) -- State regulators shut down two banks Friday, bringing this year's total number of bank failures to 151.
Both of this week's failed banks were previously included in
institutions, based on preliminary third-quarter regulatory data provided by
The Michigan Office of Financial and Insurance Regulation shuttered
of Farmington Hills, Mich. and appointed the
Federal Deposit Insurance Corp.
as receiver. The failed bank had $257.2 million in total assets, which the FDIC sold to
Level One Bank
, which is also headquartered in Farmington Hills.
Paramount Bank had entered into an agreement with the
in October 2008, requiring the institution to submit a new capital plan to the regulator, as well as a liquidity plan, and improve its credit administration staff, policies and procedures. The bank was also required to accelerate the charging-off of problem loans.
Following net losses of $12.3 million during 2008 and $9.9 million in 2009, the bank was undercapitalized with a total risk-based capital ratio of 6.81% as of Dec. 31, 2009. This ratio needs to be at least 10% for most banks to be considered well-capitalized and 8% for most to be considered adequately capitalized by regulators. Following another $10.2 million in losses during the first three quarters of 2010, the total risk-based capital ratio was 2.49% and the bank was unable meet the requirements of a subsequent Aug. 3 order from the Fed to sell the bank or raise adequate capital within 60 days.
Paramount Bank's four branches were set to reopen Monday as branches of Level One Bank. The FDIC agreed to cover 80% of losses on $233.1 million in assets acquired by Level One Bank and estimated the cost to the deposit insurance fund would be $90.2 million.
Pennsylvania regulators closed
of Southampton, Pa., which had $112.6 million in assets and $104.5 million in deposits. The FDIC was appointed receiver and arranged for
of Huntington Valley, Pa. to assume all of the deposits and $77.1 million in assets from the failed institution, with the agency agreeing to cover 80% of losses on $45.8 million. Polonia Bank is the main subsidiary of
Earthstar Bank had entered into a cease and desist order with the FDIC in May 2008, after an examination by the agency and the Commonwealth of Pennsylvania Department of Banking determined that the bank had "engaged in unsafe or unsound banking practices and had committed violations of law and regulation."
The bank was ordered to engage a third party to assess the qualifications and effectiveness of its senior management and board of directors, follow through with recommendations to replace board members and members of senior management with better-qualified personnel and essentially write or improve procedures for every facet of running the bank.
After net losses of $6.8 million in 2009, the bank was undercapitalized as of December 31 with a total risk-based capital ratio of 5.23%. The cease and desist order was amended in April, noting that the bank was found during a June 2009 examination to be "Operating with inadequate staff to perform present and anticipated duties, including lack of a Chief Executive Officer, Chief Financial Officer, and Chief Risk Officer."
Earthstar Bank was ordered to retain qualified management and improve its board of directors supervision, and raise sufficient capital to bring its total risk-based capital ratio to 12% by June 30.
As of September 30, the total risk-based capital ratio had dropped to 4.06% and the bank's nonperforming assets - including loans past due 90 days, nonaccrual loans and repossessed assets - made up 8.17% of total assets.
Earthstar Bank's four offices were scheduled to reopen Saturday as branches of Polonia Bank. The FDIC estimated the cost of the failure to the deposit insurance fund would be $22.9 million.
Thorough Bank Failure Coverage
All bank and thrift closures since the beginning of 2008 are detailed in
interactive bank failure map:
The bank failure map is color-coded, with the states having the greatest number of failures highlighted in dark gray, and states with no failures in light green. By moving your mouse over a state you can see its combined 2008-2010 totals. Then click the state to open a detailed map pinpointing the locations and providing additional information for each bank failure.
Written by Philip van Doorn in Jupiter, Fla.
>To contact the writer of this article, click here:
>To follow the writer on Twitter, go to
>To submit a news tip, send an email to:
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., 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.