National Cooperative Bank

Where did you read that it's in trouble?

The Fitch report below is old news, and there is very little official coverage. My understanding from talking to people who know more than I about banking but don't cover this bank specifically, if it were a normal bank it would have been given up for dead by now. Clearly, it's not a normal bank. I'm just wondering if anyone has any insight beyond that....

Fitch Downgrades National Consumer Co-op Bank's L-T IDR to 'CCC'
2011-04-26 19:43:15.945 GMT

FITCH DOWNGRADES NATIONAL CONSUMER COOPERATIVE BANK'S L-T IDR TO 'CCC'; REMOVES WATCH NEGATIVE

Fitch Ratings-New York-26 April 2011: Fitch Ratings has downgraded the long-term Issuer Default Rating of National Consumer Cooperative Bank (NCCB) to 'CCC' from 'B-' and affirmed the long-term IDR of NSB, FSB (FSB) at 'B'. The Ratings are removed from Rating Watch Negative. A full rating list follows this release.

Fitch had maintained NCCB's ratings on Rating Watch Negative in Sept 2010 in order to assess the company's ability to address covenant violations related to the revolving credit facility and senior note agreement coupled with a deferral of its $24 million amortization payment of subordinated Class A notes to the Treasury. The resolution of the rating watch follows the considerable steps the company has taken, primarily via asset sales, to raise liquidity and repay amounts due entirely under the revolving credit facility and senior note agreement, as well as make the amortization payment of subordinated Class A notes.

Although Fitch acknowledges the progress the company has made in addressing these acute issues, nonetheless, Fitch's downgrade of NCCB incorporates the view that parent company liquidity will remain pressured. NCCB remains subject to a cease and desist (C&D) agreement with the Office of Thrift Supervision (soon to become OCC), which prohibits dividends from FSB to NCCB without OTS approval.
Until and unless the C&D is lifted, NCCB will be challenged to repay the $75 million Temporary Liquidity Guarantee Program (TLGP) borrowings, the first $25 million of which come due in February 2012, with the remainder maturing in May 2012. At present, Fitch estimates that at year-end 2010, the parent company has approximately $53 million in cash along with over $222 million of loans. As such, Fitch believes that NCCB would need to raise additional funds in order to cover debt and operating expenses.

NCCB and FSB remain subject to supervisory agreements with the OTS, and have submitted business plans, as required under the regulatory orders, and are presently operating consistent with those plans. Further, FSB's current capital ratios continue to exceed regulatory requirements. As NCCB is technically a government sponsored enterprise, it is not subject to minimum regulatory capital levels.

The affirmation of the bank at 'B' reflects the relative performance of FSB to the parent and maintenance of adequate capital levels consistent with the risk profile and ratings. Although FSB has been profitable, Fitch is concerned with depositor concentrations at the thrift, with one depositor accounting for approximately 10% of total deposits. This is mitigated by the fact that the deposits associated with this depositor are insured by the FDIC in the light of pass-through insurance and laddered CD maturities with early withdrawal penalties.

The current ratings also reflect the expectation that near-term operating performance will remain constrained as impaired loans continue to be a drag on earnings. Asset quality remains challenged and many middle market businesses in the healthcare, franchise, and hardware markets are still facing financial difficulties. Fitch expects NCCB's overall portfolio to continue to shrink, thus reducing net interest income further.

Further negative rating actions could result if Fitch believes that NCCB is unable to upstream dividends from FSB or put in place alternative plans to address TLGP debt maturities in 2012 or remain in compliance with supervisory agreements. Positive rating momentum will be constricted until C&D is lifted and the company is able to bring down the absolute level of non-performing assets.

In accordance with Fitch's policies the issuer appealed and provided additional information to Fitch that resulted in a rating action which is different than the original rating committee outcome.

Fitch has downgraded the following ratings:

National Consumer Cooperative Bank

--Long-term IDR to 'CCC' from 'B-';

--Short-term IDR to 'C' from 'B';

Fitch withdrew coverage, I believe, so there's nothing new.

http://www.businesswire.com/news/home/20111018007152/en/Fitch-Affirms-Withdraws-National-Consumer-Cooperative-Banks

As far as I know, NCB is the only major lender for small co-op underlying mortgages, and the only lender willing to go out longer than 5-7 years for smaller buildings. The loss of NCB would probably tighten the co-op underlying mortgage market quite a bit and probably make underlying mortgages even more impossible to pay off.

My dealings with NCB have been pleasant, if bureaucratic.

That's my fear. Can't figure out if it's a reasonable fear.

When I shopped our underlying coop mortgage last year, I only found 4 banks willing to underwrite it, of which NCB was one, so the loss of NCB would be troubling in an already small marketplace.

As I said, I think it may be govt guaranteed like Fannie Mae,so it may not be able to fail. I just don't know, thought maybe someone might. I don't want to worry people needlessly.

REMom, how hard is it to get the underlying refinanced, presuming the coop has paid only the interest? Did you have prove sufficient reserves, etc.? Were banks other than NCB more skeptical or demanding?

I am the director of marketing and communications for NCB. I wanted to clarify some of the information above. National Consumer Cooperative Bank is a traditional bank holding company that is cooperatively owned by 2600 of our customers (housing coops and commercial coops). All banking products and services are offered through our thrift subsidiary NCB,FSB not NCCB. Last year, NCBFSB provided over $840 million to housing cooperatives nationwide. Of the $840 million, $654 was for underlying mortgages mainly in New York. NCB has very strong marketshare in the cooperative housing market. If you would like more information on NCB, please visit our website www.ncb.coop. All updated financial information can be found at fdic.gov.