Two Corporate Credit Unions Go Into Conservatorship; Three Banks Fail

Posted by Orb Staff on March 24, 2009 No Comments
Categories : Mortgage Servicing

Last week, two corporate credit unions were placed into conservatorship by the National Credit Union Administration (NCUA) Board, and three banks were closed by regulators.

U.S. Central Federal Credit Union of Lenexa, Kan., and Western Corporate (WesCorp) Federal Credit Union of San Dimas, Calif., were placed into conservatorship to stabilize the corporate credit union system and resolve balance sheet issues, the NCUA says.

Colorado National Bank of Colorado Springs, Colo., and Teambank NA, of Paola, Kan., meanwhile, were closed by the Office of the Comptroller of the Currency, and FirstCity Bank of Stockbridge, Ga., was closed by the Georgia Department of Banking and Finance. The Federal Deposit Insurance Corp. (FDIC) was appointed receiver for all three banks.

Under the Federal Credit Union Act, the NCUA Board is authorized to appoint itself conservator when necessary to conserve the assets of a federally insured credit union, preserve member assets and protect the National Credit Union Share Insurance Fund (NCUSIF).

Corporate credit unions do not serve consumers. They are chartered to provide products and services to the credit union system. The NCUA says its actions have no direct impact on the credit unions' products and services.

The conservatorships follow analyses and stress tests performed by NCUA staff on the mortgage- and asset-backed securities held by all corporate credit unions, including U.S. Central and WesCorp. Specifically, this review determined that an unacceptably high concentration of risk resided only in the two conserved corporate credit unions.

Securities held by U.S. Central and WesCorp deteriorated further since late January 2009, contributing to diminished liquidity and payment system capacities, as well as further loss of confidence by member credit unions and other stakeholders, according to the NCUA.

U.S. Central has approximately $34 billion in assets and 26 retail corporate credit union members. WesCorp has $23 billion in assets and approximately 1,100 retail credit union members. The member accounts of both credit unions are guaranteed under provisions of the previously announced NCUA Share Guarantee Program through Dec. 31, 2010. The program extends NCUSIF coverage to all funds held by the two corporate credit unions.

The FDIC reports that it entered into purchase and assumption agreements with Herring Bank of Amarillo, Texas, and Great Southern Bank of Springfield, Mo., to assume all of the deposits of Colorado National and Teambank, respectively.

The FDIC and Herring Bank entered into a loss-share transaction, where the FDIC will share 80%/20% in the losses with Herring Bank on approximately $62 million in assets covered under the agreement. The loss-sharing arrangement is projected to maximize returns on the covered assets and minimize disruptions for loan customers. The FDIC and Great Southern Bank entered into a similar 80%/20% share agreement on approximately $450 million in assets.

For FirstCity, deposits from the federal government, such as Social Security and veterans' payments, will be transferred to SunTrust Bank, the FDIC says. The three bank closings bring the total number of FDIC-insured institution failures this year to 20.

SOURCES: FDIC, NCUA

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