Four U.S. Banks Fail Friday - TheStreet

Four U.S. Banks Fail Friday

State and federal regulators shut down four more banks, bringing to 57 the number of failed U.S. banks and savings and loan associations during 2009.
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State and federal regulators on Friday shut down four more banks, bringing to 57 the number of U.S. banks and savings and loan associations that have failed during 2009.

All but one of the failed banks were included in

TheStreet.com's

recent list of 89

undercapitalized banks and thrifts

. So far, 18 of the undercapitalized institutions listed on May 28 have failed.

All four of the failed institutions were overwhelmed by nonperforming construction and commercial real estate loans, following the pattern of the majority of this year's bank failures.

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The Georgia Department of Banking and Finance shut down

First Piedmont Bank

of Winder, Ga. and appointed the Federal Deposit Insurance Corp. receiver. The FDIC sold all the failed institution's deposits and branches to

First American Bank and Trust

of Athens, Ga.

South Dakota regulators closed

BankFirst

of Sioux Falls, S.D. The FDIC was appointed receiver and sold all of BankFirst's deposits and branches to

Alerus Financial

of Grand Forks, N.D.

The Office of the Comptroller of the Currency took over

Vineyard Bank

of Rancho Cucamonga, Calif. and appointed the FDIC receiver. The FDIC then sold all of the failed bank's retail deposits and branches to

California Bank & Trust

of San Diego, which is a subsidiary of

Zions Bancorporation

(ZION) - Get Report

.

Lastly, California regulators shuttered

Temecula Valley Bank

of Temecula, Calif., which was held by

Temecula Valley Bancorp

(TMCV)

. The FDIC was appointed receiver and sold the failed bank's retail deposits to

First-Citizens Bank and Trust

of Raleigh, N.C. First-Citizens is a subsidiary of

First Citizens Bancshares

(FCNCA) - Get Report

.

All previous bank failures since the beginning of 2008 are detailed on

TheStreet.com's

interactive bank failure map:

With 15 bank and thrift failures during 2008 and 2009, Georgia ranks first among U.S. states, followed by California and Illinois with 13 failures each, Florida with five and Nevada with four.

Besides Zions Bancorporation, large bank holding companies that have acquired failed institutions during 2008 and 2009 include

J.P. Morgan Chase

(JPM) - Get Report

, which acquired Washington Mutual, the largest-ever bank or thrift to fail in the U.S.;

SunTrust Banks

(STI) - Get Report

;

Regions Financial

(RF) - Get Report

;

Fifth Third Bancorp

(FITB) - Get Report

;

U.S. Bancorp

(USB) - Get Report

; and

BB&T

(BBT) - Get Report

.

First Piedmont Bank

First Piedmont Bank had been assigned a financial strength rating of E-minus (Very Weak) by

TheStreet.com Ratings

in March, a downgrade from the E-plus assigned in June 2008.

As of March 31, the institution's ratio of nonperforming assets to total assets was 25.17%, and its capital was dwindling, with a Tier 1 leverage ratio of 4.16% and a total risk-based capital ratio of 4.51%. These capital ratios need to be at least 5% and 10%, respectively, for most institutions to be considered well capitalized under

regulatory capital guidelines

.

First Piedmont had total assets of $115 million and total deposits of $109 million. First American Bank & Trust acquired $111 million of the failed institution's assets, with the FDIC agreeing to share losses on $90 million of the acquired assets.

First Piedmont's two offices were set to reopen Monday as branches of First American Bank and Trust. The FDIC estimated the cost to its deposit insurance fund from the failure of First Piedmont would be $29 million.

BankFirst

BankFirst was assigned an E financial strength rating by

TheStreet.com Ratings

in March, which was a downgrade from D-minus (Weak) the previous quarter. The bank was the only one of this week's failures not to appear on

TheStreet.com's

recent list of 89

undercapitalized banks and thrifts

, because it was still considered adequately capitalized under ordinary regulatory guidelines, with a Tier 1 leverage ratio of 5.90% and a total risk-based capital ratio of 8.68%.

