a VERY strict interpretation that the POD beneficiary had to show in the account title that gets printed out on the banks records. That's the way it worked with us in this case, when the FDIC Team ran the bank records, the account title printed out clearly with my name and the letters POD and then my wife's name. And vice versa. There was absolutely no doubt that it was a correctly configured POD with the names correctly displayed. No one had to go consult the bank's signature files. It was all right there on the same computer file that prints address labels. Somewhere, deep on the FDIC website, it says this.

The point here is simple: Take the extra steps to make certain that the POD status and qualified beneficiary are as clear as a bell even to the dumbest clerk and dimmest bulb in the system. Let there be no doubt, Do not leave it to a "check of the bank's signature cards." If it's John Doe POD Jane Doe right smack in the account title, no one can quibble or equivocate. It's a black and white issue. Meanwhile, if it's NOT B/W, then let the equivocation begin!

We certainly learned that all three elements of this equation would have been most happy to equivocate all day long if there was the slightest doubt about the matter. And that includes: 1) Staff of failed institution; 2) Staff of receiver institution; and 3) FDIC Team.

Related Posts

Michael   |     |   Comment #1
Thank you so much, Bank Guy, for this detailed posting. I am sure everyone reading it will heed your warnings.

I think the biggest confusing part of what you wrote concerns the account titling issue (with both the NCUA and FDIC).

Many credit unions and online bank CSR's tell their customers that as long as the POD beneficiaries are listed on the account record, they do not need to specifically be on the title of the account.

Allow me to use some of my accounts as a specific example:

I up until recently had a large amount at Wachovia. The rep at the branch gave me a printout of my account which listed 4 beneficiaries, but my actual account title only had my name. The rep insisted that this was OK as far as the FDIC was concerned. I accepted it (and maybe after what you wrote, I made a mistake accepting it).

I currently have a large amount at Alliant CU. They have my 4 beneficiaries listed in their computer, but my account title only has my name.

And finally: I recently (thanks to you) opened up an AARP Savings Jumbo MMA. I sent in in writing to add beneficiaries to my account, but the CSR specifically told me my account title is just my name. (So, now I am scared.) The CSR told me absolutely that they cannot and will not put the beneficiaries in the title, nor do I need it to get the extra FDIC coverage.

Obviously, the FDIC needs to raise the limit (it is about time now). But it doesn't look like they will. So, what is one to do? One wants the 4.75% from AARP Savings or the 4% from Alliant...and some of us are very fortunate to have more than $100,000 to deposit.

What happens if the high-paying banks won't put the beneficiaries in the account title and keep insisting that one really doesn't need it as long as it is in their system?
Bozo   |     |   Comment #2
To: Michael and Banking Guy
Re: Similar issue

I also had the same issue with Alliant. When I decided to roll an additional $50K CD (and a maturing liquid CD) into Alliant, I asked the local rep if the accounts (which would then be over $100K) would be under the insurance limit. She assured me they would be, since I had my wife as beneficiary, even though she was not on the "title" of the CD as ATF. I was still concerned, so (in an abundance of caution), my wife joined Alliant and the second CD is in her name, and the initial CD and the savings account are in my name.

Based on the NCUA website insurance brochure, it is not at all clear that "merely" having a beneficiary on a single account, without POD or ATF in the title of the instruments therein, triggers additional coverage.

Anyone know the answer?

Thanks in advance.


Chester   |     |   Comment #3
Here is the excerpt from the FDIC site:

"The account title must include a commonly accepted term such as "payable-on-death," "in trust for," "as trustee for" or similar language to indicate the existence of a trust relationship. The term may be abbreviated (for example "POD," "ITF" or "ATF")."

If you read the rules at the site, it is clear that the title must reflect the POD or ITF, etc.

I am currently looking for similar language at the NCUA site. Have not found it yet.

So, for anyone who has more than $100K in an account at an FDIC insured bank, if you don't have the account title as the FDIC requires, and if your bank goes under, you will not be insured.

