Capital Briefs: New Mexico Shuts Undercapitalized Bank

State regulators shut down $16.8 million-asset Zia New Mexico Bank on Friday; it was the second bank to fail this year.

Based in Tucumcari, the two-branch bank was reopened Monday as part of $48 million-asset First National Bank of New Mexico in Clayton. First National paid the Federal Deposit Insurance Corp. a $375,000 premium for all of Zia's $16.8 million of deposits and for $6 million of its assets. The FDIC estimated the failure would cost the Bank Insurance Fund $1.6 million.

William J. Verant, New Mexico's director of financial institutions, said Zia's capital had fallen below 1% of its assets. In addition, he said, a number of loans the bank had made outside its operating area had gone sour.

"Zia has been struggling for a number of years," Mr. Verant said. "In the end, they just could not get enough capital to support and expand it."

The bank was hit by several enforcement actions recently. In February the state issued a cease-and-desist order, citing low capital and poor management. In January the Federal Reserve Board ordered the bank to increase its equity, cut the interest rate offered on deposits, and limit the size of bonuses paid to senior officers.

A December order from the Fed had cited the bank for inadequate year- 2000 preparations, but Mr. Verant said the bank's closure had to do with inadequate capital, not the year-2000 problem.

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