Dedicated to Deposits: Deals, Data, and Discussion

Two Recent Credit Union Liquidations

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While the FDIC has been quiet with bank failures, the NCUA has recently liquidated two small credit unions. The number of credit union closures is coming close the number of bank failures for this year. The total number of credit union closures for 2013 is now 11 while the total number for banks is 16.

The NCUA first liquidated Ochsner Clinic Federal Credit Union of New Orleans on Friday. This was a small credit union with only 3,099 members and assets of approximately $9.25 million. According to this Credit Union Times article, “Ochsner was well capitalized and turning a profit.” DepositAccounts.com had shown an overall health score of 3 stars (out of 5) with a Texas ratio of 19.22% (average) based on March 2013 data. This shows that small credit unions can be at risk from issues that can’t always be seen from publicly available financial data.

The NCUA liquidated PEF Federal Credit Union in Ohio on Monday. This was also a small credit union with 2,974 members and assets of approximately $31.3 million. This credit union’s financial health was significantly worse than Ochsner’s. DepositAccounts.com had shown an overall health score of 2 stars (out of 5) with a Texas ratio of 60.63% (below average).

One interesting thing to note about PEF is that the NCUA placed PEF into conservatorship on June 21st. When the NCUA places a credit union into conservatorship, NCUA takes over the credit union management in an effort to keep the credit union operating. It didn’t take the NCUA long to determine that PEF “had no prospect for restoring viable operations.” The nice thing about the NCUA’s conservatorship process is that it gives members time to ensure all of their deposits are under the NCUA coverage limits. For credit unions, there is no loss of deposits when the credit union enters conservatorship. That isn’t always the case at the time of liquidation.

Unlike the FDIC, the NCUA hasn’t been clear about the potential loss of deposits during liquidations. That is also the case for these two liquidations. For the case of Oshsner Clinic FCU, it appears all deposits were assumed by ASI Federal Credit Union. According to the NCUA’s press release:

ASI Federal Credit Union of Harahan, La., immediately assumed Ochsner Clinic Federal Credit Union’s members, deposits and loans.

However, that was not the case with PEF Federal Credit Union. Here’s what is stated in the NCUA’s press release:

Best Reward Credit Union of Brook Park, Ohio immediately assumed certain PEF Federal Credit Union members, shares, assets and liabilities.

Note the word “certain”. That implies that some PEF members, shares, assets and liabilities were not assumed.

Below is a summary of the two credit union liquidations:

10th Credit Union Liquidation of 2013 (June 28)

11th Credit Union Liquidation of 2013 (July 1)

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