As featured in The Wall Street Journal, Money Magazine, and more!

Posts tagged as:

fdic

As of October 26, 2009, over 100 banks have failed this year. Most of these are smaller regional banks who, in order to compete with larger banks, offered risky loans and are now facing customer defaults. Larger banks were offered government bailouts to prevent failure, but these smaller banks whose failures are not seen as major risks to the economy are left without taxpayer assistance.

The FDIC covers savings accounts, checking accounts, and certificates of deposit to ensure that customers hardly notice when one of these smaller banks fail. As long as a bank is a member of FDIC, and most are, customers should be confident that even if a bank fails, they will be able to withdraw their deposits within the coverage limit. Predicting the increase of bank failures this year, the FDIC decided over a year ago to increase its insurance limits. In 2008, only 26 banks failed compared to 106 so far this year.

Although there is often worry in the press that FDIC is underfunded and might run out of money, that situation is highly unlikely. The FDIC is requiring banks to start paying their FDIC premiums which have largely been ignored for decades to increase its available funds. The FDIC also has an extensive line of credit with the Treasury, and because Congress will always vote to make sure the FDIC will be able to cover necessary expenses, it is in effect a limitless credit line.

Here is a full list of banks that have failed since 2000. I will update this list as necessary.

Bank Location Failed Date
Riverview Community Bank Otsego, MN October 23, 2009
Partners Bank Naples, FL October 23, 2009
Hillcrest Bank Florida Naples, FL October 23, 2009
Flagship National Bank Bradenton, FL October 23, 2009
First DuPage Bank Westmont, IL October 23, 2009
Bank of Elmwood Racine, WI October 23, 2009
American United Bank Lawrenceville, GA October 23, 2009
San Joaquin Bank Bakersfield, CA October 16, 2009
Warren Bank Warren, MI October 2, 2009
Southern Colorado National Bank Pueblo, CO October 2, 2009
Jennings State Bank Spring Grove, MN October 2, 2009
Georgian Bank Atlanta, GA September 25, 2009
Irwin Union Bank, F.S.B. Louisville, KY September 18, 2009
Irwin Union Bank and Trust Company Columbus, IN September 18, 2009
Venture Bank Lacey, WA September 11, 2009
Corus Bank, N.A. Chicago, IL September 11, 2009
Brickwell Community Bank Woodbury, MN September 11, 2009
Vantus Bank Sioux City, IA September 4, 2009
Platinum Community Bank Rolling Meadows, IL September 4, 2009
InBank Oak Forest, IL September 4, 2009
First State Bank Flagstaff, AZ September 4, 2009
First Bank of Kansas City Kansas City, MO September 4, 2009
Mainstreet Bank Forest Lake, MN August 28, 2009
Bradford Bank Baltimore, MD August 28, 2009
Affinity Bank Ventura, CA August 28, 2009
First Coweta Bank Newnan, GA August 21, 2009
CapitalSouth Bank Birmingham, AL August 21, 2009
Guaranty Bank Austin, TX August 21, 2009
ebank Atlanta, GA August 21, 2009
Colonial Bank Montgomery, AL August 14, 2009
Community Bank of Nevada Las Vegas, NV August 14, 2009
Union Bank, National Association Gilbert, AZ August 14, 2009
