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Two Banks Closed by Regulators, FDIC Unable to Find Buyer for One

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Two banks failed this Friday which brings the total number of failures for the year to 11. Last year at this time there had been 23 bank failures. This shows how the pace of closures has slowed.

For the first time since January 2011, the FDIC wasn't able to find a buyer of a failed bank. Home Savings of America which was based in Minnesota with branches in California has been shut down by the FDIC. When the FDIC can't find a buyer, those with deposits over the FDIC limit may lose their uninsured deposits. According to the FDIC:

The amount of uninsured deposits will be determined once the FDIC obtains additional information from those customers.

For insured deposits, the FDIC will be mailing checks to the depositors. Those checks should include both the principal and accrued interest up to the day of closure.

The other bank failure was typical of the closures over the last year. Central Bank of Georgia was closed, and all of its deposits were assumed by Ameris Bank. The only concern of Central Bank depositors is if their CD rates will be lowered. The FDIC included its typical note regarding future interest rates:

Interest on deposits accrued through close of business on February 24, 2012 will be paid at your same rate. Central Bank of Georgia's rates will be reviewed by the new bank and may be lowered; however, you will be notified in writing of any changes. You may withdraw funds from any transferred account, regardless of whether your interest rate changes, without early withdrawal penalty until you enter into a new deposit agreement with the new bank.

Credit Union Liquidations

On February 19th, The NCUA issued a rare Sunday press release on the liquidation of People for People Community Development Credit Union (CDCU) of Philadelphia. This was the second credit union liquidation of the year. The NCUA had placed this tiny credit union in conservatorship on January 6th. This gave depositors over a month to ensure all of their deposits were under the NCUA limits. So hopefully, no members had any uninsured deposits at the time of liquidation.

The NCUA placed A M Community Credit Union of Wisconsin into conservatorship last Friday. This is a larger credit union with 16,000 members and $125 million in assets. So it's likely that some members may have uninsured deposits. Those members would be wise to adjust their accounts so all of their deposits are insured. It's common for credit unions placed into conservatorship to be eventually liquidated, as was the case with that Philly credit union. When a credit union is liquidated, uninsured deposits may be lost if the credit union isn't acquired by another credit union.

This conservatorship process is unique to credit unions. Going into conservatorship has no effect on deposits. Members continue to have full access to all of their deposits, even those over the NCUA limit. This gives members a chance to adjust their uninsured deposits so that all of their deposits are insured. In fact, the credit union is likely to contact members with uninsured deposits to warn them. However, there's no guarantee of the notification. There was an interesting case reported by the Credit Union Times on this issue.

Below is the summary of Friday's bank failures and the recent credit union liquidation.

10th Bank Failure of 2012 (2nd in Georgia)

  • Closed Bank: Central Bank of Georgia, Ellaville, GA
  • FDIC Press Release
  • Size: 5 branches, $278.9 million in assets and $266.6 million in deposits
  • Acquiring Bank: Ameris Bank, Moultrie, GA
  • Possible Uninsured Deposits: all deposit accounts, including brokered deposits, have been assumed by Ameris Bank
  • Rate Changes: Central Bank of Georgia's rates will be reviewed by the new bank and may be lowered (FDIC's Q&A)
  • Estimated Cost to Deposit Insurance Fund: $67.5 million
  • Enforcement Action: FDIC 12/3/09 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 234.76% at DepositAccounts.com (see financial rating note)
11th Bank Failure of 2012 (2nd in Minnesota)

  • Closed Bank: Home Savings of America, Little Falls, MN
  • FDIC Press Release
  • Size: 4 branches, $434.1 million in assets and $432.2 million in deposits
  • Acquiring Bank: None
  • Possible Uninsured Deposits: The amount of uninsured deposits will be determined once the FDIC obtains additional information from those customers
  • Rate Changes: The FDIC will mail directly to depositors of Home Savings of America, checks for the amount of their insured money
  • Estimated Cost to Deposit Insurance Fund: $38.8 million
  • Enforcement Action: OTS 6/2/10 C&D Order, OCC 12/16/11 PCA Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 348.04% at DepositAccounts.com (see financial rating note)

2nd Credit Union Liquidation of 2012 (Feb 19)

2nd Credit Union Placed into Conservatorship in 2012 (Feb 17)

  • Conserved CU: A M Community Credit Union, Kenosha, WI
  • NCUA Press Release
  • Size: 16,000 members and $125 million in assets

References:


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Comments
Comment #1 by Anonymous posted on
Anonymous
Re: Home Savings of America

" False or Misleading Representations in Solicitation" 

"The Solicitation was mailed from the "Home Equity Conversion Department" of Home Savings and contained a header, entitled "Section 255 of the National Housing Act (12 U.S.C. 1715x-20) is amended," and contained a "Notification of Eligibility." The Solicitation also stated "IDENTIFICATION PAPERS ISSUED TO RECEIVED AS FILED". The body of the Solicitation notified the Massachusetts consumer that their mortgage now "qualified them for a Home Equity Conversion Mortgage." The Solicitation further stated that "the United States Federal Government Has created this program for seniors who were facing financial difficulty."

"The Solicitation highlighted the following statement "No Monthly Payments are required," however it failed to notify the consumer that other obligations such as real estate tax payments and homeowners insurance payments that became due periodically would still have to be paid by the consumer."

http://www.mass.gov/ocabr/business/banking-services/banking-legal-resources/enforcement-actions/2011-dob-enforcement-actions/home-savings-cease-directive.html

Branches only in senior communities:  http://www.myhsoa.com/contact.php

“We differ from most traditional banks in that we don’t want to be everyone’s bank. We want to provide only those products and services that are most appealing to senior customers”  http://shopsatrossmoor.com/news_release.php?id=20

 

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