There was a flurry of bank failures late last week, with seven banks failing in one day. The largest of the banks, First Federal Bank of California, had estimated assets of $6.1 billion. The most interesting thing about this past Friday’s failures, however, was the variety of solutions created by the FDIC to cover the failed banks deposits.
First Federal Bank, Santa Monica, CA
First Federal Bank has 39 locations in California, which opened as OneWest Bank locations Saturday. OneWest entered into a loss share transaction with the FDIC to assume $5.3 billion in assets from First Federal.
This loss share transaction by an assuming institution is typically what has happened when the FDIC takes over a failed bank. However, for a few of the banks closing last Friday, the FDIC tried a couple different methods for insuring the failed deposits. Its possible that this reflects the feeling of the agency to slow down its insured payouts as more banks keep failing, to make sure it will continue to be able to cover deposits over the next few years.
For one of the banks, Independent Banker’s Bank of Springfield, IL, the FDIC created what it calls a “bridge bank.” This is in part due to the fact that Independent Banker’s Bank is a commercial bank that offered correspondent banking services rather than taking direct deposits from consumers. The “bridge bank,” which was named the Independent Banker’s Bank Bridge Bank, allows customers to maintain their correspondent banking without changing the relationship. The bank has about 450 clients in four states, and approximately $585.5 million in assets.
Deposit Insurance National Bank
The FDIC created a temporary bank, named the Deposit Insurance National Bank of New Baltimore (DINB), in order to provide depositors of the failed Citizens State Bank of New Baltimore, MI an opportunity to retrieve their deposits and find another insured bank. The bank will be open for 45 days to allow customers to complete this process. CDs and IRAs do not transfer to the DINB, and will be mailed directly. Citizens State Bank had an estimated $168 million in assets at the time of closing.
Rockbridge Commercial Bank of Atlanta, GA and the FDIC were unable to find another bank willing to take over the banking operations of Rockbridge Commercial, and so the FDIC will be mailing depositors checks for the amount of their insured deposits today. Brokered accounts, up to the insured limit, will be wired once the FDIC is provided with the necessary information from your broker. If you have questions on a brokered accounts deposits, you must contact your broker. Rockbridge Commercial Bank had about $294 million in deposits as of September 30th, 2009.
The assets of the other four failed banks were assumed by other financial institutions. The total cost of the failures of December 18th, 2009 to the Deposit Insurance Fund were an estimated $1.8 billion. For more information on the 2009 bank failures, visit out Failed Banks List page.