How much does it take to get the FDIC to take over a bank?
Last Friday’s FDIC event – the takeover of Ameribank – has given me some thought.
It’s a small bank – it has 8 branches, 112 million in assets and 115 million in deposits.
NPLs were 5 percent June last year. They were 32 percent at year end and 45 percent by June 30 this year.
45% NPLs is what it took to get an FDIC event.
There is much speculation (see WSJ, Calculated Risk etc) that WaMu might be taken over by the FDIC.
Last I looked (ie last quarter) the WaMu NPL over total assets were 3.62 percent, up from 1.29 percent a year ago or 2.17 percent at year end. I am not comparing apples with apples. The NPLs WaMu quotes are against total assets, not total loans – but they are still only in the low 4s.
Now there is plenty of room for NPLs to rise. There are a lot of option ARMs in WaMu’s book –and NPLs have been rising quite consistently and in my view will continue to rise.
But if you take the FDIC on form its not likely to confiscate WaMu soon. It waited more than six months AFTER Ameribank reported 32% NPLs for a takeover.
In the blogosphere I am in a (small) minority of believing that WaMu will probably be OK in the end. I know its gonna get a lot worse. But the FDIC seems to take a lot to act – and I am not sure that that much happens at WaMu.
Then again WaMu might run out funds – and that would force the FDIC hand. So far there is little evidence of that but…