FAILED BANK: First Priority Bank, Bradenton, FL

FDIC has taken over First Priority Bank in Bradenton, FL

FDIC Information for First Priority Bank, Bradenton, FL
On August 1, 2008, First Priority Bank, Bradenton, Florida was closed by the Florida Office of Financial Regulation. Subsequently the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

All insured non-brokered deposit accounts have been transferred to SunTrust Bank, based in Atlanta, Georgia. For more information on SunTrust Bank visit us at www.suntrust.com/fpbank

The FDIC has assembled useful information regarding your relationship with First Priority Bank. Besides a checking account, you may have Certificates of Deposit, a business checking account, a Social Security direct deposit, and other relationships with the institution.

Please select the link below to read more about this event:

FDIC Bank Closing Information for First Priority Bank

Online service is expected to resume on Monday, August 4, 2008. First Priority Bank had a number of avenues for customers to access funds, and each of those avenues had to be closed off so that a final accounting could be completed.

Capital rules no longer apply to banks taken over by the FDIC

Now the FDIC can keep a failed bank open without the pressure of selling it off. This is possible for preparation of a large bank failing that could not be sold in a timely manner to the nationalization of some of the US banking system.

FDIC Request

The exemption in the new law, which was requested by the FDIC without objection by the Fed's Board of Governors, was aimed at making clear that once banks are taken over by the FDIC, capital rules no longer apply because they are effectively owned, operated and in liquidation by the government.

Once banks are taken over by the FDIC, capital rules no longer apply. The Fed will no longer have to pay penalties on loans it makes to institutions taken over by the Federal Deposit Insurance Corp. The Federal Reserve Act's Rule 10B penalizes the Fed for loans to undercapitalized institutions exceeding specific time periods. The original provision was aimed at preventing the central bank from keeping failing banks open.

Bair Says IndyMac `Unattractive' to a Potential Buyer

FDIC Chairman Sheila Bair said this about IndyMac in a interview with Bloomberg

"There are a number of things about this institution that, to be honest with you, make it unattractive to a potential purchaser," Bair said.

"What we're trying to do now is do what we can to strengthen it, strengthen the asset quality, strengthen the servicing portfolio, so we can sell it off and get a better value, hopefully," Bair said.

I guess the question is, how `Unattractive' does the FDIC allow a bank to get before they pull the plug.

Franklin Bank Corp. Receives Non-Compliance Notification From NASDAQ

MarketWatch reports Franklin Bank Corp. Receives Non-Compliance Notification From NASDAQ.

Franklin Bank Corp. received a letter from the NASDAQ Stock Market ("Nasdaq") indicating that, for the prior 30 consecutive business days, Franklin's common stock had not maintained the minimum bid price of $1.00 per share required for continued listing, as set forth in Nasdaq Marketplace Rule 4450 (the "Minimum Bid Price Rule"). This notification will not impact the listing of Franklin's common stock at this time. Franklin's common stock will continue to trade on the NASDAQ Global Select Market under the symbol "FBTX."

White House estimates FDIC to pay out $12 billion through 2010

White House budget estimates (pg. 17) show the Federal Deposit Insurance Corp could pay almost $12 billion to cover insured bank deposits through fiscal 2010 if more banks fail.

Deposit insurance.—Over the next five years, net outlays for the Federal Deposit Insurance Corporation are expected to increase by $5 billion. Net outlays increase by $4 billion in 2008 and $12 billion in 2009 due to higher projections of net payments for deposit insurance losses over the next few years. Starting in 2011, net outlays are lower than in the February estimate because of higher projected premiums necessary to restore funding ratios in the Deposit Insurance Fund.

Opinion: This seems very low with the current condition of the banks and not even seen feeling the effects of CRE and Option ARMs yet. IndyMac alone is going to eat up between $4 billion and $8 billion of the FDIC insurance fund this year.

