Regulators Shutter Small California Bank

SAN JOAQUIN, Calif. (TheStreet) -- State regulators closed San Joaquin Bank of Bakersfield, Calif. Friday, bringing the total number of failed U.S. banks and thrifts this year to 99.

The California Department of Financial Institutions took over the bank, a subsidiary of San Joaquin Bancorp(SJQU Quote) and arranged for Citizens Business Bank of Ontario, Calif. to assume its deposits. Citizens Business Bank is a subsidiary of CVB Financial(CVBF Quote).

San Joaquin Bank had been assigned an E-minus (Very Weak) financial strength rating by TheStreet.com Ratings earlier in October, a downgrade from a D-minus (Weak) the previous quarter.

The bank was also included in TheStreet.com's list of undercapitalized banks and thrifts, based on second-quarter data.

San Joaquin Bank was not included on a previous list of 89 institutions that were undercapitalized as of March 31, because its initial regulatory filing indicated the bank was adequately capitalized under regulatory capital guidelines. The first-quarter filing was later amended with additional loan charge offs and a higher net loss.

Like so many failing banks in the states at the forefront of the boom-and-boost real estate cycle, San Joaquin's business was focused on commercial construction lending. The bank's nonperforming loans shot up in the first quarter, and even after charging off $14 million in nonaccrual loans during the first half of 2009, it was left with nonperforming assets (including nonperforming loans and repossessed real estate) making up 12% of total assets as of June 30.

The bank's Tier 1 leverage ratio was 4.12% as of June 30, and its total risk-based capital ratio was 6.70%. These ratios neeed to be at least 4% and 8%, respectively, for most banks to be considered adequately capitalized. They need to be 5% and 10%, respectively, for most institutions to be considered well-capitalized.