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Three Banks Fail; Tally Up to 149

WASHINGTON (TheStreet) - State regulators shuttered three more banks in Florida, Pennsylvania and Wisconsin respectively Friday, bringing this year's total number of bank failures to 149.

All three failed banks were previously included in TheStreet's Bank Watch List of undercapitalized institutions, based on preliminary third-quarter regulatory data provided by SNL Financial.

Gulf State Community Bank

The Florida Office of Financial Regulation closed Gulf State Community Bank of Carrabelle, Fla. The Federal Deposit Insurance Corp. was appointed receiver and sold the failed institution to Centennial Bank of Conway, Ark.

Gulf State Community Bank had $112 million in total assets when it failed. The bank had slipped to undercapitalized in December 2009, when a net loss of $2.9 million lowered its Tier 1 leverage ratio to 3.02% and its total risk-based capital ratio to 5.23%. These ratios need to be at least 4% and 8% for most banks to be considered adequately capitalized by regulators, and 5% and 10% to be considered well-capitalized.

Further losses totaling $4.29 million during the first three quarters of 2010 left the bank with negative capital ratios as of September 30.

The bank's portfolio was heavily concentrated in construction loans and commercial real estate loans and its nonperforming assets -- including loans past due 90 days, nonaccrual loans and repossessed real estate -- made up nearly 23% of its total assets as of September 30.

A November 2009 consent order from the FDIC and state regulators required Gulf State Community Bank's board of directors to improve their supervision of the institution and retain qualified management. The bank was also required to increase its Tier 1 leverage ratio to 8% and its total risk-based capital ratio to 12% within 90 days. The bank had little chance of achieving the required capital raise, since potential investors are more likely to invest in a failed bank -- with a generous loss-sharing agreement with the FDIC -- rather than prop up a bank with poor asset quality.

The FDIC agreed to cover 80% of losses on $84.4 million of the assets acquired by Centennial Bank, which is a subsidiary of Home BancShares (HOMB). The failed bank's five offices were set to reopen as Centennial Branches during normal business hours, beginning Saturday.

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