Regulators in the U.S. shuttered two banks and one savings and loan Friday, bringing the tally of failed institutions in 2009 to six.

The Federal Deposit Insurance Corporation was named receiver all three companies.

The Utah Department of Financial Institutions shut down Magnet Bank of Salt Lake City. Unable to find a buyer for the bank's deposits, the FDIC is liquidating the bank and will mail checks to retail depositors on Monday morning.

Meanwhile, the Office of the Comptroller of the Currency closed Ocala National Bank of Ocala, Fla., and the FDIC arranged for all deposits to be assumed by CenterState Banks of Florida ( CSFL)), based in Winter Haven, Fla.

And the Office of Thrift Supervision shuttered Suburban Federal Savings Bank of Crofton, Md., with the Bank of Essex of Tappahannock, Va. assuming all deposits.

Magnet Bank

As of Dec. 2, Magnet Bank had total assets of $292.9 million and total deposits of $282.8 million. Most of the deposits were brokered CDs, making the bank unattractive to potential acquirers.

TheStreet.com Ratings had assigned Magnet Bank an E- (Very Weak) financial strength rating back in June, downgrading the institution from a D- (Weak) because of a rapid increase in losses from nonperforming construction and development loans.

Loan charge offs peaked in the third quarter, when a net loss of $24 million caused the bank's ratios to slip so far that it was considered undercapitalized per regulatory guidelines, with leverage and risk-based capital ratios of 4.94% and 6.76%, respectively. These ratios need to be at least 5% and 10%, respectively, for a bank or thrift to be considered well-capitalized.

The FDIC estimated that Magnet Bank had no uninsured deposits, although the final determination could not be made until brokers provided the FDIC with customer information.

When a bank or savings and loan institution with brokered deposits fails, the FDIC asks the brokers to list their customers and deposit amounts. Since brokered CDs are registered with a bank or S&L only in the name of the broker, the FDIC needs the brokers to provide detailed customer account information for the agency to cross-check with other broker lists and the bank's retail deposits to make sure that a customer's total deposits with the failed institution don't exceed insurance limits. It can take customers with brokered deposits a few weeks to get their money back.

FDIC spokesman David Barr said that the last time the agency was unable to find a buyer for (at least) the insured deposits of a failed institution was on Feb. 14, 2004, when Dollar Savings of Newark, N.J. failed.

The liquidation of Magnet Bank's deposits will be relatively simple, since the institution had no transaction accounts when it failed. If it had, the FDIC would have processed all checks presented for collection on the evening following the closing. Any checks that didn't clear would be returned with a notice saying the bank was closed, not that there were insufficient funds. Accounts would then be balanced so the FDIC could send customers checks for their insured balances promptly.

Mr. Barr confirmed that the FDIC had done this before and was well-prepared to handle such a scenario.

Ocala National Bank

In September, TheStreet.com Ratings assigned Ocala National Bank an E- financial strength rating, a downgrade from the previous rating of E in June. The bank had total assets of $223.5 million and total deposits of $205.2 million as of Dec. 31.

All retail deposits, including any uninsured balances, were acquired by CenterState Bank of Florida, with Ocala National's four offices scheduled to reopen on Monday as branches of CenterState.

Ocala's $17 million in brokered deposits were not part of the transactions. Customers with brokered CDs need to contact their brokers, who will pursue payment from the FDIC.

When announcing the institution's closing, the OCC cited "unsafe and unsound practices," and said the bank's losses had burned through its capital.

Like so many Florida Banks, Ocala National made huge bets on residential construction and development loans, with loan quality sliding late in 2007 and hitting critical levels in the first quarter of 2008 when nonperforming assets (including loans past due 90 days or more and repossessed real estate) made up 21.84% of total assets.

At the end of the third quarter, the nonperforming assets ratio had climbed to 31.56%, even after the bank had charged off $8 million in loans. The bank had not been well-capitalized since December 2007.

The FDIC estimated that the loss to its deposit insurance fund from Ocala National Bank's closing would be $99.6 million.

Suburban Federal Savings Bank

The OTS announced Suburban Federal Savings Bank's failure late Friday, saying the institution was "critically undercapitalized and in unsound condition."

All of Suburban Federal's deposits were acquired by Bank of Essex of Tappahannock, Virginia, with the failed thrift's branches set to reopen Saturday under the Bank of Essex name.

Suburban Federal had total assets of $360 million and deposits of $302 million as of Sept. 30. The institution had been assigned an E- financial strength rating by TheStreet.com Ratings in January, a downgrade from the D- rating assigned in March 2007.

With a continued slide in residential and construction loan quality through the first three quarters of 2008, the institution reported losses exceeding $10 million and was considered critically undercapitalized as of Sept. 30, with leverage and risk-based capital ratios of 1.33% and 3.09%, respectively.

Ratings

The failure of Magnet Bank shows that even if your deposits are fully insured, you still face some risk if your bank or savings and loan institution fails.

It's possible to be greatly inconvenienced if you have checks outstanding from a transaction account if your bank or thrift fails and another institution doesn't grab the deposits.

Depositors of Magnet Bank that locked in decent CD rates a few months back face the prospect of finding a new parking place for their cash, at a much lower rate. BankingMyWay's national composite rate for a 6-month CD was just 1.28% Friday.

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