BankNotes ...

The FDIC has just released the results of a national survey pertaining to banks’ efforts to reach unbanked and underbanked individuals and households. This demographic is widely recognized as untapped potential for the banking industry—but industry efforts to move unbanked customers into traditional checking, savings and credit products have not been consistently successful.

The survey, conducted by Dove Consulting, was designed to quantify the efforts of banks to meet the needs of the unbanked/underbanked demographic, to identify the challenges associated with serving this market, and to identify innovative products and services which appeal to this target customer.

Outreach plays pivotal role

More than 25 percent of respondent banks recommended the use of outreach programs to bring unbanked households into the conventional banking system. The bank employees tasked with designing appropriate outreach programs can turn to local employers, labor unions and community organizations to gain deeper insights into the needs and motivations of the targeted group. Alliances with these local organizations can also be leveraged by the bank to build awareness and trust quickly within the community.

Improved access

The traditional bank branch, with its limited hours and relatively formal setting, may be off-putting to this customer demographic. To address these concerns, banks might consider broadening customer access via kiosks, extended hours, web access and phone service. Some banks also reported success with hiring staff members who are fluent in foreign languages.

Specialty products and services

Banks nationwide recognize the importance of the check-cashing service to unbanked customers. Many institutions, unfortunately, are reluctant to take on the risk associated with offering this service. A secondary barrier is the inability for many unbanked individuals to produce acceptable forms of identification.

Money orders, international remittances and bill payment services were also identified as service offerings that would appeal to unbanked individuals. Of the banks that responded to the survey:

•  49 percent offer check-cashing to non-customers.
•  37 percent offer bank checks and money orders to non-customers.
•  6 percent offer international remittances to non-customers (32 percent of respondents cited regulatory concerns as a barrier to offering this service.


Downsized credit products

Entry-level credit products are useful in helping the unbanked individual enter or re-enter the economic mainstream. Prepaid cards and debit-card accounts are two services that often resonate well with this customer segment. Secured credit cards, tax refund anticipation loans and other advances on funds that are due to arrive were also recommend, although these services are not widely offered by mainstream banks.

Banks’ interest in providing these alternate services varies widely. There is a perception that the costs and risks associated with catering to the unbanked group will fall outside the bank’s strategic parameters. The FDIC’s survey did reveal, however, that 77 percent of banks had not conducted any research on the potential unbanked customers in their areas—which could mean that the reluctance to provide tailored products and services to this group is largely based on unproven assumptions.

The FDIC’s survey did not delve specifically into the long term value of the unbanked customer—but it is generally believed that these individuals, once obtained, can be transitioned into conventional banking services over time.

Survey methodology

The surveys were sent out by mail to a nationally representative sample of 1283 banks with brick-and-mortar branches. Six hundred eighty-five surveys were returned; at the time the survey was conducted, the respondent banks represented $8.3 trillion in assets or 70 percent of the total assets within FDIC-insured institutions.

The FDIC Advisory Committee on Economic Inclusion (ComE-IN) will hold a public meeting this week to discuss ways that the banking community can reach out to currently underserved households. The meeting will be held on February 5, 2009, between 8:30 a.m. and 4:00 p.m. in the FDIC Board Room; it will also be viewable via webcast at http://www.vodium.com/goto/fdic/advisorycommittee.asp.

 

The topic of underserved or “unbanked” customers has been a prominent discussion point in the banking industry for several years. These are individuals or households that rely on non-banking institutions, such as check-cashing stores or even retailers, to conduct regular monetary transactions. Generally, these unbanked customers absorb considerably higher transaction costs than if they maintained a traditional depositor relationship with a bank.

 

Sizeable market opportunity

The Center for Financial Services Innovation estimates that there are nearly 10 million unbanked households, spending roughly $13 billion per year on non-bank financial transactions. Clearly, this represents a sizeable market opportunity for traditional banks. Unfortunately, understanding how to reach these customers with a compelling service offering continues to be something of an unsolved mystery.

