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Government Closes Two Banks

Regulators shut down First National Bank of Nevada and First Heritage Bank and save depositors from losses.

The continuing credit crisis has claimed two more banks.

The Office of the Comptroller of the Currency announced late Friday that it had closed First National Bank of Nevada and First Heritage Bank of Newport Beach, Calif., both of which are units of the First National Bank Holding Company, based in Scottsdale, Ariz.

The Federal Deposit Insurance Corporation saved depositors of the two institutions from incurring losses by selling all of the banks' deposits and some of their assets to Mutual of Omaha Bank, of Omaha, Neb. All 28 branches of the two banks are scheduled to reopen Monday under the Mutual of Omaha name, and depositors will have ATM access over the weekend. Some of First National's branches operated under the name First National Bank of Arizona.

This is great news for the depositors of the closed institutions, since even uninsured depositors will have a smooth transition and lose no money as a result of the closings.

You can read the FDIC's press release on Mutual of Omaha Bank's assumption of deposits


First National, with $3.4 billion in total assets, was found to be undercapitalized, and "had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices," according to the OCC's statement. Although June 30 financial information was not yet available, Ratings had assigned the institution a financial strength rating of D- (Weak).

In its announcement of First Heritage's closing, the OCC stated that the $250 million institution was critically undercapitalized, and that there was "no reasonable prospect" the bank could improve to a "well-capitalized" status without federal assistance. First Heritage had been assigned a D+ (Weak) financial strength rating by Ratings.

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Mutual of Omaha Bank has a C- (Fair) financial strength rating. This rating is based on the institution's March 31, 2008 regulatory data, as supplied by Highline Financial, Inc. Mutual of Omaha Bank was considered well capitalized as of March 31, with leverage and risk-based capital ratios of 7.96% and 10.17%. That second ratio needs to be at least 10% for the thrift to be considered well-capitalized under regulatory guidelines.

Mutual of Omaha Bank had total assets of just $738 million as of March 31, so assuming $3.2 billion in deposits and $200 million in assets from the closed banks will change its profile completely. We hope to provide an update on the acquiring bank's financial condition, including capital levels, next week.

In its announcement of the agreement with Mutual of Omaha Bank, the FDIC says "Mutual of Omaha Bank's acquisition of all deposits was the 'least costly' resolution for the Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the banks' franchises." Ratings issues financial strength ratings on each of the nation's 8,600 banks and savings and loans. They are available at no charge on the

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

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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.