State regulators swooped in today to close the Northern Star Bank, Mankato, Minnesota. After closing the Bank, the Minnesota Department of Commerce appointed the FDIC as receiver. The FDIC in turn sold the failed bank to BankVista, Sartell, MN, under a purchase and assumption agreement.
Northern Star Bank has been under regulatory scrutiny for years due to a large amount of troubled loans, operating losses, and inadequate capital. The FDIC issued a Consent Order against Northern Star in February 2011 ordering the Bank to institute procedures and practices to improve operational efficiency and increase capital levels. The FDIC had previously issued a Cease and Desist order against Northern Star on July 24, 2009.
Northern Star Bank was very small with had only two branches and $18.8 million in assets. Depositors of the failed bank will automatically becomes depositors of BankVista with uninterrupted deposit insurance coverage up to the applicable limits.
Over the weekend, customers of Northern Star Bank can access their money through the use of debit cards, checks, and ATMs.
At September 30, 2014, Northern Star Bank had total assets of $18.8 million and total deposits of $18.2 million. BankVista agreed to assume all deposits and purchase all assets of Northern Star.
The cost to the FDIC Deposit Insurance Fund is estimated at $5.9 million. Northern Star Bank becomes the 18th banking failure of 2014 and the first bank failure in Minnesota. The last bank to fail in Minnesota was 1st Regent Bank, Andover, which failed on January 18, 2013.