 

Research indicates that many of the unbanked group have previously had traditional banking relationships. At some point, these individuals became disgruntled with the banking system and chose to leave it voluntarily. Key Bank learned this in 2004 through a series of focus groups—respondents indicated they’d had bad experiences with banks, often involving high fees for minor transactions.

 

A research report based on the PaymentDynamics 2007 Preferred Payments Study makes a similar conclusion, but adds that the unbanked group is not one homogenous demographic, but “a collection of smaller segments, each with its own unique demographics and financial characteristics.” That conclusion supports the notion that effectively pursuing unbanked households as a customer segment demands a multifaceted approach. The PaymentDynamics report is available here: http://www.edgardunn.com/uploads/100030_english/100243.pdf.

 

Reaching out, improving access

Both the banks and unbanked consumers stand to benefit from the development of products and services that will appeal to this customer group. The customers will save money on their financial transactions and begin moving down a more traditional path of wealth-building. Banks will enjoy a larger customer base, and many of those new customers can be directed into conventional banking services over time. The challenge lies in creating products and services that meet the bank’s profit hurdles while addressing the needs and lifestyles of this customer group.

 

To learn more about this underserved market and the role it will play in the banking industry going forward, log-on to the FDIC Advisory Committee meeting webcast on Thursday. Scheduled discussions will include an overview of the FDIC’s Unbanked Survey and a review of the banking industry’s successful efforts to date in reaching the unbanked customer.

2008 was a year most bankers would rather forget. Around the country, twenty-six banks failed, mostly on the tide of rising loan defaults. Seemingly, the FDIC scrambled all year to sell off bank assets and continue to fulfill its promise of deposit insurance. It wouldn’t be unreasonable to think that all of this activity has left a bad taste in regulators’ mouths.

A recent article in American Banker suggests that this ‘bad taste’ has resulted in an unofficial suspension of insurance application approvals for banks in certain states or banks that intend to focus on certain types of lending. The article references the FDIC’s unexpected denial of Perimeter First’s insurance application—the Georgia bank’s business plan emphasizes commercial and industrial lending. The FDIC has denied that any type of moratorium is in place.

Georgia banks face uncertain future

Given the record-poor performance of Georgia banks in 2008, it isn’t too far of a stretch to assume that regulators denied Perimeter First’s application on the basis of industry conditions. Of the twenty-six bank failures last year, nearly 20 percent of them were located in Georgia. According to Atlanta Business Journal, Georgia banks were holding out for a real estate recovery in the first half of 2008. That, of course, didn’t happen, and the consequences were disastrous. All five of Georgia’s bank failures occurred in the second half of the year.

Atlanta Business Journal also estimates that as many as 50 Georgia banks could collapse in 2009, citing rising unemployment and a foreclosure crisis that just won’t quit.

Other states likely to be under scrutiny

The combination of bank failures, rising unemployment and massive foreclosures isn’t exclusive to Georgia. If FDIC is unofficially proceeding with caution with respect to Georgia insurance applications, it’s likely to be doing the same for de novo banks in California, Florida and Nevada—all three states have higher than average unemployment and top-ten foreclosure rates. Here are the stats:

•  California experienced six bank failures in 2008. And, the state’s foreclosure rate, according to RealtyTrac, ranked fourth in the country at 3.97 percent. The golden state’s unemployment rate in November was 8.4 percent, versus a national average of 6.8 percent.

•  Florida had two bank failures last year, to go along with 7.3 percent unemployment in November and a 2008 foreclosure rate of 4.52 percent.

•  Nevada had three bank failures (including WAMU), 8 percent unemployment in November, and a nation-leading 2008 foreclosure rate of 7.29 percent.

Whether FDIC has suspended approval for certain states, or has simply adjusted its standards to fit a new and more difficult environment, the end result is the same: de novo banks will have to be more careful about how they proceed with their organization process. Now, more than ever, it’s crucial to have the right programs, plans, timelines and management teams in place to be successful.

The OCC, Federal Reserve Board, FDIC and OTS have collectively approved a final rule that permits banking organizations to reduce the goodwill deduction to tier 1 capital by the amount of any associated deferred tax liability. Banks, savings associations and bank holding companies are allowed to adopt this rule for the reporting period ending December 31, 2008.

