Puerto Rico’s Doral Bank failed Friday.
The Federal Deposit Insurance Corp. said in a press release Friday that Doral Bank in San Juan had been closed by the Office of the Commissioner of Financial Institutions of Puerto Rico, which appointed the FDIC as receiver.
The agency then entered into a purchase and assumption agreement with Banco Popular de Puerto Rico in Hato Rey, P.R., to acquire Doral’s banking operations, including all of the deposits.
Doral Bank’s 26 former branches reopened Saturday, with eight now operated by Banco Popular. The remaining 18 branches and their deposits were subsequently sold by Banco Popular to three banks: FirstBank Puerto Rico in Santurce, P.R., which now operates Doral Bank’s 10 other branches in Puerto Rico, assuming deposits there; Banco Popular’s affiliated bank, Banco Popular North America, now operating Doral’s three locations in New York; and Centennial Bank in Conway, Ark., now operating Doral’s five Florida branches, assuming those deposits.
Doral had roughly $5.9 billion in total assets and $4.1 billion in total deposits at the end of 2014, the FDIC said. Banco Popular bought $3.25 billion of Doral assets and paid the FDIC a premium of 1.59% for the failed bank’s deposits. The FDIC entered into two separate agreements to sell $1.3 billion of Doral Bank’s assets to other parties, expected to close in 30 days.
The FDIC will retain the remaining assets for later disposition. The closure will cost the Deposit Insurance Fund an estimated $748.9 million.
Doral was deemed by regulators as “critically under-capitalized,” unable to raise more capital after the FDIC told the bank last year that it couldn’t use a $229 million tax refund as part of its Tier 1 capital, reported Bloomberg.
On Friday, the FDIC accidentally released the information of the bank’s shutdown before the stock markets closed in New York. Doral shares sunk 46% before trading was halted.