Regulators Shutter Three Banks

When a bank or thrift fails and uninsured deposits are not acquired by another institution, depositors become creditors to the FDIC receivership for the amount of their uninsured balances. Any payments by the FDIC to these creditors after the institution fails are called dividends. The agency sometimes pays "advance dividends" to depositors at the time an institution fails.

No advance dividends were announced for FirstCity's uninsured depositors.

Although the Georgia Department of Banking and Finance didn't issue a press release Friday night on the failure of FirstCity Bank, the institution reported total net losses of $8.3 million for 2008.

Like so many other Georgia institutions that failed in 2008 and 2009, FirstCity's troubles were focused on a portfolio of residential construction loans that went sour. The bank's ratio of nonperforming assets (including loans past due 90 days or more and repossessed real estate) was 20.41% as of Dec. 31.

During 2008, FirstCity turned more and more to wholesale funding and brokered deposits. Rising funding costs and declining interest revenue from loans caused the institution to report negative interest income for the fourth quarter of 2008.

FirstCity also slipped from being well capitalized per regulatory guidelines to adequately capitalized as of Dec. 31, with a tier 1 leverage ratio of 4.57% and a risk-based capital ratio of 8.54%. These ratios need to be at least 5% and 10%, respectively, for an institution to be considered well capitalized per regulatory guidelines.