First U.S. banking failure since late 2017 occurs in Texas over the weekend

Federal banking regulators took over the first U.S. bank to fail in nearly 18 months when the Texas Department of Banking closed the doors to the Enloe State Bank in Cooper, Texas, on Friday (May 31).

The Federal Deposit Insurance Corp. (FDIC) was then appointed as the receiver and entered into a purchase and assumption agreement with Legend Bank N.A., in Bowie, Texas, to assume the insured deposits of the smaller bank. FDIC officials said the only office of The Enloe State Bank will reopen as a branch of Legend Bank during their normal business hours starting Monday (June 3).

Enloe depositors will automatically become Legend Bank customers. Deposits assumed by larger Texas bank will continue to be insured by the FDIC, “so there is no need for customers to change their banking relationship to retain their deposit insurance coverage,” officials said.

As of March 31, Enloe had total assets of $36.7 million and total deposits of $31.3 million, of which there were nearly $500,000 that exceeded FDIC insurance limits. This estimate is likely to change once the FDIC obtains additional information from these customers. Legend Bank has agreed to assume the insured deposits for a 0.51% premium. It will also purchase approximately $5.2 million of the failed bank’s assets, while the FDIC will retain the remaining assets for later disposition.

The FDIC preliminarily estimates that the failure will cost its Deposit Insurance Fund about $27 million, which will change over time as the assets are sold.

Enloe is the first bank to fail in the nation this year. The last bank failure was Washington Federal Bank for Savings in Chicago, Ill., on December 15, 2017.

RECESSION AFTERMATH
The number of U.S. bank failures peaked in the years following the Great Recession. Although there were only 25 bank failures in 2008, the total asset volume peaked at $375.6 billion due to several large financial institutions going bankrupt. That year included the largest bank failure in history when Washington Mutual was closed with assets of $307 billion. The assets of the Henderson, Nev.-based bank was purchased by JPMorgan Chase for $1.9 billion.

In 2009 and 2010, there were 140 and 157 banks, respectively, that entered FDIC receivership. However, the total asset volume in those years fell to $170.9 billion in 2009 and $96.5 billion the next year. The number of failed banks dwindled to less than ten from 2015 to 2017, and zero in 2018.

During the height of the nation’s post-recession banking crisis between 2009-2012, Arkansas’ four largest banks participated in more than 110 auctions conducted by the FDIC seeking to purchase distressed banks with assets exceeding $52 billion in more than a dozen states, according to an analysis of the FDIC’s “Failed Bank” bid summaries by Talk Business & Politics.

Of the 525 banks that have landed on the notorious list over the past decade, Arvest, Bank OZK, Simmons First National and Home Bancshares have submitted 20 winning bids that have collectively added $7.75 billion in assets and more than $7 billion in new deposits to their financial portfolios, the analysis shows.

Arkansas also has the distinction of having the last U.S. bank seized at the end of 2016 when the Arkansas State Bank Department took possession of Mulberry-based Allied Bank and entered into an agreement with the FDIC and Huntsville-based Today’s Bank to acquire all of the troubled bank’s assets and deposits, which amounted to $66 million and $65 million, respectively.