Feds Shut Down Guaranty Bank, Closing Branches In Walmart, Kroger Stores

Image courtesy of Adam Fagen

Last week, the Office of the Comptroller of the Currency shut down Guaranty Bank, which also did business as BestBank. While the shutdown and transfer process is supposed to be relatively simple for bank customers, they’re facing long lines at the remaining banks.

The bank had branches in Georgia, Illinois, Michigan, Minnesota, and Wisconsin, with the banks in Georgia and Michigan doing business as BestBank. The issue for customers is that the majority of its branches were inside Walmart stores and Kroger-owned supermarkets, but the only branches that will reopen as First Citizens Bank & Trust are the free-standing ones.

“When did banks start failing again?” you might ask. “Should we start the Recession Watch back up?” No, banks fail more often than we realize. Guaranty is the fifth bank to fail so far in 2017.

The Milwaukee Journal-Sentinel reports that the bank was still dealing with after-effects of bad loans made during last decade’s housing crisis.

The government closed the bank late on Friday, with the OCC saying in a statement that “the bank had experienced substantial dissipation of assets or earnings due to unsafe or unsound practices,” and that Guaranty “was significantly undercapitalized and failed to submit a capital restoration plan acceptable to the OCC.”

Yet an investment banker told the Journal-Sentinel that his clients were planning to invest $100 million in the bank, which would have brought its levels of capital above the level needed to protect against loans gone bad. He called the shutdown “a horrendous case of government overreach,” and claimed that bank regulators were aware of the investment plan.

The shutdown is done, though, and the Federal Deposit Insurance Corporation chose First Citizens Bank & Trust out of North Carolina to take over most of the assets and customers of Guaranty. However, customers aren’t happy about this, since the store-based branches will not re-open, and they were 105 of Guaranty’s 117 branches.

“There’s just no locations anywhere near us anymore,” one customer who traveled to a branch to close her account told TV station WITI. “It took about 35 minutes to get here.”

In Wisconsin, the state with 10 remaining branches, people reported waiting for an hour to get help on Monday morning. It wasn’t just the shutdown: The bank had gone from 48 locations in the state to 10 over the weekend, which meant that regular Monday-morning bank business transferred to the standalone branches too.

Former Best Bank customers in Georgia and Michigan are completely out of luck, since there were no standalone branches in their states at all.

If they decide to leave and choose a bank or credit union that actually has offices nearby, they will be allowed to withdraw their money from Guaranty accounts with no penalty. That includes certificates of deposit, as long as that money isn’t being used as collateral for a loan.

You don’t have to worry about any checks you have from Guaranty customers not being honored because of the change. Customers are also still able to use their debit cards and make loan payments, and make withdrawals from ATMs. Not the ones in Walmarts and grocery stores, though: Those have been shut down.