Dwelling House Savings and Loan Association Pittsburgh, PA August 14, 2009
Community Bank of Arizona Phoenix, AZ August 14, 2009
First State Bank Sarasota, FL August 7, 2009
Community National Bank of Sarasota County Venice, FL August 7, 2009
Community First Bank Prineville, OR August 7, 2009
Integrity Bank Jupiter, FL July 31, 2009
Peoples Community Bank West Chester, OH July 31, 2009
Mutual Bank Harvey, IL July 31, 2009
First State Bank of Altus Altus, OK July 31, 2009
First BankAmericano Elizabeth, NJ July 31, 2009
Waterford Village Bank Williamsville, NY July 24, 2009
Security Bank of North Metro Woodstock, GA July 24, 2009
Security Bank of North Fulton Alpharetta, GA July 24, 2009
Security Bank of Jones County Gray, GA July 24, 2009
Security Bank of Houston County Perry, GA July 24, 2009
Security Bank of Gwinnett County Suwanee, GA July 24, 2009
Security Bank of Bibb County Macon, GA July 24, 2009
Vineyard Bank Rancho Cucamonga, CA July 17, 2009
Temecula Valley Bank Temecula, CA July 17, 2009
First Piedmont Bank Winder, GA July 17, 2009
BankFirst Sioux Falls, SD July 17, 2009
Bank of Wyoming Thermopolis, WY July 10, 2009
Rock River Bank Oregon, IL July 2, 2009
Millennium State Bank of Texas Dallas, TX July 2, 2009
John Warner Bank Clinton, IL July 2, 2009
Founders Bank Worth, IL July 2, 2009
First State Bank of Winchester Winchester, IL July 2, 2009
First National Bank of Danville Danville, IL July 2, 2009
Elizabeth State Bank Elizabeth, IL July 2, 2009
Mirae Bank Los Angeles, CA June 26, 2009
Horizon Bank Pine City, MN June 26, 2009
Neighborhood Community Bank Newnan, GA June 26, 2009
MetroPacific Bank Irvine, CA June 26, 2009
Community Bank of West Georgia Villa Rica, GA June 26, 2009
Southern Community Bank Fayetteville, GA June 19, 2009
First National Bank of Anthony Anthony, KS June 19, 2009
Cooperative Bank Wilmington, NC June 19, 2009
Bank of Lincolnwood Lincolnwood, IL June 5, 2009
Strategic Capital Bank Champaign, IL May 22, 2009
Citizens National Bank Macomb, IL May 22, 2009
BankUnited, FSB Coral Gables, FL May 21, 2009
Westsound Bank Bremerton, WA May 8, 2009
America West Bank Layton, UT May 1, 2009
Silverton Bank, NA Atlanta, GA May 1, 2009
Citizens Community Bank Ridgewood, NJ May 1, 2009
American Southern Bank Kennesaw, GA April 24, 2009
Michigan Heritage Bank Farmington Hills, MI April 24, 2009
First Bank of Idaho Ketchum, ID April 24, 2009
First Bank of Beverly Hills Calabasas, CA April 24, 2009
Great Basin Bank of Nevada Elko, NV April 17, 2009
American Sterling Bank Sugar Creek, MO April 17, 2009
New Frontier Bank Greeley, CO April 10, 2009
Cape Fear Bank Wilmington, NC April 10, 2009
Omni National Bank Atlanta, GA March 27, 2009
FirstCity Bank Stockbridge, GA March 20, 2009
TeamBank, NA Paola, KS March 20, 2009
Colorado National Bank Colorado Springs, CO March 20, 2009
Freedom Bank of Georgia Commerce, GA March 6, 2009
Security Savings Bank Henderson, NV February 27, 2009
Heritage Community Bank Glenwood, IL February 27, 2009
Silver Falls Bank Silverton, OR February 20, 2009
Corn Belt Bank & Trust Co. Pittsfield, IL February 13, 2009
Sherman County Bank Loup City, NE February 13, 2009
Riverside Bank of the Gulf Coast Cape Coral, FL February 13, 2009
