The Federal Deposit Insurance Corporation (FDIC) closed all six branches of the First State Bank of Flagstaff (FSB) in early September after the bank failed to repair a faulty loan portfolio and bring in more capital. 

A Californua-based community bank called Sunwest Bank of Tustin took over the FSB. Sunwest had four branches in California before acquiring the Flagstaff locations and assumed all loans and assets of FSB. By Sept. 8, all locations of FSB reopened as branches of Sunwest, but are yet to aquire the proper signage. 

There is no information as to when this will occur. 

The FDIC, a U.S. agency created to insure banks and limit the economic effects of bank failure, said in a press release, the Sunwest acquisition of FSB was the “least costly” option. FSB is the 89th bank the FDIC has closed this year. 

Chris Walsh, the executive vice president of the Woodland Street FSB location and employee of Sunwest, said there will not be any drastic alterations. 

“There shouldn’t be a lot of changes for anyone working [at the bank],” Walsh said. “The key is that Sunwest had an opportunity to get into the Arizona marketplace. Our [banking] philosophies are similar.”

FSB held most of their loans in construction and land management, an area that has been hit particularly hard in the current economy.

Jamey Hasapis, a small business consultant who used FSB for five years, said he was saddened by the Flagstaff bank’s failure but is positive about the change.

“They’re a nice community bank,” Hasapis said. “I totally trust them.” 

Hasapis said FSB was “very informative” about the change in ownership and there were materials both online and in the bank itself for people with questions.

Another customer, Adelina (who declined to give a last name) said she felt very differently. 

“I don’t like them,” Adelina said concerning Sunwest. “But I’m not sure where to go yet. They say it was because they were giving out too many construction loans…but I trusted this bank [FSB]. I don’t know this bank [Sunwest]; I’ve never heard of this bank.”

Adelina also said she received no information about the bank’s failure and heard from a friend about the FDIC closure of FSB. 

Dennis Foster, a NAU senior lecturer who teaches — among other classes — money and banking courses, said for those individuals who hold deposits and loans in FSB nothing will change, but for businesses the change could be an issue. 

“There are some businesses, especially those that have a relationship with FSB or had one where they are using [the bank] to access lines of credit that will have to find a new bank to do that, so there’s an issue there,” Foster said. 

On the issue of the FDIC takeover of FSB, Foster said the FDIC is simply doing its best in a troubling time for the banking industry. 

“Those regulators’ jobs,” Foster said, “are to make sure things don’t go from bad to worse.”