It’s been six years since a bank failed in the state of Arkansas but this trend ended on Friday when state regulators closed Allied Bank in Mulberry, Arkansas. The failure of Allied Bank apparently had no linkage to the health of the overall business environment in Arkansas. According to the Arkansas Banking Commissioner, Candace Franks, “This transaction in no way reflects a weakened condition of the Arkansas banking system…This was the result of poor quality loans and bad business decisions.” The same could probably be said of most banking failures over the past six years.
Although Allied Bank was in business for over a century since its founding in 1902, the bank never gained traction to expand its economic footprint either within Arkansas or nationally. When regulators closed the bank, total assets amounted to only around $66 million.
Allied Bank has been on the rocks for years and one look at its financials makes it clear that the only mystery involving this bank failure was what took regulators so long to close this poorly run enterprise.
The FDIC, appointed as receiver for Allied Bank, sold the failed bank to Today’s Bank, Huntsville, Arkansas, in order to protect depositors. All five branches of Allied Bank will reopen as branches of Today’s Bank and there will be no interruption in FDIC deposit insurance coverage.
Until Allied Bank branches reopen during regular business hours as part of Today’s Bank, depositors of the failed bank can continue to access their funds through the use of checking accounts, ATM machines, and debit cards.
As of June 30, 2016, Allied Bank had total deposits of $64.7 million and total assets of $66.3 million. Today’s Bank agreed to purchase all of Allied Bank’s assets, probably at a large discount and along with a loss share agreement with the FDIC which will limit some or all of future losses on the loan portfolio purchased by Today’s Bank.
The cost to the FDIC Deposit Insurance Fund is estimated at $6.9 million. Allied Bank becomes the fifth banking failure of the year and the first to occur in Arkansas.