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9 Banks Fail In One-Day Record

December 4, 1987

WASHINGTON (AP) _ Nine commercial banks failed Thursday, setting a one-day record for the most bank closings in the 53-year history of the Federal Deposit Insurance Corp.

Five of the banks, four in Nebraska and one in Iowa, were owned by a holding company whose major stockholder was Timothy M. Brennan of Omaha. Two banks in Louisiana and one each in Oklahoma and Kentucky also failed, bringing the year’s total to 173.

The previous one-day record was set May 31, 1985 when seven banks failed, said Alan J. Whitney, an FDIC spokesman.

The FDIC pumped cash into a 10th bank - Crossroads Bank of Victoria, Texas - to avoid a failure, bringing the number of assistance transactions this year to 18.

Nebraska Banking Director Cynthia Milligan said the banks in her state failed because bank insiders - shareholders, directors and officers - failed to repay loans. The records in those cases have been referred to law enforcement agencies for investigation.

″These are not normal closings caused by the economy,″ she said.

The four Nebraska institutions - Crofton State Bank in Crofton, the Center State Bank in Center, the First State Bank in Oakdale and the State Bank of Jansen - will reopen under new ownership on Friday, Ms. Milligan said.

Brennan’s holding company also owns Climbing Hill Savings Bank in Climbing Hill, Iowa.

The FDIC, which insures deposits up to $100,000, was also appointed receiver of the Madison Bank and Trust Co. of Richmond, La.; the State Bank of Commerce in Slidell, La.; the Peoples Bank in Olive Hill, Ky., and the Farmers National Bank of Cordell in Cordell, Okla.

FDIC Chairman L. William Seidman is predicting about 200 failures nationwide this year, a post-Depresssion record, and a decline to 150 next year. However, he warned in congressional testimony last month that the 1988 projection may have to be revised to account for the economic fallout from the Oct. 19 stock crash.

Last year, 138 commercial banks failed. Previous records were 120 in 1985, 79 in 1984 and 77 in 1937. An estimated 4,000 banks closed their doors in 1933 at the peak of the Great Depression.

Banks in Oil Patch states, and to a lesser extent in the Farm Belt, have been particularly hard hit this year. Texas, with 45 failures, and Oklahoma, with 30 closings, represent nearly half of the 1987 total.

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