 Prior to the adoption of this rule, the tier 1 capital calculation required banking organizations to deduct the full carrying amount of goodwill and other intangible assets resulting from a taxable business combination. This full deduction, however, was inconsistent with other aspects of the tier 1 capital computation. Other intangible assets acquired in nontaxable transactions, for example, could be deducted from tier 1 capital net of any associated deferred tax liability.

In a taxable business combination, the deferred tax liability arises from differences between tax treatment and book treatment of the asset. And, that deferred tax liability is not routinely settled for financial reporting purposes; it remains until the goodwill is written down, written off or otherwise derecognized. If the entire amount of the goodwill is impaired, the banking organization would also derecognize the associated deferred tax liability for financial reporting purposes. Therefore, the banking organization’s maximum exposure to loss with respect to the goodwill asset would be the full carrying value of that goodwill less the deferred tax liability. The spirit of this rule change is to improve the tier 1 capital computation by reflecting the banking organization’s actual exposure to loss with respect to goodwill arising from taxable business combinations. Also, the banking organization that deducts goodwill net of the associated deferred tax liability from tier 1 capital may not net that deferred tax liability against deferred tax assets for the computation of regulatory capital limitations on deferred tax assets.

 Comments largely positive

 On September 30, 2008, the regulatory agencies published a notice of proposed rulemaking requesting comments on this change. Of the thirteen comments received, only two opposed the change. Five comments suggested that the rule be adopted and available to banking organizations for the reporting period ending on December 31, 2008. The agencies have agreed with this request.

 Some of the comments also requested that the change be applied to other intangible assets as well, but did not provide sufficient data or analysis to support that request.

 

Other miscellaneous changes

 The OCC is also adopting other miscellaneous changes as noted in the proposed rule, including:

 

·         Clarification of the current treatment of intangible assets acquired due to a nontaxable purchase business combination

·         Replacement of the term “purchased mortgage servicing rights” with “servicing assets”

·         Clarification of OCC’s interpretation of existing regulatory text

·         Amendment of the goodwill definition to conform to GAAP

 

To review the full text of the final rule, please click here (http://www.fdic.gov/news/board/08DEC15rule4.pdf).

Sanderson State Bank, Sanderson, Texas, was closed today by the Texas Department of Banking, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with The Pecos County State Bank, Fort Stockton, Texas, to assume all of Sanderson State Bank's deposits, including those that exceeded the deposit insurance limit.

Sanderson State Bank's sole office will reopen on Monday as a branch of The Pecos County State Bank. All depositors of the failed bank will automatically become depositors of The Pecos County State Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their existing banking relationship to retain their deposit insurance coverage. Customers of the failed bank should continue to use the same banking location until they receive further information from The Pecos County State Bank.

Over the weekend, depositors of Sanderson State Bank will have access to all of their money by writing checks or using ATMs 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 December 3, 2008, Sanderson State Bank had total assets of $37 million and total deposits of $27.9 million. The Pecos County State Bank agreed to assume all of the deposits for a .55 percent premium. In addition to assuming all of the failed bank's deposits, The Pecos County State Bank will purchase approximately $3.8 million of assets, and have the option to purchase owned premises and equipment. The FDIC will retain the remaining assets for later disposition.

Customers who have questions about today's transaction can call the FDIC toll-free at
1-866-782-1766. This phone number will be operational this evening until 9:00 p.m., CST; on Saturday from 9:00 a.m. to 6:00 p.m., CST; on Sunday from noon until 6:00 p.m., CST; and thereafter from 8 a.m. to 8 p.m., Central. Interested parties can also visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/sanderson.html.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $12.5 million. The Pecos County State Bank's acquisition of all the deposits was the least costly resolution for the FDIC's Deposit Insurance Fund compared to alternatives. Sanderson State Bank is the 25th bank to fail in the nation this year, and the second in Texas. The last bank to be closed in the state was Franklin Bank, SSB, Houston, TX, on November 7, 2008.

