State regulators Friday shut down
Bank of Lincolnwood
of Lincolnwood, Ill., bringing to 37 the total number of U.S. banks and savings and loans that have failed during 2009.
The regulators appointed the Federal Deposit Insurance Corp. receiver, and the FDIC arranged for
Republic Bank of Chicago
, of Oak Brook, Ill. to take over all of the failed institution's deposits.
Bank of Lincolnwood's two offices were set to reopen Saturday morning as branches of Republic Bank of Chicago.
The previous two banks to fail (on May 22) were also Illinois institutions:
Strategic Capital Bank
of Champaign and
Citizens National Bank
for an interactive summary of all previous bank and savings and loan failures during 2008 and 2009.
This was the sixth Illinois bank to fail this year, tying the state with Georgia for the largest number of bank failures in 2009.
For 2008 and 2009 to date, Georgia is No. 1, with 11 bank or thrift failures, followed by California, with nine, and Illinois, with seven. Florida has had five and Nevada four.
Large bank holding companies that have acquired failed institutions since the start of 2008 include
J.P. Morgan Chase
, which acquired Washington Mutual, the largest bank or thrift ever to fail in the U.S.;
Fifth Third Bancorp
Bank of Lincolnwood was included in
latest list of
, which was published last week. As of March 31, the institution's tier 1 leverage ratio was just 1.16%, and its total risk-based capital ratio was 2.63%. These ratios need to be at least 5% and 10%, respectively, for most institutions to be considered well-capitalized under
The institution was assigned an E (Very Weak) financial strength rating by
in March, based on Dec. 31 financial information. The rating was downgraded from a D- (Weak) the previous quarter.
Although Bank of Lincolnwood's loan quality was weak throughout 2008, the institution reported quarterly profits throughout the year. Nonperforming assets -- mainly residential construction loans and single-family mortgages -- nearly doubled during the fourth quarter, to 18.43% of average assets. Loan quality slipped even further during the first quarter, and the institution's capital was nearly wiped out as it lost $13 million from loan losses and provisions for reserves to cover further expected losses.
In addition to the failed institution's deposits, Republic Bank of Chicago agreed to purchase $162 million of its assets, with the FDIC retaining the rest for later disposition. The agency projected that its losses from Bank of Lincolnwood's failure would total $83 million.
Free Financial Strength Ratings
Although the extension of the temporary increase on the basic FDIC deposit insurance limit to $250,000 through 2013 is great news for many depositors, the waiver on deposit insurance limits on business checking accounts is apparently still set to expire at the end of 2009.
Readers should also consider that even if their personal deposits are under FDIC insurance limits, they or someone they 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, since attractive CD rates that are locked in can be lost when an institution fails.
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
. In addition, the Financial Strength Ratings for 4,000 life, health, annuity, and property/casualty insurers are available on the
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.