Magazine article American Banker

Regulator's Talk of Closure Sparks Run on Iowa Bank

Magazine article American Banker

Regulator's Talk of Closure Sparks Run on Iowa Bank

Article excerpt

CHICAGO -- In a run apparently touched off in part by remarks made by the state's top regular, depositors at the Farmers State Bank of Massena, Iowa, withdrew about $50,000 in the hours before officials were to close the bank last week.

The run drained cash on hand at the bank to about $5,000 and forced regulators to close the bank several hours ahead of schedule. It was an accumulation of bad loans, not the deposit withdrawals, that caused the bank to fail, officials said.

Howard Hall, the Iowa deputy superintendent of banking, said that because of the cash withdrawals it was evident the bank would need additional cash before 3 p.m. Friday, when regulators had planned to close the bank. "We were planning to close the bank anyway, so we just moved up the time to 10:30 in the morning," he said.

The deposit run apparently was sparked in part by remarks made by Thomas Huston, the Iowa superintendent of banking, at a conference in Chicago last Thursday. Mr. Huston said then that he would be closing a bank the next day. Mr. Huston also said then that he would close another bank today.

Wednesday, regulators said they were watching for signs of a deposit run at the bank that Mr. Huston has said will be closed today. The closing would bring to six the number of state-chartered banks shut down this year in Iowa. One nationally chartered bank was also closed in the state this year.

In his comments last week, Mr. Huston did not identify the banks that he said would be closed or the towns where the banks are located. …

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