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TierOne Bank, Two Others Fail

Bank failures on Friday included Nebraska's TierOne and community banks in Illinois and Mississippi

WASHINGTON (

TheStreet

) -- Banks failed on Friday in Nebraska, Illinois and Mississippi, bringing this year's total number of U.S. bank closings to 81.

All three of the banks that regulators shut down had been included in

TheStreet's

Bank Watch List

of undercapitalized banks and thrifts, based on first-quarter regulatory data provided by

SNL Financial

.

TierOne Bank

The Office of Thrift Supervision shut down TierOne Bank of Lincoln, Neb., which had $2.8 billion in total assets and was the main subsidiary of

TierOne Corp.

(TONE)

. The Federal Deposit Insurance Corp. was appointed receiver and sold the failed institution's $2.2 billion in deposits for a 1.5% premium to

Great Western Bank

of Sioux Falls, S.D., which is held by

National Australia Bank LTD

.

Great Western also agreed to take on all of TierOne's assets, with the FDIC agreeing to share in losses on $1.9 billion. The failed institution's 69 offices were set to reopen during normal business hours as branches of Great Western Bank. The FDIC estimated TierOne's failure would cost its deposit insurance fund $297.8 million.

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TierOne Bank had been assigned an E-minus (Very Weak) financial strength rating by

Weiss Ratings

(formerly

TheStreet.com Ratings

) in December, which was a downgrade from a D-minus (Weak) the previous quarter. A third-quarter net loss of $132 million left the institution

undercapitalized

, and subsequent losses left TierOne in critical shape as it was overwhelmed by soured commercial real estate, multifamily and construction loans.

Arcola Homestead Savings Bank

Illinois regulators closed

Arcola Homestead Savings Bank

TST Recommends

of Arcola, Ill. and appointed the FDIC receiver. Since the agency was unable to find a buyer for the failed bank, the FDIC announced that it would pay out Arcola Homestead's deposits.

The FDIC said that checks would be mailed on Monday to retail customers with savings accounts, certificates of deposit or IRA accounts. Customers with deposits made through brokers were encouraged to contact their brokers, who were to be paid directly by the FDIC after providing documentation to the agency. For customers with checking accounts, balances were transferred to the Arcola branch of First Mid-Illinois Bank and Trust and checks were to be mailed out for any insured balances not withdrawn by June 12.

Arcola Homestead Savings Bank had $17 million in total assets, and the FDIC said it did not appear to have any uninsured deposits.

The bank had been assigned a C-minus (Fair) financial strength rating by

Weiss Ratings

in March, based on Dec. 31 financial reports. At that time, the bank appeared to be strongly capitalized, but a subsequent revision of the institution's year-end call report showed a $2.8 million loss that wiped out its capital.

The FDIC estimated the cost of Arcola Homestead Savings Bank's failure to the deposit insurance fund would be $3.2 million.

First National Bank

The Office of the Comptroller of the Currency closed

First National Bank

of Rosedale, Miss., which had $60 million in total assets. The FDIC arranged for the failed bank's assets and deposits to be assumed by

The Jefferson Bank

of Fayette, Miss., with the agency agreeing to share in losses on $43.5 million of the acquired assets.

First National Bank had been assigned an A-minus (Strong) rating by

Weiss Ratings

in March, based on Dec. 31 financial reports. In its fourth-quarter call report, the bank reported 2009 net income of $1.4 million, with a tier 1 leverage ratio of 12.69% and a total risk-based capital ratio of 16.57% as of Dec. 31. These ratios far exceeded the 5% and 10% required for most institutions to be considered well capitalized. Meanwhile, reported nonperforming assets were also relatively low, making up 1.48% of total assets.

For the first quarter of 2010, the bank's call report showed $10.6 million in loan charge-offs, which completely wiped-out the bank's capital. Even after the charge-offs, nonperforming loans comprised 26% of the bank's assets as of March 31. This was quite a surprise, as even early-stage loan delinquencies were reported to be very low the previous quarter.

First National's sole office was set to reopen Monday as a branch of The Jefferson Bank. The FDIC estimated the failure would cost the insurance fund $12.6 million.

TheStreet

will publish an update detailing First National Bank's first-quarter slide as more information becomes available.

Ongoing Bank Failure Coverage

All previous bank and thrift failures since the beginning of 2008 are detailed in

TheStreet's

interactive bank failure map:

The bank failure map is color-coded, with the states having the greatest number of failures highlighted in red, and states with no failures highlighted in gray. By moving your mouse over a state you can see its combined 2008-2010 totals. Then click on the state to open a detailed map pinpointing the locations of each failure and providing additional information for each one.

Free Financial Strength Ratings

TheStreet's

Banks & Thrifts Screener

features independent and very conservative financial strength ratings provided each quarter by Weiss Ratings, for each of the nation's banks and savings and loans. The ratings are available at no charge.

--

Written by Philip van Doorn in Jupiter, Fla.

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.