Regulators shuttered three small banks Friday, bringing to 20 the total of U.S. banks and savings and loans closed during 2009. Georgia regulators closed FirstCity Bank of Stockbridge, Ga., while the Office of the Comptroller of the Currency shut down Colorado National Bank of Colorado Springs, Colo. and TeamBank of Paola, Kan. The Federal Deposit Insurance Corp. was appointed receiver of all three institutions and was expected to liquidate FirstCity Bank and find buyers for all retail deposits and most of the assets of the other two failed companies. TeamBank was included in TheStreet.com's updated list of undercapitalized banks, the second list in our recent article focusing on undercapitalized savings and loans. FirstCity and Colorado National were not included on the list of undercapitalized banks, because they were still considered adequately capitalized under regulatory guidelines as of Dec. 31. Please see TheStreet.com's Bank Failure Map for an interactive summary of all previous bank and S&L failures during 2008 and 2009. The FDIC also amended its Quarterly Banking Profile Friday, revising the combined fourth-quarter net loss for U.S. banks and thrifts to $32.1 billion from the $26.2 billion net loss the agency reported Feb. 26.
When a bank or thrift fails and uninsured deposits are not acquired by another institution, depositors become creditors to the FDIC receivership for the amount of their uninsured balances. Any payments by the FDIC to these creditors after the institution fails are called dividends. The agency sometimes pays "advance dividends" to depositors at the time an institution fails. No advance dividends were announced for FirstCity's uninsured depositors. Although the Georgia Department of Banking and Finance didn't issue a press release Friday night on the failure of FirstCity Bank, the institution reported total net losses of $8.3 million for 2008. Like so many other Georgia institutions that failed in 2008 and 2009, FirstCity's troubles were focused on a portfolio of residential construction loans that went sour. The bank's ratio of nonperforming assets (including loans past due 90 days or more and repossessed real estate) was 20.41% as of Dec. 31. During 2008, FirstCity turned more and more to wholesale funding and brokered deposits. Rising funding costs and declining interest revenue from loans caused the institution to report negative interest income for the fourth quarter of 2008. FirstCity also slipped from being well capitalized per regulatory guidelines to adequately capitalized as of Dec. 31, with a tier 1 leverage ratio of 4.57% and a risk-based capital ratio of 8.54%. These ratios need to be at least 5% and 10%, respectively, for an institution to be considered well capitalized per regulatory guidelines.
With negative net interest income, FirstCity had no hope of surviving without a significant infusion of new capital. The FDIC estimate the cost to its deposit insurance fund from FirstCity's failure would be $100 million. TheStreet.com Ratings had assigned FirstCity a D- (Weak) rating in December, based on the institution's Sep. 30, 2008 financial reports (when the bank was still considered well capitalized). Updated ratings for all U.S. banks and thrifts based on finalized Dec. 31 financial information received from Highline Financial this week, will be available soon.
In its press release announcing its takeover of Colorado National Bank, the OCC said "the bank's unsafe and unsound practices weakened the bank's condition and seriously prejudiced the interests of the bank's depositors and the deposit insurance fund." TheStreet.com ratings had assigned the institution a D (weak) rating in December, based on Sep. 30, 2008 financial information. At that time, Colorado National was well capitalized, with tier 1 leverage and risk-based capital ratios of 6.74% and 11.19%, respectively. Its nonperforming assets ratio was 4.00%. While Colorado National was not in the same dire straits as its sister institution, loan quality deteriorated sharply in the fourth quarter, with the nonperforming assets ratio rising to 13.14% and the bank losing its well-capitalized status. The FDIC estimated the cost to its insurance fund from the failure of Colorado National would be $9 million.