As the coronavirus pandemic rapidly swept across the U.S, the two banks failed and shut down by banking authorities. The closure of banks located in West Virginia and the state of Nebraska puts mortgage holders into an unforeseen risk in the near-term.
The Federal Deposit Insurance Corporation (FDIC), an independent agency of the U.S. government, states, “The First State Bank has experienced longstanding capital and asset quality issues, operating with financial difficulties since 2015. The bank’s December 31, 2019, financial reports indicated capital levels were too low to allow continued operations under federal and state law.”
The First State Bank had $139.5 million and $152.4 million in total deposits and assets, respectively, as of December 31, 2019. FDIC announced that the accounts of the failed bank would be taken over by another bank in the state called MVB Bank of Fairmont.
Larry Mazza, MVB’s CEO, says, “MVB Bank’s strong financial position has enabled us to complete this strategic purchase. This acquisition aligns with MVB’s strategy for growth in our core commercial markets in West Virginia and Northern Virginia, which also powers our expanding fintech vertical.”
After the announcement by FDIC, citizens shared their concerns on social channels about the failure of more banks due to the pandemic. The agency claimed again that the collapse of the bank was not because of COVID19. However, the slowdown of the economy owing to this outbreak may increase such cases. In the short-term, the closure of such banks will less likely impact the buyer of a home with a fixed-rate long-term advance.
FDIC explains further, “It strongly encourages bank customers to follow Centers for Disease Control and Prevention guidance on social distancing and utilize online and electronic banking capabilities. In keeping with West Virginia Governor Jim Justice’s Stay-at-Home Order, customers should visit a bank branch only if an in-person visit is essential and only after making an appointment.”
Ericson State Bank in Nebraska is another bank in the U.S to fail during this crisis. It had a single branch and was closed by the Department of Banking & Finance in February.
In this case, Farmers and Merchants Bank in Milford, Nebraska, came into the purchase and assumption agreement and took over the deposits of the failed bank. Ericson State Bank had $95.2 million and $100.9 million in total deposits and assets, respectively, as of December 31, 2019.
In 2019, four other U.S. banks failed before these cases. According to the FDIC report, no other banks failed in 2018.