Regulators announced Friday that three more U.S. banks have failed, bringing the total for 2009 to nine.

State regulators closed FirstBank Financial Services of McDonough, Ga. and appointed the Federal Deposit Insurance Corporation receiver. The FDIC struck a deal with Regions Bank of Birmingham, Ala. (held by Regions Financial Corp. ( RF)) in which Regions will assume all of the failed institution's deposits.

Meanwhile, The California Department of Financial Institutions shuttered Alliance Bank of Culver City, Calif. The FDIC (as usual) was named receiver and arranged for California Bank & Trust of San Diego (a subsidiary of Zions Bancorporation ( ZION)) to assume all of Alliance's deposits.

California regulators also closed County Bank of Merced, Calif., with the FDIC arranging for Westamerica Bank of San Rafael, Calif. (held by Westamerica Bancorporation ( WABC)), to take over all deposits.

Please see TheStreet.com's Bank Failure Roundup for a summary of previous bank and savings and loan failures during 2008 and 2009.

FirstBank Financial Services

TheStreet.com Ratings assigned FirstBank Financial Services an E (Very Weak) financial strength rating in September, a downgrade from an E+ in June and a D- (Weak) in March. The institution, with total assets of $337 million and total deposits of $279 million, was one of the undercapitalized banks identified by TheStreet.com early Friday, using preliminary Dec. 31 data, provided by Highline Financial.

FirstBank Financial Services was actually considered significantly undercapitalized under regulatory guidelines, with a tier-1 leverage ratio of 2.31% and a risk-based capital ratio of 4.46% as of Dec. 31. These ratios need to be at least 5% and 10%, respectively, for a bank to be considered well capitalized.

Mounting losses from soured commercial and construction loans in the Atlanta metropolitan area took their toll through 2008, with the institution posting a net loss of $25 million for 2008. Even after $9 million in net loan charge offs for the year, the institution's ratio of nonperforming assets to total assets was 34% as of Dec. 31.

Regions Bank took over all of First Bank Financial's deposits, including uninsured balances and brokered deposits, and approximately $17 million in assets. The failed bank's four offices were set to reopen as Regions branches on Monday.

Alliance Bank

Alliance Bank had total assets of $1.14 billion and total deposits of $951 million as of Dec. 31. TheStreet.com Ratings downgraded the institution to an E- (Very Weak) financial strength rating in early January, from an E+ in September and a D- (Weak) in June.

In a press release announcing the failure, the California Department of Financial institutions said Alliance was inadequately capitalized and the bank failed in efforts to raise additional capital. Alliance lost $65 million during 2008, mostly from residential construction loan charge offs, but also from problem commercial loans.

California Bank & Trust agreed to take over all of Alliance Bank's deposits and most of the failed institution's assets, for a discount of $9.9 million. The FDIC sweetened the deal for California Bank & Trust (and its holding company, Zions Bancorporation) by entering into a loss-sharing agreement with the acquiring institution.

The failed institutions branches were to reopen Monday.

This was Zions Bancorporation's second acquisition of a relatively large failed community bank. The previous acquisition was Silver State Bank of Henderson, Nev., which failed in September.

The FDIC estimated the loss to its insurance fund would be $206 million.

County Bank

California regulators cited inadequate capital as the reason for closing County Bank of Merced, and the institution was included in TheStreet.com's preliminary list of banks that were undercapitalized as of Dec. 31. The failed bank's tier-1 leverage and risk-based capital ratios were 3.12% and 6.53%.

TheStreet.com Ratings assigned County Bank an E- (Very Weak) rating early in January, a downgrade from an E+ rating in September and a D (Weak) in June. The driving factor in the institution's failure was nonperforming commercial real estate and construction loans. County Bank reported net loan charge offs of $53 million during 2008 and net losses totaling $96 million, wiping out too much of the institution's capital for it to survive.

County Bank had $1.7 billion in total assets and $1.3 billion in deposits. The FDIC arranged for Westamerica Bank to assume all of the failed institution's deposits, including uninsured balances and brokered deposits. The agency also entered into a loss-sharing agreement, under which Westamerica assumed all of County Bank's assets.

The FDIC estimated the loss to its insurance fund would be $135 million.

Ratings

Not all banks have filed their Dec. 31 earnings reports, and data for most savings and loans is not yet available. But TheStreet.com already has identified a partial list of 40 undercapitalized banks.

The three bank failures this week turned out well for depositors, because the FDIC was able to find banks willing to acquire all deposits, including uninsured balances. However, this is not always the way bank failures turn out. As we saw last week, the agency cannot always find another institution to take over deposits. This can result in uninsured depositors losing some or all of their balances. It can also result in insured CD depositors losing money when they are forced to place their money elsewhere at lower rates.

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

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