FDIC RECEIVES $9.75 MILLION FROM FIRST COASTAL CORPORATION OF MAINE TO SETTLE CROSS-GUARANTY ASSESSMENT
FOR IMMEDIATE RELEASE PR-55-96 (7-24-96)
Media Contact: Sally Kearney (202-898-8675)
First Coastal Corporation, Westbrook, Maine, paid the
FDIC $9.75 million today to settle a cross-guaranty assessment
that had been levied against its subsidiary, Coastal Savings Bank,
Portland, Maine, in 1993.
A cross-guaranty assessment is a claim made against the
affiliate of a failed institution to offset losses incurred by the
insurance fund. The FDIC was granted authority to impose such
assessments with the enactment of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989.
In 1991, Suffield Bank, Suffield, Connecticut, was declared
insolvent at a cost of $90 million to the FDIC's Bank Insurance
Fund. To offset the loss, the FDIC exercised its right to levy a
cross-guaranty assessment against Suffield's affiliate, Coastal
Savings Bank. Both Suffield and Coastal Savings were owned by
First Coastal Corporation.
At the time, Coastal Savings had $178.7 million in assets
and $10.6 million in shareholders' equity. After extensive
negotiations with Coastal Savings, the FDIC agreed to release its
claim in exchange for a $9 million interest-bearing note from First
Coastal Corporation. The note, issued on January 31, 1995, has
accrued $753,000 in interest since that date.
"Today's payment represents an instance in which the
FDIC used its cross-guaranty authority to minimize the loss from a
failed institution without impairing the health of the affiliate
institution," said Gail Patelunas, Acting Director of Resolutions.
"Much of the credit for settling this claim goes to Coastal Savings
Bank and First Coastal for their concerted efforts to raise the
capital for this payment. Thanks to the strong efforts of all sides,
Coastal Savings Bank remains open for business and continues to
serve its community."
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Congress created the Federal Deposit Insurance Corporation in 1933 to
restore public confidence in the nation's banking system. The FDIC
insures deposits at the nation's 12,000 banks and savings associations
and it promotes the safety and soundness of these institutions by
identifying, monitoring and addressing risks to which they are exposed.
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