Haven Trust Bank, Duluth, Georgia, was closed today by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Branch Banking & Trust (BB&T), Winston-Salem, NC, to assume all of Haven Trust's deposits, including those that exceeded the insurance limit.

The four branches of Haven Trust will reopen on Monday as branches of BB&T. All the depositors of Haven Trust will automatically become depositors of BB&T. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their existing banking relationship to retain their deposit insurance coverage. Customers of the failed bank should continue to use their existing branches until they receive further information from BB&T.

Over the weekend, depositors of Haven Trust can access all their money by writing checks or using ATMs 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 December 8, 2008, Haven Trust had total assets of $572 million and total deposits of $515 million. BB&T agreed to assume all of the deposits for $112,000. In addition to assuming all of the failed bank's deposits, BB&T will purchase approximately $55 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.

Customers who have questions about today's transaction can call the FDIC toll-free at 1-866-782-1402. This phone number will be operational this evening until 9 p.m., EST; on Saturday from 9 a.m. to 6 p.m., EST; on Sunday from noon to 6 p.m., EST; and thereafter from 8 a.m. to 8 p.m., EST. Interested parties can also visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/haventrust.html.

It is important to note that neither the FDIC as receiver nor BB&T as the acquiring institution will e-mail customers of Haven Trust asking them to validate their deposits or to request personal, confidential information, such as account numbers, social security numbers or driver's license numbers. Customers will not be asked to revalidate passwords, deposit accounts or deposit insurance. If customers receive e-mails asking for such personal information, they should consider the e-mails fraudulent and should not respond.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $200 million. The BB&T's acquisition of all deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. Haven Trust is the 24th bank to fail in the nation this year, and the fifth in Georgia. The last bank to be closed in the state was First Georgia Community Bank, Jackson, GA, on December 5, 2008.

First Georgia Community Bank, Jackson, Georgia, was closed today by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with United Bank, Zebulon, Georgia, to assume all of the deposits of First Georgia Community Bank.

The four branches of First Georgia Community Bank located in Jackson, Covington, Griffin and Locust Grove will reopen on Saturday as branches of United Bank. Depositors of the failed bank will automatically become depositors of United Bank. 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 of the failed bank should continue to use their existing branches until further information is received from United Bank.

Over the weekend, depositors of First Georgia Community Bank 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 November 7, 2008, First Georgia Community Bank had total assets of $237.5 million and total deposits of $197.4 million. United Bank agreed to assume all the deposits for a .811 percent premium. In addition to assuming all of the failed bank's deposits, United Bank will purchase approximately $60.6 million of assets. The FDIC will retain the remaining assets for later disposition.

Customers who have questions about today's transaction can call the FDIC toll-free at 1-800-930-5172. This phone number will be operational this evening until 9 p.m., Eastern; on Saturday from 9 a.m. to 6 p.m., Eastern; and on Sunday 12 p.m. to 6 p.m., Eastern; and thereafter from 8 a.m. to 8 p.m. Interested parties can also visit the FDIC's Web site at http://wwwdev/bank/individual/failed/firstga.html.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $72.2 million. United Bank's acquisition of all deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. First Georgia Community Bank is the 23rd bank to fail in the nation this year, and the fourth in Georgia. First Georgia Community Bank, the failed bank, is not affiliated with First Georgia Banking Company. The last bank to be closed in the state was The Community Bank, Loganville, GA, on November 21, 2008.

FDIC Reports Continued Deterioration in Earnings Performance, Asset Quality

 

The FDIC’s third quarter, 2008 Quarterly Banking Profile was released on November 25, 2008. The industry snapshot shows a continuation of negative trends, including depressed earnings and deteriorating asset quality. The report also provides detail on the proposed changes to the FDIC’s assessment system.

 

Earnings continue to slide

 

Greater than 58 percent of member institutions reported year-over-year declines in quarterly net income, while 64 percent generated a reduced quarterly return on assets (ROA). Profitability issues appear to be magnified at the larger banks; institutions with assets greater than $1 billion experienced a 47-basis point, year-over-year ROA decline. Community banks fared somewhat better with a 25-basis point decline. Nearly one-quarter of member banks failed to earn a profit in the quarter; this is the highest level for this metric since the fourth quarter of 1990.

