Friday, March 20, 2009

FDIC Closes Three More Banks

This brings the 2009 total to 20 banks down and counting. The latest three are:

  • FirstCity Bank of Stockbridge, GA, had total assets of $297 million and total deposits of $278 million. At the time of closing, the bank had approximately $778,000 in deposits that exceeded the insurance limits. In English this means tomorrow some people will realize they are $778,000 poorer.
  • Colorado National Bank, Colorado Springs, CO, had total assets of $123.5 million and total deposits of $82.7 million. The FDIC will share 80/20 percent in the losses with Herring Bank (who assumes Colorado Natl's deposits) on approximately $62 million in assets covered under the agreement.
  • TeemBank, National Association, Paola, KS, had total assets of $669.8 million and total deposits of $492.8 million. The FDIC will share 80/20 percent in the losses with assuming bank Great Southern Bank on approximately $450 million in assets covered under the agreement.

And thanks to vigilant readers who pointed out this new twist: the U.S. placed two credit unions under conservatorship: U.S. Central Federal Credit Union (Lenexa, KS) with $34 billion in assets and Western Corporate Federal Credit Union (San Dimas, CA) with $23 billion in assets...

The two corporate credit unions were placed into conservatorship to protect retail credit union deposits and the interest of the National Credit Union Share Insurance Fund (NCUSIF), as well as to remove any impediments to the Agency’s ability to take appropriate mitigating actions that may be necessary. Service continues uninterrupted at both U.S. Central Corporate Federal Credit Union and WesCorp, and members are free to make deposits and access funds.

The Federal Credit Union Act authorizes the NCUA Board to appoint itself conservator when necessary to conserve the assets of a federally insured credit union, preserve member assets and protect the NCUSIF.

$57 billion in assets? This is more than all FDIC-seized bank assets in 2009. Has the FDIC been merely attempting to distract from the real troubles at the National Credit Union Administration?

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11 comments:

Anonymous said...

You forgot 3 important credit unions...

Anonymous said...

I mean 2 CU's.

Anonymous said...

Should I buy FAZ?

J.P. Carter said...

I live in Olathe, KS. Lenexa, KS is down the street. The US Central Credit Union is in Lenexa.. I bank at the Farmers Insurance Group Credit Union in Olathe. It is based in L.A., CA (where we are headquartered). USCCU serves other credit unions, not individuals. They were taken into conservatorship today. However, they had just assessed a charge to all member C.U.'s to make up for the mortgage securities exposure. Pretty big deal in the CU community. They have never had to take such a big hit. It may sink a few of them.

I sent in the note on the fact that Zurich (who owns Farmers Ins.) was doing well and thinking of buying 21st Century from AIG. I work at Farmers.

J.P. Carter said...

http://money.cnn.com/2009/03/20/news/companies/credit_unions/index.htm?cnn=yes

marmico said...

The corporate CUs have only $8.7 billion in capital with a Treasury backstop of $41 billion on $64 billion of toxic securities.

What a mess.

Anonymous said...

Looks like the orginal bloomberg title was right on the money (or what little there is left of it)....

J.P. Carter said...

Here is NCUA'a press release:
March 20, 2009, Alexandria, Va. -- The National Credit Union Administration Board today placed U.S. Central Federal Credit Union, Lenexa, Kansas, and Western Corporate (WesCorp) Federal Credit Union, San Dimas, California, into conservatorship to stabilize the corporate credit union system and resolve balance sheet issues. These actions are the latest NCUA efforts to assist the corporate credit union network under the Corporate Stabilization Plan.

The two corporate credit unions were placed into conservatorship to protect retail credit union deposits and the interest of the National Credit Union Share Insurance Fund (NCUSIF), as well as to remove any impediments to the Agency’s ability to take appropriate mitigating actions that may be necessary. Service continues uninterrupted at both U.S. Central Corporate Federal Credit Union and WesCorp, and members are free to make deposits and access funds.

The Federal Credit Union Act authorizes the NCUA Board to appoint itself conservator when necessary to conserve the assets of a federally insured credit union, preserve member assets and protect the NCUSIF.

