Freedom Bank of Georgia was closed yesterday by the Georgia Department of Banking and Finance. Northeast Georgia Bank assumed the deposits of the bank.
Freedom Bank of Georgia was closed yesterday by the Georgia Department of Banking and Finance. Northeast Georgia Bank assumed the deposits of the bank.
As of March 4, 2009, Freedom Bank of Georgia had total assets of approximately $173 million and total deposits of $161 million. In addition to assuming all of the deposits of the failed bank, Northeast Georgia Bank agreed to purchase approximately $167 million in assets at a discount of $13.65 million. The FDIC will retain the remaining assets for later disposition.
These remaining assets are most likely brokered deposits which the FDIC typically covers up to the FDIC maximum. Once again, it appears that the FDIC has backstopped an arrangement that will keep depositors, except for brokered deposits, whole. The downside is that these transactions are depleting the FDIC insurance fund, requiring the agency to raise more money from the very banking system that is under stress.
Out of curiosity, I wanted to see what rating Baeur Financial gave to Freedom Bank. For those that don't know, Bauer Financial is a company that analyzes banks' financial statements and provides a quarterly rating on their safety and soundness. I was pleased to see that they had rated Freedom Bank a ZERO in their last update, the worst possible score. The score is based on data from several months ago so there does seem to be some predictive ability there, at least with Freedom Bank.
AmericaNet Bank, a division of Oklahoma based All-America Bank, is offering 3.10% APY on its Mega Money Market Account. Key featured of the account include:
Includes 6 FREE withdrawals per month ($5 fee for each additional withdrawal)
FREE Account (No Monthly Maintenance Fee)
FREE Daily Email Notification if Overdrawn
NO MINIMUM BALANCE
The account application is all electronic. Identify is authenticated via several questions pulled from your credit report. Funding the account can be electronically via ACH.
AmericaNet also offers a 5.25% APY Rewards Checking account on the first $25,000 deposited. The subsequent funds receive a lower rate of 2.25% APY, which is still competitive. To get the rate the sole requirement is that you must make 10 AmericaNet Bank® VISA® CheckCard sales transactions per month.
Safety and Soundness
All-America Bank, the parent company of AmericaNet Bank has a Bauer rating of 4 out of 5 stars (Excellent) for its safety and soudness. The bank has been FDIC insured since December 22, 1969 (Certificate # 20093).
Millions of investors have parked their cash in brokerage sweep accounts. In most cases, this is a bad idea.
As stock markets have crashed, millions of investors are holding a significant percent of their portfolio in their brokerage sweep accounts. While this is good for financial companies, it's terrible for investors. Sweep accounts offer rates of return as low as .01%. For banks, the accounts are a bonanza. They reinvest the money parked in these accounts at significantly higher rates, earning billions per year.
So, how do you make sure that you get a decent rate of return instead of funding your bank?
Move the money out of your brokerage account temporarily until you are ready to reinvest. High yield savings and money market accounts on the BestCashCow rate table pay above 3% APY. If you want to park significantly more than the FDIC limit of $250,000 per person per bank, then you may want to consider a CDARS program.
The disadvantage of getting these higher rates is that you'll have to move the money out of your brokerage and it can take 3-4 business days or longer to move the cash back in. If you don't need immediate access to your money, it's not a problem. But if you want to be able to transfer and trade, the time limit might be a drawback.
A solution to the access problem is to look for a companion savings account with your broker. Online stock brokers like Etrade and Charles Schwab offer relatively high savings accounts that provide ffast and easy transfer between brokerage and bank. Etrade is currently paying 1.95% APY while Schwab is paying 2% APY. BankDeals has a good review of the Schwab High Yield Investor Savings. Be sure to ask your broker about higher yielding options
Sweep accounts were never meant to be a place to park money for long periods of time. Your broker has no incentive to suggest you move your money elsewhere but if you ask they should be able to provide a better option. If they don't, at least you now know there are higher yielding places to invest your cash.
