- The Nebraska Department of Banking and Finance (NDBF) closed Ericson State Bank on Friday, the first U.S. bank failure of 2020.
- Farmers and Merchants Bank of Milford, Nebraska, agreed to purchase $9.6 million of Ericson’s $100.9 million in assets and assume all of its $95.2 million in deposits, said the Federal Deposit Insurance Corp. (FDIC), which was named receiver. The agency said it would retain the bank’s remaining assets for later disposition.
- Ericson’s sole branch was set to reopen Tuesday under the Farmers and Merchants name.
Ericson State Bank received consent orders in October from both the FDIC and the NDBF. The federal agency ordered Ericson to take more than a dozen corrective actions, including naming a new CEO, devising a one-year and a three-year strategic plan to return to solvency, and adding at least two independent board members.
The state regulator’s order required the bank’s president, Jack Poulsen, and IT officer and loan secretary, Debra Poulsen, to resign from the bank and its board. The NDBF also ordered Jack Poulsen to surrender his executive officer's license for cancellation with prejudice.
The state regulator said it learned that Jack Poulsen had personally made, or was directly responsible for, many loans, lines of credit and overdrafts that violated the law.
Two other Nebraska banks, Eagle State Bank of Eagle, and Tri Valley Bank of Talmage, announced a three-way merger with Ericson in November that never went through.
"Whatever they may have had in the works is now off," a FDIC spokesperson said Friday, according to American Banker.
The bank’s failure is expected to cost the Deposit Insurance Fund $14.1 million. The shutdown marks the first bank failure in the U.S. since October and November, when, in the span of a week, City National Bank of New Jersey, Louisa Community Bank in Kentucky and Resolute Bank in Ohio all shuttered.
"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," the NDBF’s director, Mark Quandahl, said in a statement Friday. "When the capital was not replenished, the Department was left with no option but to place the insolvent institution in receivership."
Ericson had been hit with a previous FDIC consent order in June 2010. The bank fulfilled the requirements, and the order was canceled in 2012.