Insure upto $50 million with the FDIC using CDARS

CDARS is another way to circumvent the FDIC 100k insurance limit with one account and using a network of regional banks. From the CDARS website:

CDARS® is the Certificate of Deposit Account Registry Service®. And it's the most convenient way to enjoy full FDIC insurance on deposits of up to $50 million. With CDARS, you sign one agreement with a participating local bank or other financial institution of your choice, earn one interest rate, and receive one regular statement. It's that easy.


CDARS is the perfect solution for many depositors — from non-profits and public funds to businesses, advisors (including trustees, CPAs, financial planners and lawyers) and individuals, as well as socially-motivated investors.


You've worked hard for your money. Now let it work hard for you. See for yourself.

After calling one of the banks on the list, CDARS does offer competitive market rates. Please make sure your money is fully insured by either staying under the FDIC limits with various accounts in multiple banks, buying brokered CDs or using the CDARS network.

The Bank of the Bluegrass & Trust Co reveals cease and desist order from FDIC

The bank has sent out the following letter to customers today

Dear Bank of the Bluegrass & Trust Co. Customer,

The foundation of service and trust on which the Bank of the Bluegrass is built grew from a tradition of strong management and adherence to sound banking principles. That foundation has enabled the Bank of the Bluegrass & Trust Co. to continue to provide quality, personal service throughout our 36-year history regardless of the strength or weakness of the local economy.

Because we value our relationship with our customers above all else, I am writing to let you know in advance of an important development that you may hear or read about in the news and to assure you that it will in no way alter the way we serve you.

The board of directors of the Bank of the Bluegrass recently voted to approve actions -- relating primarily to the Bank’s real estate loan portfolio -- required by the Federal Deposit Insurance Corporation to assure that we are in compliance with FDIC guidelines.

Financial institutions like ours that are committed to providing significant real estate lending within our own community are adversely affected by any downturn in the United States and local economies and particularly the real estate market.

Regardless of some vulnerability as a result of the economic downturn, the decision by the Board does not in any way affect the continuity of normal bank operations and we will continue to provide the excellent service you have come to rely on from us.

Because we are a local, community bank focused primarily on personal banking and community-based real estate lending, a number of features are in place that guarantee the stability of the bank and its future –

• The Board of Directors has acted immediately to revise portions of our lending operations. We fully expect that the FDIC will verify that this and other actions taken by the Bank will be completely satisfactory.
• FDIC insurance protects depositors up to certain limits no matter what happens in other areas of banking operations.
• We have limited our commercial loan exposure.
• We have not been involved in sub-prime lending.
• We have over $24 million in capital and ample funds in required loan loss reserves.
  

In short, despite the downturn in the real estate market and its affect on a limited portion of bank operations, the Bank of the Bluegrass remains stable and well-capitalized. In fact, our stock price has more than doubled since 2001.

The Bank of the Bluegrass will never waiver in our commitment to our customers and in our determination to provide you a strong, stable banking environment. We are proud of our ability to provide personal attention to all your banking needs.

Thank you for your continued loyalty and patronage of the Bank of the Bluegrass.

Sincerely,
Mark Herren Bill Allen
Chairman/CEO President

P.S. We are happy to discuss the actions the Bank of the Bluegrass is taking with you at any time. Please call 859-233-4500 to talk to either of us or call your personal banker.

Why the FDIC's problem bank list is not a great indicator of what banks will fail

Once banks are placed on the the FDIC's problem bank list they will often merge or receive capital injections. Capital injections will often come from the banks owners and directors to protect their multi-million dollar investment. In other not so legal actions, banks will sometimes receive forbearance from a member of Congress directing the primary regulator to step back as was seen with the Keating Five. Those who have worked with the FDIC say that they have never placed much trust in the problem bank list as an indicator of what banks will ultimately fail. Once a bank is put on the problem bank list, in most cases the FDIC puts the failing banks out for bid to healthy banks. Even with the FDIC requiring the bidding banks to sign a disclosure to prevent public panic, the banking community is fairly aware of who was placed on the list.

Looking at a bank stock, bond and credit default swap pricing is most likely to give a better idea of if a bank will ultimately fail.

