Tiny bank’s failure is first since 2017, ending nearly 18-month streak for deposit insurer

The bank failure announced Friday by the federal insurer of bank deposits – the first of the year – was for a relatively small institution: It held less than $37 million in assets.

But the news of the bank’s demise was nonetheless a big story: It was not only the first bank failure of 2019, it was also the first bank failure in nearly a year-and-a-half. Could this be the start of a new trend? At least recent history indicates that’s possible.

Enloe State Bank of Cooper, Texas, was closed Friday by the Texas Department of Banking, with the Federal Deposit Insurance Corp. (FDIC) announced as the receiver. Depositors, the FDIC noted, should see no interruption of the insured status of their savings. FDIC entered into a purchase and assumption agreement with Legend Bank, N.A., Bowie, Texas, to assume the insured deposits of The Enloe State Bank, the regulator said.

The agency said the only office of The Enloe State Bank will reopen as a branch of Legend Bank, N.A., during its normal business hours starting Monday. Depositors of the failed bank will automatically become depositors of Legend Bank, N.A.

But the failure of the tiny bank (the first since the Office of the Comptroller of the Currency [OCC] announced the closure of Washington Federal Bank for Savings, Chicago) will likely become a bellwether for those who keep tabs on the trends in bank failures.

Last year was the first since 2006 in which no bank failures were recorded by the deposit insurer (there were also no failures in 2005, according to the FDIC). However, 13 years ago was also the last year before the financial crisis began to ramp up. Within three years (by 2009), the agency reported 168 bank failures – and 157 alone in 2010, the peak of failures during the financial crisis.

In 2017, the last year of reported bank failures, a total of eight banks closed their doors. In the 10-year period 2007-2017, there were 529 insured-institution failures, according to FDIC records. Most of those (468) occurred between 2008-12.

Legend Bank, N.A., Bowie, Texas, Acquires the Insured Deposits of The Enloe State Bank, Cooper, Texas