The shakeout among community banks accelerated, as regulators in the U.S. closed four institutions Friday, bringing total number of failed banks and savings and loans in 2009 to 13.

The Nebraska Department of Banking and Finance closed

Sherman County Bank

of Loup City and appointed the Federal Deposit Insurance Corp. receiver. The FDIC then sold all of the failed bank's deposits and some of its assets to

Heritage Bank

, of Wood River, Neb.

Florida bank regulators shut down

Riverside Bank of the Gulf Coast

of Cape Coral with the FDIC (as receiver) selling the failed institution's retail deposits to

TIB Bank

of Naples, Fla. TIB Bank is held by

TIB Financial Corp



State regulators seized

Corn Belt Bank and Trust

of Pittsfield, Ill. The FDIC was named receiver and arranged for all of Corn Belt's retail deposits to be taken over by

Carlinville National Bank

, of Carlinville, Ill.

Friday's last failure was

Pinnacle Bank

of Beaverton, Ore. State regulators took over the bank and appointed the FDIC as receiver. The bank's deposits were then purchased by

Washington Trust Bank

of Spokane, Wash., along with most of its assets.

Please see's

Bank Failure Roundup

for a summary of all previous bank and S&L failures during 2008 and 2009.

Sherman County Bank

In a press release announcing the failure of Sherman County Bank, state regulators cited a previous order for the bank to raise more capital, and the institution's failed efforts to do so. The regulators provided no other information. Ratings

had assigned Sherman County Bank a D+ (Weak) financial strength rating in September. Still, the closing of the institution was a surprise, because Sherman County Bank was still considered well capitalized under ordinary regulatory guidelines with a tier 1 leverage ratio of 8.96% and a risk-based capital ratio of 10.74%, as of Dec. 31. These ratios need to be at least 5% and 10%, respectively for a bank to be considered well capitalized, under ordinary circumstances.

The Dec. 31 data are still subject to revision, so it's possible the available figures were incorrect. Per the early Dec. 31 data, Sherman County Bank's asset quality had improved over the previous four quarters, with nonperforming assets (loans past due 90 days or more and repossessed real estate) comprising just 0.56% of total assets, and a ratio of net loan charge-offs to average loans of just 0.13% of 2008.

Sherman County Bank had total assets of about $130 million and $85 million in deposits. All deposits, including any uninsured balances and brokered deposits, were assumed by Heritage Bank. All four of Sherman County Bank's offices, including those operating under the name of Howard County Bank, were set up reopen as branches of Heritage Bank on Tuesday, following the Monday observance of Presidents Day.

The FDIC estimate the cost to its insurance fund would be $28 million.

Riverside Bank of the Gulf Coast

Riverside Bank of the Gulf Coast had total assets of approximately $539 million and deposits of $424 million. Ratings

had assigned the institution an E- (Very Weak) financial strength rating in January, downgrading the institution from an E+ in September. In June, the bank had received a D- (Weak) rating.


identified a partial list of 40

undercapitalized banks

based on preliminary regulatory data downloaded on Feb. 5, Riverside Bank of the Gulf Coast was highlighted as a critically undercapitalized institution, with a tier 1 leverage ratio of just 1.23%, the second-lowest in the country.

The Cape Coral, Fla. institution's problems sprang from an overconcentration in residential construction loans, which quickly soured when the residential housing boom in Florida went bust. Riverside Bank of the Gulf Coast charged off $32 million in nonperforming loans during 2008. Even after those losses, it had a nonperforming assets ratio of 10.52% as of Dec. 31.

Net losses totaling $49 million for 2008 had nearly wiped out the bank's capital, and prospects for a capital infusion from private investors were dim.

While TIB Bank will acquire all retail deposits, with Riverside of the Gulf Coast's nine offices reopening as TIB branches Tuesday, the failed bank's $142.6 million in brokered deposits were not part of the transaction.

When a bank with brokered deposits fails, the FDIC asks the brokers to list their customers and deposit amounts. Since brokered CDs are registered with a bank only in the name of the broker, the FDIC needs the brokers to provide detailed customer account information for the agency to cross-check with other broker lists and the bank's retail deposits to make sure that a customer's total deposits with the failed institution don't exceed insurance limits. It can take customers with brokered deposits a few weeks to get their money back.

Riverside Bank of the Gulf Coast's portfolio of soured construction loans, with projects in varying states of completion, are particularly unattractive to an acquiring institution, and the cost to the FDIC's insurance fund will be relatively high.

TIB Bank is only acquiring about $125 million in the failed bank's assets (mainly cash and marketable securities), and the FDIC expects the cost to its insurance fund on the disposal of the remaining $414 million in assets to be $201.5 million.

Corn Belt Bank and Trust

Corn Belt Bank and Trust had $272 million in assets and $234 million in deposits as of Dec. 31. Ratings

had assigned the bank an E- rating in January, a downgrade from the previous rating of D+. Corn Belt was also included on the recent partial list of

undercapitalized banks

, based on preliminary regulatory data downloaded on Feb. 5.

The institution was considered significantly undercapitalized under regulatory guidelines, with tier 1 leverage and risk-based capital ratios of 2.04% and 5.30%, respectively, as of Dec. 31. The writing was on the wall for Corn Belt ever since its $19 third-quarter loan loss provision, to cover current and anticipated commercial loan charge-offs, wiped out two-thirds of its capital.

Carlinville National Bank was set to take over all of Corn Belt's retail deposits, with the failed banks two branches to reopen under the Carlinville name on Tuesday. Once again, brokered deposits were not acquired, and depositors should give their brokers a call.

This is another relatively high-cost failure for the FDIC. Carlinville is taking over approximately $60.7 million of the failed banks assets. The FDIC expects its cost on disposing of the roughly $211 million in remaining assets to be $100 million.

Pinnacle Bank

In its press release announcing the closing of Pinnacle Bank, Oregon regulators said the institution was insolvent and was facing liquidity problems from its reliance on brokered deposits. Ratings

had assigned Pinnacle an E- financial strength rating in January, a downgrade from a D- in September. Nonperforming assets (mainly nonaccruing commercial construction loans) comprised 12.52% of total assets as of Dec. 31, and the institution didn't appear to have sufficient capital to ride out anticipated loan charge-offs.

Pinnacle Bank had $73 million in total assets and $64 million in deposits. Washington Trust Bank is acquiring most of the assets and all the deposits, including any uninsured balances and brokered CDs.

The FDIC estimated the cost to its insurance fund would be $12.1 million.


The four bank failures this week turned out well for retail depositors, since the FDIC was able to find banks willing to acquire all deposits, including uninsured balances.

However, depositors with CD accounts made through brokers will face the inconvenience of waiting for their brokers to provide the FDIC with the information required so the agency can return the money to the brokers. These depositors may also face the prospect of getting a much lower rate on their next CD deposit, especially if they had locked in much higher rates through their brokers a few months back. Ratings

issues independent and very conservative financial strength ratings on each of the nation's 8,500 banks and savings and loans which are available at no charge on the

Banks & Thrifts Screener

. In addition, the Financial Strength Ratings for 4,000 life, health, annuity, and property/casualty insurers are available on the

Insurers & HMOs Screener


Philip W. van Doorn joined Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.