They're doing fine, thanks

The aftermath of the closing of Sherman County Bank in Loup City six months ago — the first bank failure in Nebraska since 1990 — is a story of community support and determination to preserve local jobs and financial services.

The bank's closure last February, on Friday the 13th, shuffled banking services in the area north of Grand Island and Kearney.

Bank offices were preserved in Loup City and St. Paul by Heritage Bank of Wood River, which purchased the Sherman County Bank's deposits from the Federal Deposit Insurance Corp.

Farwell and Dannebrog lost their branch banks, but after an unusual town-hall meeting, Dannebrog accepted an offer of a credit union office from nearby Archer.

“Overall, things have gone, frankly, better and faster than I had thought they would,” said Bob Morris, operations manager for Heritage Bank. “Our people in those two locations have just done an outstanding job.”

Leo Kringle, formerly an operating officer with Sherman County Bank, now is in charge of the Loup City office. Bob Moyer, who had retired as chief financial officer of Heritage Bank, returned to take over the St. Paul office and act as senior loan officer for both locations.

Heritage hired the staffs of the two offices, so customers see the same people when they do their banking and the community kept those important jobs. Next month, the two offices will convert to Heritage Bank's computer system, making them fully integrated.

Morris said employees at the two offices are as involved in community activities as they ever were, including this summer's Polish Days in Loup City and Grover Cleveland Alexander Days in St. Paul.

Along with taking over the former Sherman County Bank deposits, Heritage Bank bought some of its loans from the FDIC. The acquisition swelled Heritage Bank's deposit base by 20 percent, to $340 million.

The absorption by Heritage of all Sherman County Bank deposits prevented any losses by depositors whose accounts exceeded the FDIC's insurance limits, said State Banking Director John Munn.

There was no interruption in bank services, including ATM cards.

The Sherman County Bank closing is not indicative of weakness in the local or state economy, Munn said. No other Nebraska bank has failed since, despite 56 other closings across the country so far this year, most of them related to the recession.

“We're very fortunate to be in Nebraska right now,” Munn said. “Our banks compare very favorably in their performance.”

Munn declared Sherman County Bank insolvent after it wrote off loans to about 30 of its farm customers, stemming from transactions related to commodity trading. The uncollectable loans depleted the bank's $8.4 million in capital and caused an additional $25 million in losses.

The Nebraska Attorney General's Office said its investigation into possible criminal wrongdoing in the commodity trading is ongoing but did not elaborate.

The FDIC took control of the Sherman County Bank and sold it to Heritage Bank, which re-opened the offices, minus the bad loans. The FDIC's deposit insurance fund will lose about $28 million by assuming the Sherman County Bank's bad loans, the agency said.

The offices in Loup City and St. Paul are not yet profitable because of startup costs and not having made enough loans, Morris said. But the bank's eight other locations are profitable, and he said he expects Loup City and St. Paul to join them by the end of this year.

After a lengthy review, Morris said, Heritage decided not to purchase the Farwell and Dannebrog locations because it couldn't operate them profitably.

Dannebrog's 350 residents were faced with losing their only banking service.

“The town pulled together,” said Linda Grim, who with Dawn Webb ran the bank office in Dannebrog.

Steve Lamon, president and CEO of Archer Cooperative Credit Union in Archer, heard about the bank closings on the radio at his office. Archer, which has a population of 70, is about 25 miles east of Dannebrog.

The credit union, which opened in 1906 and has about $54 million in assets, has branches in Chapman and Central City, two larger communities.

“I figured, ‘Here's an opportunity to help those people retain a financial institution,' ” Lamon said. “It kind of fit within our niche.”

Citizens Bank of nearby St. Paul also was interested, so Dannebrog organized a town meeting to hear officials of the two companies describe their services and answer questions.

The credit union got the most votes in an informal ballot of Dannebrog residents and opened June 1, staffed by the two former bank employees.

The office operated out of a camper for the first three days while the credit union purchased the former bank building from the FDIC, bidding $83,500, its tax-assessed value.

So far, 196 new members have opened 352 accounts at the Dannebrog office, Lamon said. A loan officer soon will begin weekly visits to the Dannebrog office. If loan volume warrants, the office will get a full-time loan officer, he said.

So far, the Dannebrog office is mostly a source of deposits that support loans made at the credit union's other offices.

“In the long run, we want it to stand alone,” Lamon said, with enough loans to support its operating costs.

Grim said the Dannebrog office has made three consumer loans and is working on some real estate loans. Last week, the credit union celebrated its initial success with an open house.

“Archer did a good thing,” Grim said. “We're a booming little town, and this town wasn't going to give up.”

Contact the writer:

444-1080, steve.jordon@owh.com

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