Behind the Rapid Fall of ANB Financial

Late last Friday, the Office of the Comptroller of the Currency announced the closing of ANB Financial NA, of Bentonville, Ark.

In its announcement, the OCC noted that ANB Financial, with $1.9 billion in total assets, was undercapitalized and that its "unsafe and unsound practices also weakened the bank's condition and seriously prejudiced the interests of the bank's depositors and the deposit insurance fund."

This was the third bank closing this year, and the largest since NetBank was shut down in September 2007.

TheStreet.com ratings had already downgraded its rating for ANB Financial to an E (very weak financial strength) in March, based on December 2007 financial results. ANB had been previously rated a D- (weak) since June 2007.

ANB Financial's $212.9 million in FDIC-insured retail deposits were assumed by Pulaski Bank and Trust Company, of Little Rock, Ark. Most of ANB's deposits were acquired through brokers, who were to be paid directly for the amount of their customers' insured funds.

David Barr, the FDIC's Assistant Director for Public Affairs, says four banks made bids to take over ANB's branches and retail deposits, and Pulaski Bank and Trust made the lowest bid. The FDIC expects the closing to cost its insurance fund about $214 million.

ANB's customers had about $39.2 million in uninsured deposits in 647 accounts. When a bank is closed, depositors become creditors to the receivership for their uninsured funds. As the FDIC disposes the failed bank's assets, these creditors are typically paid "dividends" for a significant portion of their uninsured deposits.