Pinnacle Bank of Oregon Beaverton, OR February 13, 2009
FirstBank Financial Services McDonough, GA February 6, 2009
County Bank Merced, CA February 6, 2009
Alliance Bank Culver City, CA February 6, 2009
Suburban FSB Crofton, MD January 30, 2009
Ocala National Bank Ocala, FL January 30, 2009
MagnetBank Salt Lake City, UT January 30, 2009
1st Centennial Bank Redlands, CA January 23, 2009
Bank of Clark County Vancouver, WA January 16, 2009
National Bank of Commerce Berkeley, IL January 16, 2009
Sanderson State Bank Sanderson, TX December 12, 2008
Haven Trust Bank Duluth, GA December 12, 2008
First Georgia Community Bank Jackson, GA December 5, 2008
PFF Bank & Trust Pomona, CA November 21, 2008
Downey Savings & Loan Newport Beach, CA November 21, 2008
Community Bank Loganville, GA November 21, 2008
Franklin Bank, SSB Houston, TX November 7, 2008
Security Pacific Bank Los Angeles, CA November 7, 2008
Freedom Bank Bradenton, FL October 31, 2008
Alpha Bank & Trust Alpharetta, GA October 24, 2008
Meridian Bank Eldred, IL October 10, 2008
Main Street Bank Northville, MI October 10, 2008
Washington Mutual Bank FSB Park City, UT September 25, 2008
Washington Mutual Bank Henderson, NV September 25, 2008
Ameribank Northfork, WV September 19, 2008
Silver State Bank Henderson, NV September 5, 2008
Integrity Bank Alpharetta, GA August 29, 2008
Columbian Bank & Trust Topeka, KS August 22, 2008
First Priority Bank Bradenton, FL August 1, 2008
First National Bank of Nevada Reno, NV July 25, 2008
First Heritage Bank, NA Newport Beach, CA July 25, 2008
IndyMac Bank Pasadena, CA July 11, 2008
First Integrity Bank, NA Staples, MN May 30, 2008
ANB Financial, NA Bentonville, AR May 9, 2008
Hume Bank Hume, MO March 7, 2008
Douglass National Bank Kansas City, MO January 25, 2008
Miami Valley Bank Lakeview, OH October 4, 2007
NetBank Alpharetta, GA September 28, 2007
Metropolitan Savings Bank Pittsburgh, PA February 2, 2007
Bank of Ephraim Ephraim, UT June 25, 2004
Reliance Bank White Plains, NY March 19, 2004
Guaranty National Bank of Tallahassee Tallahassee, FL March 12, 2004
Dollar Savings Bank Newark, NJ February 14, 2004
Pulaski Savings Bank Philadelphia, PA November 14, 2003
First National Bank of Blanchardville Blanchardville, WI May 9, 2003
Southern Pacific Bank Torrance, CA February 7, 2003
Farmers Bank of Cheneyville Cheneyville, LA December 17, 2002
Bank of Alamo Alamo, TN November 8, 2002
AmTrade International Bank Atlanta, GA September 30, 2002
Universal Federal Savings Bank Chicago, IL June 27, 2002
Connecticut Bank of Commerce Stamford, CT June 26, 2002
New Century Bank Shelby Township, MI March 28, 2002
Net 1st National Bank Boca Raton, FL March 1, 2002
NextBank, NA Phoenix, AZ February 7, 2002
Oakwood Deposit Bank Co. Oakwood, OH February 1, 2002
Bank of Sierra Blanca Sierra Blanca, TX January 18, 2002
Hamilton Bank, NA Miami, FL January 11, 2002
Sinclair National Bank Gravette, AR September 7, 2001
Superior Bank, FSB Hinsdale, IL July 27, 2001
Malta National Bank Malta, OH May 3, 2001
First Alliance Bank & Trust Co. Manchester, NH February 2, 2001
National State Bank of Metropolis Metropolis, IL December 14, 2000
Bank of Honolulu Honolulu, HI October 13, 2000

