FDIC Bank seizures 56 and 57

By Edward Harrison On Jul 17, 2009

These two seizures are going to be costly. The first one here, Vineyard Bank in California is going to cost the taxpayer an estimated $579 million. The second, Temecula Valley Bank in North Carolina, is estimated to cost $391 million.

Here’s the first press release.

Vineyard Bank, National Association, Rancho Cucamonga, California, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with California Bank & Trust, San Diego, California, to assume all of the deposits of Vineyard Bank, N.A., excluding those from brokers.

Vineyard Bank, N.A.’s sixteen offices will reopen as branches of California Bank & Trust during normal business hours. Depositors of Vineyard Bank, N.A. will automatically become depositors of California Bank & Trust. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branches until California Bank & Trust can fully integrate the deposit records of Vineyard Bank, N.A.

Over the weekend, depositors of Vineyard Bank, N.A. can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of March 31, 2009, Vineyard Bank, N.A. had total assets of $1.9 billion and total deposits of approximately $1.6 billion. In addition to assuming all of the deposits of the failed bank, California Bank & Trust agreed to purchase approximately $1.8 billion of assets. The FDIC will retain the remaining assets for later disposition.

California Bank & Trust will purchase all deposits, except about $134 million in brokered deposits, held by Vineyard Bank, N.A. The FDIC will pay the brokers directly for the amount of their funds. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.

The FDIC and California Bank & Trust entered into a loss-share transaction on approximately $1.5 billion of Vineyard Banks, N.A.’s assets. California Bank & Trust will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today’s transaction can call the FDIC toll-free at 1-800-523-8159. The phone number will be operational this evening until 9:00 p.m., Pacific Daylight Time (PDT); on Friday and Saturday from 9:00 a.m. to 6:00 p.m., PDT; on Sunday from noon to 6:00 p.m., PDT; and thereafter from 8:00 a.m. to 8:00 p.m., PDT. Interested parties can also visit the FDIC’s Web site at https://www.fdic.gov/bank/individual/failed/vineyard.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $579 million. California Bank & Trust’s acquisition of all the deposits was the "least costly" resolution for the FDIC’s DIF compared to alternatives. Vineyard Bank, N.A. is the 56th FDIC-insured institution to fail in the nation this year, and the seventh in California. The last FDIC-insured institution to be closed in the state was Mirae Bank, Los Angeles, on June 26, 2009.

Here’s the second.

Temecula Valley Bank, Temecula, California, was closed today by the California Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First-Citizens Bank and Trust Company, Raleigh, North Carolina, to assume all of the deposits of Temecula Valley Bank, excluding those from brokers.

Temecula Valley Bank’s eleven offices will reopen on Monday as branches of First-Citizens Bank and Trust Company. Depositors of Temecula Valley Bank will automatically become depositors of First-Citizens Bank and Trust Company. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branches until First-Citizens Bank and Trust Company can fully integrate the deposit records of Temecula Valley Bank.

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

As of May 31, 2009, Temecula Valley Bank had total assets of $1.5 billion and total deposits of approximately $1.3 billion. In addition to assuming all of the deposits of the failed bank, First-Citizens Bank and Trust Company agreed to purchase essentially all of the assets.

First-Citizens Bank and Trust Company will purchase all deposits, except about $304 million in brokered deposits, held by Temecula Valley Bank. The FDIC will pay the brokers directly for the amount of their funds. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.

The FDIC and First-Citizens Bank and Trust Company entered into a loss-share transaction on approximately $1.3 billion of Temecula Valley Bank’s assets. First-Citizens Bank and Trust Company will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today’s transaction can call the FDIC toll-free at 1-800-930-5170. The phone number will be operational this evening until 9:00 p.m., Pacific Daylight Time (PDT); on Friday and Saturday from 9:00 a.m. to 6:00 p.m., PDT; on Sunday from noon to 6:00 p.m., PDT; and thereafter from 8:00 a.m. to 8:00 p.m., PDT. Interested parties can also visit the FDIC’s Web site at https://www.fdic.gov/bank/individual/failed/temecula.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $391 million. First-Citizens Bank and Trust Company’s acquisition of all the deposits was the "least costly" resolution for the FDIC’s DIF compared to alternatives. Temecula Valley Bank is the 57thth FDIC-insured institution to fail in the nation this year, and the eighth in California. The last FDIC-insured institution to be closed in the state was Vineyard Bank, National Association, Rancho Cucamonga, also today.

I just want to remind you that the FDIC only had $56 billion just last July (See “Does the FDIC have enough money?”). Obviously, the American taxpayer is on the hook for the poor lending of a lot of banks here.