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Should anyone care about small bank failures?

By Marcie Geffner ·
Wednesday, June 30, 2010
Posted: 9 am ET

The Federal Deposit Insurance Corp., or FDIC, has closed 86 U.S. banks this year, three in the last full week of June.

The biggest and most costly failures naturally get the most attention. Here, in Los Angeles, one biggie that failed earlier this year was First Regional Bank, which cost the Deposit Insurance Fund a whopping $825 million.

The recent failures were much smaller. High Desert State Bank in Albuquerque, N.M., which closed June 25, had approximately $80 million in assets and $81 million in deposits, according to an FDIC statement. Its failure will cost the Deposit Insurance Fund approximately $21 million -- not a pittance, to be sure, but a much smaller sum than $825 million.

High Desert State’s customers needn’t worry about their accounts since First American Bank in Artesia, N.M., signed an agreement with the FDIC to assume all of High Desert State’s deposits, take over High Desert State’s two branches and continue High Desert State’s banking relationships with its customers.

High Desert State was the second FDIC-insured institution in New Mexico to fail this year. The first was Charter Bank in Santa Fe, which failed in January.

Those facts and numbers, interesting as they are, don’t tell us anything about the personal stories of High Desert State Bank. Who worked there? Why did the bank fail? How will the experience of being an employee of a failed bank change the lives of the branch managers and bank tellers?

A local newspaper clipping mentions only one person by name: CEO Doug Lutz. Where is he now? And how does he feel about what happened to his bank on his watch?

The High Desert State Bank website, assuming there was one, is gone along with, again presumably, the sign on the door, letterhead, business cards and other paraphernalia that signified whatever the bank meant to its employees and customers.

Should anyone care about the fate of this small institution with its two branches? Or was High Desert State Bank just another random casualty of our economic times?

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Marcie Geffner
July 29, 2010 at 6:07 pm

Well said. Even the big banks were once small, and small towns certainly need local banking services. Big cities could benefit from more local-oriented banking as well.

June 30, 2010 at 12:29 pm

all of us should care greatly. community banks are and have been for 200 years the fabric of commercial exchange in every town of the US. Wells Fargo, Bank of America, Bank of New York, Chase all started the same way one office in a community that needed to facilitate commerce. These types of banks are the only means that "local" businesses have to reach out for to access the capital they need. What we need are better trained community bankers. BANKALCHEMIST.