{ 5 comments }



The American Bankers Association (ABA) has not been happy with Ally Bank. A few weeks ago, the organization on behalf of its member banks sent a letter to the Federal Deposit Insurance Corporation complaining about Ally’s interest rates. With Ally planning to receive bailout funds through its enrollment in the government’s Treasury Liquidity Guarantee Program (TLGP), the bank used the opportunity to offer higher interest rates on its savings, money market, and certificate of deposit accounts than its competitors.

The letter from the ABA admonished the FDIC for allowing Ally Bank, formerly GMAC Bank, to offer the highest rates or rates among the highest in the country in order to seek more deposits and grow their business. It is unfortunate that the ABA should want to see banks lower interest rates on savings products and to let FDIC force them to do so. Millions of people rely on savings interest for living, and banks should want to encourage higher rates whenever possible.

I do see where the ABA is coming from. Regulations such as interest rate limits, if imposed, should be imposed fairly to all banks. In any other situation, the ABA would be fighting regulation and be interested in competitive practices that allow the banks to set whatever rates they feel their business can handle.

The FDIC responded to the ABA’s complaint by sending a letter to GMAC, Ally Bank’s parent company, warning the bank to “focus on reducing Ally Bank’s overall deposit costs,” where “deposit costs” is a term we would recognize better as “interest rates.” Even before GM’s bankruptcy and the rebranding of the bank from GMAC Bank to Ally Bank, the bank offered one of the highest interest rates available, but now the high rates are unacceptable to the government.

The letter also stated that the amount of guaranteed debt available to GMAC from the government will rely on disclosure of Ally’s interest rates in comparison to the other top banks, signifying that Ally Bank should not find itself at the top of the list. SmartyPig, on the other hand, offers a significantly higher interest rate, though there are some strange restrictions when you compare the account with a traditional bank account.

So where does that leave customers?

  • It would be nice to be able to find a liquid savings option that pays consistently high interest rates.
  • The American Bankers Association should continue to focus on the needs of banks but shouldn’t try to stifle competition.
  • Customers of Ally Bank, lured by higher interest rates, will see some of those benefits disappear.

Should the FDIC continue going after banks, even if they are well-capitalized like Ally Bank and its parent GMAC, to prevent them from offering high interest rates to attract customers? Who benefits if the ABA and the FDIC win the fight against high interest rates?

Here are links to the letters mentioned above.

Letter from American Bankers Association to Sheila Bair, chairman of the Federal Deposit Insurance Corporation, May 27, 2009
Letter from Federal Deposit Insurance Corporation to Alvaro de Molina, CEO of GMAC, June 4, 2009

{ 5 comments }



The Federal Deposit Insurance Corporation (FDIC), the federal organization that insures that customers do not lose deposits held at banks when those banks run into trouble, is finding itself in trouble. For years, Congress hasn’t allowed the FDIC to collect insurance premiums from banks, bowing to the strong banking industry lobby. Now that banks have been failing and are expected to continue, the FDIC is in a tight spot. Despite the lack of funding, last year the government approved increasing insured limits from $100,000 to $250,000 per depositor through the end of 2009, and there is talk of extending the increased coverage.

If banks continue to fail and the FDIC does not have the funds to ensure deposits, what happens to the money held in those bank accounts? Well, you may not be able to withdraw your money when you want. But what are the realistic chances of this happening?

I mentioned recently that some money market funds are insured not to lose money for depositors, in addition to savings accounts, and Yana brought up the FDIC’s problems.

She mentioned that in this environment no bank is very safe, despite President Obama’s reassurance that Americans do not need to resort to withdrawing money from the financial system and storing the cash in mattresses. Yana is making changes in her saving philosophy to stay away from companies that are formed as brokerages with a banking arm. In some case, banks appeared on top of the game one day but failed the next, so it’s hard to predict the next to fall.

The FDIC is asking to increase their line of credit with the Treasury from $30 billion to $500 billion. If everyone agrees, with separate approvals from Congress, the Federal Reserve, the Treasury Department, and the White House, the increased credit limit will go a long way to cover deposits in a catastrophic situation. The FDIC’s current funding should be sufficient for the usual stream of smaller banks, but if the insurance organization were to take over Citigroup or another major global bank to prevent the major banking crisis, the reserves would be drained immediately.

I do not advise withdrawing money from savings accounts, but I do suggest diversifying across a number of banks. Do not leave more than $250,000 in one bank, unless you can also create a joint account. Stay within the FDIC limits for insurance, and spread your money out as much as possible. Many people suggest credit unions. Most credit union savings accounts are insured by the National Credit Union Association (NCUA), a federal agency like the FDIC, but the NCUA is also looking for more money to keep in reserve to cover failing institutions.

I expect FDIC’s $500 billion request to be approved and for there to be no problems accessing money if and when banks continue to fail. Maybe I’m just an optimist, but I think having a diversified portfolio of banking accounts, even if you don’t have savings up to FDIC insurance limits, is a good enough solution for now.

Right now, my savings accounts are distributing amongst Wachovia, ING Direct, TD Bank, HSBC Direct, FNBO Direct, E*TRADE Bank, Emigrant Direct, and a money market fund at Vanguard. Savings interest rates may go down to zero, but I’m confident enough that I won’t lose any money with this strategy.

