Behind the Rapid Fall of ANB Financial

Uninsured depositors didn't receive an immediate dividend payment when ANB was closed, but Mr. Barr expects them to receive dividend payments as the failed banks assets are disposed by the FDIC.

A Rapid Fall

While the institution's loan quality had worsened steadily through the first three quarters of 2007, its year-end results were shocking, as nonperforming assets shot up to $422 million, or 21% of total assets. Being forced to set aside as much as possible for loan loss reserves, ANB lost $75.5 million in the fourth quarter, causing its capital levels to drop. The bank was considered undercapitalized at year-end, with a risk-based capital ratio of 6.82%. This ratio needs to be at least 10% for a bank to be considered well capitalized under regulatory guidelines and 8% to be adequately capitalized.

Most of ANB Financial's problem loans were commercial real estate and construction loans, Arkansas, Idaho, Wyoming and Utah.

During the first quarter of 2008, things got even worse, with nonperforming assets rising to 34% of total assets and the risk-based capital ratio dropping to 3.50%. The bank was critically undercapitalized, pretty much forcing the OCC to shut it down.

The news hasn't hurt the KBW Regional Bank ETF(KRE Quote), which was recently trading at $34.08, 2% higher on the day.

Once again, we see how important it is for depositors to consider the safety of their financial institutions.

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