Why is the FDIC insuring all deposits and then taking a $862 million charge?

In the latest bank failures of First National Bank of Nevada and First Heritage Bank, the FDIC is insuring all deposits including those over the FDIC limits while taking a $862 million charge. With more bank failures on the way would it have not been a better decision to limit the losses by paying out all insured deposits and uninsured deposits would get what was leftover from the asset sale. Is the FDIC is using these failures as a confidence builder after the IndyMac debacle?

Silver State Bancorp Announces Director Resignation

MarketWatch reports

Silver State Bank, announced today that Andrew K. McCain submitted his resignation as a director on the Boards of Directors of Silver State Bancorp and Silver State Bank, citing personal reasons.

Housing Bill gives the FDIC new power

From the Washington Post

Indeed, a little-noticed provision in the bill underscores the continuing pessimism about the state of the economy going forward. The provision gives the Federal Deposit Insurance Corporation authority to create so-called bridge institutions for failing savings associations, mirroring a capability that has existed since 1991 for failed banks.

The new power will give the F.D.I.C. more latitude to continue the operations of savings associations like California-based IndyMac, which failed earlier this month, and buy regulators time to work out a resolution at the lowest possible cost.

Failed Banks: First National Bank of Nevada and First Heritage Bank, N.A

The FDIC reports two failed banks this weekend

• First National Bank of Nevada, Reno, Nevada, with approximately $3.4 billion in assets was closed. Mutual of Omaha Bank, Omaha, Nebraska has agreed to assume all deposits (approximately $3.0 billion). On June 30, 2008, First National Bank of Arizona, Scottsdale, Arizona, merged with First National Bank of Nevada and was included in this action. (PR-63-2008)
• First Heritage Bank N.A., Newport Beach, California, with approximately $254 million in assets was closed. Mutual of Omaha Bank, Omaha, Nebraska has agreed to assume all deposits (approximately $233 million). (PR-63-2008)

Details from the FDIC Press Release

The cost of the transactions to the Deposit Insurance Fund is estimated to be $862 million. The failed banks had combined assets of $3.6 billion, .03 percent of the $13.4 trillion in assets held by the 8,494 institutions insured by the FDIC.

The 28 offices of the two banks will reopen on Monday as branches of Mutual of Omaha Bank. All depositors, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Mutual of Omaha Bank for the full amount of their deposits. Depositors will continue to be insured with Mutual of Omaha Bank so there is no need for customers to change their banking relationship to retain their deposit insurance.

Over the weekend, customers of the banks can access their money by writing checks or using ATM or debit cards. Checks drawn on the banks will be processed normally. Loan customers should continue to make loan payments as usual.

Bank failure watch list based on stock prices

One of the easiest ways to see the health of a bank is to look at what the markets value the stock at. Here is the under $5 watch list of bank stocks sorted by Market Cap.

WM - Washington Mutual, Inc.
NCC - National City Corporation
ETFC - E TRADE Financial Corporation
UCBH - UCBH Holdings, Inc.
CRBC - Citizens Republic Bancorp, Inc.
CORS - Corus Bankshares, Inc.
BKUNA - BankUnited Financial Corporation
FRGB - First Regional Bancorp
CBBO - Columbia Bancorp
CCOW - Capital Corp. of the West
LION - Fidelity Southern Corporation
DEAR - Dearborn Bancorp, Inc.
CWBC - Community West Bancshares
SSBX - Silver State Bancorp
FMAR - First Mariner Bancorp
TFIN - Team Financial, Inc.

Who gets the good assets of a failed bank? Ask the FDIC

The FDIC issued a Covered Bond Policy Statement in preparation for banks to raise more capital. Not going into detail, this will allow specific investors (Goldman Saks possibly) to purchase the covered bonds where the backing collateral will actually be worth something. That leaves everyone else (mostly the taxpayer though the Fed) with collateral that is absolute garbage. Nice way for the well connected to clean out the good assets with no questions asked when a bank goes under.

