How high 21.8% is can be gauged from the fact that the three others companies for whom provisions were recommended were South Canterbury Finance with a capital ratio of a mere 0.69%, Allied Nationwide with just 0.12% and Mutual Finance at 6.36%.

What differentiates this company, believed to be FE Investments, is its asset quality which stood at 65.2% compared with South Canterbury 55.6% the next worst in the list, and liquidity ratio of 0.38 which was the least with South Canterbury the next worst again at 0.40. Asset quality is defined as impaired plus past due loans plus 75% cap interest plus 50% restructured loans as a percentage of total loans.

Treasury had placed the expected default date for the failure at September. The company, however, managed to survive through the guarantee expiry period but no longer has the cover from the Crown through the extended guarantee scheme.

As at August 2010, FE had deposits of $4.47 million representing 52% of its total assets and based on estimated loan repayments the company believes it needs to raise minimum monthly deposits of $120,000 for the next 12 months to meet liquidity requirements.  FE's average deposit inflow from April-August was $161,860, but it must be noted that this amount was received when the company was still under the guarantee cover.

FE's most significant risk is that it may not be able to recover loans in full from its borrowers. At the end of July, the company had various legal proceedings seeking repayment of loans and expected the recovery amount to be $2.9 million. This compares with the total loan book of the company at around $12.7 million in March, including impaired, overdue and restructured loans.

In July, FE was in breach of the Trust Deed's single party exposure limit but since this was caused due to reduction in total assets and not because of deliberately making loans in excess of the limit, trustee Perpetual Trust advised it will not take further action. Such exposure comprised of four loans totalling $5.27 million representing 61% of total assets.

FE currently offers the best rates for deposits at 10% for a 12-month term and for deposits over $5,000. For 9-month deposits, FE is offering 8%.