Two Banks Fail, But Depositors Are Fully Covered
On July 25, 2008, the regulator for nationally-chartered banks (the Office of the Comptroller of the Currency) seized two insolvent banks, First National Bank of Nevada, headquartered in Reno, Nevada, and First Heritage Bank, N.A., headquartered in Newport Beach, California. After the banks were closed, the FDIC was named Receiver.

Here's what's particularly noteworthy: the FDIC did a deal with Mutual of Omaha Bank, Omaha, NB, to acquire many of the assets of the failed institutions and assume all deposits, both insured and uninsured. In doing the deal, the FDIC weighed the costs of administering the claims on the uninsured portion of deposits (as well as other factors) and determined that allowing Mutual of Omaha Bank to acquire all deposits (and not just the insured ones) 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 two banks.

FDIC reports this is the second time in the last two years in which another bank acquired a failing bank's insured and uninsured deposits. Ten banks have failed in the last two years.

Depositors of the two failed banks can breathe a sight of relief and proceed with business as usual. They automatically become depositors of Mutual of Omaha Bank.