Following weeks and months of speculation about its fate, the Puerto Rico Office of the Commissioner of Financial Institutions and the Federal Deposit Insurance Corporation, announced Friday the closing of Doral Bank’s local and stateside operations.
To protect the depositors, the FDIC entered into a purchase and assumption agreement with Banco Popular de Puerto Rico to acquire $3.25 billion of Doral Bank’s assets. Banco Popular agreed to pay the FDIC a premium of 1.59 percent for the right to assume Doral Bank’s deposits, the agency said.
Banco Popular will operate eight of Doral Bank’s 26 former branches. It entered into separate agreements with three banks to acquire 18 of the remaining locations. Banco Popular’s affiliated bank, Banco Popular North America, will operate all three locations in New York City; and Centennial Bank, Conway, Ark., will operate and assume the deposits of Doral Bank’s five branches in the panhandle area of Florida.
Richard L. Carrión, CEO of Popular Inc. said: “this transaction brings additional stability to Puerto Rico’s banking sector. Our participation in this transaction reflects our long-standing commitment to our main market, Puerto Rico. The prospect of adding deposits and loans to our Puerto Rico franchise, as well as the excellent fit of the New York operations with our existing business in the region, made this an attractive opportunity for us.”
Late Friday, the Federal Reserve Board announced its approval of the applications by Banco Popular North America, to acquire the assets and assume certain liabilities from Doral, and establish and operate branches at the locations of the acquired branches of Doral Bank.
Meanwhile, FirstBank will operate and assume the deposits of Doral Bank’s 10 other branches in Puerto Rico. All depositors are fully protected, the FDIC noted.
This transaction includes approximately $600 million in deposits and a mortgage loan portfolio of $300 million, “solidifying FirstBank’s position as the second largest bank in Puerto Rico,” FirstBank CEO Aurelio Alemán said Friday.From left: FirstBank CEO Aurelio Alemán, Banco Popular President Richard Carrión and Financial Institutions Commissioner Rafael Blanco offer details of Friday’s events during an early evening news conference. (Credit: Sin Comillas)
“As part of our commitment to Puerto Rico, we forged an alliance with a local competitor, Banco Popular de Puerto Rico, to acquire 10 branches of Doral Bank and a portion of its assets. We are convinced that this investment contributes to further strengthen the local banking sector, and thus the economic condition of Puerto Rico,” he said.
Doral Bank’s 26 former branches will reopen under normal business hours Saturday. As far as employees go, Popular said it expect to retain substantially all non-executive employees that work in branches and operations for at least three months. FirstBank, meanwhile, said it will add the 100 former Doral employees associated with the transaction.
“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. Depositors of Doral Bank can continue to 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,” the FDIC said in a statement released Friday.
Financial Institutions Commissioner Rafael Blanco said Doral customers need not worry about their deposits, which are insured by the FDIC up to $250,000.
“Both the Office of the Commissioner of Financial Institutions and the FDIC have been watchful that this transition is handled with sensitivity and efficiency, culminating in a fully stabilized operation for the benefit of its customers and its employees,” Blanco said.
Doral Bank had been under regulatory watch for the better part of the last year, due to its worsening liquidity issues. The FDIC had issued several warning letters requiring the financial institution to shore up its finances, which were below capitalization levels.Detailed breakdown of which branches will now be run by Popular and which will be operated by FirstBank. (Source: FDIC)
“Doral’s closing occurs after multiple alerts for the bank to submit a viable plan of minimum capitalization, which it could not achieve, so keeping it within those conditions threatened everyone associated with the operation,” Blanco said.
As of December 31, 2014, Doral Bank had approximately $5.9 billion in total assets and $4.1 billion in total deposits.
The FDIC entered into two separate agreements to sell $1.3 billion of Doral Bank’s assets to other parties. Those sales are expected to close in 30 days. The FDIC will retain the remaining assets for later disposition.
The FDIC estimates that the cost to the Deposit Insurance Fund will be $748.9 million.
“Compared to other alternatives, Banco Popular’s acquisition was the least costly resolution for the FDIC’s Deposit Insurance Fund.
Doral Bank is the fourth FDIC-insured institution to fail this year, and the first in Puerto Rico.
The last time an FDIC-insured institution was closed in Puerto Rico was on April 30, 2010, when the regulator shuttered Eurobank, Westernbank and RG Financial.