Battling inflation is another issue. Sticking with high-yield accounts has worked so far, but with the stock market continuing its downward trend, you win when your account value doesn’t fall.

Bill Seeks to Let FDIC Borrow up to $500 Billion, Damian Paletta, Wall Street Journal, March 6, 2009
Letter from FDIC Chairman Sheila Bair to Christopher Dodd, Senate Chairman of Banking, Housing and Urban Affiars [pdf], March 5, 2009

{ 19 comments }

Through December 31, 2009, the Federal Deposit Insurance Corporation (FDIC) insures bank deposit accounts up to $250,000, with the limits returning to $100,000 after that. This includes checking accounts, savings accounts, money market accounts, and certificates of deposit. There are a few nuances to this coverage, so ensure you know the full details of FDIC coverage. This does not cover money market funds, which are occasionally called money market mutual funds.

Money market accounts are similar to savings accounts, and the names are often interchangeable. The main difference is that money market accounts are limited to six withdrawals per month. In my experience, many banks that call their products “savings accounts,” like ING Direct, still enforce this limit.

Money market funds are different than money market accounts and savings accounts. Money market funds are mutual funds offered by banks and brokerages. These products invest in bonds and commercial paper, which make them riskier than money market accounts. Since this type of fund carries more risk, the FDIC does offer insurance. Therefore, if a money market fund loses value or the bank can’t pay funds on withdrawal, the money is lost.

This rarely happens, but it did happen in 2008. At that point, the Treasury Department stepped in and covered the loss. The Treasury now offers an insurance program for money market mutual funds that agree to participate (details here). If the offering bank pays an insurance fee to the Treasury, their money market fund will be guaranteed against losing money. Specifically, the value of the fund will be protect against falling below one dollar per share.

Many banks and brokerages have opted not to participate in this program. Those that do participate, like Vanguard and Fidelity, cover money invested in the funds as of September 12, 2008, and unless extended by a new law the coverage will end in April 2009.

{ 2 comments }

Three more banks failed on Friday, bringing the 2009 tally to nine. When banks fail, the deposits (bank accounts) are transferred to another bank, sometimes with the FDIC facilitating the transition. Regardless of the process, bank accounts are generally insured by the FDIC up to $250,000 per depositor, so you won’t lose your money if you have an account at a bank that fails. In fact, most of the time, the transition is completely seamless. Old debit and ATM cards continue to work, you can still write checks.

The $250,000 limit is an increase over the previous limit of $100,000. The current law is scheduled to expire at the end of 2009, with limits returning to $100,000 next year. The law may be extended or even superseded by a new law that would increase the limit further.

Here are the latest banks to fail.

FirstBank Financial Services, McDonough, Georgia. Deposits here will now be held at Regions Bank, based in Birmingham, Alabama, and FirstBank’s branches will reopen as Regions branches.

Alliance Bank, Culver City, California. Deposits here will now be held at California Bank & Trust, based in San Diego, California, and Alliance’s branches will reopen as California B&T branches.

County Bank, Merced, California. Deposits here have been transferred to Westamerica Bank, based in San Rafael, California, and County’s branches are reopening today as Westamerica branches.

These banks were closed earlier this year:

  • MagnetBank, Salt Lake City, Utah does not have a receiving bank, so the FDIC will be mailing checks to customers for their insured amounts.
  • Suburban Federal Savings Bank, Crofton, MD has transferred its deposits to Bank of Essex, Tappahannock, VA.
  • Ocala National Bank, Ocala, FL has transferred its deposits to CenterState Bank of Florida, National Association, Winter Haven, FL.
  • 1st Centennial Bank, Redlands, CA has transferred its deposits to First California Bank, Westlake Village, CA.
  • Bank of Clark County, Vancouver, WA has transferred its deposits to Umpqua Bank, Roseburg, OR.
  • National Bank of Commerce, Berkeley, IL has transferred its deposits to Republic Bank of Chicago, Oak Brook, IL.

When deposits change hands, it’s usually uneventful. As you can see, occasionally, the FDIC cannot find a bank willing to take on a failed bank’s deposits. This is the case with MagnetBank. In cases like this, bank customers will have access to all their money within the insured limits, but there is a slight amount of hassle required to find a new bank.

