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FDIC Seizes West Virginia Bank, More Likely to Follow

More than 100 banks on agency's troubled list

By Mark Huffman
ConsumerAffairs.com

September 21, 2008

The Office of the Thrift Supervision closed the bank and named the Federal Deposit Insurance Corporation as receiver. Customers with $100,000 or less in deposits will not lose any money because of the bank's failure.

The FDIC said last month that its "problem list" had grown to 117 institutions from 90 at the end of the first quarter. That is highest number since the middle of 2003.

For consumers, these are unsettling numbers as banks have become one of the last refuges for cash, with the collapse of real estate and with Wall Street in a full-scale meltdown. Just how much peace of mind can consumers take from the words "FDIC Insured?"

Sleep tight

The agency says consumers with money in FDIC insured institutions should be able "to get a good night's sleep." The agency recently issued an "FDIC-Insured Depositor's Bill of Rights" that spells out the agency's promise to bank customers, plus information about a new advertising and education campaign to raise awareness about deposit insurance coverage limits. Among the key points for consumers to remember:

• If someone's deposits are within the FDIC's insurance limits, as is the case for most bank customers, those deposits are safe regardless of the financial condition of the bank.

• The FDIC's guarantee --that it will protect against the loss of insured deposits if an FDIC-insured bank or savings associations fails -- is ironclad. As FDIC Chairman Sheila C. Bair said, since the creation of the FDIC 75 years ago, "no one has ever lost so much as a penny of FDIC-insured deposits -- not a single penny," as a result of a bank failure.

• The FDIC protects deposit accounts – including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs) – up to the federal limits. But FDIC insurance doesn't protect against losses on non-deposit products -- such as stocks, bonds and mutual funds -- even if they were sold by insured banks.

• The basic insurance coverage is $100,000 per depositor per insured institution, but individuals may qualify for more than $100,000 in coverage at one insured bank if they own deposit accounts in different "ownership categories," such as single accounts, joint accounts, certain retirement accounts, and trust accounts.

• Consumers who have questions about their insurance coverage can call the FDIC toll-free (1-877-ASK-FDIC, which is 1-877-275-3342), read or print information online at www.fdic.gov, or send questions to the FDIC in an e-mail or letter.

• If a bank fails, the FDIC provides quick access to insured funds, usually on the first business day after the institution is closed. It is also possible to recover money over the FDIC's insurance limits, depending on how much the FDIC recovers by selling the bank's assets. In some cases, the FDIC is able to make an initial payment on the uninsured portion of deposits within a few days or weeks. Additional payments are made over the course of a year or two after the bank failure.

Deposits, assets taken over

The FDIC entered into purchase and assumption agreements with Pioneer Community Bank, Inc., Iaeger, West Virginia, and The Citizens Savings Bank, Martins Ferry, Ohio to take over all of the deposits and certain assets of Ameribank, Inc., Northfork, West Virginia.

All depositors, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of the assuming institution where the customer opened the account for the full amount of their deposits. All deposits will continue to be insured with the new institutions.

Therefore, there is no need for customers to change their banking relationship to retain deposit insurance, FDIC said. Brokered deposits are included in this transaction.

Branches in West Virginia will reopen on Monday. Ohio branches reopened on Saturday. 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.

Pioneer Community Bank, Inc., and The Citizen's Saving Banks' acquisition of all deposits was the "least costly" resolution for the Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the banks' franchises, the agency said.

As of June 30, 2008, Ameribank, Inc. had total assets of $115 million and total deposits of $102 million.

See How Does The Banking Crisis Affect You? for more on bank safety.

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