Allied Bank of Mulberry, which had been in financial trouble since 2012 when it was sanctioned by the Federal Reserve, was closed Friday by the Arkansas State Bank Department.
Allied was sold to Today's Bank of Huntsville. A sales price was not disclosed.
Allied had $66 million in assets, $42 million in loans and $65 million in deposits at the end of the second quarter.
"I think the handwriting was on the wall when they filed their June 30 numbers, and [Allied's] capital ratio dropped below 2 percent," said Randy Dennis, president of DD&F Consulting Group in Little Rock. "That's the magic number for the [Federal Deposit Insurance Corp.]."
The bank was ordered by the Federal Reserve about a month ago to sell itself or raise more capital. The Federal Reserve said at the time that Allied Bank was "critically undercapitalized."
Today's Bank has assets of more than $125 million. The five branches of Allied Bank, including a branch in Little Rock, will reopen Monday as branches of Today's Bank during its normal business hours.
Depositors of Allied Bank will automatically become depositors of Today's Bank. Deposits will continue to be insured by the FDIC.
A number of banks never recovered from the financial crisis that began in 2007, which led to the closure of more than 517 banking institutions, said Garland Binns, a Little Rock banking attorney.
Including Allied, five banks have closed nationally this year.
"Another factor in the closure of banks has been the decline in real estate values, which served as collateral for bank loans," Binns said. "That resulted in the loans having to be written down and thereby depleting the capital of the bank."
The sale of Allied Bank is a good deal for all parties, Dennis said.
"It gives Today's Bank a good reach down South," Dennis said. "Today's Bank is an active lender. They can use the deposits. They are very familiar with the type of lending that Allied did. And apparently there were a bunch of bidders on [Allied]."
Two other banks have failed in Arkansas since 2000 -- ANB Financial of Bentonville in 2008 and First Southern Bank of Batesville in 2010.
Allied Bank's downfall was related to the weakening economy and to loans made to Kevin Lewis, a former Little Rock attorney convicted of bank fraud in 2011, Allied's president, Alex Golden, said after Allied was sanctioned in 2012.
Lewis' scheme also led to the closure of First Southern Bank and cost other banks in the state several million dollars.
Business on 09/24/2016