If you don't believe me, read it for yourself at:


I don't know, Michael and others at AARP Savings, what you can do if the bank refuses to change your title. Threaten to remove your money.

Bozo, the NCUA has a consumer phone number:

NCUA’s Consumer Assistance Hotline 1-800-755-1030

I think you and Michael need to call them to verify. If they say they also require the account title to reflect POD/ITF, I urge you to get somebody high up at Alliant CU to make the change.

Please post your results.

Anonymous   |     |   Comment #4
I had extensive and separate conversations with Alliant and the NCUA on this very topic a couple months ago. Finally, I insisted they speak directly with each other and give me a single, consistent response. Bottom line: "Alliant accounts that have beneficiary forms attached to them are considered revocable trust accounts for share insurance purposes," provided those beneficiar(ies) meet qualification requirements. Put another way: Given qualified beneficiaries, the POD title is assumed.

For those interested in learning more, I was referred to page 13, #16 of the NCUA "Your Insured Funds" brochure.

My remaining quibble, which I communicated strenuously to Alliant, is the confirmation of benficiary designation. After submitting our completed beneficiary forms, we as customers go on faith that they've been properly "attached" to the account. Personally, I'd feel more comfortable if there was confirmation from Alliant of form receipt and names of beneficiaries. As of a couple months ago, there was no such confirmation
Anonymous   |     |   Comment #5
Here's relevant section from "Your Insured Funds" brochure:

"16. What is the insurance coverage on a revocable trust account, a tentative or 'Toten' trust account, a 'payable-on-death' account, or a qualifying living trust account?

"These accounts, or any similar accounts which evidence an intention that the funds shall pass on the death of the owner to a named beneficiary, are considered revocable trust accounts and are insured as a form of individual account ..."

The answer goes on to describe qualified relationships but the key phrase to note, for purposes of our discussion, is "which evidence an intention that the funds shall pass on the death of the owner to a named beneficiary."

Sorry I neglected to include excerpt earlier.
Sofa King Frustrated
Sofa King Frustrated   |     |   Comment #6
Thanks, Anonymous, for posting your experience with Alliant.

I have called Alliant and asked that they mail me a document that confirms they have the POD beneficiaries listed as part of the account record.

I am assuming (hoping) that should Alliant go under (I'd like to think doubtful), I can use their documentation as proof to the NCUA should they ever have questions about my account.

I guess it is safe to assume that all banks could potentially fail at any time, no matter how strong they appear now.

If a bank of CU won't put POD/ITF on your account title, at the very least they should be able to send you proof that your beneficiaries are listed on your official account record.

But, pertaining to FDIC only, it does appear that they absolutely need the POD/ITF designation in the account title. So, if you are dealing with a bank that refuses to put the POD/ITF in the account title, I highly recommend you keep your funds total under $100,000. It's just not worth the risk these days.
Bozo   |     |   Comment #7
To: All
Re: The more I learn, the less I know (etc)

I am now more convinced than ever that I was wise to have my wife join Alliant as a member, have the second CD put in her name (with me as beneficiary), and have any future CDs deposited in a new, "joint" account (which even the NCUA recognizes has separate and distinct insurance limits from individual accounts).

I really, really, don't want to bet the ranch on what some CSR or bank rep says (especially considering, if they are BK, it really doesn't matter what they said).


Anonymous   |     |   Comment #8
I'm assuming their accounts were insured for over $200,000 because children and/or parents were listed as beneficiaries. If not then the excess amount was technically at risk.
Anonymous   |     |   Comment #9
In my experience with the NCUA and Alliant, I spoke with administrative staff at the latter, not a CSR. My observation about the absence of confirmation is related to their standard process. As I told Alliant, I believe upon receipt of beneficiary designation or changes to same, a confirmation should be automatic, not ad hoc and subject to request.

