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Third Bank Failure of the Year: Covenant Bank, Chicago, IL

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Third Bank Failure of the Year: Covenant Bank, Chicago, IL

It has been four weeks without any bank failures. That streak ended today with the closure of Covenant Bank of Chicago, IL. That's only the third bank failure of the year. By this time last year there had already been nine bank failures. Bank failures are becoming rare, but they're still not as rare as they were before the financial crisis. At this time in 2008, there had only been one bank failure.

The closure of Covenant Bank was typical with the FDIC arranging for another bank to assume all deposits. The FDIC had the following message in its Q&As:

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 Liberty Bank and Trust Company.

CD customers at Covenant Bank will have to wait to see what happens with the rates. The FDIC has its typical message about interest rates in its Q&As:

Interest on deposits accrued through close of business on February 15, 2013, will be paid at your same rate. Covenant Bank 's rates will be reviewed by Liberty Bank and Trust Company 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 Liberty Bank and Trust Company.

No credit unions failed over the last four weeks. However, there was one tiny credit union that was placed into conservatorship by the NCUA. On February 8th, the NCUA assumed control of service and operations at NCP Community Development Federal Credit Union of Norfolk, Virginia. The credit union only has $2 million in assets and 709 members.

No deposits are affected when a credit union is placed into conservatorship. However, if the NCUA determines that the credit union can't be saved, it will be liquidated. Consequently, members who find their credit union placed into conservatorship should immediately ensure that all of their deposits are below the NCUA deposit coverage limits.

Below is the summary of the today's bank failure and last week's credit union conservatorship:

3rd Bank Failure of 2013 (1st in Illinois)

  • Closed Bank: Covenant Bank, Chicago, IL
  • FDIC Press Release
  • Size: 1 branch, $58.4 million in assets and $54.2 million in deposits
  • Acquiring Bank: Liberty Bank and Trust Company, New Orleans, LA
  • Possible Uninsured Deposits: all deposit accounts, excluding the Cede & Co. deposits, have been assumed by Liberty Bank and Trust Company (FDIC Q&A)
  • Rate Changes: Covenant Bank's rates will be reviewed by Liberty Bank and Trust Company and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $21.8 million
  • Enforcement Action: FDIC 6/6/11 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 314.49% at DepositAccounts.com (see financial rating note)

1st Credit Union placed into conservatorship in 2013 (Feb 8)

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 at DepositAccounts.com, BauerFinancial and Bankrate.com are based on September 30, 2012 data.

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