 

Income a mixed bag  

 

Member banks reported declines in several categories of noninterest income, including securitization income and gains on sales of assets other than loans. Losses on sales of bank-owned real estate increased almost six-fold to $518 million. Loan sales, however, showed a marked improvement with net gains of $166 million. This compares to net losses of $1.2 billion in the third quarter of last year.

 

Net interest income also improved by 4.9 percent versus a year ago. The average net interest margin (NIM) remained flat with last quarter, but rose 2 basis points relative to the year-ago quarter. This trend was more pronounced among larger institutions.

 

Credit losses still piling up

 

As expected, expenses related to credit losses drove much of the earnings decline. Industry-wide, credit loss-related expenses topped $50 billion, eating up about one-third of the industry’s net operating revenue. Aggregate loan-loss provisions tripled from the year-ago level, reaching $50.5 billion in the quarter. Net charge-offs increased by 156.4 percent to $27.9 billion, with two-thirds of the increase related to loans secured by real estate. Charge-offs related to closed-end first and second lien mortgages, real estate construction and development loans, and loans to commercial and industrial borrowers all showed increases well in excess of 100 percent. The quarterly net charge-off rate jumped 10 basis points sequentially to 1.42 percent; this is the highest quarterly net charge-off rate since 1991.

 

Past-due loans still rising

 

Noncurrent loans and leases, defined as being 90 days or more past due or in nonaccrual status, increased by $21.4 billion sequentially to $184.3 billion. Nearly half of this growth came from closed-end first and second lien mortgages. The percentage of loans and leases that are noncurrent rose to 2.31 percent, which is the highest percentage recorded since 1993.

 

Loan-loss reserves ticked up by 8.1 percent, bringing the ratio of reserves to total loans and leases to 1.95 percent. Reserves to noncurrent loans fell to $0.85, which is the lowest level recorded since the first quarter of 1993.

 

Watch list grows 46 percent, number of new charters shrinks

 

Nine banks collapsed during the third quarter, and another seventy-three were merged into other institutions. While the number of failures marks a high point since the third quarter of 1993, the growth of the FDIC’s list of problem banks indicates that there are still rough times ahead; an additional fifty-four banks were added to the watch list, bringing the total number of problem banks to 171.

 

Twenty-one new institutions were chartered during the quarter. This marks a decline from the twenty-four new charters that were added last quarter.

 

Noninterest-bearing deposits rise, DIF reserve ratio declines

 

The total assets of all FDIC-insured member institutions rose 2.1 percent to $273.2 billion during the quarter. Most of the increase, some 57 percent, came from noninterest-bearing deposits. Interest-bearing deposits on the other hand showed a slight decrease of 0.3 percent.

 

Insured deposits continued an upward trend, rising 1.8 percent on top of a second quarter increase of 0.6 percent. Fifty-eight percent of member institutions reported an increase in insured deposits, 42 percent reported a decrease and the remainder reported no change.

 

The Deposit Insurance Fund decreased by $10.6 billion, primarily due to an $11.9 billion increase in loss provisions for bank failures. As of September 30, 2008, the reserve ratio was 0.76 percent, down 25 basis points from three months prior. Nine insured institutions failed during the quarter, bringing year-to-date failures to thirteen; those thirteen failed institutions had combined assets of $348 billion and are estimated to have cost the DIF $11 billion.

 

Restoration plan involves increases, changes to risk-based assessments

 

The FDIC adopted a restoration plan on October 7 to increase the DIF’s reserve loss ratio to 1.15 percent within five years, as required by Federal Deposit Insurance Reform Act of 2005. In accordance with the plan, the FDIC Board approved the publication of a notice of proposed rule making to increase the assessment and shift a larger proportion of that increase to riskier institutions. For the first quarter of 2009, the FDIC seeks to increase assessment rates by 7 basis points across the board.

 

The proposed assessment system, to be effective April 1, 2009, establishes base assessment rates ranging from 10 to 45 basis points for Risk Categories I through IV. Those base rates would then be adjusted for unsecured debt, secured liabilities and brokered deposits. The adjusted assessment rates would range from 8 to 77.5 basis points. 

