Wednesday, June 30, 2010

Should anyone care about small bank failures?

By Marcie Geffner · Bankrate.com
Wednesday, June 30
Posted: 9 am ET
The Federal Deposit Insurance Corp., or FDIC, has closed 86 U.S. banks this year, three in the last full week of June.
The biggest and most costly failures naturally get the most attention. Here, in Los Angeles, one biggie that failed earlier this year was First Regional Bank, which cost the Deposit Insurance Fund a whopping $825 million.
The recent failures were much smaller. High Desert State Bank in Albuquerque, N.M., which closed June 25, had approximately $80 million in assets and $81 million in deposits, according to an FDIC statement. Its failure will cost the Deposit Insurance Fund approximately $21 million -- not a pittance, to be sure, but a much smaller sum than $825 million.
High Desert State’s customers needn’t worry about their accounts since First American Bank in Artesia, N.M., signed an agreement with the FDIC to assume all of High Desert State’s deposits, take over High Desert State’s two branches and continue High Desert State’s banking relationships with its customers.
High Desert State was the second FDIC-insured institution in New Mexico to fail this year. The first was Charter Bank in Santa Fe, which failed in January.
Those facts and numbers, interesting as they are, don’t tell us anything about the personal stories of High Desert State Bank. Who worked there? Why did the bank fail? How will the experience of being an employee of a failed bank change the lives of the branch managers and bank tellers?
A local newspaper clipping mentions only one person by name: CEO Doug Lutz. Where is he now? And how does he feel about what happened to his bank on his watch?
The High Desert State Bank website, assuming there was one, is gone along with, again presumably, the sign on the door, letterhead, business cards and other paraphernalia that signified whatever the bank meant to its employees and customers.
Should anyone care about the fate of this small institution with its two branches? Or was High Desert State Bank just another random casualty of our economic times?