The FDIC reported the liquidation of The Farmers and Merchants State Bank of Argonia. This was a small bank with two locations in Argonia and Schulte, Kansas.
It did business as Farmers & Merchants State Bank & Insurance Agency. The combination of banking and insurance might seem strange. There was a brief period after 1999 when many in the banking industry thought every bank should also be working in insurance. Most such arrangements were unwound by 2010. I have never seen an example where combining banking and insurance worked well. With so little operationally to connect banking and insurance, each business would have to be a distraction from the other. There are also financial implications. When a community bank makes half of its money from mortgage loans in its local area, concentration of risk is a concern in the first place, and this only gets worse if the bank is also issuing the insurance on those loans. I don’t have any relevant information on the cause of this bank failure, but regardless of the real story, the failure of any “Bank & Insurance Agency” may serve as a further caution to anyone who might be considering that combination of businesses.
This is the first FDIC bank resolution since May 26, which means the United States went for three months without a bank failure. This is what the pace of bank failures looks like in normal times, and it means that banks are doing reasonably well, even if hundreds of banks have not yet recovered financially from the real estate crash of a decade ago.
