At the height of the recession, two or three banks were failing every week. These days, it’s more like one or two a month.
Still, a casualty can occur at any time, and today one of the banks savers have counted on for top CD rates has failed.
Doral Bank — which was operating in Puerto Rico, Florida and New York City — was seized this afternoon by the Federal Deposit Insurance Corp., with regulators swooping in to Doral locations and securing assets.
If you hold funds at Doral, you can breathe easy that your deposits are safe, as they are insured by the FDIC.
Per the FDIC’s official press release on the Doral Bank seizure:
Doral Bank’s 26 former branches will reopen under normal business hours beginning Saturday, February 28. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits.
But what we can’t promise CD owners is that they’ll be able to keep the rate they had previously secured with Doral.
The FDIC has transferred Doral’s assets and operations to Banco Popular de Puerto Rico. Banco Popular will operate eight of the 18 branches Doral operated in Puerto Rico, while its stateside counterpart, Popular Community Bank, will operate all three Doral Bank locations in New York City.
In turn, the San Juan-based bank entered agreements with two additional banks to acquire Doral’s remaining branch locations.
FirstBank Puerto Rico will operate and assume the deposits of Doral Bank’s 10 other branches in Puerto Rico, while Centennial Bank, based in Conway, Arkansas, and with branches throughout Florida, Arkansas and south Alabama, will operate and assume the deposits of Doral Bank’s five branches in the Panhandle area of Florida.
As Doral’s new owners, none of these banks is under any obligation to offer the same products and rates as Doral provided.
However, should any of these banks change the rates for existing certificates of deposit, those CD account holders will be afforded the option to walk away penalty-free with their full principal plus any accrued interest.
As of today, it was offering the second-best nationally available return on 6-month CDs of 0.82% APY. Only California First National Bank offers a better deal on our CD Rates Leaderboard.
At this breaking-news stage, no one knows whether the acquiring banks intend to honor Doral’s rates going forward.
And even if they do, they may or may not offer CDs and other banking products nationally and online, as Doral did.
Doral Bank’s financial problems have been building for almost 10 years, with the bank losing nearly $950 million over the last seven years, according to FDIC call reports.
As a result, the FDIC deemed the bank “significantly undercapitalized,” requiring it to boost capital levels.
When multiple capital restoration plans proposed by Doral were rejected by the FDIC as insufficient, the regulators tightened the noose.
Doral is the fourth bank to fail this year, with 18 seized in 2014. The annual number of bank failures has been dropping dramatically from its recent high of 157 closures in 2010, the largest number the FDIC had seized since the savings and loan crisis of the 1980s and early 1990s.