I'd love to hear if there's a credit union out there with a more rigorous process -- explicit titling of account and/or automatic confirmation of beneficiary designations and changes.
Banking Guy
Banking Guy   |     |   Comment #10
In this previous post I have a section where I discuss the account title issue for credit unions. Also, I have links to references at the NCUA supporting what the above commenter (8:10 PM, May 14, 2008) mentioned.
Anonymous   |     |   Comment #11
Big shout out to Banking Guy, and to the reader that shared his experience. Very informative and interesting post. THANKS!!
Michael   |     |   Comment #12
Both the FDIC & NCUA basically do the same function, yet one requires the account title say POD or ITF and one does not.

I phoned Alliant this morning and was told the account title does not have to say POD or ITF. I did request they mail me a printout stating their records list my PODs.

I am still waiting to hear back from AARP Savings on if they will change my aacount title to POD or ITF, as the FDIC really requires it.

Please post if anyone has had luck getting AARP to do this. Thanks.
Howard   |     |   Comment #13
I, too, requested that AARP change my account title to reflect beneficiary status.

A customer service rep replied that they will change my account title to just:

"(my name) POD"

Bank Guy, is this enough to satisfy the FDIC's account title requirement in your opinion?

In other words, is it enough for the title just to say "Your Name POD" or does it specifically have to list the names of the POD's in the account title?

If you had AARP Savings, they would write your account title:

"Bank Guy POD"

If the names of the PODs had to be in the account title, and if you had two beneficiaries, it might read:

"Bank Guy POD Marie Guy and Donnie Guy"

Opinions welcome. Thank you.
CD Rates Blog
CD Rates Blog   |     |   Comment #14
It would appear that the FDIC should amend their rules for POD accounts. In order for banks to save time (and money), they don't want to open multiple accounts, etc.

If a bank refuses I would first point them to the FDIC guidelines. If they continue to refuse, I would ask for the uninsured portion to be returned without penalty since the bank is not willing to abide by the criteria the FDIC says must be in place. Keep pushing on up the chain of responsiblity. If they still refuse, contact the FDIC. If enough people contact the FDIC I'm sure there legal counsel will issue an opinion or the FDIC will amend the criteria.

I also doubt that if a bank failed, that the FDIC wouldn't honor the intent of the account. That wouldn't be in there best interest. However, I wouldn't be willnig to bet $100,000 or more either.
Anonymous   |     |   Comment #15
CD Rates Blog, I agree with you fully.

Any opinion on what the previous poster said about the bank just willing to put the letters "POD" in the account title instead of the family names? Do you think this would suffice as far as the FDIC is concerned? I am asking because I would guess all banks would be willing to add these 3 little letters to one's account title, while most might balk at having to type in many family names.
Anonymous   |     |   Comment #16
I ran and had WAMU change my account title after reading all of this. According to the FDIC (tel. 877.275.3342) the account title MUST have POD after your name, i.e. John Doe POD; no other names need be listed, regardless of the way the bank says it has it listed in their system. Further, WAMU gave me a hard time to make this change and the rep spoke with several others on the phone which told (her) that this was not required!

Finally, I got the change done.

If you need to lodge a complaint against your bank for not following FDI rules, call Division of Thrift Supervision, 800.842.6929.
Anonymous   |     |   Comment #17
Thank you, Banking Guy. I have long been dismayed by the INSTANTANEOUS loss of insurance when a pivotal POD beneficiary passes away. One second you have the insurance and literally the next moment your insurance is GONE. It is such an unforgiving rule which obviously should be changed to provide at least a small cushion for the account holder. Equally obviously, the FDIC and the NCUA are not about to change anything. People need to be aware that when one of their POD beneficiaries dies they might have a severe personal emergency on their hands. I'm guessing very few depositors are aware of this. It's a pity.
Chester   |     |   Comment #18
Thanks, Anonymous.

You have proven yet again that people need to be tough with their bank and fight for what they want...

...and also that the quantity of misinformation given out by customer service reps is astounding.

Can we ever trust what a CSR says?

