Regulators Close Washington Bank

According to preliminary regulatory data supplied by SNL Financial, Westsound's ratio of nonperforming assets (including loans 90 days past due or in nonaccrual status, and repossessed real estate) was 38.21%. Construction and development loans made up the bulk of the nonperformers.

Even though Westsound had a very high number of problem loans and had reported a $31 million net loss for 2008, the bank was still well capitalizedunder ordinary regulatory requirements, with a tier 1 leverage ratio of 8.02% and a total risk-based capital ratio of 10.93% as of March 31.

Unless under a regulatory order requiring higher capital ratios, a bank or savings and loan association needs to maintain a tier 1 leverage ratio of 5% and a total risk-based capital ratio of 10% to be considered well capitalized. These ratios need to be 4% and 8%, respectively, for an institution to be considered adequately capitalized.

TheStreet.com recently published a preliminary list of undercapitalized banks as of March 31. The list likely will be significantly expanded once a complete set of finalized data for all banks and thrifts is available.

Westsound was the second Washington bank to fail this year. On Jan. 16 Bank of Clark County failed and its branches and deposits were acquired by Umpqua Holdings Corp. (UMPQ Quote).

Georgia leads all states with 11 bank or thrift failures during 2008 and 2009, followed by California with nine failures and then Florida, Illinois, and Nevada, each of which has had four bank or thrift failures.