TierOne Bank, Two Others Fail

WASHINGTON (TheStreet) -- Banks failed on Friday in Nebraska, Illinois and Mississippi, bringing this year's total number of U.S. bank closings to 81.

All three of the banks that regulators shut down had been included in TheStreet's Bank Watch List of undercapitalized banks and thrifts, based on first-quarter regulatory data provided by SNL Financial.

TierOne Bank

The Office of Thrift Supervision shut down TierOne Bank of Lincoln, Neb., which had $2.8 billion in total assets and was the main subsidiary of TierOne Corp.(TONE). The Federal Deposit Insurance Corp. was appointed receiver and sold the failed institution's $2.2 billion in deposits for a 1.5% premium to Great Western Bank of Sioux Falls, S.D., which is held by National Australia Bank LTD.

Great Western also agreed to take on all of TierOne's assets, with the FDIC agreeing to share in losses on $1.9 billion. The failed institution's 69 offices were set to reopen during normal business hours as branches of Great Western Bank. The FDIC estimated TierOne's failure would cost its deposit insurance fund $297.8 million.

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TierOne Bank had been assigned an E-minus (Very Weak) financial strength rating by Weiss Ratings (formerly TheStreet.com Ratings) in December, which was a downgrade from a D-minus (Weak) the previous quarter. A third-quarter net loss of $132 million left the institution undercapitalized, and subsequent losses left TierOne in critical shape as it was overwhelmed by soured commercial real estate, multifamily and construction loans.

Arcola Homestead Savings Bank

Illinois regulators closed Arcola Homestead Savings Bank of Arcola, Ill. and appointed the FDIC receiver. Since the agency was unable to find a buyer for the failed bank, the FDIC announced that it would pay out Arcola Homestead's deposits.

The FDIC said that checks would be mailed on Monday to retail customers with savings accounts, certificates of deposit or IRA accounts. Customers with deposits made through brokers were encouraged to contact their brokers, who were to be paid directly by the FDIC after providing documentation to the agency. For customers with checking accounts, balances were transferred to the Arcola branch of First Mid-Illinois Bank and Trust and checks were to be mailed out for any insured balances not withdrawn by June 12.