Can you imagine the horror of a CSR that tells a client that the account title doesn't need to say POD or ITF, and then that bank fails, and then the customer loses perhaps hundreds of thousands of dollars?
Anonymous   |     |   Comment #19
One MORE THING! After going to WAMU, I also had to change another account title at a different bank. Again, the rep knew nothing, said everything was fine, I then asked for the manager...said that this bank in the past added POD to the name years ago but this changed with their equipment upgrade. Said, can't do, all is OK, don't worry.

I said, NO WAY!!!!

She then looked it up (account title requirement) in her FDIC reference handbook, and stated, wow, I am sooo wrong. Changed things in a flash.

So don't take NO or everything is fine for an answer, please! Do your homework. It is your money.

Thanks Bank guy for this excellent information on the post and everyone else.
Anonymous   |     |   Comment #20
A couple months ago, shortly after my discussions with Alliant and the NCUA which I reported on earlier, I decided to open a couple CDs with WaMu, one to be POD. In calling one branch to ask about the ease of such titling, the manager suggested I help myself to an FDIC brochure available at the site. Instead, I personally visited a second branch where that manager assured me it would be no problem, just a routine part of opening an account. Following my name for one CD is "an individual account in my name." For the second, it's "a single voluntary and revocable trust." Branch staff also showed me how they were entering beneficiary info into their systems.

If my experience with Alliant and WaMu is any indication, I believe there's a huge gap in understanding of account insurance among financial institutions and even among locations of the same institution. It can be an intimidating subject and the staff is often not well trained. My advice is to take names and get documentation, if you're unsure. Better still, if there's a choice, give your business only to those who inspire your confidence, treat your concerns respectfully and take care to earn your trust.
Anonymous   |     |   Comment #21
The experience of the depositor at ANB shows that if you have "POD" or something similar in an account title, then you are properly covered.

However, it does not prove that lack of the words "POD" in the account title leaves you uncovered.

Do we have any examples of someone who lost their money despite having qualified beneficiaries just because "POD" wasn't on the account title?
Bozo   |     |   Comment #22
To: All
Re: What a Firestorm

OK, the experiences reflected in these posts is startling. Sort of reconfirms my belief that CSRs, tellers, even branch managers, know just as much as their training manual says they are to know (which, I fear, is little).

Bottom line: if you are shopping "large money" and are concerned about FDIC/NCUA insurance limits, go with your gut. Better to be safe, yadda, yadda, yadda . . . .


Doc   |     |   Comment #23
Yes, it does not prove that not having the words POD or ITF in the account title leaves you uncovered, but do you want to have to worry about it? Do you want to be the one who finds out when it comes to potentially be thousands and thousands of dollars?
CD Rates Blog
CD Rates Blog   |     |   Comment #24
I sent an email to the FDIC regarding this issue. But their written response time is up to 7 to 10 Days or longer depending on the issue. I'll report back when I get some information from them.
Anonymous   |     |   Comment #25
Perhaps someone could give us a calculator for the Capitol One ERV penalty.


Penalties for early withdrawal

You may not withdraw principal from your account before the account's maturity date. If we allow early withdrawal, you will be assessed a penalty for early withdrawal as described below:
1. On a CD with a term of less than six months, the penalty will equal one month's interest on the principal amount withdrawn
2. On a CD with a term of six months to one year, the penalty will equal three months' interest on the principal amount withdrawn
3. On a CD with a term of more than one year:
a) If a withdrawal is made within six months of maturity, the penalty will equal six months' interest on the principal amount withdrawn
b) If a withdrawal is made six months or more before maturity, the penalty will equal the greater of six months' interest or the Economic Replacement Value (see below for definition) on the principal amount withdrawn.

Economic Replacement Value (ERV)
The Economic Replacement Value is an estimate of the interest cost to us if we were to replace a CD that is withdrawn early with another CD having a term that is comparable to the remaining term of the original CD. If interest rates have risen, then the cost of the new CD will be higher.

FOR EXAMPLE (this example does not reflect your actual CD terms):
1. Perhaps you have a 5-year CD and you withdraw $40,000 of principal 27 months early.
2. But rates have risen so that a new CD has an APY 0.50% higher than your original CD.
3. Therefore, the ERV would be $450.00.

