Lessons of bank’s demise

The demise of TeamBank is a textbook lesson on how to lose your shirt.
Put all your eggs in one basket. Spend money that isn’t there. Bury your head in the sand.
It has been particularly painful for Iola managers to watch as the company’s flagship bank in Paola spent its 16 branches into insolvency. Iola’s bank, headed by third-generation banker Jim Gilpin, made the most money for TeamBank, N.A. this year.
The lure of speculative housing in Johnson County drove the bank down. When mortgages began to go under, senior lenders poured more money into housing as the bubble burst.
Because TeamBank’s capital didn’t cover the outstanding loans, the Feds closed them down Friday night.
It all harkens back to the savings and loan crisis of the 1980s. Then, the government founded the Resolution Trust Corporation that liquidated the assets of more than 700 S&Ls along with imprudent banks, including two banks in Chanute, one in Bronson and Colony.
Great Southern Bank of Springfield, Mo., bought TeamBank’s $474 million of deposits for $4.74 million or 1 percent. It paid $100 million for $450 million worth of loans and real estate owned. With the transaction also came nearly 37,000 current customers.
Under this agreement the Federal Deposit Insurance Corporation agrees to cover 80 percent of any losses on loans up to $115 million and 95 percent of losses above that amount.
Someday, its stockholders will benefit handsomely. It’s a most lucrative deal for GS to pay pennies on the dollar, rubbing salt into the wound for the banks who abided by good lending standards. After all, you’re talking about local TeamBank customers, who have built the bank into a solid business for decades.
TeamBank’s demise is a much simplified version of what happened to American International Group whose financial unit brokers obligated the company to trillions more than it had capital to cover. The company’s debts are now being discounted and paid with taxpayer money.
It smarts to see a local bank built by a family over three generations brought down by reckless gambling. One can only hope the gamblers were rewarded with company stock.

— Susan Lynn