Regulators shuttered two Illinois banks Friday, bringing the total number of failed U.S. banks and thrifts during 2009 to 36.

The Illinois Department of Financial and Professional Regulation seized

Strategic Capital Bank

of Champaign, Ill. The Federal Deposit Insurance Corp. was appointed receiver and arranged for all of the failed bank's deposits to be taken over by

Midland States Bank

of Effingham, Ill.

The Office of the Comptroller of the Currency then shut down

Citizens National Bank

of Macomb, Ill. and appointed the FDIC receiver. The FDIC then arranged for

Morton Community Bank

of Morton, Ill. to assume Citizens' retail deposits.

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The two bank closings come on the heels of Thursday's failure of BankUnited FSB.

Please see's

follow-up coverage of the

BankUnited failure

, which includes the Bank Failure Map -- an interactive summary of all previous bank and thrift failures during 2008 and 2009.

Both of the Illinois banks that failed Friday were included in's

preliminary list of

undercapitalized banks

as of March 31.

According to preliminary first-quarter regulatory data provided by SNL Financial, 17 Illinois banks were undercapitalized under

regulatory guidelines

as of March 31.

While Illinois led the list with the most undercapitalized banks for any state, it is important to point out that Illinois also has more banks than any other state, with 658 as of Dec. 31. Illinois was one of the last states to remove legal barriers against out-of-state banks doing business within its borders, which is one of the reasons it is not as far along on the road to consolidation as many other states.

The Friday failures brought the number of failed Illinois institutions this year to five.


leads all states, with 11 bank or thrift failures during 2008 and 2009, followed by


, with nine failures;


, with six;


, with five; and Nevada, with four.

Large bank holding companies that have acquired failed institutions during 2008 and 2009 include

J.P. Morgan Chase

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

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

SunTrust Banks

(STI) - Get SunTrust Banks, Inc. Report

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Regions Financial

(RF) - Get Regions Financial Corporation Report


Zions Bancorp

(ZION) - Get Zions Bancorporation (ZION) Report


Fifth Third Bancorp

(FITB) - Get Fifth Third Bancorp Report


U.S. Bancorp

(USB) - Get U.S. Bancorp Report


BB&T Corp

(BBT) - Get BB&T Corporation Report


Strategic Capital Bank

Strategic Capital Bank had total assets of $537 million and total deposits of $471 million. Midland State Bank entered into a loss-sharing agreement with the FDIC, with Midland acquiring all of the failed institution's deposits and $536 million of its assets. The FDIC agreed to share in losses on $420 million in assets.

Strategic Capital's office is to reopen Tuesday as a branch of Midland State Bank.

ratings had assigned Strategic Capital an E-minus (Very Weak) financial strength rating in March, based on Dec. 31 financial information. The rating was a downgrade from the E rating that was assigned in September.

According to preliminary data supplied by SNL Financial, Strategic Capital Bank was undercapitalized under regulatory guidelines, with a Tier 1 leverage ratio of 3.62% and a total risk-based capital ratio of 6.01%. These ratios need to be at least 5% and 10%, respectively, for a bank or thrift to be considered well-capitalized, unless an institution has received a regulatory order to maintain higher levels of capital.

Although Strategic Capital reported first-quarter net income of $1.6 million, this was mainly the result of a transfer of $1.5 million from loan-loss reserves. The bank's net losses for 2008 totaled $11.1 million, as losses on securities and charge-offs in its commercial and construction loan portfolios ate into its capital.

The FDIC estimates that the cost to its deposit insurance fund from Strategic Capital's failure will be $173 million.

Citizens National Bank of Macomb

Citizens National Bank of Macomb had total assets of $437 million and total deposits of about $400 million. The FDIC came to an agreement with Morton Community Bank under which Morton is acquiring all of the failed bank's retail deposits and purchasing $240 of its assets. The FDIC agreed to share losses on $200 million of the assets.

Morton Community chose not to acquire roughly $200 million in brokered deposits. The FDIC will pay brokers directly.

In its press release announcing the failure of Citizens National, the OCC cited "unsafe and unsound practices" and said there was "no reasonable prospect" for the bank to become well-capitalized without federal assistance.

Citizens National Bank was considered significantly undercapitalized, with a Tier 1 leverage ratio of 2.21% and a total risk-based capital ratio of 4.55% as of March 31, according to preliminary data supplied by SNL Financial. Ratings

had assigned the institution an E-minus (Very Weak) financial strength rating in March, based on Dec. 31 financial information. The rating was a downgrade from the E rating assigned in September.

Citizens National reported a first-quarter net loss of $4.3 million, following a 2008 net loss of $13.8 million, as the institution was overwhelmed by losses on securities investments and nonperforming commercial real estate loans.

The FDIC estimated the cost to its insurance fund from Citizens National Bank's failure would be $106 million.

Good News for Some Depositors

Depositors took no losses this week, even though the FDIC racked up the second-largest loss to its insurance fund in the current crisis when BankUnited FSB failed. Also good news for depositors: President Obama signed a bill Wednesday that extends the temporary increase on the basic individual deposit account insurance limit through 2013.

The basic individual deposit account insurance limit was temporarily increased in October 2008 from $100,000 to $250,000, and the deposit insurance limit on non-interest-bearing business checking accounts was waived. Insurance limits for both account types were set to revert to $100,000 at the end of 2009.

As part of the Helping Families Save Their Homes Act signed by the President on Wednesday, the temporary increase on the basic individual deposit account insurance limit was extended through 2013. The bill, however, made no mention of any extension on the waiver of insurance limits on business checking accounts, and the FDIC's press release on the act made no mention of business checking accounts. It appears that the waiver on these accounts is still set to expire at the end of 2009.

Free Financial Strength Ratings for Banks and Thrifts

An important thing to consider is that 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, since attractive CD rates can be lost when an institution fails. Ratings

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