The Farmers Bank of Lynchburg, TN, Closed By Regulators After 124 Years Of Operations

One of the oldest banking institutions in the country was closed by regulators after becoming critically undercapitalized.  The Farmers Bank of Lynchburg, established in 1888, was closed by the Tennessee Department of Financial Institutions which appointed the FDIC as receiver.  In order to protect depositors, the failed bank was sold by the FDIC to Clayton Bank and Trust, Knoxville, TN.

After surviving financial panics, depressions, world wars and numerous recessions, The Farmers Bank of Lynchburg failed after loan defaults began to soar during 2011.

All four branches of The Farmers Bank will reopen on Saturday as branches of Clayton Bank and Trust and FDIC deposit insurance will continue without interruption up to the applicable limits.  Depositors will also have access to their money over the weekend through the use of checks, debit cards and ATMs.

The Farmers Bank of Lynchburg signed a Consent Order with the FDIC on November 18, 2011 in which, among other things, the FDIC ordered the Bank to increase capital levels within 180 days and improve managerial and financial practices.  Management was unable to comply with the FDIC directives and regulators had no choice but to close the Bank.

As of March 31, 2012, The Farmers Bank had total assets of $163.9 million and total deposits of $156.4 million.  Clayton Bank paid the FDIC a premium of 0.10% to assume the failed bank’s assets and also agreed to purchase all of The Farmers Bank’s assets.

Clayton Bank, which was established one year after The Farmers Bank began operations, is well capitalized and has over $600 million in assets.

The loss to the FDIC Deposit Insurance Fund for the failure of The Farmers Bank is $28.3 million.   The Farmers Bank of Lynchburg becomes the nation’s 31st banking failure of 2012 and the third in Tennessee.

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