Valley Bank, Moline, IL, Closed by Regulators, Tenth and Largest Bank Failure of 2014

Valley BankThe Illinois Department of Financial and Professional Regulation closed the Valley Bank, Moline, Illinois, and appointed the FDIC as receiver.  To protect depositors, the FDIC sold the failed bank to Great Southern Bank, Reeds Spring, Missouri, which will assume all deposits of Valley Bank.

Valley Bank was founded by a group of local bankers and businessmen in 1993.  The bank was originally chartered in Iowa but later moved to Moline, Illinois.

According to the Bank’s website Valley Bank attributed their “success” to “the vision of our founders and their commitment to service. Their strong belief in focusing on the individual needs of our clients is what sets Valley Bank apart from others in the industry. We take pride in helping all of our customers buy their homes, grow their businesses and achieve their financial goals.”   Considering the large amount of defaults on their loan book, Valley Bank should have focused more on their clients ability to repay a loan rather than their “needs”.

Valley Bank has been under increased scrutiny by regulators since it was forced to take a $25.5 million asset write-down last August after an FDIC audit.  Based on the unfavorable results of the audit and doubts about the diligence of Valley Bank’s management and outside auditor, the FDIC ordered the Bank to hire a new accounting firm to conduct a full scope audit of their books.

On January 15, 2014, the FDIC and Valley Bank signed a consent order in which Valley Bank was cited for unsafe and unsound banking practices and various violations of law, rule, or regulation.  The FDIC ordered Valley Bank to implement numerous management and operational changes including the hiring of a new president.  Valley Bank was also ordered to immediately increase its capital levels which it was unable to do, resulting in today’s closure by regulators.

All 13 branches of Valley Bank will reopen as branches of Great Southern Bank and all depositors of Valley Bank will continue to have uninterrupted FDIC deposit insurance up to the applicable limits.  All depositors of Valley Bank have access to their money over the weekend through the use of ATMs, checking account, and debit cards.

At March 31, 2014, Valley Bank had total assets of $456.4 million and total deposits of $360.0 million.  Great Southern Bank agreed to purchase $375.4 million of Valley Bank’s assets with the remaining balance of $81 million retained by the FDIC for later disposition.

Great Southern Bank has been a relatively prolific acquirer of failed banks.  Since 2009 Great Southern has acquired five failed banks counting today’s acquisition of Valley Bank.  The four other banks purchased by Great Southern Bank from the FDIC are Vantus Bank, IA, TeamBank, KS, Sun Security Bank, MO, and Inter Savings Bank, MN.

Based on total assets of $456.4 million, Valley Bank is the largest bank failure of 2014.  Prior to today the largest banking failure of 2014 was The Bank of Union, OK, which failed in January and had $331.4 million of total assets.  The previous nine banks that failed in 2014 had total assets of $1.04 billion.

The cost to the FDIC deposit insurance fund for the failure of Valley Bank is $51.4 million.  All ten banking failures of 2014 have resulted in losses to the FDIC totaling $190.7 million.  Valley Bank becomes the 10th banking failure of 2014 and the third in Illinois.

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