Broward Bank of Commerce, FDIC issues deposit insurance

Broward Bank of Commerce said it has received conditional approval from the FDIC for deposit insurance. This is good news that new banks are receiving approval in this environment to take the place of badly managed banks being kept alive. The quote on the about us section says it all:

The fact that the bank will open with a clean loan portfolio is significant given the current state of the local and national banking industry. “We will have the ability and willingness to make loans to our customers”, adds Costello.

A bank with a clean slate, now that is something to look forward to.

Reuters: Washington Mutual debt protection costs jump

From Reuters:

The cost of protecting Washington Mutual's debt for five years rose to $1.85 million on an upfront basis, plus $500,000 in annual premiums, up from about $1.35 million plus $500,000 annually on Thursday, according to a trader.

So to insure $10 Million of Washington Mutual's debt over 5 years it will cost roughly $4.35 million. If you think about this another way, the insurer is estimating a recovery of the debt around $5.65 million from $10 million. This puts Washington Mutual's debt almost at a 50% chance of going bad in the next 5 years. The hike also makes it harder for Washington Mutual to keep doing business.

Use Brokered CDs to Insure Large Deposits

A brokered CD is a Certificate of Deposit sold by broker and can offer very competitive market rates while maintining full insurance coverage. Effectivly brokered CDs split up a sum of money over the FDIC limits and spreads it out into smaller insured deposits over many different banks. The rates tend to be very competitive because the financial institution is competing directly with other institutions for your deposit in the open market. Brokered CDs are usually purchased through a brokerage account and terms can range from 30 days to 5 years just like any other CD offering.

When working with a broker on a brokered CD it is important to verify all CDs are under the $100k limit per insitution and any changes are made if two institutions merge.

Are your deposits FDIC insured?

For your deposits to be insured they generally need to fall under all three conditions

1. The institution is a member of the FDIC
2. The account is a CD, money market, checking, savings, trust or IRA retirement savings account (Note: money market funds, mutual funds, annuities, life insurance policies, stocks or bonds are NOT insured)
3. Under $100,000 per depositor, per insured bank (This is the basic insurance amount and may be greater depending on account formation. See the EDIE to estimate FDIC insurance coverage)
   

The rule of thumb regarding insurance is provided by the following FDIC statement:

If you and your family have $100,000 or less in all of your deposit accounts at the same insured bank, you do not need to worry about your insurance coverage -- your deposits are fully insured.

Other useful information can be found at the FDIC frequently asked questions page

Deposits in Credit Unions fall under similar rules, see details at the NCUA.

FDICs Depositor's Bill of Rights

From the FDIC Press Release: FDIC Chairman Sheila C. Bair Reiterates Promise of Deposit Insurance

FDIC's Depositor's Bill of Rights

1. You have the right to automatic deposit insurance coverage when you open a deposit account at an FDIC-insured bank, with no additional cost or action on your part.
2. You have the right to separate FDIC insurance coverage for deposits held at different FDIC-insured banks.
3. You have the right to confirm that a bank is insured by using the FDIC's Bank Find service (www2.fdic.gov/IDASP/main_bankfind.asp) or by calling the FDIC toll-free at 1-877-275-3342.
4. You have the right to deposit insurance coverage of $100,000 for your deposits at an FDIC-insured bank – up to $250,000 for your IRA deposits.
5. You have the right to deposit insurance coverage of more than $100,000 at a single bank when deposits are held in different "ownership categories," such as a single, joint and trust accounts.
6. You have the right to confirm that your deposits are within the insurance limits by using the FDIC's Electronic Deposit Insurance Estimator and other online resources at www.fdic.gov/deposit/deposits or by calling the FDIC at 1-877-275-3342.
7. You have the right to be informed when a financial product offered by your bank is not covered by FDIC insurance.
8. You have a right, if your bank fails, to prompt access to your insured deposits.
9. You have the right, if you are an uninsured depositor, to receive distributions from the receivership as the sale of assets permits.
10. You have the right to sleep well, knowing that since the creation of the FDIC 75 years ago, no depositor has ever lost one penny of insured deposits.

