Less than a week after the failure of NetBank, federal regulators on Thursday announced the failure of an Ohio institution that also leaves some large depositors in limbo.

The Ohio Superintendent of Financial Institutions and the Federal Deposit Insurance Corp. announced the $86.7 million Miami Valley Bank's closing and the transfer of its insured deposits to The Citizens Banking Co., of Sandusky, Ohio. TheStreet.com Ratings provided advance notice of Miami Valley Bank's weak condition, as its rating was downgraded to an E- (very weak financial strength) in June 2007.

As with last week's failure of NetBank (which is formerly a unit of NetBank Inc. ( NTBK)), Miami Valley customers with deposits exceeding FDIC insurance limits are on the hook. At the time it was closed down, Miami Valley Bank had about $14 million in uninsured deposits in 269 accounts.

This time, however, the scenario may be more painful than the NetBank's closing. While NetBank's depositors received an immediate payout of 50 cents on the dollar for uninsured deposits, Miami Valley's depositors have received nothing so far.

David Barr, the FDIC's assistant Director for Public Affairs, said that the quick sale of half of NetBank's assets enabled the agency to make the 50% payments immediately. None of Miami Valley Bank's assets have been sold yet.

A Rapid Fall

After showing a steady rise in nonperforming assets, which comprised 3.27% of total assets as of Dec. 31, 2006, things really got out of hand in the first quarter. Nonperformers shot up to 12.80% of total assets, an amazingly high figure for a very small bank specializing in residential mortgage lending. Miami Valley Bank lost $6 million in the first quarter of 2007, as it transferred money to reserves to cover losses on problem loans. This reduced the bank's capital from $13.2 million to $8.4 million, making it undercapitalized per regulator guidelines.

With no improvement in asset quality in the second quarter, the bank lost another $5 million, and its total equity capital plummeted further to $5.4 million.

Miami Valley's failure is another example of why it is so important to monitor the health of the bank or savings and loan institution that holds your money. TheStreet.com Ratings Screener makes it easy to quickly check on the health of your bank free of charge.

While most depositors are well within FDIC limits, consumers and small businesses still should be aware of the health of their financial institutions. It is quite easy for any small business to have more than $100,000 -- the maximum individual non-retirement deposit the FDIC will insure -- of working funds flowing through a bank.

Also, almost all of the country's thousands of municipal entities, and thousands more organizations of all types, have bank deposits exceeding FDIC insurance limits.

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 o f 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.

More from Investing

When Is It 'Worth It' to Work With a Financial Advisor?

When Is It 'Worth It' to Work With a Financial Advisor?

Amazon, Microsoft and Google Face Backlash over ICE, Military Deals

Amazon, Microsoft and Google Face Backlash over ICE, Military Deals

3 Great Stock Market Sectors Millennials Should Invest In

3 Great Stock Market Sectors Millennials Should Invest In

Why Millennials Are Ditching Stocks for ETFs

Why Millennials Are Ditching Stocks for ETFs

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says