Corporate credit unions do not serve consumers. They are chartered to provide products and services to the credit union system. These products and services will continue uninterrupted and there is no direct impact by NCUA’s actions on the 90 million credit union members nationwide. Credit unions that serve consumers remain very strong, with net worth exceeding 10 percent of assets, healthy growth in assets, membership, and loan portfolios despite the difficult economy.

U.S. Central has approximately $34 billion in assets and 26 retail corporate credit union members. WesCorp has $23 billion in assets and approximately 1,100 retail credit union members. The member accounts of both credit unions are guaranteed under provisions of the previously announced NCUA Share Guarantee Program, through December 31, 2010. The Program extends NCUSIF coverage to all funds held by the two corporate credit unions.

Following initial actions taken by the NCUA Board January 28, 2009 (see NCUA Letter to Credit Union No. 09-CU-02 http://www.ncua.gov/letters/letters.html), NCUA staff completed a detailed analysis and stress test of the mortgage and asset backed securities held by all corporate credit unions, including US Central and WesCorp. Specifically, this review determined that an unacceptably high concentration of risk resided only in the two conserved corporate credit unions. Securities held by US Central and WesCorp deteriorated further since late January 2009, contributing to diminished liquidity and payment system capacities, as well as further loss of confidence by member credit unions and other stakeholders.

Additional mortgage and asset backed security analysis and assessment of the two credit unions by NCUA staff enabled NCUA to refine NCUSIF’s required reserve for potential loss. The findings indicated an overall estimated reserve level, previously announced by NCUA, had increased from $4.7 to $5.9 billion. The specific computation and the impact of the refined reserve level are addressed in NCUA Letter No: 09-CU-06, which NCUA issued and posted online today at http://www.ncua.gov/letters/letters.html.

NCUA is hosting a webcast Monday, March 23 at 2 p.m. to provide the credit union community with an update on the corporate credit union stabilization program.

The central short-term objective of NCUA’s Corporate Stabilization Program has been to increase liquidity in corporate credit unions. Since the NCUA Board first began taking stabilization actions, liquidity has demonstrated marked improvement. The reliance on external borrowing has declined from $11.8 billion to $2.1 billion.

NCUA believes that the actions to conserve the two corporates, in tandem with established plans to enhance liquidity and generally stabilize the corporate network, represent the most cost effective and prudent alternative available to the credit union industry. The final stage in the overall stabilization program involves the Advanced Notice of Proposed Rulemaking initiated by the NCUA Board in January. The credit union industry is expected to provide suggestions on possible future regulatory reforms to the corporate credit union network.

NCUA will continue to take any and all steps necessary to preserve a well-functioning system of corporate credit unions and to protect the assets of natural person credit unions and their members during the ongoing broader financial market dislocation.

The National Credit Union Administration is the independent federal agency that regulates, charters and supervises federal credit unions. NCUA, backed by the full faith and credit of the U.S. government, also operates and manages the National Credit Union Share Insurance Fund (NCUSIF), insuring the deposits of over 89million account holders in all federal credit unions and the majority of state-chartered credit unions.

J.P. Carter said...

Sorry for the long post. It explains a lot. NCUA just threw their kids to the wolves. Better than nuking the whole thing.

Anonymous said...

Toxic Asset Plan Foresees Big Subsidies for Investors


"The F.D.I.C. will provide nonrecourse loans for the hedge funds — that is, loans that are secured only by the value of the mortgage assets being bought — worth up to 85 percent of the value of a portfolio of troubled assets."

Yummy! Lets go back to the all you can eat buffet!


http://www.nytimes.com/2009/03/21/business/21bank.html?_r=2&th&emc=th

hmp49 said...

At the time this was posted, the writer thought $778,000 in deposits exceeding FDIC insurance limits was a big deal.

Today's news:

"Depositors stand to lose more than $150 million in the Greeley bank failure, federal regulators said, because roughly 10 percent of the New Frontier Bank deposits were uninsured or over the FDIC’s $250,000 limit. Shutting down the bank will cost the FDIC’s Deposit Insurance Fund an estimated $670 million, regulators said."

http://coloradoindependent.com/26366/state-shutters-feds-seize-greeley-bank-in-largest-us-bank-failure-this-year