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First Bank Failure of the Year - North Milwaukee State Bank

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First Bank Failure of the Year - North Milwaukee State Bank

The first bank failure of 2016 occurred last Friday. North Milwaukee State Bank in Wisconsin was closed by state regulators, and the FDIC arranged for First-Citizens Bank & Trust Company of North Carolina to assume all of the deposits. North Milwaukee State Bank was small with only two branches and with only $61.5 million in deposits.

Bank failures have become rare. The last bank to fail was on October 2, 2015 which was over five months ago. Last year only eight banks failed. If the trend continues, we will probably only see around two bank closures per quarter. A few years ago, it was rare to go through a month without a bank closure. In fact, there were months in 2010 with over ten failures.

The closure of North Milwaukee State Bank was typical in that the FDIC arranged for another bank to assume all of the deposits. According to the FDIC:

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-Citizens Bank & Trust Company.

The only exception are brokered deposits which were not assumed by First-Citizens Bank & Trust Company. Those with brokered deposits of this bank who had over the FDIC limits may not get back their uninsured deposits. Below are the instructions the FDIC provided for these depositors:

The total of all deposit accounts, excluding the Cede & Co. deposits, have been assumed by First-Citizens Bank & Trust Company. If you are a customer who has a North Milwaukee State Bank deposit through a broker, you must contact your broker with any questions.

CD customers of this failed bank will have to wait to see what happens with their rates. According to the FDIC’s Q&A:

Interest on deposits accrued through close of business on Friday, March 11, 2016, will be paid at your same rate. North Milwaukee State Bank’s rates will be reviewed by First-Citizens Bank & 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 First-Citizens Bank & Trust Company.

Credit Union Failures

In the last five months, there have been seven credit union failures (three in 2016 and four in 2015). These were very small credit unions with only three having assets of over $1 million. The names and sizes of these credit unions are listed below. One thing to note about these closures is that only two of the seven that were closed had another credit union to assume members’ deposits. For the other five credit unions, the NCUA closed the credit union and sent checks of insured deposits to the members. Members who had deposits over the NCUA limits may have lost their uninsured deposits.

Below is the summary of Friday’s bank failures and the recent credit union failures:

1st Bank Failure of 2016 (1st in Wisconsin) (Mach 11)

  • Closed Bank: North Milwaukee State Bank, Milwaukee, WI
  • FDIC Press Release
  • Size: 2 branches, $67.1 million in assets and $61.5 million in deposits
  • Acquiring Bank: First-Citizens Bank & Trust Company, Raleigh, NC
  • Possible Uninsured Deposits: all deposit accounts, excluding the Cede & Co. deposits, have been assumed by First-Citizens Bank & Trust Company (FDIC Q&A)
  • Rate Changes: rates will be reviewed by First-Citizens Bank & Trust Company and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $9.6 million
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, F & Texas Ratio of 151% at DepositAccounts.com (see financial rating note)

3rd Credit Union Liquidation of 2016 (March 4)

  • Liquidated CU: Education Associations Federal Credit Union of Washington, D.C.
  • NCUA Press Release
  • Size: 665 members and assets of $2,596,701
  • Acquiring CU: None

2nd Credit Union Liquidation of 2016 (February 24)

  • Liquidated CU: Mildred Mitchell-Bateman Hospital Federal Credit Union of Huntington, WV
  • NCUA Press Release
  • Size: 57 members and had assets of $27,039
  • Acquiring CU: None

1st Credit Union Liquidation of 2016 (February 5)

  • Liquidated CU: CTK Credit Union of Milwaukee, WI
  • NCUA Press Release
  • Size: 397 members and had assets of $163,197
  • Acquiring CU: None

11th Credit Union Liquidation of 2015 (December 29)

  • Liquidated CU: First Hawaiian Homes Federal Credit Union of Hoolehua, HI
  • NCUA Press Release
  • Size: 1,379 members and had assets of nearly $3.2 million
  • Acquiring CU: Molokai Community Federal Credit Union of Kaunakakai, HI

10th Credit Union Liquidation of 2015 (December 18)

  • Liquidated CU: Bethex Federal Credit Union of Bronx, NY
  • NCUA Press Release
  • Size: 5,824 members and had assets of $12.2 million
  • Acquiring CU: USAlliance Federal Credit Union of Rye, NY

9th Credit Union Liquidation of 2015 (December 1)

  • Liquidated CU: Greater Abyssinia Federal Credit Union of Cleveland, OH
  • NCUA Press Release
  • Size: 425 members and had assets of $412,775
  • Acquiring CU: None

8th Credit Union Liquidation of 2015 (November 20)

  • Liquidated CU: Helping Other People Excel Federal Credit Union of Jackson, NJ
  • NCUA Press Release
  • Size: 110 members and had assets of $626,529
  • Acquiring CU: None

Financial Ratings Notes: 0 star is lowest at BauerFinancial, 1 star is lowest at Bankrate.com and an F is lowest at DepositAccounts.com &, Texas Ratios over 100% is considered at risk. Ratings at DepositAccounts.com and BauerFinancial are based on December 31, 2015 data. Ratings at Bankrate.com are based on September 30, 2015 data.

References:

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Comments
Anonymous
Anonymous   |     |   Comment #1
No one lost any money EXCEPT...
It's hard to fathom the depth of our collective willingness to lie to each other and ourselves on a daily basis. If banks were PROPERLY supervised they would be liquidated long before disaster strikes. The FDIC estimates its cost at 9.6 million on a 60 million entity. God help us all when one of the "bigger now than when we were too big to fail" banks becomes insolvent.
Anonymous
Anonymous   |     |   Comment #3
When has government been proactive or go something efficiently
Anonymous
Anonymous   |     |   Comment #4
Now imagine what negative rates can do to the banks, most of them will close the doors overnight for the cost of the capital being disposed of at any cost (nobody would like to pay for the money to have money), I mean unload the debt to the consumers to pay for it.
If the loans cost the consumers 4% plus negative -2% it will cost the borrowers 6%, ouch!
Anonymous
Anonymous   |     |   Comment #5
We can imagine literally anything, - pigs that fly, intelligent and articulate DA posters, - anything.

It's wild speculation to simply assume negative interest rates are a foregone conclusion in the US before long, - let alone -2% (4 times greater than what any Central Bank has instituted up to now). 

You need to relax your apocalyptic projections and just wait to see how things unfold.

BTW, what kind of loan are you benchmarking at 4% with a Federal Funds rate of -2%?
Anonymous
Anonymous   |     |   Comment #7
The FED will probably not go NIRP but, if they did, it would be small and affect bank deposits with the FED. Debtors and Savers would see lower interest rates. How about 0% on balances below 50K and a whopping .02% for balances 50K-100K. Over 100K deposit and we'll pay you .05%. We can offer you a jumbo 10-year CD for 1.5%.

NIRP is goosing the banks to goose consumers to buy more stuff. It's stupid, but that's how bad it's become.
Anonymous
Anonymous   |     |   Comment #8
I forgot. The NIRP home loan special is now 3%, no money down and no points!
Anonymous
Anonymous   |     |   Comment #2
surprised it wasn't valor. 
Anonymous
Anonymous   |     |   Comment #6
It might well have been had they not taken the action they did in eliminating the insane unlimited add-on.
Anonymous
Anonymous   |     |   Comment #9
it should be as its just a matter of time and taxpayers shouldn't foot the bill for their incompetence
Anonymous
Anonymous   |     |   Comment #10
And, therefore everyone including deposit holders lose?  That is not the current system of safeguards!  Prohibiting any/officers from future positions in the industry, etc. will stop it, if not, the non-payment of postemployment benefits!