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Credit Unions Keeping Pace With Bank Failures

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There have been just as many credit union failures so far this year as bank failures — though the credit unions tend to be much smaller than the banks. Credit union losses, however, are being tempered by recoveries from bad mortgage securities.

The Arizona Department of Financial Institutions closed down Gold Canyon Bank on Friday. The seven-year-old bank had just a dozen employees.

Included in Gold Canyon’s $45 million in total assets as of Dec. 31, 2012, were $8 million in home loans, $12 million in commercial real estate assets and $2 million in construction-and-development loans. Total deposits stood at $44 million.

The state handed over the Gold Canyon, Ariz., bank to the Federal Deposit Insurance Corp. as receiver. Following a secret bidding process, First Scottsdale Bank, N.A., won its bid to acquire all Gold Canyon’s assets and assume all the deposits. The agreement between the FDIC and First Scottsdale came at an estimated tab of $11 million to the FDIC.

The failed bank entered a written agreement with the Federal Reserve Bank of San Francisco and state regulators in January 2012, while the Fed issued a prompt corrective action in August 2012.

Gold Canyon was the fifth FDIC-insured bank to fail so far in 2013.

First Place Financial Corp., which filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the District of Delaware back in October, reported in a filing with the Securities and Exchange Commission that it filed a motion to convert the bankruptcy to a Chapter 7 liquidation. The motion was granted the motion on March 25.

First Place sold its primary asset, First Place Bank, to Talmer Bancorp Inc. on Oct. 26, 2012, for $45 million. Talmer agreed to pour as much as $205 million into a bank recapitalization.

On March 15, the National Credit Union Administration reported that it liquidated Pepsi Cola Federal Credit Union. The decision to close the Buena Park, Calif., financial institution followed a determination that 558-member credit union was insolvent and had no prospect for restoring viable operations. There were just $0.7 million in assets at the 57-year-old firm.

I.C.E. Federal Credit Union was liquidated by the NCUA on the same day. The Inglewood Calif., credit union had just 942 members and $3.4 million in assets. It was originally chartered in 1939 to serve employees of the City of Inglewood and their immediate family members.

On March 20, the NCUA said that Kinecta Federal Credit Union agreed to assume the assets and deposits of I.C.E. — the fifth credit union failure tracked so far in 2013 by Mortgage Daily.

Projected losses as a result of the failed corporate credit unions are expected to be between $1.6 billion and $3.9 billion, according to a March 28 estimate from the NCUA. The projected assessments, which are associated with the Temporary Corporate Credit Union Stabilization Fund, have improved from the $1.9 billion to $4.8 billion in losses projected six months earlier.

“The narrower range of projected remaining assessments reflects the actual performance of the failed corporate credit unions’ legacy assets to date and NCUA’s updated evaluation of the macroeconomic factors used in projecting the future performance of NCUA guaranteed notes,” the regulator’s statement said. “Factors influencing the estimated range include changes in housing prices, interest rates, unemployment rates and mortgage prepayments.”

Among previously announced corporate credit unions to fail are U.S. Central Federal Credit Union and Western Corporate Federal Credit Union — both which were seized by the NCUA in March 2009.

On April 2, the NCUA reported that it settled with Bank of America and some of its subsidiaries alleged losses on residential mortgage-backed securities acquired by the failed corporate credit unions.

Including settlements NCUA has reached with Citigroup, Deutsche Bank Securities and HSBC — $171 million has been recovered from alleged RMBS losses at the corporate credit unions. Lawsuits are still pending against several other investment banking firms.

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