And So it Begins: First U.S. Bank Failure in 17 Months

by John Galt May 31, 2019 21:30 ET

If the credit markets are not received as an omen, the failure and subsequent panic in China after a major bank failure there, and bizarre equity market action recently, then perhaps tonight’s surprise FDIC takeover of Enloe State Bank of Cooper, TX might just be the first fat canary to fall in the coal mine.

From the FDIC website:

The Enloe State Bank, Cooper, Texas, was closed today by the Texas Department of Banking, which then appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Legend Bank, N.A., Bowie, Texas, to assume the insured deposits of The Enloe State Bank.

The only office of The Enloe State Bank will reopen as a branch of Legend Bank, N.A. during their normal business hours starting Monday. Depositors of the failed bank will automatically become depositors of Legend Bank, N.A. Deposits assumed by Legend Bank, N.A. will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.

Over the weekend, customers of The Enloe State Bank can access their insured deposits by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of March 31, 2019, The Enloe State Bank had total assets of $36.7 million and total deposits of $31.3 million, of which there were approximately $500,000 that exceeded FDIC insurance limits. This estimate is likely to change once the FDIC obtains additional information from these customers.

Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-888-408-4360 to set up an appointment to discuss their deposits. This phone number will be operational this evening until 9:00 p.m., Central Time (CT); on Saturday from 9:00 a.m. to 6:00 p.m., CT; on Sunday from 12:00 p.m. to 6:00 p.m., CT; Monday from 8:00 a.m. to 8:00 p.m., CT; and thereafter from 9:00 a.m. to 5:00 p.m., CT.

All customers who would like more information on today’s transaction can call the toll-free number or visit the FDIC’s website at https://www.fdic.gov/bank/individual/failed/enloe.html.

Beginning Monday, depositors of The Enloe State Bank with more than $250,000 at the bank may visit the FDIC’s webpage “Is My Account Fully Insured?” at https://closedbanks.fdic.gov/drrip/AFI/Search to determine their insurance coverage.

Legend Bank, N.A. agreed to assume the insured deposits for a 0.51% premium. It will also purchase approximately $5.2 million of the failed bank’s assets. The FDIC will retain the remaining assets for later disposition.

The FDIC preliminarily estimates that the failure will cost its Deposit Insurance Fund about $27 million. The estimate will change over time as the assets are sold. The Enloe State Bank is the first bank to fail in the nation this year. The last bank failure was Washington Federal Bank for Savings in Chicago, Illinois on December 15, 2017. The last failure in Texas was Texas Community Bank, N.A., in The Woodlands, Texas on December 13, 2013.

This could leave a mark.

Or it could be another sign that the greatest credit bubble in human history is starting to show cracks. Texas is the last place in the world any sane person would have expected to see a bank failure. With oil and natural resources peaking in the past two years since Trump took office, this failure is a shocker.

Keep an eye out boys and girls, this could be the start of something or just an isolated incident. But with the 10 year US Treasury down some 70 points below what I called a warning signal just six weeks ago, all hell could break loose between now and the fourth quarter and blindside everyone.

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