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Review of the 2008 Credit Union Liquidations

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During 2008 I covered all 25 bank closures, and recently I described 10 lessons to be learned from these in this post. I'm afraid I neglected credit union closures in 2008 so I thought it would be useful to review the 2008 credit union failures. There were 14 federally insured credit unions that were liquidated in 2008. The last one to close was West Hartford Credit Union in Connecticut which was liquidated on December 5th.

One reason I didn't report on these closures is due to the small size of most of these failed credit unions. The smallest to be liquidated was St. Luke Baptist Federal Credit Union in New York which was liquidated on May 3rd. It had only 162 members and less than $50,000 in assets. There were at least 3 other credit unions with less than a million dollars in assets and there were at least 4 failed credit unions with less than $10 million in assets. For most of these small credit unions that were liquidated, the NCUA issued checks to the members with share accounts.

There were four liquidations in 2008 of sizable credit unions. These included:
For all of these liquidations, the NCUA arranged for strong credit unions to absorb these failed credit unions. Kaiperm was absorbed by Alliant Credit Union, Cal State 9 and Sterlent were absorbed by Patelco Credit Union and Norlarco was absorbed by Public Service Credit Union.

Cal State 9 and Norlarco were both put into NCUA conservatorship before being liquidated. Unlike when the FDIC became the conservator of IndyMac, the NCUA conservatorship doesn't seem to threaten uninsured deposits. I investigated this when Cal State 9 was placed into conservatorship in 2007. In the announcement of the conservatorship, the credit union stated that "they are working with any individual members whose deposit accounts may exceed insured amounts to maximize coverage and minimize risk." Unlike the FDIC, the NCUA has provided very few details in its press releases regarding potentially uninsured deposits. I'm not sure if this means there have been no losses by depositors or if the NCUA just doesn't disclose this information.

Below is a list of 13 credit unions that were liquidated in 2008 based on the NCUA press releases. The last liquidation press release for 2008 mentioned that the liquidation was the 14th of the year. This was on December 5th. I can only find 13 in this press release page. Please leave a comment if you can find the missing one.

Federally Insured Credit Unions Liquidated in 2008

  • Dec 5 - West Hartford CU in CT; $2.9 million in assets; 1,206 members; NCUA issued checks to members
  • Oct 3 - N&W Poca Division FCU in WV; $6 million in assets; 1,194 members; NCUA issued checks to members
  • Oct 3 - TEXDOT-WF CU in TX; $1.8 million in assets; 530 members; Member accounts assumed by Postel CU
  • Sep 29 - Kaiperm FCU in CA; $91 million in assets; 18,000 members; All member accounts assumed by Alliant CU
  • Sep 17 - Interfaith FCU in NJ; $388,000 in assets; 370 members; NCUA issued checks to members
  • Aug 5 - Port Trust FCU in SC; $460,900 in assets; 260 members; member accounts assumed by CPM FCU
  • Jul 28 - New London Security FCU in CT; $12.7 million in assets; 365 members; NCUA issued checks to members
  • Jul 16 - Meriden F.A. FCU in CT; $337,968 in assets; 206 members; NCUA issued checks to members
  • Jul 1 - Cal State 9 CU in CA; $339 million in assets; 29,000 members; member accounts assumed by Patelco CU
  • Jul 1 - Sterlent CU in CA; $94.6 million in assets; ? members; member accounts assumed by Patelco CU
  • May 12 - Father Burk FCU in NY; $1.2 million in assets; 504 members; NCUA issued checks to members
  • May 3 - St. Luke Baptist FCU in NY; $49,734 in assets; 162 members; NCUA issued checks to members
  • Jan 24 - Norlarco CU in CO; $290 million in assets; 42,000 members; member accounts assumed by Public Service CU
Note, I did not include in the list credit unions that went into conservatorship.

A few readers may remember Huron River Area Credit Union in Michigan. It was placed into NCUA conservatorship in February 2007 and liquidated in November 2007. The NCUA just recently issued a loss review of Huron (pdf). The NCUA noted the use of an association to illegally expand its field of membership which it used to rapidly grow loans.

Recent NCUA Deposit Insurance Changes

The NCUA made insurance coverage changes in 2008 that were very similar to the changes made by the FDIC. Please refer to this post for a review of these changes.

Related Posts

Comments
9 comments.
Comment #1 by Anonymous posted on
Anonymous
When I spoke with the president of a local credit union last summer, I thought he said that no one has lost money through the failure of a credit union. I don't know whether he meant in the past few years or what. It would be interesting to find out whether that was true over the past year.

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Comment #2 by Anonymous posted on
Anonymous
Huron River is now a division of another credit union, Detroit Edison.

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Comment #3 by Anonymous posted on
Anonymous
Credit unions are insured under a different government agency and many proclaim that they don't do risky business like most major banking institutions since the customer base is limited. This is true, but with a limited (or membership only) customer base also limits the ability of the credit union to expand its operation. Most are pretty safe and will rarely be involved in liquidation proceedings. But their small size also makes them more vulnerable to changes in the economic environment.

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Comment #4 by Anonymous posted on
Anonymous
the 14th one you're looking for is valley credit union. it was placed into conservatorship in sep 08 and merged into citizens equity first credit union (www.cefcu.com) in dec 2008.

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Comment #5 by Anonymous posted on
Anonymous
Thank goodness! As usual, the left coast and their northeastern thieving brothers lead the nation!

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Comment #6 by Banking Guy (anonymous) posted on
Banking Guy
Regarding Valley Credit Union, I see the assumption of Valley by CEFCU was announced on December 15th and was scheduled to take place on December 31st.

However, this may be the 15th liquidation for 2008. The NCUA stated that West Hartford CU was the 14th liquidation on December 5th. Perhaps there's another credit union that was placed into conservatorship earlier in 2008 that was liquidated later in the year. It looks like the NCUA may not do press releases of all liquidations during conservatorships.

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Comment #7 by Anonymous posted on
Anonymous
Whatever the missing one may be, it took place before September 17th. Interfaith CU press release says it is the 10th liquidation of the year.

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Comment #8 by Anonymous posted on
Anonymous
Banking Guy thank you for posting. Excellent run down. Of interest to me: All of the failed credit unions appear to have been NCUA insured. Unless I missed it, none was ASI insured. I wonder if this is indication ASI imposes stricter, tougher operating standards than the NCUA. It would be interesting to know when the last ASI insured CU failed.

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Comment #9 by Anonymous posted on
Anonymous
Re: Valley Credit Union

Thanks for the reply. I see your point. Perhaps there is another failed CU then.

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