This represents an estimate of Capital One’s interest cost if it were to replace the money you withdrew with a comparable CD. The term offered by Capital One that is closest to (but not greater than) the remaining term of your CD would be 24 months or two years in this example. In other words:
1. Perhaps your original 5-year CD had an APY of 2.00%.
2. But rates have risen and the 24-month replacement CD offered by Capital One for new accounts of the same CD type had an APY of 2.50% at the time of your early withdrawal.
3. Therefore, Capital One’s interest cost in replacing the $40,000 principal you withdrew early would be an additional 0.50% APY. This comes to an additional $200 per year on the $40,000 you withdrew early. Over 2.25 years (time left to maturity), this adds up to $450.00.

You can now use this example to calculate ERV in the following way:

Subtract the APY on your CD from the APY offered for new accounts of the same CD type by Capital One on the date of your early withdrawal. Make sure to choose an APY for a CD term that is closest to (but not greater than) the number of years remaining until your CD matures.

If there is more than one APY offered for the relevant CD term and product, use the lowest APY offered for new accounts of the same CD type.

Original CD APY = 2.00%
Current APY for a 24-month CD (for this example only) = 2.50%
2.50% - 2.00% = 0.50%

Multiply the result from Step 1 by the amount of principal you withdrew to calculate the annual interest differential.

$40,000 x 0.50% = $200

Multiply the result from Step 2 by the amount of time left until your CD matures (in years) to calculate the ERV.

27 months to maturity = 2.25 years (27 ÷ 12 = 2.25)
$200 x 2.25 = $450.00

REMEMBER: This example is for illustrative purposes only. The terms in the example are not specific to your CD. The actual calculation of ERV will depend on the current APY offered on new accounts for the same type of CD. The ERV will also depend on the APY, term and principal amount of your CD.
Anonymous   |     |   Comment #26
Payable on death accounts must identify the beneficiaries by name in the account records of the institution (but not necessarily in the account title). Living trust beneficiaries must be the ones who will receive the funds upon the owner's death. For example, if a parent names her two children as the beneficiary of her living trust but specifies that the funds will then go to that child's heirs (the owner's grandchildren) if a child predeceases her, only the two children are considered beneficiaries for insurance purposes (assuming the children are both alive when the institution fails).
Anonymous   |     |   Comment #27
Interesting story on ANB in Friday's Wall Street Journal ("A Gamble That Went Bust. ANB's Collapse From Real-Estate Bet Is Ominous for Small, Midsize Lenders"). An exec of Pulaski Bank & Trust, the organization that took over some of ANB's assets and deposits, described ANB as "a bank on steroids."
Anonymous   |     |   Comment #28
In the Quail Ridge subdivision, for-sale signs have popped up like the
overgrown grass choking lawns of four-bedroom and five-bedroom homes,
costing as much as $450,000, that never should have been built.

Michael Woods/Arkansas Democrat Gazette
Was ANB a "bank on steroids"?
"If you had a tool belt and a pickup truck, you could get a
construction loan," says Robert W. Abercrombie, owner of Betty's Homes
Inc., which built some of the houses in Quail Ridge but filed for
bankruptcy protection in 2006 after sales stalled.

Mr. Abercrombie's company defaulted on more than $2.5 million in loans
from ANB Financial, a local bank known for its enthusiastic lending.
So did another Quail Ridge home builder that borrowed from ANB. By
Friday, an epidemic of bad real-estate loans had overwhelmed the bank,
which was seized by federal regulators in the second-biggest federally
insured bank failure since 2001.

On Monday morning, nine ANB offices reopened as branches of Pulaski
Bank & Trust Co., which took over some of the closed bank's assets and
deposits. The bust is reverberating as a sign of turmoil at many small
and medium-size banks throughout the U.S. that pinned huge hopes, and
capital, on the housing boom.

