The fourth bank failure of 2016 occurred on Friday. The Woodbury Banking Company in Georgia was closed by state regulators, and the FDIC arranged for United Bank to assume all of the deposits. The Woodbury Banking Company was small with only one branch and $21 million in deposits.
The last bank failure was on May 6th. The trend of fewer bank failures continues. Last year only eight banks failed. In recent times, 2010 had the most bank failures (157). Each year after 2010, fewer banks have failed.
The closure of The Woodbury Banking Company 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 United Bank.
All deposits were transferred to United Bank including brokered deposits. For many past closures, the FDIC mentioned in its Q&A that certain brokered deposits were excluded in the assumption agreement. If brokered deposits are excluded, customers with brokered deposits that exceed deposit insurance limits will be at risk of losing their uninsured deposits.
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, August 19, 2016 will be paid at your same rate. The Woodbury Banking Company’s rates will be reviewed by United 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 United Bank.
There have been no credit union liquidations since April. Also, the NCUA hasn’t placed any credit unions into conservatorship since February. However, a state regulator has just placed a state-chartered credit union into conservatorship. The Michigan Department of Insurance and Financial Services (DIFS) placed Valley State Credit Union into conservatorship. According to DIFS’s press release:
As the appointed conservator, DIFS will assume control of Valley State Credit Union in order to ensure its financial stability and safe and sound operation. DIFS and the NCUA will work together to address issues related to the credit union’s operations and financial condition while maintaining member services.
This is the first time I can remember that a state regulator not only placed the credit union into conservatorship but also appointed itself as the conservator. Typically, the state regulator appoints the NCUA as the conservator. This was the case with another Michigan credit union that was conserved in January.
Members’ uninsured deposits are not at immediate risk when a credit union is placed into conservatorship. However, a conserved credit union is much more likely to be liquidated, so it behooves members to make sure all of their deposits are under the insurance limits.
One well-known credit union hasn’t gone into conservatorship, but news did come out that showed the credit union is having serious financial problems. Last week, the Credit Union Times reported that the NCUA has designated Melrose Credit Union as undercapitalized. News of growing financial problems at Melrose started last year due to Melrose’s large exposure to the New York City taxi industry. The taxis industry has been hurt by the ridesharing services like Uber. According to the Credit Union Times:
The undercapitalization places Melrose into prompt corrective action and requires it to submit a net worth restoration plan to the NCUA within 45 days as of July 31, according to the agency’s regulations.
Before 2015 and the downturn of the taxi industry, Melrose was financially strong.
Below is the summary of Friday’s bank failure:
4th Bank Failure of 2016 (1st in Georgia) (August 19)
- Closed Bank: The Woodbury Banking Company
- FDIC Press Release
- Size: 1 branch, $21.4 million in assets and $21.1 million in deposits
- Acquiring Bank: United Bank, Zebulon, Georgia
- Possible Uninsured Deposits: all deposit accounts, including brokered deposits, has been assumed by United Bank (FDIC Q&A)
- Rate Changes: rates will be reviewed by United Bank and may be lowered (FDIC Q&A)
- Estimated Cost to Deposit Insurance Fund: $5.2 million
- Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, F & Texas Ratio of 292% at DepositAccounts.com (see financial rating note)
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 March 31, 2016 data. Ratings at Bankrate.com are based on December 31, 2015 data.
- FDIC list of failed banks
- NCUA list of failed credit unions
- Evaluate the Financial Health of Your Bank or Credit Union
- Latest FDIC info on deposit insurance
- My bank failure review posts
- Review of the 2015 bank and credit union failures
- Review of the 2014 bank and credit union failures
- Review of the 2013 bank and credit union failures
- Review of the 2012 bank and credit union failures
- Review of the 2011 bank and credit union failures
- Review of the 2010 bank and credit union failures
- 10 Lessons from the 2008 bank failures