Archive for Thursday, March 17, 2011

Federal Reserve deal to help First State Bank and Trust

March 17, 2011


— The Federal Reserve Bank of Kansas City, Mo., has signed an agreement with Tonganoxie Bankshares Inc., which owns First State Bank and Trust, in an effort to maintain the bank’s financial soundness.

Through the agreement, the Federal Reserve requires approval of First State Bank and Trust before paying out dividends, as well as debt and stock redemptions.

The agreement, released this week, was signed March 8. It requires that the local bank should not declare or pay any dividends without approval from the Reserve Bank. First State Bank and Trust also should not directly or indirectly take dividends or payments that represent a reduction in capital without the Federal Reserve’s approval.

Jilinda White, executive vice president for First State Bank, said “They’re not doing anything in the agreement we’re not already doing.”

First State Bank has two locations in both Lawrence and Tonganoxie, as well as branches in Perry, Basehor and Kansas City, Kan.

The group also has a branch in Clearwater, near Wichita, but sale of that branch will be final next week, White said.

First State’s assets are nearly $300 million and would decrease to $250 million with the sale of the Clearwater branch to Emprise Bank.

Other stipulations of the agreement include not incurring, increasing or guaranteeing any debt without the Federal Reserve Bank’s consent, nor purchasing or redeeming any shares or stocks without the Reserve’s written consent.

In December, First State entered into a consent order with the Federal Deposit Insurance Corp. and the Kansas Office of the State Bank Commissioner. The latest agreement is aimed at ensuring the bank complies with the previous agreement.

At the end of 2010, First State had $8.44 million in problem loans, just more than 4 percent of its $206 million in total loans. In 2010, the bank lost $4.7 million, which compares to $291,000 in 2009. Still, the bank has $22.5 million in equity capital and a $6.8 million provision for loan losses. White likened the provisional money to a savings account the bank has against potential losses, such as loan that can’t be repaid.


Jonathan Becker 7 years, 2 months ago

I am more concerned with the return OF my money than the return ON my money -Mark Twain

Jennifer Alexander 7 years, 2 months ago

OK, I must be a total idiot, but can somebody put this in plain english for me? I have a checking account with First State that I have had for 10 years. I just want to make sure everything is ok with my bank. It appears that everything is ok, but still something seems fishy.

sr80 7 years, 2 months ago

Yes Jchristine2 i would watch closely how these crooks get bailed out, not too scare you to much but there's a article in the WSJ talking about the TARP bailout. You will see the similarities of your bank and them!

Evan Ridenour 7 years, 2 months ago

Banks are required to maintain a certain level of assets and First State Bank has had a recent history of failing to do so. The penalties for this can be severe and this agreement with the FED was probably done to prevent things like the loss of their FDIC insurance.

hipper_than_hip 7 years, 2 months ago

I'm closing my account at First State Bank ASAP. Regardless of whether it's FDIC insured or not, I don't want any problems accessing my money. Will this bank fail in the future? I don't know, but I'd rather be a year early than a day late.

Crazy_Larry 7 years, 2 months ago

More insanity from the Fed Res Bank! Bailout for profit businesses and tell the bankrupt states to go to hell! I thought the Fed Res Bank was worked for the benifit of the United States of America, not the United Corporations of America. What kind of capitalist system do we have? Socialism for the corporations and "so sad, too bad" for the citizens. Citizens must take cuts in pay, education, heath care, pensions, etc. I thought bad businesses were supposed to go bankrupt! Not get bailed out by the Fed Res Bank of the United States of America. When do we riot?

Jennifer Alexander 7 years, 2 months ago

Eride - thanks for the plain English explanation.

Commenting has been disabled for this item.