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Seven Banks Fail; Some Depositors Suffer

Updated from 10/22/10

Updated to include information about a seventh bank failure on Friday.

WASHINGTON (TheStreet) -- Regulators Friday shuttered seven banks spread across five states, bringing the total number of U.S. bank failures for 2010 to 139.

The bank closures cost the Federal Deposit Insurance Corp.'s insurance fund a combined $461.8.2 million. The agency found buyers for all of the failed institution save one, and there were some losses to depositors with uninsured balances.

Six of the seven failed banks were previously included in TheStreet's Bank Watch List of undercapitalized institutions, based on second-quarter regulatory data provided by SNL Financial.

First Bank of Jacksonville

The Florida Office of Financial Regulation closed First Bank of Jacksonville and appointed the FDIC receiver. The FDIC then sold the failed bank to Ameris Bank of Moultrie, Ga.

First Bank of Jacksonville had been operating under an FDIC consent order since October 2009, when regulators ordered the institution's board of directors to "reaffirm its participation in the affairs of the Bank," by improving its oversight and taking steps to "retain qualified management." The bank was also required to charge off its most troubled loans within 30 days and increase its Tier 1 leverage ratio to 8% and its total risk-based capital ratio to 12% within 120 days.

Those ratios need to be 5% and 10%, respectively, for most banks to be considered well-capitalized by regulators, and 4% and 8%, respectively, for most to be considered adequately capitalized. Over the past two years, hundreds of banks have been required by regulators to hold much higher levels of capital to absorb loan losses.

As of June 30, First Bank of Jacksonville's Tier 1 leverage ratio was 0.83% and its total risk-based capital ratio was 2.41%. The bank's ratio of nonperforming assets -- including loans past due over 90 days or in nonaccrual status and repossessed real estate -- made up 13.99% of total assets.

First Bank of Jacksonville had $81 million in total assets when it failed. The FDIC agreed to absorb 80% of losses on $60 million of the assets acquired by Ameris Bank and estimated that the cost of the bank closure to the deposit insurance fund would be $16.2 million.

The failed bank's office was scheduled to reopen Monday as an Ameris branch.

Ameris Bank is the main subsidiary of Ameris Bancorp (ABCB).

Progress Bank of Florida

State regulators also closed Progress Bank of Florida, which was based in Tampa, Fla. The FDIC was appointed receiver and sold the failed bank to Bay Cities Bank, also of Tampa.

Progress Bank of Florida had $111 million in assets when it failed and had slipped to undercapitalized in the fourth quarter of 2009. That's when its nonperforming assets ratio doubled from the previous quarter to 14.66% and it posted a net loss of $6.7 million, mainly from loan loss provisions. After two more quarters of losses, the bank's Tier 1 leverage ratio was 1.41% and its total risk-based capital ratio was 3.32% as of June 30, and its nonperforming assets ratio was 16.69%.

The FDIC agreed to share in 80% of losses on $83 million of the assets acquired by Bay Cities Bank and estimated the cost of the bank failure to the deposit insurance fund would be $25 million.

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