FDIC offers new tool for failed bank depositers: Is My Account Fully Insured?

New tool for depositers of a failed bank to determine the insurance of accounts. IndyMac is the only bank listed for now and offers a good way to check your accounts.

Is My Account Fully Insured?

This tool allows failed bank customers the ability to verify whether their account is fully insured or they need to contact FDIC. A link to specific contact information will be provided.

This service is only available for banks that failed after July 1, 2008. The customer must enter each account number to determine that account's status. If you have multiple accounts with the failed bank, please enter each account number one at a time.

This service will be available for use no later than the first business day after a bank failure.

FDIC orders Cerberus must provide $3 billion of credit to GMAC

Bloomberg reports: GMAC, Cerberus Pact With FDIC Sets $3 Billion Line

GMAC LLC, the auto and housing lender owned by General Motors Corp. and Cerberus Capital Management LP, must provide $3 billion of credit to its banking unit, according to an agreement with federal banking regulators.

This is good news as the FDIC is sending a message that bank owners are not going to just be able to walk away from their commitments.

WaMu unsecured creditors were "pulling funds"

According to Bloomberg

Washington Mutual Inc. tumbled more than 20 percent for a second day as Gimme Credit LLC said unsecured creditors were "pulling funds" from the biggest U.S. savings and loan.

From this quote, it seem if depositers are moving money around to get under FDIC limits.

"We won't use the phrase 'run on the bank,' but we would be remiss if we did not observe that many creditors have quietly been pulling funds," wrote Shanley, based in Chicago. Their actions are "presenting an increasing funding challenge," she wrote. Gimme Credit is an independent research firm serving corporate bond investors.

Suggestion: Use the FDIC Electronic Deposit Insurance Estimator to determine your exposure. If you are over the FDIC limits you might want to consider opening a new account, moving your money around between institutions or adding beneficiaries.

Opinion: Why a bank run at IndyMac AFTER the FDIC took control

Bank runs happen before a bank is closed so why did IndyMac have a bank run after the FDIC took control

• There must have been a major breakdown in relaying the appropriate information to the account holders on why the FDIC took the bank over and that all insured deposits are safe
• Reports of ATMs not working even though the FDIC said they were fully funtional
• Reports that Online access was not working contrary to the FDIC information

Bottom line is it was ludicris for anyone to rush down to IndyMac after the FDIC took control to take their money out. Now that the FDIC is the owner of IndyMac, the deposits are in the safest bank in the United States.

Should the FDIC watch blogs or banks?

Maybe the FDIC should do it's job of watching the banks, then they would not have to watch the blogs. Actually most blogs were saying "Don't pull your money out of IndyMac" after the bank closure, something the FDIC should have relayed to the depositers.

FDIC learns it ignores bloggers at its peril

The federal agency insuring bank deposits learned that it can't afford to ignore the blogs following its seizure this month of IndyMac Bank, the largest bank failure since the 1980s.

"The blogs were a bit out of control," Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the San Francisco Business Times after a speech in San Francisco this week.

That's putting it mildly. Following the FDIC's takeover of IndyMac on July 11, widely followed blogs were speculating on bank runs on some of California's largest banks based on nothing more than people waiting for their branch to open or large deposits moving between financial institutions.

The FDIC plans to pay closer attention to the blogosphere in the future.

"We're very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it," Bair said. "The misinformation that came out over the weekend fed a lot of depositors' fears."

The Texas Ratio

Wikipedia - Texas Ratio

The Texas ratio is a measure of a bank's credit troubles. Developed by Gerard Cassidy and others at RBC Capital Markets, it is calculated by dividing the value of the lender's non-performing loans by the sum of its tangible equity capital and loan loss reserves.

In analyzing Texas banks during the early 1980s recession, Cassidy noted that banks tended to fail when this ratio reached 1:1, or 100%. He noted a similar pattern among New England banks during the recession of the early 1990s.

CBS Explains the Texas Ratio