Delinquencies and charge-offs are rising at lenders that barreled into
real-estate loans but now are feeling a double whammy of the housing
slump and credit crunch. Regulators are bracing for more failures.
Even banks in no danger of collapse will need years to slog through
their lending mistakes.

"People just naturally get ahead of themselves," says Daryl G. Byrd,
president and chief executive of IberiaBank Corp., the Lafayette, La.,
parent of Pulaski Bank. "They get caught up in the growth. They think
it will never end."

ANB was launched in 1994 by Dan ****ma, then 34 years old, who had
been a star lender at Bank of Bentonville, now called Arvest Bank
Group Inc.

Mr. ****ma offered some of the highest interest rates in the country
on certificates of deposit. ANB also aggressively sought deposits sold
through securities firms. By last year, such brokered deposits had
increased to more than 80% of the bank's total.

ANB's swelling deposits were funneled into real-estate loans tied to
the fast growth of northwestern Arkansas. New employees and
transplants lured by Wal-Mart, suppliers such as General Mills Inc.
and Unilever, trucking company J.B. Hunt Transport Services Inc. and
other companies turned the area into a sprawl of strip malls,
restaurants and new subdivisions carved from forests and farmland.

By the end of last year, ANB had $1.3 billion of construction and land-
development loans on its books -- and $114 million in conventional
home mortgages, according to financial data filed with regulators. In
contrast, Mr. Byrd says Iberia has 5.5% of its loan portfolio in
construction and land development, while ANB's is more than 75%.

ANB also opened loan offices in resort communities such as Jackson
Hole, Wyoming, and St. George, Utah. "One might characterize [ANB] as
a bank on steroids," says John R. Davis, Iberia's senior executive
vice president.

When he wasn't overseeing the lending surge as ANB's chief executive,
Mr. ****ma dabbled in real-estate development. Documents indicate he
was involved in various residential and commercial projects, though
his exact role isn't clear. Mr. ****ma also co-owns Bentonville
Butcher & Deli on South Walton Boulevard, according to his business
partner. Mr. ****ma says he was told by his lawyer and the Federal
Deposit Insurance Corp. not to comment.

The strategy backfired when housing sales began cooling in 2006. Soon,
more than a dozen local real-estate developers filed for bankruptcy
protection. In a lawsuit filed in a Benton County, Ark., court this
year, ANB alleged a developer called Zachary Investments had
defaulting on at least $934,000 in loans used to build several homes
in the Quail Ridge subdivision. In response, the developer accused ANB
of reneging on a promise to increase its credit line.

As loan losses ballooned, regulators in June ordered ANB and its
parent company, ANB Bancshares Inc., to slow loan growth, bolster its
capital and develop a plan to control risk.

As of March 31, past-due and nonaccrual loans -- or those for which
full repayment is in doubt -- related to construction and land
development had surged to $732 million from $123 million six months

The Office of the Comptroller of the Currency concluded ANB "had
incurred and is likely to incur losses that will deplete all or
substantially all of its capital." The failure is expected to cost the
FDIC's deposit-insurance fund about $214 million.

J. Neal Ethridge, a retired Archer-Daniels-Midland Co. manager whose
family owns a now-worthless 5% stake in the bank, says the OCC field
office that took over supervision of the bank last year "attacked us."
To be sure, like most of its peers, the bank had long been regulated
by the OCC, but there was a change in the tone of that regulation
according to Mr. Ethridge when a new field office took over.

"Those statements are not accurate," says Kevin M. Mukri, an OCC
spokesman. "Our job is to ensure the bank is properly capitalized and
used proper accounting procedures, and that is what we did in this
CD Rates Blog
CD Rates Blog   |     |   Comment #29
I did get a response from the FDIC regarding POD accounts. In summary, the title must have the letters "POD" or "ITF" in the title and although the title doesn't have to list the beneficiares, the bank records clearly do. If a bank refuses to correct the title a complaint should be filed with the FDIC. Here is the actual text of the response. Bolding is mine:

"Thank you for contacting the FDIC Division of Supervision and Consumer Protection.

