As we had feared, ShoreBank was among the eight banks regulators seized over the weekend, pushing the total number of failed banks to 118 for the year.
ShoreBank was the first bank we can recall that actually failed while it was in any of our rankings of the top CD rates and savings accounts.
In this case, the Chicago-based bank was third on our list of the best nationally available 6-month CD rates, offering 1.19% APY on a 6-month CD.
We urged savers to hold off buying certificates of deposit from ShoreBank until it was closed and its deposits sold to a new owner.
That has now been done.
All accounts have been transferred to Urban Partnership Bank, a newly formed company led by ShoreBank’s management and backed by money many of the nation’s biggest banks, including Citigroup, Bank of America, JPMorgan Chase and Goldman Sachs.
Why those banks rushed to ShoreBank’s aid is a matter of some political controversy.
Either they believed in ShoreBank’s mission of lending to families and businesses in low-income, inner-city communities or they succumbed to pressure from the White House because ShoreBank is part of the south Chicago minority community that launched President Obama’s political career.
Whatever the case, the new bank will maintain its branches in Chicago, Cleveland and Detroit, and continue to focus on lending in low-income communities.
We checked with ShoreBank this morning, and it says it’s continuing to accept online applications and pay 1.19% APY on 6 month CDs.
If that’s what the bank offers, that’s what you’ll get.
It’s too early to tell if the new owners will exercise their right to reduce the return on CDs sold by the old bank. If they do, investors have the right to reclaim their savings without be charged early withdrawal penalties.
The seven other failed banks were from three states – California, Virginia and Florida –and the Federal Deposit Insurance Corp. immediately sold their deposits and branches to other banks.
Those branches have reopened under the management of their new owners
The failed banks are:
Sonoma Valley Bank, of Sonoma, Calif., which was sold to Westamerica Bank of San Rafael, Calif.
Los Padres Bank, of Solvang, Calif., which was sold to Pacific Western Bank of San Diego, Calif.
Butte Community Bank, of Chico, Calif., which was sold to Rabobank of El Centro, Calif.
Pacific State Bank, of Stockton, Calif., which was also sold to Rabobank of El Centro, Calif.
Imperial Savings and Loan Association, of Martinsville, Va., which was sold to River Community Bank, of Martinsville.
Independent National Bank, of Ocala, Fla., which was sold to CenterState Bank of Florida, based in Winter Haven, Fla.
Click on the name of each failed bank to see the FDIC closure report.