While that second capital ratio reflects loan quality to some extent, BankFirst had an extremely high level of problem loans, with a nonperforming assets ratio of 43.68% as of March 31.

After acquiring the failed bank's deposits and branches, Alerus Financial made a separate agreement for BankFirst's Sioux Falls office to be operated as a branch of

First Dakota National Bank

, of Yankton, S.D. BankFirst's other office, in Minneapolis, will reopen as a branch of Alerus Financial. Both branches will reopen Monday.

BankFirst had total assets of $275 million and total deposits of $254 million. Alerus Financial agreed to acquire $72 million of the failed bank's assets, consisting of securities and loans collateralized with deposits. The FDIC made a separate arrangement to sell $177 million of BankFirst's loans to Beal Bank Nevada, of Las Vegas. Beal Bank amassed a very high level of capital before and during the early stages of the real estate crisis, as CEO Andrew Beal pursued a strategy of waiting to purchase heavily discounted nonperforming real estate loans from troubled lenders.

Vineyard Bank

Vineyard Bank was assigned an E-minus financial strength rating by

TheStreet.com Ratings

in March, a downgrade from an E-plus assigned back in September, after the institution's holding company admitted in August it would need to

raise capital and boost liquidity

.

As of March 31, Vineyard's nonperforming assets ratio was 22.22%, and it was undercapitalized with a Tier 1 leverage ratio of 3.49% and a total risk-based capital ratio of 5.44%.

Vineyard Bank had total assets of $1.9 billion and is the fourth largest bank or thrift to fail so far in 2009. Deposits totaled $1.6 billion. Zions Bancorporation arranged for its California Bank & Trust subsidiary to acquire all of the failed institution's branches and deposits, except for $134 million in brokered deposits. The FDIC announced it would pay the brokers directly. Customers with brokered CD deposits at Vineyard Bank will need to contact their brokers.

California Bank & Trust also acquired $1.8 billion in assets from the FDIC receivership. The FDIC agreed to share in losses on $1.5 billion of the acquired assets. Vineyard's 16 offices will reopen Monday as California Bank & Trust branches. The FDIC estimated the cost to its deposit insurance fund would be $579 million.

Temecula Valley Bank

Temecula Valley Bank was assigned an E-minus financial strength rating by

TheStreet.com Ratings

in March, a downgrade from the D rating that had been assigned in June 2008. The bank's nonperforming assets ratio was 11.73% and it was undercapitalized, with a Tier 1 leverage ratio of 3.99% and a total risk-based capital ratio of 5.44% as of March 31.

The failed bank had $1.5 billion in total assets and $1.3 billion in deposits. First Citizens Bank & Trust agreed to purchase all of the failed bank's deposits, save $304 million in brokered CDs.

First Citizens also acquired nearly all of Temecula Valley Bank's assets, with the FDIC agreeing to share in losses. Temecula Valley's 11 offices were scheduled to reopen Monday as branches of First Citizens.

Free Financial Strength Ratings

Although depositors suffered no losses in the four bank failures on Friday, there have been five instances this year when a bank failed and the FDIC was unable to find another institution to acquire its deposits. Depositors with total balances exceeding FDIC insurance limits lost money in four of those failures.

Even if your personal deposits are under FDIC insurance limits, you or someone you know are probably associated with a business, organization or government entity (such as a school district) with large deposits of somebody else's money in a local bank. In this environment, it is a very good idea to look into the health of your bank.

For depositors shopping for high-rate CDs through brokers, it is also important to consider the health of a bank or thrift, because attractive CD rates can be lost when an institution fails. Customers of Vineyard Bank and Temecula Valley Bank with CD deposits made through brokers are facing this inconvenient scenario and will probably have to wait a few weeks to receive their money from their brokers.

TheStreet.com Ratings

issues independent and very conservative financial strength ratings on each of the nation's 8,500 banks and savings and loans. They 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 TheStreet.com 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.