This is another case of a bank closing accounts of out-of-state customers. The Morrill and Janes Bank and Trust Company has just emailed out-of-state customers informing them that they will close all Elite Checking and Treasury Index accounts held by customers outside of Kansas and Missouri on or after December 1, 2012. Thanks to the readers who emailed me this news and posted in the forum. One reader forwarded me the email he received. It included a PDF attachment which explained the upcoming closures. Here's an excerpt of that letter:
We constantly analyze our growth strategies and acquisition opportunities that are in the best interest of our customers, our bank and our shareholders at the Morrill & Janes Bank and Trust Co. We have recently received Regulator Approval to purchase United Bank of Kansas, Lenexa, Kansas in a market we currently serve, which will increase our Bank's assets approximately $115 million. We anticipate closing the transaction during the Fourth Quarter 2012. Due to this increase in assets and to maintain a strong Morrill & Janes Bank capital position we have made a decision to discontinue our Internet offering of Elite Checking and Treasury Index accounts outside the states of Kansas and Missouri effective October 17, 2012.
Our deposit agreement permits us to close this account at any time upon reasonable notice to you and tender the account balance personally or by mail.
Please consider this our official written notification and make plans to close your account(s) prior to December 1, 2012.
We offer several available options to complete the account closing process:
1) U.S. Postal Service Mail - Request a check to close the account for your balance plus any unpaid interest by signing and returning the form on page two of this letter.
2) E-Mail - You may request a check for your account balance plus any unpaid interest by sending your request to [email address]. Please include your name and the last three digits of your account number.
If the account remains open, we will close the account on or after December 1, 2012 and mail a check for the account balance plus any unpaid interest to the current address we have on file. After your account is closed, any incoming checks, automatic payments or deposits received after this date will be returned "account closed".
Wire Transfer Service is not available for your payment for security reasons.
Past examples of banks closing out-of-state accounts have mostly involved reward checking accounts. This can happen when banks get too much demand for their accounts and have more deposits than they can put to use. In most cases, the banks will just limit new accounts to residents of their state. They won't close accounts of existing customers.
In the case of Morrill & Janes Bank, the accounts weren't reward checking, but they did offer high yields. I first reported on the Elite Checking and Treasury Index money market account in October 2010. At that time, the bank was allowing anyone in the nation to apply. This continued until April 2011 when new accounts were limited to Kansas and Missouri. The bank has cut rates, but the rates have been competitive. You have to wonder if they had considered lowering the rates more to reduce deposits rather than closing out-of-state accounts. They may have determined that lowering rates could have hurt relationships with their local customers.
The bank's explanation about the reason for the account closures is a little confusing. They claim that it's needed to maintain a strong capital position after a bank acquisition that will increase their assets by $115 million. The bank currently has $654 million in assets, and it's financially healthy with a 5-star rating and a Texas ratio of 0.55% (excellent).
This is one downside with opening an online account at a small bank rather than an internet bank. Out-of-state customers will always be a lower priority for small banks than their local customers. Fortunately, it has been rare for banks to close out-of-state accounts. It has been much more common for small banks to stop accepting new applications from out-of-state customers. Even this has a downside. For example, if your bank comes out with a new account that may nicely complement your existing account, the bank may not allow you to open this new account if you're not local.