With the state facing its worst drought in decades, the Salem Cooperative Bank has been struggling to keep its doors open for the past four years.
Key points:The cooperative’s business is expected to fall by more than a third in two yearsThe bank has raised $20m to date, but only about $4m of that has been usedCommunity care co-op Bank of America, which has $3.8bn in assets, is one of the state’s largest cooperative banks, with a combined assets of $3bn.
It has struggled to survive amid the drought in the state.
The cooperative is set to close after the end of this financial year, and will be liquidated within five years, with the money transferred to another bank, according to a letter from state regulators last month.
It is set for an 80 per cent reduction in staff in 2018-19.
The letter said the bank’s operations were being severely impacted by the drought.
It said the cooperative had experienced a reduction in revenues of $1.3m between July 1, 2017, and December 31, 2017.
The bank was able to borrow $6.2m to cover the shortfall, but had to rely on the Federal Reserve’s Help to Families and Homes program for some of its funding.
It was able, for example, to borrow from the Federal Emergency Management Agency $1m to pay for staff and other costs.
The Cooperative Bank’s financial situation is in dire straits, and the bank has also been struggling with staff shortages, according the letter.
It told ABC Rural that it has not received any of the federal funds that were intended for the cooperative’s operation, and had to borrow money to cover any shortfall in operating funds.
“The financial situation of the cooperative has become precarious,” the letter read.
“Due to our reliance on the Help to Family and Homes Program, our operating revenues were $2.9m lower than expected in 2018, with $2m more expected to be needed by 2019.”
Bank of America told ABC Radio the bank had been unable to meet its debt obligations, and was in dire need of additional resources to meet the bank.
The agency said it was “reviewing the situation”.
The state said it will provide the bank with a $15m grant, as well as $5m from the Rural and Remote Australian Fund, which is funded by the Government and Commonwealth Governments.