The Phaserl


First Bank Failure of the Year – North Milwaukee State Bank

by Ken Tumin, Deposit Accounts:

The first bank failure of 2016 occurred last Friday. North Milwaukee State Bank in Wisconsin was closed by state regulators, and the FDIC arranged for First-Citizens Bank & Trust Company of North Carolina to assume all of the deposits. North Milwaukee State Bank was small with only two branches and with only $61.5 million in deposits.

Bank failures have become rare. The last bank to fail was on October 2, 2015 which was over five months ago. Last year only eight banks failed. If the trend continues, we will probably only see around two bank closures per quarter. A few years ago, it was rare to go through a month without a bank closure. In fact, there were months in 2010 with over ten failures.

The closure of North Milwaukee State Bank was typical in that the FDIC arranged for another bank to assume all of the deposits. According to the FDIC:

No one lost any money on deposit as a result of the closure of this bank. All deposits, regardless of dollar amount, were transferred to First-Citizens Bank & Trust Company.

The only exception are brokered deposits which were not assumed by First-Citizens Bank & Trust Company. Those with brokered deposits of this bank who had over the FDIC limits may not get back their uninsured deposits. Below are the instructions the FDIC provided for these depositors:

The total of all deposit accounts, excluding the Cede & Co. deposits, have been assumed by First-Citizens Bank & Trust Company. If you are a customer who has a North Milwaukee State Bank deposit through a broker, you must contact your broker with any questions.

CD customers of this failed bank will have to wait to see what happens with their rates. According to the FDIC’s Q&A:<

Interest on deposits accrued through close of business on Friday, March 11, 2016, will be paid at your same rate. North Milwaukee State Bank’s rates will be reviewed by First-Citizens Bank & Trust Company and may be lowered; however, you will be notified in writing of any changes. You may withdraw funds from any transferred account, regardless of whether your interest rate changes, without early withdrawal penalty until you enter into a new deposit agreement with First-Citizens Bank & Trust Company.

Credit Union Failures

In the last five months, there have been seven credit union failures (three in 2016 and four in 2015). These were very small credit unions with only three having assets of over $1 million. The names and sizes of these credit unions are listed below. One thing to note about these closures is that only two of the seven that were closed had another credit union to assume members’ deposits. For the other five credit unions, the NCUA closed the credit union and sent checks of insured deposits to the members. Members who had deposits over the NCUA limits may have lost their uninsured deposits.

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