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.

FirstCity Bank

FirstCity Bank had total assets of $297 million and total deposits of $278 million. Since the FDIC was unable to find a buyer for the institution, the agency was set to mail checks to depositors with insured balances on Monday. There were an estimated $778,000 in uninsured deposits.

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.

Colorado National Bank and TeamBank

Both Colorado National Bank and TeamBank were subsidiaries of Team Financial, Inc. ( TFIN), of Paola, Kan.

The holding company announced earlier Friday that the OCC had served notice Tuesday that Team Financial's capital restoration plan, which was submitted to the regulator on March 2, was not accepted and that TeamBank was therefore considered undercapitalized. While the holding company left open the possibility the OCC might accept a revised capital restoration plan, the filing said the two subsidiary banks might be placed in receivership.

Colorado National

Colorado National Bank had total assets of $124 million and total deposits of $83 million. The FDIC arranged for Herring Bank of Amarillo, Texas, to acquire all of the failed bank's deposits, along with $117 million in assets. The FDIC agreed to share in losses on $62 million in assets acquired by Herring Bank, with the agency absorbing 80% of the potential losses.

Colorado National's four offices were to reopen Saturday as branches of Herring Bank.

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.

TeamBank

TeamBank, NA had total assets of $670 million and total deposits of $493 million. The FDIC entered into an agreement with Great Southern Bank (held by Great Southern Bancorp ( GSBC)) of Springfield Mo., for Great Southern to acquire TeamBank's retail deposits and most of its assets.

The FDIC agreed to absorb 80% of losses on $450 million of the assets acquired by Great Southern.

While all retail deposits were acquired, $18.8 million in brokered deposits were to be paid directly to brokers by the FDIC.

In its press release announcing the failure, the OCC cited Teambank's undercapitalized condition. The agency again used the term "unsafe and unsound practices," and said the institution was "likely to incur losses that will deplete all or substantially all of its capital, and there is no reasonable prospect that the bank will become adequately capitalized."

TheStreet.com Ratings had assigned Teambank a D- (Weak) financial strength rating in December based on Sept. 30, 2008 financial reports.

As of Dec. 31, TeamBank was undercapitalized, with a tier 1 leverage ratio of 4.00% and a risk-based capital ratio of just 6.35%. The institution's nonperforming assets ratio shot up to 18.25% from 5.99% in September, as it was overwhelmed by nonperforming construction and land development loans.

The FDIC estimated the cost to its deposit insurance fund would be $98 million.

Ratings

The failure of FirstCity was the second time this year that the FDIC was unable to find a buyer for a failed institution's branches and deposits. The previous instance was the Jan. 30 failure of Magnet Bank.

While the FDIC has been able to find buyers for all deposits (including uninsured balances) for a majority of failed institutions during 2008 and 2009, FirstCity shows that there's risk for depositors, even though the basic insurance limit for individuals has been temporarily increased to $250,000 until the end of 2009.

While no depositors will lose money on their balances, TeamBank's brokered depositors will lose the CD rates that were locked in, and will likely be looking at much lower rates as they shop for new parking places for their cash. These customers will also probably have to wait several weeks for their brokers to collect their balances (no longer earning interest) from the FDIC.

Another thing to consider is that even if your personal deposits are under FDIC insurance limits, you or someone you know are probably associated with a business, organization or government entity (such as a school district) with large deposits of somebody else's money in a local bank. In this environment, it is a very good idea to look into the health of your bank.

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.

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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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