RISKY CDO INVESTMENTS LEADS TO DEMISE OF CU-CONVERT RAINIER PACIFIC BANK


Credit Union Times   March 1, 2010


TACOMA, Wash. – State regulators on Friday shut down credit union-convert Rainier Pacific Bank and assigned its customer accounts to Oregon’s Umpqua Bank after ill-fated investments in risky collateralized debt obligations, known as CDOs, went bad.

Rainier Pacific, chartered in 1933 as Tacoma Teachers CU and known until 2001 as Rainier Pacific CU, lost $14 million in 2008 and almost $70 million in 2009 after CDOs, valued at $108.8 million, were written down all the way to just $17.1 million, wiping out its capital.

The FDIC estimated the failure of Rainier Pacific, which had $720 million in assets, will cost it $95.2 million.

The one-time credit union was one of two banks shut down Friday, the traditional day for bank closures. The other was Carson River Community Bank of Reno, Nev.

Rainier Pacific's parent company, Rainier Pacific Financial Group, went public in October 2005 at $10 a share as part of the credit union-convert’s demutualization. On Friday, those shares closed at 18.3 cents.

Washington’s banks have become increasingly exposed to the souring economy. Last month, regulators seized three Washington banks: Evergreen Bank, Horizon Bank of Bellingham and American Marine Bank of Bainbridge Island.


© 2007, Used with permission from The Credit Union Times. All rights reserved.


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