For just the third time in three decades, the Nebraska Department of Banking and Finance has closed a troubled state-chartered bank.
The department announced it closed Ericson State Bank at 4 p.m. Friday because it was insolvent, following the bank's demand for a capital injection that went unmet.
“The failure of Ericson State Bank resulted primarily from large out-of-territory commercial loan losses and poor management practices, which led to a deterioration of the bank’s capital," Banking Department Director Mark Quandahl said in a news release. "When the capital was not replenished, the department was left with no option but to place the insolvent institution in receivership."
The Federal Deposit Insurance Corporation has been named the receiver of the bank and has entered into a purchase and assumption agreement with Farmers and Merchants Bank, which is based in Milford. The sole branch of Ericson State Bank, in the Wheeler County village of Ericson, will reopen Tuesday under that name.
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No state-chartered bank had been closed by the state since 2011, when Omaha-based Mid City Bank was declared insolvent. Only one other bank — Sherman County Bank in Loup City in 2009 — has been shuttered since 1989.
Late last year, Ericson State Bank agreed to a consent order with the FDIC regarding financial troubles at the bank. In November, Eagle State Bank of Eagle and Tri Valley Bank of Talmage announced plans to merge and purchase the bank's assets.
Ericson State Bank was chartered in 1959 and had total assets of roughly $100.9 million and deposits of approximately $95.2 million on Dec. 31, 2019, according to the state.