Bank of Clark County, which failed last month, was in worse shape than it appeared in 2008. The failed bank’s Chief Lending Officer, in a plea statement entered in federal court last Friday, hinted at a plan among bank employees to misrepresent the value of real estate development projects that were the subject of loans from the bank, going back at least to early 2008. The statement also reveals that the bank already knew at that point that its future was in doubt and had started seeking a buyer, a process that ultimately failed.
FDIC-insured banks made an aggregate profit of less than $1 billion in the fourth quarter. Without the run-up in the stock markets, banks’ collective losses would have been substantial. Asset quality deteriorated. That is a trend that will continue at least until the real estate market stabilizes. A positive note from the quarterly results, though, is that more than two out of three banks are still making a profit.
Bank of America may have drained more than $1 billion from its customers’ accounts through its affiliation with a subscription service called “Privacy Assist,” an estimate based on details provided in a class-action lawsuit filed in federal court last week. The lawsuit claims that Bank of America enrolled customers in the subscription without their consent and refused to assist customers who had not ordered the service in canceling it. Bank of America has been telling customers who have inquired that it is not affiliated with the service. More recently, it has been telling reporters that it is proud of its affiliation with Privacy Assist, but it is not the provider of the service. However, Bank of America hosts the web site for the service, and press releases found on the Bank of America web site indicate that the service is provided by its FIA Card Services subsidiary.
Washington state bank regulators closed Rainier Pacific Bank, which had 14 offices in the Tacoma area and $446 million in deposits. Umpqua Bank, already one of the biggest names in banking in the area, becomes bigger with the acquisition of the offices and deposits and 93 percent of the assets.
The failed bank had formerly been organized as a credit union, and it expanded aggressively after its conversion to a bank holding company in 2003. Over the next three years, it spent millions of dollars on new offices, computer software, and two insurance companies. It was that pattern of heavy spending and a business plan based on high operating costs, more than the subsequent loan losses, that led to the bank’s failure.
The state of Nevada closed Carson River Community Bank tonight. The bank had $50 million in deposits at one location in Carson City. The deposits are being transferred to Heritage Bank of Nevada, which is also buying three fourths of the assets.
The two bank closings tonight are estimated to cost the FDIC $103 million.
The NCUA liquidated two credit unions this week. Yesterday, it was Friendship Community Federal Credit Union, in northwestern Mississippi, which had 685 members and less than $1 million in assets. Membership accounts were transferred to Shreveport Federal Credit Union. Today, it was Mutual Diversified Employees Federal Credit Union, in Santa Ana, California. It had 748 members and $6 million in assets. Membership accounts are being transferred to SchoolsFirst Federal Credit Union.