We are only five weeks into 2009 and nine banks have already failed. Could that number be one hundred by the end of the year?

{ 6 comments }

With the $700+ billion bailout bill signed into law, the FDIC now insures more deposits per account holder per bank. Here are the new limits for the most common account types, effective October 3.

  • Single accounts are insured up to $250,000 per owner through December 31, 2009
  • Joint accounts are insured up to $250,000 per co-owner through December 31, 2009
  • IRAs and other retirement accounts are insured up to $250,000 per owner
  • Trust accounts are insured up to $250,000 per owner per benficiary

Single and joint accounts will revert to the $100,000 maximum after December 31, 2009 unless a new law is created before then to extend the increased limits.

These increases don’t have much of an effect on everyday depositers like me. It’s unlikely that individuals keep more than $100,000 in a single bank account. These increased limits do help small businesses that need to keep cash on hand to fund payroll accounts and other operating accounts.

Small banks are also boosted by this new law because other businesses may willing to increase deposit balances. More capital available to these small banks can in turn make more cash available for local lending.

The increase may, according to Congress, create more confidence in the safety of the banking system, preventing a massive wave of withdrawals. When people lose confidence in banks, they withdraw their money to keep cash on hand, and the banking industry and the government want to prevent that as much as possible.

{ 6 comments }

Suze Orman is now involved with a marketing campaign for the FDIC, pointing consumers to EDIE, a calculator that halps determine how much of your money held at banks is insured.

The aim of the campaign is to help Americans feel secure about leaving their money in banks. The government and the banking industry want to prevent customers from withdrawing money in volatile markets to keep “safe” in a shoebox underneath the bed or in a coffee can buried in the backyard.

According to the marketing materials (you can watch the commercials here), the FDIC has not lost one cent of insured money for customers in the group’s 75 year history.

The EDIE calculator works well, taking into account different types of accounts, including IRAs and PODs. It prints a report for you describing the covered amount of your deposits. The calculator does not, however, tell you if the bank where your money is held is a member of FDIC. EIDE assumes that the institutions you enter as you provide your banking information are covered.

To determine whether your banks are members of FDIC and your deposits are insured, use the FDIC Bank Find.

{ 0 comments }

Shares in Washington Mutual, the country’s largest savings and loan bank, dropped over 30% in one day due to fears that this institution will be the next in a series of failures of financial companies. WaMu holds $310 billion in assets, a huge amount of deposits. The FDIC, which might step in to take over the bank, has only $53 billion set aside to assist customers when their banks collapse.

There are a few scenarios. A larger domestic or foreign bank could step in to take over all or part of Washington Mutual. This would be a risky move for the acquiring bank, however, thanks to about WaMu’s $180 billion tied into mortgage-related loans and expectations of massive losses this year.

If the FDIC steps in, it won’t be able to cover all deposits with reserves. Perhaps it’s possible for a combination acquisition of WaMu by FDIC and a private bank. Private equity firms could also infuse capital into the company, but this is another risky choice for equity investors.

Washington MutualIt’s more likely that, if necessary, Washington Mutual will be taken over by FDIC, and any shortfall in deposits will be assisted by the U.S. Treasury printing more money. This increase in the money supply would allow WaMu’s customers to withdraw their accounts in full when needed, but the real value of that money — and the value of the money held by anyone who saves or invest using the U.S. dollar — will be less. How much less? That remains to be seen.

I do not have any money in Washington Mutual. I’ve considered opening a savings account thanks to the high interest rates they’ve offered recently, but my earlier laziness may have saved me stress today.

While in most circumstances your money held at a bank insured by the FDIC is safe, when the industry is in crisis with a string of failures, it makes sense to play a little safer than usual. I intend on always keeping my savings accounts within the FDIC limits. While I once considered simplifying my finances by reducing the number of banks in which I hold accounts, it may make more sense to diversify among a number of banks and credit unions.

Photo: P.C. Loadletter
Washington Mutual Stock Falls on Investor Fears, Eric Dash and Geraldine Fabrikant, The New York Times, September 10, 2008

{ 10 comments }