The first bank failure in 2020 will cost the federal deposit insurance fund an estimated $14.1 million, the agency overseeing the fund said late last week.
In a release Friday, the Federal Deposit Insurance Corp. (FDIC) said the Nebraska Department of Banking and Finance had closed Ericson State Bank, a $100.9 million institution in Ericson, Neb. The FDIC was appointed the receiver.
According to the agency, Farmers and Merchants Bank in Milford, Neb., will assume the bank’s $95.2 million in deposits and will purchase about $9.6 million of Ericson State Bank’s assets. The remaining $91.3 million of assets will be retained by the FDIC for “later disposition,” the agency said.
The FDIC said that, compared to other alternatives, the acquisition by Farmers and Merchants Bank’s acquisition was the least costly resolution for its deposit insurance fund (DIF).
Last month, the FDIC issued a Financial Institution Letter (FIL) outlining challenges facing agricultural lenders from the combined effects of tariff uncertainty, bad weather and low prices. The letter urged banks and other insured institutions to engage in “sound underwriting standards, strong credit administration practices, effective risk management strategies, and appropriate allowances for losses and capital levels through the credit cycle.”
According to the FDIC figures, Ericson State Bank’s assets were equal to about half of the total assets of the four banks that failed in 2019 (for a total of $214.1 million).