In September, regulators seized the largest institution to be closed in over three years, the $3.1 billion-asset First National Bank in Edinburg, Texas, throwing cold water on the idea that only the smallest banks are vulnerable now to failure.
The Office of the Comptroller of the Currency shuttered First National after eight straight quarters of reported losses for the bank. It failed the same day as The Community's Bank, a $26 million-asset institution in Bridgeport, Conn.
First National was sold by the Federal Deposit Insurance Corp. in a deal estimated to cost $637 million to the Deposit Insurance Fund. It was the largest failure since April 30, 2010, when the FDIC seized both Westernbank Puerto Rico and R-G Premier Bank of Puerto Rico, with asset sizes of $8.6 billion and $4.2 billion, respectively.
Of the 22 banks to fail this year through September, only First National had more than $1 billion in assets. (The last $1 billion-plus failure was Tennessee Commerce Bank, in January 2012.)
First National and its parent had operated under regulatory enforcement actions as far back as 2011, and earlier this year the bank had announced plans to consider "strategic alternatives." It had a core capital ratio of 1.96 percent as of the end of the second quarter.
PlainsCapital Bank in Dallas agreed to assume all of First National's $2.3 billion in deposits and to acquire about $2.7 billion of its assets. The FDIC agreed to share losses on $1.8 billion of First National's assets. Regulators were unable to find a buyer for the smaller bank that failed the same day. The FDIC said it would mail a check for only the insured deposits of customers of The Community's Bank. Connecticut's first failed bank in 11 years had nearly $26 million in total deposits. The failure was estimated to cost $7.8 million to the DIF.