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One Illinois Bank & One Wisconsin Credit Union Closed by Regulators

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The first Friday of August was fairly quiet in terms of bank failures. There was only one bank failure. Waukegan Savings Bank in Illinois was closed by state regulators, and the FDIC arranged for First Midwest Bank to assume all deposits.

That brings the number of bank failures for the year to 40. At this time last year there had been 63 bank failures, and at this time in 2010 there had been 109 bank failures.

This is the sixth bank to fail in Illinois in 2012. That moves Illinois past Florida for #2 in the nation as the state with the most 2012 bank failures. It's still far behind Georgia which has 9 bank failures for the year.

First Midwest Bank assumed all deposits of Waukegan Savings Bank. The FDIC has the following message at its Q&A page:

No one lost any money on deposit as a result of the closure of this bank. All deposits, regardless of dollar amount, were transferred to First Midwest Bank.

I was not able to find any information at the First Midwest Bank's website regarding what will happen to the rates of existing CDs at Waukegan Savings Bank. The FDIC has its typical information in its Q&A page:

Interest on deposits accrued through close of business on August 3, 2012, will be paid at your same rate. Waukegan Savings Bank'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.

Unfortunately, First Midwest Bank is allowed to reset the CD rates starting the day after the closure even though it doesn't have to communicate the new CD rates until later.

Credit Union Liquidation

In addition to a bank failure, there was a credit union failure this week. A M Community Credit Union in Wisconsin was liquidated by state regulators on August 1st. The NCUA arranged for TruStone Financial Federal Credit Union to purchase and assume A M Community Credit Union’s members, deposits and consumer loans. This was the 8th credit union liquidation of 2012 (7th for federally insured credit unions).

One interesting thing to note about the credit union liquidation is that the NCUA had placed the credit union into conservatorship in February. It's common for credit unions that have been placed into conservatorship to eventually be liquidated. So the conservatorship gives a useful warning to credit union members to move or restructure any uninsured deposits.

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

40th Bank Failure of 2012 (6th in Illinois)

  • Closed Bank: Waukegan Savings Bank, Waukegan, IL
  • FDIC Press Release
  • Size: 2 branches, $88.9 million in assets and $77.5 million in deposits
  • Acquiring Bank: First Midwest Bank, Itasca, IL
  • Possible Uninsured Deposits: all deposit accounts, including brokered deposits, has been assumed by First Midwest Bank (FDIC Q&A)
  • Rate Changes: Waukegan Savings Bank's rates will be reviewed by the new bank and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $19.8 million
  • Enforcement Action: FDIC 4/19/10 Consent Order, FDIC 12/14/11 PCA
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 247.92% at DepositAccounts.com (see financial rating note)

8th Credit Union Liquidation of 2012 (Aug 1st)

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. Ratings are based on March 2012 data.

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