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One Bank and Two Credit Union Failures

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One Bank and Two Credit Union Failures

This was a quiet Friday for the FDIC with only one bank failure. Ravenswood Bank in Chicago, Illinois became the country's 109th bank failure and Illinois' 13th bank failure for 2010. It was a small bank with only two branches, $264.6 million in assets and $269.5 million in deposits.

One interesting note about this bank was reported by the Wall Street Journal. According to the article, Ravenswood Bank was one of four banks which held campaign funds of former Illinois Governor Rod Blagojevich.

Another interesting note mentioned in the WSJ article was the bank's ratio of deposits vs. assets. According to the article:

It's unusual for a bank to have a higher level of deposits than assets. When this happens, banks are often quickly shut because the liabilities are disproportionately high.

This shows why banks sometimes slash their deposit rates or restrict accounts to their local market area.

The FDIC was able to find a buyer for Ravenswood. The buyer, Northbrook Bank and Trust Company, assumed all deposits (except some brokered deposits) including deposits above the FDIC limits. Northbrook provided some good news to Ravenswood CD holders in its FAQs:

Will my personal Certificates of Deposit (CDs) change? Will the rates change prior to maturity?

For personal and IRA CDs, the simple answer is NO. These CDs will remain the same until maturity and automatically renew at the Northbrook Bank & Trust posted rates in effect at maturity.

I'm glad to see a buyer is honoring the CD rates. If a bank doesn't honor the original rates, the CD holder must be allowed to make a penalty-free early withdrawal.

We actually had more credit unions closed in the last seven days than banks. Two credit unions were liquidated since my last Friday bank failure summary. This brings the total number of credit union liquidations in 2010 to 13. One of the two liquidated credit unions, Kappa Alpha Psi FCU, was unusual in that its field of membership was based on a college fraternity. Another thing to note about this credit union liquidation is that the NCUA couldn't find another credit union to take over the member accounts. Thus, the NCUA will be mailing checks.

Below is a summary of this week's bank and credit union failures:

109th Bank Failure of 2010 (13th in Illinois)

  • FDIC Press Release
  • Closed Bank: Ravenswood Bank, Chicago, IL
  • Size: 2 branches, $264.6 million in assets, $269.5 million in deposits
  • Acquiring Bank: Northbrook Bank and Trust Company, Northbrook, IL
  • Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits, have been assumed by Northbrook Bank and Trust Company
  • Rate Changes: Personal and IRA CDs will remain the same until maturity (Northbrook's FAQs)
  • Estimated Cost to Deposit Insurance Fund: $68.1 million
  • Enforcement Action: FDIC 7/15/09 C&D Order, FDIC 5/06/10 Prompt Corrective Action
  • Financial Ratings: 1 star (lowest) at Bankrate.com, 0 star (lowest) at BauerFinancial

12th Credit Union Liquidation of 2010 (closed on July 31)

  • NCUA Press Release
  • Liquidated CU: Certified Federal Credit Union, Commerce, CA
  • Size: $37.6 million in assets and served 8,580 members
  • Acquiring CU: Vons Employees Federal Credit Union, El Monte, CA
  • Financial Ratings: 1 star at Bankrate.com, ? stars at BauerFinancial

13th Credit Union Liquidation of 2010 (closed on August 3)

  • NCUA Press Release
  • Liquidated CU: Kappa Alpha Psi Federal Credit Union, Addison, TX
  • Size: $780K in assets and served 1,341 members
  • Acquiring CU: None, checks being mailed to members
  • Financial Ratings: 1 star at Bankrate.com, ? stars at BauerFinancial

The above ratings are based on 3/31/2010 data.

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