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Two Georgia Banks and One Washington State Bank Fail

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Two Georgia Banks and One Washington State Bank Fail

Two Georgia banks and one Washington State bank failed this Friday. That brings the total number of bank failures for the year to 43. Georgia now has 12 bank failures for the year which far exceeds the second place state, Florida which has 5 bank failures. At this time last year there had been 73 bank failures.

The two failed Georgia banks were both acquired by the same bank, CertusBank, N.A. of Easley, SC. This bank was just established in January from the acquisition of another failed bank. Just like it did in January, CertusBank assumed all deposits from the failed banks except some brokered deposits. As has been common, no one with regular deposits lost any money even those who had over the FDIC limit.

The Washington State bank failure was the first for the state this year. The failed bank was Summit Bank in Burlington, and it was acquired by Columbia State Bank in Tacoma which assumed all deposits except some brokered deposits. Columbia State Bank provided some details for Summit Bank depositors in its FAQs. One noteworthy detail not mentioned in the FDIC documentation is the bank's plan for CD rates:

The maturity date on your CDs will remain the same. However, we will be changing the interest rate. New rates for your existing interest bearing deposit account(s) and CD(s) will be mailed to you in the coming week. You may withdraw your CD funds without an early withdrawal penalty until you enter into a new deposit agreement with Columbia Bank.

I think it's a safe bet that the rate changes will involve lower rates.

Credit Union Liquidation

The tiny credit union Hmong American Federal Credit Union of St. Paul, Minnesota was liquidated by the NCUA on Wednesday (May 18, 2011). According to the NCUA's press release, the NCUA made the decision to close the credit union and "discontinue its operation after determining the credit union is insolvent and has no prospects for restoring viable operations." No other credit union was chosen to assume deposits. Thus, the NCUA will "issue checks to individuals holding verified share accounts in the credit union within one week."

Hmong American FCU was just placed into conservatorship on May 4th. The only credit union that went from conservatorship to liquidation quicker was St. Paul Croatian Federal Credit Union that failed last year. As I reported on Tuesday, authorities are uncovering major fraud at that credit union. If there is fraud, that would explain why it had strong financial ratings. The financial ratings are based on data that the institutions provide to their regulators. If there are any deceptions in this data, financial ratings may not reflect the problems.

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

41st Bank Failure of 2011 (11th in Georgia)

  • FDIC Press Release
  • Closed Bank: Atlantic Southern Bank, Macon, GA
  • Size: 16 branches, $741.9 million in assets, $707.6 million in deposits
  • Acquiring Bank: CertusBank, N.A., Easley, SC
  • Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits, have been assumed by CertusBank, N.A.
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC)
  • Estimated Cost to Deposit Insurance Fund: $273.5 million
  • Enforcement Action: FDIC 9/8/09 C&D Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 473.30% at DepositAccounts.com (see financial rating note)

42nd Bank Failure of 2011 (12th in Georgia)

  • FDIC Press Release
  • Closed Bank: First Georgia Banking Company, Franklin, GA
  • Size: 10 branches, $731.0 million in assets, $702.2 million in deposits
  • Acquiring Bank: CertusBank, N.A., Easley, SC
  • Possible Uninsured Deposits: all deposit accounts, excluding the Cede & Co. deposits, have been assumed by CertusBank, N.A.
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC)
  • Estimated Cost to Deposit Insurance Fund: $156.5 million
  • Enforcement Action: FDIC 8/11/10 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 2 stars & Texas Ratio of 276.27% at DepositAccounts.com (see financial rating note)

43rd Bank Failure of 2011 (1st in Washington)

  • FDIC Press Release
  • Closed Bank: Summit Bank, Burlington, WA
  • Size: 3 branches, $142.7 million in assets, $131.6 million in deposits
  • Acquiring Bank: Columbia State Bank, Tacoma, WA
  • Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits, has been assumed by Columbia State Bank
  • Rate Changes: We will be changing the interest rate. New rates for your existing interest bearing deposit account(s) and CD(s) will be mailed to you in the coming week (bank's FAQs)
  • Estimated Cost to Deposit Insurance Fund: $15.7 million
  • Enforcement Action: FDIC 6/2/10 Consent order, FDIC 3/2/11 PCA
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 2 stars & Texas Ratio of 140.95% at DepositAccounts.com (see financial rating note)

8th Credit Union Liquidation of 2011 (May 18th)

  • NCUA Press Release
  • Liquidated CU: Hmong American Federal Credit Union of St. Paul, MN
  • Size: $2.7 million in assets and 700 members
  • History: Placed into conservatorship on May 4, 2011
  • Financial Ratings: 4 stars at Bankrate.com, 2 stars at BauerFinancial, 5 stars & Texas Ratio of 1.77% at DepositAccounts.com (see note)

Financial Ratings Notes: 0 star is lowest at BauerFinancial, 1 star is lowest at Bankrate.com & DepositAccounts.com, Texas Ratios over 100% is considered at risk. Ratings are based on December 2010 data.

References:



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Comments
5 Comments.
Comment #1 by Anonymous posted on
Anonymous
Hmong American Federal Credit Union of St. Paul, MN must be the smallest CU in USA,
most private people have more assets then this CU.

 

3
Comment #2 by KenBDG posted on
KenBDG
There are actually quite a number of these tiny credit unions. I reviewed a few last month that were offering high CD rates. As we saw with Hmong American, it's hard to know how safe these tiny credit unions are.

3
Comment #3 by Anonymous posted on
Anonymous
Why has Georgia been hit so hard with bank failures? I'm surprised because this state is not one with super high foreclosure or unemployment rates.

2
Comment #4 by Anonymous posted on
Anonymous
As far as I can tell from their website (http://www.summitbank-wa.com) Summit Bank has three branches, less than $150 mil. in assets and... wait for it...  eight executives and four AVPs (http://www.summitbank-wa.com/2616/mirror/a_directors.htm). That's a very healthy 4 executive managers for every branch. Is this normal in American banking (I'm Canadian, so I'm not sure if this is typical or not)?

1
Comment #5 by Anonymous posted on
Anonymous
To #3:

Being from Georgia, I can tell you that one of the problems is that Georgia has 159 counties and each of those wants to have a "county" bank they can call their own.  Couple that, with relatively easy requirements to open for business, Georgia has way more banks than the population would seem to require.  Georgia has been number 1 in bank foreclosures since this recession has begun and I would think they are not near the finish line in bank closures.

4