The disclosure requirements for payable on death accounts are found in 12 C.F.R. Part 330.10(b), which states:

b) Required intention. The required intention in paragraph (a) of this section that upon the owner's death the funds shall belong to one or more qualifying beneficiaries must be manifested in the title of the account using commonly accepted terms such as, but not limited to, "in trust for," "as trustee for," "payable-on-death to," or any acronym therefor. In addition, the beneficiaries must be specifically named in the deposit account records of the insured depository institution.

Please note that only the POD (or other similar acronym) language needs to be in the title--as discussed above, the beneficiaries can be named elsewhere in the account documentation if the owner is not comfortable with (or the bank's computer system does not allow) having them named in the account title. Many banks meet the title requirement with the following format in the electronic name and address file or Customer Identification Files:

John Smith, POD
Mary Smith, POD
123 Main Street
Anytown, USA


John Smith
Mary Smith
123 Main Street
Anytown, USA

Inconsistent or incomplete records, in which the owner's intentions are not clear or in which the regulatory requirements are not met may result in unintentional uninsured funds in the event of a failure of an insured bank.

As to your question, "What should a consumer do if a bank refuses to change the title, already has their funds, and refuses to send the uninsured funds back without penalty?" the FDIC would suggest filing a complaint with the FDIC stating the failure of the specific bank to comply with section 12 C.F.R. Part 330.10(b). The website for filing a complaint is found at www4.fdic.gov/STARSMAIL/index.asp.

I hope this information is helpful."

It seems like ultimately the FDIC would be reasonable in trying to decipher the intent of accounts not properly titled. However, that could take some time and there is no guarantee. For safety sakes, insist on having the correct title used.

ChrisCD :O)
Anonymous   |     |   Comment #30
Can someone explain how a Living Trust should be listed. I have my living trust setup as a POD, but after reading the section posted above from the FDIC website, I'm thinking this may not be correct. If I'm reading it correctly a living trust is not a POD. A POD can only be a person or charity. I believe the only way a living trust can be insured is for the account to be named in the name of the Living Trust?

Can someone verify this? Thank you~
Anonymous   |     |   Comment #31
RE:  "The account title must include a commonly accepted term such as "payable-on-death," "in trust for," "as trustee for" or similar language to indicate the existence of a trust relationship. The term may be abbreviated (for example "POD," "ITF" or "ATF")."

I know the FDIC documentation now (5/2014) states POD can be included in the banks computer records instead of the account title.  However, after reading the FDIC documents they show it both ways (ie: title or computer records).  I've called the FDIC and different reps say different requirements on the title.

Does anyone have any current experience in the Proper way to title a POD account?
paoli2   |     |   Comment #32
I do a lot of PODs and I noticed recently the beneficiary's name was no longer listed in the account title.  When I asked the bank why the POD's name was missing, they said they received new official regulations for POD's and due to the Privacy Law, the person's name can no longer be listed where it can be seen by others.  You see, when I get our monthly interest checks the address box was just what is on the CD title, My name POD ____________________  and the address in an envelope with a see through window.  They did not change the way to do the POD on the certificates, they just had to make sure it is not included in the address for any mail sent to me.  The way it is titled is usually the way they all title my POD CDs.  The POD is usually always next to the name of the CD Owner.  A few banks and/or credit unions have a box they mark in the CD document which states this is a POD account and the info for the POD beneficiary.
paoli2   |     |   Comment #33
One thing I would like to add on the subject of POD CDs.  I was concerned about what would happen with these CDs made in  my name only if I got sick or incapacitated in any way.  What if they matured and I was not able to get to or inform the institution I wanted to close them out?  I was told that since my spouse and I have POAs on each other, I could give the institution a copy of the POA giving him power to do whatever I needed done and he could take over dealing with the CD for me.  So for anyone who has PODs, you might want to consider having a POA with someone who can deal with the POD  CD in case you are unable to handle it when necessary.
Anonymous   |     |   Comment #34
And, if effective upon execution, consider "testing" it now by having the one with the power complete as transaction now.