Dedicated to Deposits: Deals, Data, and Discussion
About Ken Tumin About Ken Tumin - Founder and Editor

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

Featured Savings Rates

Popular Posts

Featured Accounts

Two Credit Unions in Illinois & California Liquidated by Regulators

POSTED ON BY

No banks failed this Friday. However, two credit unions were liquidated this week. Only one of the failed credit unions was federally insured. The other one was just privately insured by the American Mutual Share Insurance Corporation (ASI). It has been rare for ASI-only credit unions to fail. I have more information on ASI in this blog post.

The federally-insured credit union that failed was Telesis Community Credit Union which was headquartered in Chatsworth, CA. It's the 6th federally-insured credit union to be liquidated in 2012. With over $300 million in assets, it's the largest credit union to be liquidated this year. According to the Credit Union Times, "the credit union had sustained years of losses tied to losses in commercial lending, particularly participation loans."

NCUA placed Telesis Community Credit Union under conservatorship on March 23, 2012. 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.

It appears Telesis members don't have to worry about losing money on uninsured deposits. The NCUA arranged for Premier America Credit Union to assume all deposits. Premier America provided a Questions and Answers page on its website. One bit of good news mentioned in this Q&A page is that rates and terms of certificates and/or IRA certificates will remain unchanged.

The privately-insured credit union that was liquidated was USA One National Credit Union in Matteson, Illinois. It's the first privately-insured credit union to be liquidated in 2012.

The Illinois regulator, Illinois Division of Financial Institutions, had ordered USA One closed due to inadequate capital, and it appointed ASI as the liquidating agent. The ASI then arranged for Credit Union 1 (another ASI-only credit union) to assume all deposits of USA One.

Below is the summary of this week's credit union failures:

6th Credit Union Liquidation of 2012 - ASI-Insured (May 31)

  • Liquidated CU: USA One National Credit Union, Matteson, IL
  • ASI Press Release
  • Size: 8,000 members and had $38 million in assets
  • Acquiring CU: Credit Union 1, Lombard, IL
  • Financial Ratings: 1 star at Bankrate.com, ? stars at BauerFinancial, 2 stars & Texas Ratio of 93.05% at DepositAccounts.com (see financial rating note)

7th Credit Union Liquidation of 2012 (June 1)

Financial Ratings Notes: 0 star is lowest at BauerFinancial, 1 star is lowest at DepositAccounts.com & Bankrate.com, Texas Ratios over 100% is considered at risk. Bankrate and BauerFinancial ratings are based on December 2011 data. DepositAccounts.com ratings and Texas Ratios are based on March 2012 data.

References:

Edit 6/2/2012: Updated the DA ratings and Texas ratios of the two failed credit unions based on March 2012 NCUA & ASI data.



Related Posts

Comments
3 Comments.
Comment #1 by Anonymous posted on
Anonymous
I understand that if an acquiring bank wants to take on all of failed banks deposits including those over the insured limit, that is their business but why on earth should the FDIC or ASI have the slightest concern about those deposits over the insured limits?  Why bother to have a limit at all, if everyone can go over them whenever they wish and pay no penalty for it when their banks fail?  Why have rules that nobody has to play by?

2
Comment #2 by KenBDG posted on
KenBDG
It appears the FDIC made the decision around 2008 that they would try to get the acquiring banks to assume all deposits including those over the FDIC limit. So my guess is that the FDIC thought this would help ease fears of bank closures.

The FDIC will probably claim this has not cost the FDIC since the costs are placed on to the acquiring banks. However, I guess it could impact the loss share agreements between the acquiring banks and the FDIC with the FDIC getting a less favorable deal. It's a topic that has not been covered by the media so not much is known. The NCUA has been even less transparent than the FDIC on this issue. Unlike the FDIC, the NCUA rarely discloses if uninsured deposits were covered in acquisitions after liquidations.

2
Comment #3 by Bancxman (anonymous) posted on
Bancxman
Ken; Easing the public's fear of potential bank closures is not a consideration in determining if the uninsured deposits of a failed bank will be transferred to an assuming bank. The FDIC will transfer uninsured deposits to an assuming bank only if it can save money by doing so. The FDIC shares the funds recovered from liquidating the assets of a failed bank on a dollar for dollar basis with uninsured depositors. In general, an assuming bank will pay a premium to acquire a  failed bank's insured deposits and may opt to bid for uninsured deposits as well. If the premium to acquire all deposits is large enough, it becomes more cost effective for the FDIC to transfer uninsured deposits than to share its liquidation proceeds with uninsured depositors.

 

 

3