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KAYSVILLE -- Tuesday was the first business day following Utah's biggest bank failure in many years, and a steady stream of customers cleaned out their accounts.
Barnes Bank is headquartered in Kaysville, but the emergency seizure by regulators affects all 10 Barnes locations up and down the Wasatch Front. The shutdown is permanent, and it will have big economic consequences.
The bank outlasted many economic storms, "since 1891" as the sign says. But the current recession was too much.
"It's a sad day when a good bank like Barnes, it can happen to it," said Brenda Watanuki, who was a customer of the bank.
Regulators seized the bank Friday night. On Tuesday, longtime customers came to remove their savings.
"It's a tough thing. I feel bad for the employees," former customer Bob Watanuki said.
Regulators say the bank ran into trouble because it lent too much money for construction and real estate development.
"We had that real estate bubble, so the value in real estate loans went down," said Michael Jones, chief examiner with the Utah Department of Financial Institutions.
As loans went sour, capital reserves deteriorated. Regulators seized the bank to protect depositors. Paying back depositors will drain about $270 million from the federal insurance fund.
"So, this is a large one. Being as old as the bank was, it hurts," Jones said.
Usually, they find another bank to buy the one that failed. In this case, there was not a single bidder. So, the FDIC set up its own temporary bank to return money to depositors.
"I know that the Barnes people made a strong effort to make sure everybody was covered," Beavers said.
"But I suspect there are going to be some who put their faith in the bank and were over the $250,000," Jones said. "It's always tragic, whenever we close a bank, for there to be uninsured depositors."
The FDIC website has tips for structuring big deposits to make sure they're insured.
If you thought this amounts to a taxpayer bailout, it's not. The insurance fund comes from the banks themselves. They're assessed quarterly payments to make sure most deposits are insured.
E-mail: jhollenhorst@ksl.com