 

 

U.S. Bank, National Association, Minneapolis, MN, acquired the banking operations, including all the deposits, of Downey Savings and Loan Association, F.A., Newport Beach, CA, and PFF Bank & Trust, Pomona, CA, in a transaction facilitated by the Federal Deposit Insurance Corporation.

The combined 213 branches of the two organizations will reopen as branches of U.S. Bank under their normal business hours, including those with Saturday hours. Depositors will automatically become depositors of U.S. Bank. 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 of both banks should continue to use their existing branches until U.S. Bank can fully integrate the deposit records of the organizations. Over the weekend, depositors can access their money by writing checks or using ATM or debit cards.

As of September 30, 2008, Downey Savings had total assets of $12.8 billion and total deposits of $9.7 billion. PFF Bank had total assets of $3.7 billion and total deposits of $2.4 billion. Besides assuming all the deposits from the two California banks, U.S. Bank will purchase virtually all their assets. The FDIC will retain any remaining assets for later disposition.

The FDIC and U.S. Bank entered into a loss share transaction. U.S. Bank will assume the first $1.6 billion of losses on the asset pools covered under the loss share agreement, equal to the net asset position at close. The FDIC will then share in any further losses. Under the agreement, U.S. Bank will implement a loan modification program similar to the one the FDIC announced in August stemming from the failure of IndyMac Bank, F.S.B., Pasadena, CA.

The loss-sharing arrangement is expected 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 as they will maintain a banking relationship.

Customers who have questions about today's transactions can call the FDIC toll free. Customers of Downey Savings should call 1-800-930-5169, and for PFF Bank 1-800-930-6827. The phone numbers will be operational this evening until 9:00 p.m. pacific; on Saturday from 8:00 a.m. to 6:00 p.m. pacific; and on Sunday noon until 6:00 p.m. pacific and thereafter from 8:00a.m. to 8:00 p.m. pacific. Interested parties can also visit the FDIC's Web site. For Downey Savings they can visit http://www.fdic.gov/bank/individual/failed/downey.html and for PFF Bank http://www.fdic.gov/bank/individual/failed/pff.html.

U.S. Bank currently has 353 offices in California. Downey Savings and PFF Bank are not affiliated with each other. Downey Savings has 170 branches in California and five in Arizona, and PFF Bank has 38 branches in California.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for Downey Savings will be $1.4 billion and $700 million for PFF Bank. U.S. Bank's acquisition of all the deposits of the two institutions was the "least costly" option for the FDIC's DIF compared to alternatives.

These were the twenty first and twenty second banks to fail in the nation this year, and the fourth and fifth banks to close in California. The last bank to be closed in the state was Security Pacific Bank, Los Angeles, on November 7, 2008.

The Community Bank, Loganville, Georgia, was closed today by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Bank of Essex, to assume all of the deposits of The Community Bank.

The Community Bank's four branches will open on Monday, November 24, 2008 as Bank of Essex. Depositors of the failed bank will automatically become depositors of Bank of Essex. 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.

Over the weekend, customers of The Community Bank can access their deposits 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 October 17, 2008, The Community Bank had total assets of $681.0 million and total deposits of $611.4 million. Bank of Essex purchased approximately $84.4 million of The Community Bank's assets, and did pay the FDIC a premium of $3.2 million for the right to assume the failed bank's deposits. The FDIC will retain the remaining assets for later disposition.

Customers with questions about today's transaction may contact the FDIC toll-free at 1-800-930-1904. This phone number will be operational this evening until 9:00 p.m. eastern; on Saturday from 9:00 a.m. to 6:00 p.m. eastern; on Sunday noon until 6:00 p.m.; and from 8:00 a.m. to 8:00 p.m. Monday and thereafter. They may also visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/community.html.

The transaction is the least costly resolution option, and the FDIC estimates that the cost to its Deposit Insurance Fund will be between $200 million and $240 million. The Community Bank is the twentieth FDIC-insured institution to be closed nationwide, and the third in Georgia, this year.