On Friday, Oct. 18, Lindsay’s First National Bank in south-central Oklahoma was reported to have been shut down by the Treasury Department’s Office of the Comptroller of the Currency due to “false and deceptive” banking records. First National, a member of the Federal Deposit Insurance Corporation (FDIC), became the first bank to be shut down by federal regulators after April 26. Two days later, it reopened as First Bank and Trust Company, based in Duncan, Oklahoma.
Typically, if a bank were to fail on Friday, customers with insured deposits would be able to continue using their debit or ATM cards and write checks as they did before the failure. The objective is not to disrupt the banking operations of customers affected by a bank’s failure.
Although bank failures are not common, they can still be unpredictable and you need to be prepared. That’s why you need to keep your money in a bank or credit union that is federally insured, and you need to make sure it follows insurance regulations.
Here we explain what happened at Lindsay’s First National Bank and what you can do to protect your funds at a federally insured institution if you find yourself in this situation. I will.
What happened to Lindsay’s First National Bank?
According to the FDIC, allegations of fraud were the cause of Lindsay First National Bank’s failure. The Office of the Comptroller of the Currency said false and false bank records and other information suggested fraud was the cause of the bank’s depletion of capital.
This type of failure has occurred at other small banks in recent years. For example, Heartland Tri-State Bank in Elkhart, Kansas, failed in 2023, and the bank’s chief executive officer served more than 24 years for embezzling millions of dollars in a cryptocurrency scheme, according to the U.S. Department of Justice. received a prison sentence.
Some bank failures are caused not only by commercial crimes but also by property damage. In 2019, Enloe State Bank in Cooper, Texas, went out of business after a fire broke out in the bank’s boardroom and damaged files. Investigators concluded the fire was arson and that the files were intentionally damaged the day before the bank was to be reviewed by the Texas Department of Banking, the Justice Department said.
“There are more than 4,000 banks in the country, most of them small community banks,” says Greg McBride, CFA, Bankrate’s principal financial analyst. “Bank failures do happen, but they are usually for reasons specific to the bank, and unless they are a large bank with a well-known brand or are causing broader market disruption, savers’ It’s almost invisible.”
In addition to being the second bank to fail in 2024, Lindsay First National Bank’s failure marks the seventh federally insured bank failure dating back to 2021. But 2023 saw some of the largest bank failures in history. Republic Bank, Silicon Valley Bank, and Signature Bank all failed within two months.
What is a bank failure?
According to the FDIC, bank failures typically occur when a bank shuts down because it is unable to meet its obligations to depositors or otherwise is severely undercapitalized.
If you exceed the FDIC limits, it can be a stressful situation if your bank account goes bankrupt. However, if you follow the guidelines within federal insurance limits, the FDIC typically makes things work very seamlessly for consumers when their accounts are maintained by an acquiring institution. In the case of Lindsay Bank’s failure, which closed on a Friday, it reopened the following Monday as First Bank and Trust Company.
Why do we need FDIC and NCUA protection?
The only way to protect your money if your financial institution fails is to bank with an FDIC-insured bank or an NCUA-insured credit union. However, you need to make sure that your money is within the insurance limits and that you follow the insurance provisions to ensure that your money is covered. The FDIC’s standard deposit insurance limit is $250,000 per depositor, insured bank, and ownership category.
Some of Lindsay National Bank’s customers were not within FDIC limits. The FDIC released half of the uninsured funds to these depositors on Monday, October 21st.
The FDIC’s Electronic Deposit Insurance Estimator (EDIE) can help you determine how much you will be covered. However, since EDIE relies on customers entering correct information, it is always a good idea to verify this with the FDIC.
Bank failures are not uncommon. However, it is rare to have a year without bank failures. In the past 20 years, there have been five such events: 2005, 2006, 2018, 2021, and 2022.
“No matter how low the risk of bank failure, it is critical for savers to ensure that all deposits at a bank or credit union are fully protected by federal deposit insurance,” McBride says. . “This is your safe and secure money, money that you need to have or cannot risk losing. The risk of an uninsured balance is not covered,” McBride added. .
conclusion
Bank customers can be caught by surprise if their financial institution fails. That’s why if you’re banking with an FDIC-insured bank or an NCUA-insured credit union, make sure your money is within your insurance limits and follows proper insurance guidelines. That is important.
