|State takes over Bank of Ephraim|
Far West Bank of Provo acquires the business's deposits
By Lynn Arave|
Deseret Morning News
Utah suffered its first bank failure in nearly 16 years Friday as Far West Bank of Provo acquired the deposits of the Bank of Ephraim after Utah's Department of Financial Institutions took control of the Ephraim business.
Commissioner G. Edward Leary said the department took possession of the Bank of Ephraim to protect depositors and the public, finding, among other things, that the bank was insolvent due to an embezzlement by a former bank employee and because of asset quality concerns.
This bank failure was Utah's first since Tracy Collins Bank in Salt Lake City failed in December 1988.
The Department of Financial Institutions, as well as the Federal Reserve Bank, had been closely monitoring the Bank of Ephraim for some time. The bank had been ordered to increase its capital to a safe level, but efforts by the bank to raise shareholders' equity to an acceptable level in a very short time were unsuccessful.
The Utah Department of Financial Institutions is the regulator for all state-chartered banks, savings banks, industrial banks and credit unions.
At the time of closure, the Bank of Ephraim had deposits of approximately $45 million in about 9,000 accounts. Bank depositors will automatically become depositors of Far West Bank and will continue to have immediate access to their insured funds.
Bank of Ephraim was chartered in 1905 and has offices at 2 N. Main and 747 N. Main in Ephraim, as well as 1095 S. Highway 89 in Mount Pleasant and 1195 W. Utah Ave. in Hildale. All of the branches except Hildale will reopen Monday as Far West Bank branches. The Hildale branch will remain closed. Its customers are advised to use the Far West Bank Branch at 308 W. Tabernacle, St. George.
"Far West Bank has been in central Utah for 23 years," said H. Don Norton, president and CEO of Far West Bank. "We are committed to serving and expanding in Sanpete County, where we already have two existing banking offices," he said in a news release Friday.
At the end of 2003, Far West Bank had $306 million in assets and $41 million in capital. It has 14 offices from Sandy to St. George.
Norton referred to the closure of the Bank of Ephraim as being due to unfortunate circumstances.
However, the bank failure was probably no surprise to financial experts. Last December, Weiss Ratings Inc. ranked the bank as one of the state's two poorest performers during 2003.
The Associated Press reported Friday that the Bank of Ephraim had made high-risk business and consumer loans in Hildale and Colorado City, Ariz., known polygamist communities. The Sanpete County-based bank lost $778,000 last year after writing off slightly more than $1.3 million in bad loans, the news service reported.
AP also reported after the Bank of Ephraim got into financial trouble, that bank officials said they had tightened credit standards and stopped accepting leaseholds on property as collateral for loans.
Most of the residents of the twin cities of Hildale and Colorado City, Ariz., are members of the Fundamentalist Church of Jesus Christ of Latter Day Saints. They do not own their homes or buildings but lease them from a church-controlled trust.
Customers of the former Bank of Ephraim can contact Far West Bank costumer service at 1-800-451-6465.
Originally published Saturday, June 26, 2004
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